The Derivative - So You Want to Start an ETF? With Gavin Filmore of Tidal

Episode Date: July 16, 2026

Jeff sits down with Gavin Filmore of Tidal for a deep dive into why, even after three decades, the ETF industry is still, potentially only in the “second or third inning.” Gavin walks through the evolution from simple, passive equity ETFs to today’s surge in active and derivatives-based products, explaining how his experience running an oil ETN through the negative-oil shock convinced him of the importance of flexibility over rigid index rules. They break down how market makers and regulation (like 6c-11 and the derivatives rule) have reshaped the landscape, why semi-transparent ETFs fizzled, and how white-label platforms like Tidal have ridden this innovation wave to roughly $80 billion across hundreds of largely active funds. Jeff and Gavin also get tactical on what it really takes to launch and grow an ETF now, from differentiated “white space” ideas and realistic AUM milestones, to operating capital, distribution strategy, and the contrasting roles of grassroots retail demand versus platform-driven institutional flows, before looking ahead to areas like prediction markets and single-stock futures as the next potential frontiers.Chapters:00:00-01:12=Intro01:13-3:51=Early Innings: Gavin’s New York Roots and ETF Growth Setup3:52–13:30 = Active ETFs, Derivatives, and Why the ETF Boom Is Still Early13:31–21:48 = Why Derivatives Need Active ETFs: Oil Going Negative, Flexibility, and Hidden ETF Plumbing21:49–32:57 = Market Makers, Liquidity Myths, and the Hidden Frictions of ETF Trading32:58–44:13 = Building Tidal: Inside a White-Label ETF Platform Built on Active and Derivatives44:14–01:02:12 = How to Launch an ETF: Capital, Distribution, Retail vs. Institutional, and Platform Hurdles01:02:13-01:13:40 =  Prediction Markets, Single-Stock Futures, and the Next Frontiers for ETFs01:13:41-01:19:16 =  ETF Inning Count, Industry Outlook, and Parting ShotsFollow along with Gavin and Tidal on LinkedIn and be sure to check out tidalfinancialgroup.com for more information!Don't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠⁠⁠⁠⁠

Welcome to the derivative by RCM Alternatives. Send it. Hello there. Welcome back, everybody, to the derivative by RCM Alternatives. Where did you air? We launched a new website. Go to rcamsmaltz.com to check it out and drop us a comment. Speaking of which, you guys have been great on the comments lately, especially over there on YouTube.

Keep them coming, but still waiting on some guest requests in there. Someone surprised me. Put someone fun in there that I can reach out to. Okay. on to this episode where we chat with the ever-energetic, somewhat frenetic Gavin Fillmore of title, the ETF white label platform that's been on its own frenetic pace growing to close to over $80 billion with a B in assets using them. What inning are we in for ETF growth? How much do I need in the bank to launch an ETF? His first member is still the biggest advantage in ETFs.

We tackle all of it and more. Next, send it. All right, everybody. We're here with Gavin. Gavin, how are you? I'm great, Jeff. How are you doing? I'm great myself. We're just talking off on five percent. The next won the finals. We got soccer.

You know, everything's happening right now. Have you been to any of the World Cup games? I've been invited three times and couldn't do any of the three. So I'm missing the opportunity wildly. And now I'm, everyone I had New York people, I know, I was like, hey, if we can make the grass that great in MetLife Stadium, like, change it for the Giants and Jets, right? Yeah, but that's never going to happen.

Why? Like, you just did it. Well, they have to win games before they can invest, I think. Got it. Are you a longtime New Yorker, New York fan? I'm a longtime New Yorker, and sadly, a friend of mine had jet season tickets. So that made me a Jets fan as a child. And, you know, it just seems disingenuous to switch teams.

But I'm thinking about it. You and Larry David, right? Exactly. We're all thinking about it. Super fans. Who did you just get? You got some good quarterback, maybe. You know, those are details that people that know me well know that I wouldn't know the answer to that question.

So Jeff, Jeff sadly, I have no idea. There you go. I don't know either. It'll hit me about halfway through. I'm a little too focused on ETFs and derivatives bluntly. Right. But Knicks real quick.

So you got the Nix win. So whatever the Jets do is just gravy, right? This is where New York is riding high after the Nix swing. Anything else from there is, as you said, gravy for sure. How crazy was the city after that? Like things were burning or they were rather respectful? It was a little crazy. But I think on the positive side of the spectrum, it was infectious and it was energy, at least from the sports perspective, that New York hasn't had it a long time.

So you could really feel it. It was pretty wild. And then we're going to, we'll jump into it now while we're talking personal stuff. So what was your background? So did you leave New York for a bit, go to school? Or where did you? Yeah, from New York. I went to northeastern and Boston for school, which was like, you know, as a native New Yorker, I thought Boston, I had lived.

literally never been there before, Jeff, right? You're going very far away, yeah. Boston's another big city, right? So I'm sure it'll be like New York. And it wasn't. I mean, it was great for school, but I mean, it's just so much smaller. Yeah. So then I beeline right back to New York after college and just kind of jumped into the Wall Street thing, if you will.

The Wall Street thing. I think on my 21st birthday, we were in Boston and got in a fight with the Northeastern football team at a bar. That sounds right. Yeah, I think we were. That sounds like quintessential Bostonian. Exactly. Yeah.

It's perfectly Boston. I wanted to start, I feel like everyone in our industry, all the podcasts I do with guys who have an ETF, we kind of gloss over the growth in ETFs. Like it's been such a story for so long. It's kind of just stated fact now. But take us, if you could, on a little journey of like what that growth's been like if you've had kind of a front row seat your whole career. Yeah. And kind of any stats you know or just general. why and how has ETS gotten so big?

Yeah, I'll probably avoid like the stat dropping, right? Because I think like you can, we can all go look at that. Yeah, yeah. We probably see it in our feeds like every single day. So the stats are the backdrop, but at a high level, you know, I like to, I'll start like with where we are today and maybe go backwards a little bit. So the growth is insane. I think every year, you know, somebody wants to like short that growth rate, right?

They're like, ah, you know, I can't keep going at this. rate. You can't keep going at this rate. And instead of of it going down, it actually just continues to surprise us, right, by like the count of ETFs, by the number of filings, and probably most importantly by the AUN because the AUM drives revenue. So like the rest doesn't really matter if the AUM is not there, but the AUM is constantly there. So if I'm asked like where we are on that growth curve, right, I'll use like sport analogy, even though I'm not sports person. And I think about it as like, what inning are we in? So I think, I think, I literally said this yesterday, you know, if you asked me in a vacuum, not data supported,

just gut feel, I'd say we're still in like inning two or three. I'm sure I could be in like an intelligent conversation with somebody where they would argue maybe inning four or five. I think if somebody tried to convince me we were like beyond that inning, I would just not having the conversation because I wouldn't respect the conversation anymore. Like there's just no really good argument for suggesting that this growth rate is going to slow or not continue. It is, right, because the data supports it consistently time and time again. Yeah, I'm going to lean right into you calling me inadvertently a stupid person, but I would feel like it was like seventh or eighth inning, right?

It's like it's just the amount of time that's gone back. But if you're saying like the under the hood, the number of filings, the number of new participants, all that stuff is like hugely growth. Yeah, so now let's let's add time sort of to the conversation because I think that's the other great way to think about it. So we, we, I think we're in like 31 years of the ETF industry, right? So we crossed like the 30 year anniversary somewhat ceremoniously, I think some point last year. I don't remember the date, but whatever. So we're roughly three decades in, which feels like a pretty long time, right? Like the world changes much faster than decades at this point, right?

when we think about technology and other industry. So that's probably why you're not a stupid person. You could say, well, we're 30 years in, and like surely we're in the later innings of this. The counterpoint would be, you know, if you look at, again, I'm not going to bring the data points to the conversation, but if you just look at how many assets are still locked up in mutual funds, right, versus the assets in ETFs, that would suggest or very significantly probably support my side of the argument, which is that we're still early days. And I think when we zoom in on the industry itself,

during those 30 years, it paints kind of a different picture. Right. So you could probably pretty quickly say decade one and decade two. So basically, you know, 1990 through 2000. What did you have? You had an ETF industry that was growing and successful, but it was rather like vanilla, you know, and I would go as far as to say, boring, right? So you have basically nothing but passive ETFs.

Most were just equity, passive ETFs, and there wasn't a lot else happening yet. So now you zoom in on the last decade, and I think things get a lot more interesting. And the two main drivers of that would first be active ETFs. And then the second would be, you know, these kind of go hand in hand to a certain extent. The second would be the utilization of derivatives or you could, you know, maybe it's not just about derivatives, but just more exotic product, more sophisticated product, more complicated product, which rhymes with more use of derivatives.

But the point really being, you can go as recent as 10 years ago, and there was still a healthy dialogue debate if active ETFs were truly going to be embraced and supported with the ETF ecosystem. Three, four years ago, that ship sailed, right? and it and it was gone. Like the conversation was over,

clearly active ETFs were going to grow. They were going to be adopted by users. And we see the growth now within active ETFs accelerating. Then you hone in even further and you look at derivatives, exotic product, and you see that as another area of massive, massive development. So maybe, you know, ETF industry is large, at large is 30 years old, but you hone in. And now you just really adopted active ETFs at like at a large scale five years ago.

And along the same timeline, you're starting to use derivatives more and more, which just leads to so many more styles of product, which creates all of these new, all this new room for growth, basically. And as you frame it, the 30 years to me sounds long, but just because that was ever since I got in that fight with the northeastern people, right? Like basically my whole career has been hockey stick up. for ETFs. Yeah. But in the grand scheme of things, what, how long stocks have been around for two, 300, 400, 400 years or something, right? So 30 out of that is, is nothing.

You mentioned active versus derivative. Do you think those are two different things? Are they two different things in the, has you guys categorize them? They're like overlapping themes that sort of support one another. So, so this gets, I can take this like many different directions, but kind of selfishly, For myself, I spent the first kind of 15 years on my career at big banks, primarily Barclays. Barclays was unique in the U.S. It didn't have an asset manager.

So that basically isolated our involvement in the asset management ecosystem to passive product, right? So all I was doing as it relates to ETFs or, you know, I also ran the ETN business there and we worked with Fortyac partners and mutual funds, it was all passive. I also was operating in an exotic derivative business there. So I basically was talk trained and really only honed my skills around adapting derivatives to passive indices. Was the exotic desk trading against the flow of the or with the flow, right? Because you're aware of housing that offset the risk. Yeah, exactly right, right. And then roughly almost five years ago, it'll be five years in September I've been with.

title. It probably took me like, Jeff, like literally three, four months to realize once I was inside of the ETF ecosystem during the last five years, which, you know, happens to align exactly with the timelines I was just talking about with respect to active and derivative utilization, realizing that honestly, I don't know that I ever would want to design a passive product for a derivative-based product ever again. So I'll say it back and then I'll explain myself, right? If I was designing a product today, and I do do this, you know, most days, right? If I'm designing a product today and it's a derivative-based product,

it's going to be exceptionally rare that I actually think that should be built on a passive index. Where that comes from is bluntly, and this gets interesting quick, Jeff, and we'll see how far down this rabbit hole we want to go. Some of it's scar, scar tissue that I saw firsthand during my time at the banks. So specific example, right, which is a good one. I ran a oil-based ETN. I ran that product when oil went negative. Oh.

Okay. And we fortunately. There's a podcast for that. We've got the podcast. That's how long we've been doing this podcast. We did a podcast right after oil went negative. Yeah, yeah, amazing, right? So I was in the driving seat of running that risk during that event.

And I was doing it on index-based product. And in essence, for a period of time there, we had no control over the situation, right? We were absolutely obliged to whatever the rules of the index were. We got very, very lucky. And it rolled from April to met like a week before it went negative. and then we were able to shut down the product before, you know, as quickly as we could, but we rode the May contract,

I think it got to like six or seven bucks, so it wasn't, it wasn't comforting, right, for this like month-long period. Now, if you're running an active ETF, you could have easily gone further out on the curve, right? You could have done all kinds of things to like avoid. Yeah, emergency power.

Yeah. Were the rules, where the, well, who manages this system? SEC, FINRA, both? Honestly, manufacturer is a product, right? There's in my words, but like, you know, if you're running product,

if you're designing product, you're designing index, you're basically manufacturing product. Today, with all the tools at your disposal, with the regulation as it stands, you're in the driver's seat of design. You get to design, you know, if somebody is working with Title to launch an ETF,

right? One of the first questions, we will assess is like, okay, the product that you're thinking about is that active or is passive, right? That's a huge like bifurcating decision. Sometimes we're guiding our clients with that decision, sometimes we're not. But what is great is the regulators, the prospectus ability to draft a prospectus, the support of product when you think about market makers and the ecosystem around the ETFs, there's no real constraints there. There's not actually a lot of limitation. So instead, you're in control. Now, that puts pressure on you to make the right decisions,

basically, right? You learn from your experience and things like that to say, okay, like you may have a product, let's say it's like a listed option, I don't know, like an income product, right, that's overlaying options. You may basically be able to say, hey, I could design a mousetrap. I basically want to run it systematically. Okay. Does that mean you should do it in a passive ETF and track an index? Or do you just basically want to run a it systematically, but because of like, you know, my, in my words, my scar tissue or your own experience or these edges is that you literally cannot predict, hey, maybe we should just run it as an active ETF so that even though 99.9% of the time I'm going to run it systematically

based on the recipe that I want to run it with, I might have an unforeseen event that means that I want some flexibility, right? And that's where I would guide people towards today. Like buying yourself flexibility has... huge advantages, some of which, many of which you can never predict. Right. If I go back to the Jeff, just real quick, that oil example, I remember a trader on the trading desk a year prior to oil going negative suggesting to a group of very smart people, including myself that, hey, oil could go negative and he basically got laughed at.

Like that's a true story. He basically got laughed at. And a year later, right, he looked really, really smart. And I tell that story just to suggest that things happen that you can. Crazier things have happened. So you want that flexibility. And it's weird just thinking out loud, like you have these complex option traders who want to, who if they go passive, take away all their optionality in their business.

It's like think about optionality on multiple levels. It's not just on your design. Exactly. Yeah. But in the beginning, was it the regulators or legal? Like, why was everyone doing passive? Just that's how it was done? Like what was the, we're lawyers saying like, oh, no, you can't do that.

That opens up a can of worms. Yeah. I mean, some of the history I probably, I won't nail because it probably predates my, my level of experience in the industry. But it is a healthy dose of regulation. And then once, but the regulation's been there, right? I think like first active ETF goes back to like the early 2010, something like that. But then you have this like long period of not much adoption and not much product

development, the factors driving that, I would probably say are twofold. One, was the ecosystem around the ETFs ready to really support those products well? So again, I first think about the market making community. So what happens, what I've found happens with the market making community is, you know, they wait and see a little bit to make sure that the investment in the work that they would have to do is really going to pay off. So they're not necessarily going to build all of the rails, all the pipes, all the plummy, because it's expensive to do that, just based on an idea, right? They actually want to see a little bit of momentum behind it before they do all that work.

And let's not shy away from examples where things didn't pan out as predicted, right? So you could look at like semi-transparent ETS, for example. Flop. No disrespect for anybody that worked on that innovation, but that is a total flop, right? What were those? I don't even remember those. say it was semi what were those I don't even remember so there was this huge and and and it was met with a lot of excitement and certain people thought it was going to totally radically transform ETFs and be another growth driver were semi transparent ETLs because the thinking was you have all these active managers who love the ETF wrapper but don't want to expose their holdings or their IP to the market automatically makes sense so then you had firms three in particular basically both solutions and heavy work with regulators

heavy work with market makers, heavy work with exchanges. And all the work was done and it worked, right? Like you could run those products. Nobody wanted those products. Now, you know, this goes off on a tangent, but it probably was because what are some of the foundational value propositions of ETS? Well, one of them is transparency. So you're going to rip one of the core value props of something out of it.

Don't assume people will actually adapt it. So, you know, I went down this road because, because basically that would be an example that like the market making community could look back at and say, well, we invested all this time and money in it and it didn't pan out. It didn't work out. So they're going to, they're going to be careful, right? They're going to want to make sure that the growth opportunity is there before they invest against it. Active ETF. So back to this active ETF story, while they've been around for 10 going on 15 years, roughly. But the first half of that timeline, let's just make it simple, right so the first seven and a half of 15 years they were not widely adopted the question was why well one

because they probably weren't operating that well for a period of time because of the ecosystem around them the second and i think this becomes interesting in a variety of ways hopefully is there actually just wasn't that much innovation happening either so you have active ETS but you basically have the same players in the ETF ecosystem, think the juggernauts, right? The state streets, the vanguard, the Black rocks, and they were high on the hog, passive business going gray, and you didn't have other regulation change that allowed more managers to come into the market there yet. So 6C11, which drove that change, didn't happen until like 2018. So up until 2018, it was hard for new managers to get into the ETF ecosystem. So that just wasn't. It basically wouldn't get approved

it would take three years or something. Exactly, and a way more of an investment. So yeah, you have this new tool at your disposal, but you basically didn't have anybody new that could use the tool. So these things had to converge, which really happened to the later 2010s into the current decade. And now you have all of these catalysts, right?

You have a new derivative rule, 1804, you have 6 and 6 and you have increased innovation. The driver of increased innovation, in my opinion, is increased success, right? If the ETF industry is growing and making more and more money, naturally more and more players are gonna want to get involved, right?

That's just like core business school type stuff, right? You see that in cross industry. So now the market opportunity is so large and so appealing, you've got everybody looking at it and all saying, how can I get involved, how can I participate? That doesn't mean it's easy, but the opportunity is,

big enough for their focus to be there. And that's going to push innovation. So we just see the rate of innovation absolutely accelerating by any count. And you see that in terms of new entrants. You see that in terms of the number of filings. And you see that in terms of the number of launches. As you mentioned, the market makers and the innovation, this just clicked in my head. Like back 25 years ago, someone is like, hey, I'm going to do an ETF.

And it's just the mag seven, even though that wasn't a thing back there. But these seven stocks. Yeah. And the market maker's like, cool, I can track that. I can take the other side. I can make a market on it. And then someone six months later comes and says, I'm going to add bonds to that.

Can you handle that? So basically that's what happened, right? It just iterated over time of like, and I'm going to add this piece. Now I'm going to sell options against that. And the market maker had to crawl along and be like, okay, I guess I can add that. I understand that.

Yeah. Essentially what happened. They just like got dragged along of like, and I need to add this, and I need to add this. Yeah, dragged along is a good way to say. So let's use finite examples. Five years ago, I started a title. We were working with the market making community already, as you would expect.

But then we started pushing the innovation curve, right? So we started building a lot more products. Specifically, let's talk about products using listed options, right? So we started using products with listed options. And you realize that the market, you know, let's just for simplicity say there's like 10 core market makers today operating in the US ETF ecosystem. If I go back five years ago and I want to do products with listed options, you probably shrunk those 10 down to like literally one or two, right?

And this was only five years ago who could really accommodate or let's not say accommodate who could really support those products and support them well. You fast forward to today five years later and essentially every single one of them can do it. right because they saw the growth, they saw the opportunity. And at some point, like it was almost forced upon them, right? Because if you are an ETF issuer and you are working with a marketmaker that's been a key partner of yours for a long, long time, but they are not able to accommodate

the new needs that you have, you're going to have to start working with more and more partners. So they all caught up rather quickly. But it was, you know, one or two in the early, early days. a couple more came along and then the rest had to follow. They kind of got dragged there. It's like you either do this, you build it, or you will be out of this business or at least significantly diminished in the business.

And just wrap up the market makers. They need to understand what you're doing as an ETF manager to make a market, right? Because it's straight at every second. I can come in, I can buy it, I can sell it two seconds later. So the market maker needs to understand what's in your book, whether that's changed second to second. and then make a market on it for that investor.

And there's other challenges, right? So you're actually, your example that you kind of made up was like, okay, you know, 30 years ago, it's seven stocks, but then you come along and you add bonds. Okay, that doesn't sound that complicated, right? Because like these market makers could, they certainly had deaths that knew how to price bonds really, really well. They certainly had deaths that could price equities really, really well. That's pretty simple stuff.

Oh, but actually combining cross asset into a single product means that you need to need cross piping right between those deaths. So that we also saw that five years ago as a real constraint. Only a couple market makers could support cross-asset product. So there's multiple factors that can make a product harder and harder, right? So you're yelling at the guy like, you have a bond desk, just talk to them. They're like, well, we don't work with it. Yeah.

Like, come on. Well, sometimes it's that, but it's also to your point. This is we're talking now like second to second stuff, right? So this is a talking. This is piping and plumbing. This is being able to calculate two different assets. Assets combine them, understand what your risk is, create the right spread around it.

And therefore, you needed real connectivity between those deaths, not just relationship connectivity. And do you think the end investor takes it all for granted? They're just like, oh, I want this uranium company ETA, like just click the button. That's probably a bad example. But whatever, they want this option alternative income ETF, click the button and just have no idea what's really going on under all that piping.

I think they do take it for granted and that sounds like negative to the end investor. Yeah. I don't think so. Like why, why should they care? Like I don't know, Jeff. I'm going to go outside of industry, right? Like you and I go on Amazon, we click a button. We buy a toy for our kids.

It's sent from, I don't care what's going on inside the machine, right? I just care about the outcome. And that makes sense to me, right? Like the ETFs, I talk about this all the time. It's shocking to some. ETFs are direct to consumer products, right? You can click a couple buttons. You can buy an ETF, right?

They're almost like frictionless in contrast to like, you know, tangible goods that are also direct to consumer products. So should an end consumer, I don't want to go off like other tangents, right, but we talk about the education. Of course, we'll want the end consumers educated. But at the same time, like an end consumer should be able to buy an ETF, understand. what it's meant to deliver with, yeah, I don't want them to have to like appreciate the work or the challenges or all of the nuts and bolts that went into the product. Like they should be able to trust. It's a 1940 act product. They should be able to trust that it's built well and be able to trust that what it's designed to do, it will do, right, with an understanding of the risks that are well disclosed and educated around. But I don't, I wouldn't expect them to have to understand all those things. But to reframe it, like the invisible hand of all those hundreds of millions of investors, right, has been like this is working.

Like they're tracking it. It's not far afield. I'm not like getting some price in the ETF that's way off from its underlying. Exactly. So the success is happening. Yeah. And I think investors tend to be pretty good at like waiting for the proof to be in the pudding. Right.

So they will watch and wait sometimes, at least some segment of the market, to make sure that. these things work, you know, if I go to good industry examples, not stuff that I was directly involved in, but if you look at defined outcome as call it like the biggest scale, scaling story over the last like eight years of more complexity, listed option utilization, you know, complicated for market makers, right? It kind of brings together all of what we've been talking about in a specific example. I think a lot of allocators were like, well, I want to wait and see if it delivers exactly the outcome that it says it delivers. And of course, the salespeople or the manufacturers,

that probably would be like, of course it will, right? I'm building it with listed options. This is what listed options do. It will absolutely deliver exactly what I am telling you it will do. And what is a rational response to that? Great. I'm going to wait and see. I'll trust it when I see it.

And therefore, right, the growth rate in like the defined outcome space was much slower in the first few years than, it was in the few years thereafter because you had all these proof points. It's the same thing with like, you know, if you're going to pay an active manager to manage a simple product like an equity, well, you should be paying for performance. It's active, yeah? Like it's pretty simple. Do you just believe that they're a good active manager?

No, you want to see track record. You want to see live track record. And in the case of ETFs, you probably want to see it in the ETF wrapper before you believe it. So you might have to print some performance and then they're going to say, okay. okay, this guy's a good manager. This woman's a good manager. I'm going to give her my money, right?

That's all very rational behavior. And I think we see that work through in the industry. And then even some of the more sophisticated investors are looking at that spread by the market maker, right? Or is that an important piece of the puzzle of like, hey, if that spread is wide, then even the market maker doesn't quite get what's happening. And you should put a yellow flag of.

Yeah, and Jeff, I think that's actually an area where, like, education can continue to get better. Because it's a very common pushback of an ETF for an allocator. So especially in the early days, right? You don't have a lot of volume. You're spread on screen, right? On screen, oftentimes it's not going to look great. Now, if you're well educated in terms of the market,

you understand there's liquidity that exists off screen. But, you know, there's thousands and thousands of wealth managers, RIAs, advisors. you know, across this very large, large country, and their level of knowledge and sophistication varies greatly. And by the way, it's the easiest excuse to get a salesperson out of your office. Right. So sometimes they do it for that reason.

It's like, well, your surprise, Brad, get out of here. So they might actually appreciate the true liquidity of a product, but just use it as a means to get you out of the office. You're saying it's not necessarily the case that that means it's a complex or whatever. You should, in theory, like the, the, The spread should be sensible and it should be able to be done at scale in the vast majority of products because what's inside the portfolio is liquid and that should basically be for simplicity, pass through liquidity.

But if you just like hit the liquidity on the screen, especially at size, you're going to have some very bad, bad outcomes and instead you have to handhold the print a little bit, right? You have to use a block trading desk. You have to talk to the ETF issue to understand who the lead market makers are. You have to connect some, you know, information. to make sure that the experience is going to be very good. And let's be blunt here appropriately. People are pretty lazy, right?

It's like human nature. People are lazy. So you're asking them to do more work in those early days. And that definitely can just move people along, right? They'll just say, I don't want to deal with that. It's amazing. Click and trade, you know, liquidity of spy right now for every ETF I trade. Okay.

Like, I can appreciate that. But at the same time, they have to appreciate that their clients have different needs and the 64 portfolio is not going to serve the end client like it once did or will. And there's more and more demand from the end client saying, hey, I want to use more sophisticated products to get diversification, to get protection, to get leverage, whatever the end client wants. So you're going to have to come along that journey too. You're going to have to learn these realities better and better because otherwise at some point you're going to put your wealth management practice at risk too because those clients are going to say, well, if you're not

going to embrace this innovation, I'm going to go to somebody else that can. Right. I can see that short side of like, we only allow you to invest in penny wide spreads. Like, okay, well, you only have these 25 ETFs, right? Like, what about this? There's a value to all this other stuff they're doing if it's five cents wider. Yeah. And if you're holding it for a year or two or five or ten, like, who care?

Totally. Yeah. Let's circle back. You've mentioned title a few times. So on purpose, was in this space, said, we want to grab onto this growth, was stumbled into it. Like, what was the path there for how you guys have succeeded so well in the space? Yeah.

So if we zoom out on the history of title, title is roughly about 14 years old now, and some form or another, right? Formally by another name, Toroso, right? And now just title for simplicity reasons. up until 2018, there was fits and starts of the business. There was a variety of different things that was trying to accomplish. Always around ETFs, right?

It was never about anything but ETFs. But at some point, it was more around consulting for growth and sales and marketing and this and that. And it was 2018 where, you know, specifically an individual, Eric Falkies, joined up the other founding partners who were Guillermo and Dan Carlson and Mike Venuto and said, okay, like, I think you have something here.

But to really build a business that can scale and bluntly, Jeff, right, the economics, like have basis points. Like, consulting is really hard. It's fixed cost, right? Like, you want carry in product. You should build a white label platform. So ultimately, that culminated with Eric joining forces, right? And they built in 2018 title pretty quickly.

So that's like just let's make it really sharp. So that's when title as a business became a white label platform. And a white label platform, you have a trust where if I want to start an ETF, I come to you and I can go on to your trust. Well said. But it's still under my banner. Yeah, well said. There's all kinds of nuances and details. But what you said, Jeff, is exactly right.

No reason taken any further. That's when an ETAF white label providers. Title has this versus others and this and that. But yeah, foundationally, if somebody wants to launch an ETF and they want to do it cost effectively at speed with the help of ETF. experts, they're going to join forces with a white label provider to do it. And so we start that business in 2018, immediately quite a bit of success, by the way, right? Big clients, like so fine the early days, very large RIAs like ERISA's, like ERISAVogue, 20 billion plus, start doing risk parity strategies, right?

And early on, like a little bit more on the innovative curve, right? Early utilization of active ETF, an appreciation for what really will drive growth of ETFs. So the foundational bill base was built starting in my opinion in 2018 over the 2018 to 2021 period steady healthy growth, right? Launching like 10 ETFs a year, signing up new partners, big names again, the sofies of the world, the RIA I mentioned, Blue Cross Blue Shield of Minnesota, right? Institutional names. So that gets us to about the time I joined. And a few things really accelerate, right? And thanks to you, right,

when you joined. Well, I would not go that far. But there was some intentionality, right? Why do you hire an exotic structure from a bank, which is what I had done the four years prior to that, right? So 2017 to 2021, I'm an exotic

structure from a bank. What is an ETF white-level provider doing hiring an exotic structure from a bank in 2021? In 2021, that That would have felt odd, right? And I can tell you, like, people I worked with were like, what are you doing? I don't get it, really.

If you said that today, I think it would be met with, of course. Yeah, that's the growth area. So I do think the phone was intentional. I also was intentional from a career standpoint, Jeff. I was like, okay, I might be an okay at best structure at a bank. I actually think I have an ARB here where I can take derivative skill, apply it to the ETF, And it might be a pretty damn good ETF structure, right, in ETF land because the skill set that existed at the banks during that era versus ETF land was very, very different, right?

So I made kind of a personal bet, the firm made a bet. At the same time, this ship sailing for the utilization of active ETFs was kind of cementing itself, right? I can almost say 2021, it sort of hits that growth moment where the pendulum swings and we're no longer having that debate. So you fast forward to today. You think real quick, you think COVID was piece of that? Like a lot of active managers sidestepped the drawdown there and like got back in quickly? I wouldn't go there. I would start to spit poetic about, you know, the retail crowd and what they were doing during COVID and what that led to. I think that was

definitely a driver, driver or an ingredient. But, It would have happened with or without COVID. Maybe it wouldn't have been a little slower. Maybe it would have been a little bit. I don't really know. But it was probably an accelerant. But I don't think it was like the base case for why we got to where we ended up getting to. But if you look at like, you know, title as a proxy, it's a proof point.

So here we are. We're at anywhere right now between 75 billion and 80 billion in AUM. Five years ago, we were about $4 billion. So that's a 20x, right? in a short period of time. If you say, slice up your business, what you would find is that the business today is 80, 85% active.

Okay, so that's like the inverse of the industry, right? The industry is probably the exact inverse of that, but we are heavily, heavily active. Then you say, how much is derivatives? I'm rounding here, but probably 30% of our AUM is a derivative ETF in some form or another. Like, again, that's not 30% of, the ETF ecosystem isn't.

But we built in 2018. So our business probably reflects the forward curve of the ETF industry, not the legacy curve of the ETF. Yeah, got it. Yeah. Right. You're not, I mean, if someone came to you and said, I have a new, it's almost impossible to do, right?

If I'm going to do a new S&P ETF, tracking the S&P, like, no thanks. No, that is not happening. Now, where passive can still play. and we definitely participate and they can lead to really exciting opportunities I think about like thematic ETFs. You can absolutely still build good thematic ETFs

around passive strategies. Sometimes that's going to make sense. But by the way, even there. So that's like AI compute or something like flavor of the day? But by the way, right, a shining example of title success was all the way back to I think 2018

when we were involved in Block, BLOK, which is the first, Crypto equity ETF at that time, everybody would have built it passively. We didn't title built it actively because we thought when you have a market that's changing as quickly as crypto, right? Today you could make the same case for AI. I would strongly encourage an active build where you've got PMs, you know, think about like IPOs, right?

Like, do you want to get involved in IPOs right out of the gate? Do you want potentially get IPO allocations at the IPO price? You can do all of those things in active ETFs. You basically can't do the Limpassive ETFs, although, you know, not to go off track here, but obviously we see some of these lines are blurring. You see is changing their rules on the fly to accommodate these things. But again, it's a lot harder to change the rules than it is to just have the flexibility up front. And so what's, maybe we'll say that, Tim.

But so now 75 to 80 billion, how many ETFs? 430, 440. And then is this the same trust? You just had to build one trust or if you had to do like 100 trust? Definitely not. We would have to be out. There's limits to that. We get it all on one trust.

So actually, and this gives me an opportunity to talk about how we interact with with the market as a whole. So 80 billion of assets under service. I'm using careful words because not everything's under management, but that's a nuance. The majority of our business is that build that you just, where it's a trust, but even there, we have four going on five series trusts, right? Because you just can't manage that many sub-advisors, that many ETS with the same group

of trustees. That's not doing it right. That's not being a good fiduciary. So that matters. We also, over time, Jeff, have adopted our business to be more flexible in terms of how we work with clients. So an example of that is oftentimes we are just a trading sub-advisor. So we may be a sub-advisor for an ETF off of our business.

trust and we are the trading sub-advisor for those products. That's like a third of the business, too. It's a great business. Some people don't realize that we do it. And that, by the way, like trading has just become kind of like, it's not really surprising probably to us, but the backbone of everything in some form or another is basically trading in cap markets for these products. And our headcounts a reflection of that. So we're about 240 employees today. A third of those, about 80, are traders, cap markets, maybe the middle office that's supporting trading, but basically a third of the head count is locked in to the trading part of the business. And we see that as like probably our biggest differentiator now. I think you could argue, I'm sure maybe there's a maybe a counter example

or two, but we're probably the largest ETF only trading desk on the street right now. And then that third model that you're talking about is somewhat I have an idea I don't want to set up all the piping myself, just, okay, you guys run it for me. But I have my trust. Yeah, I have my own trust and everything, and you just are doing the execution. Yeah, so the way I, the way I, you know, frame this is like business school stuff. Not that I went to business school. I didn't, but I imagine this is what they would teach you.

You know, it's kind of like classic build versus by decision making, right? So there's certainly going to be entities that want to get into the ETF space. and they think the best thing to do is build everything from the ground up. Others look at it and say, okay, we don't probably want to build everything from the ground up, but they may have some of the infrastructure in place. So, for example, right, we work with very large managers. Raymond James is an example. Like Raymond James came to us, but they were already running mutual funds.

They had the trust, but what they definitely didn't have was a trade in cap market. So ultimately, we plugged into their existing infrastructure to enhance that. part of the puzzle. So as you can imagine, as we got larger, we've been working with larger, larger managers and you don't really have an ability to force a single solution upon them anymore, right? You kind of have to meet them where they want to be met and where their deficiencies are. And that flexibility that we created is good for them. It's obviously led to a lot of our growth and success. Let's change for a second. I'm a brilliant trader guy. I want to start an ETF. I'm seeing all this growth. I'm listening to this podcast. Great. I've got an idea for an

ETF. How does it work? Who do I call? I call you. Yeah. And then you asked me, like you said, active or passive. I'm going to, let's say active because that's what we're doing here. What are the next steps? What, like, give me some of the like, if you don't have a hundred million dollars, forget it. If I said, oh, well, I want to skip that part. I'm going to start my own trust. What does that cost? Yeah. So let me, I'll start. I'll start. I'll start. I don't know if there's a question in there, but you know where I'm going. Yeah. And I think I get it. So, so first, you knock on the door, right? And we start to engage with you. And we have a big team that is solely dedicated

to that part of the engagement, right? New prospect, right? Knacks out of the door, we start to engage. We kind of work through, you know, these are Gavinisms at this point, but like the Gavinism is like there's a decision tree that we help that prospect walk through. The first decision is do they want to launch an ETF?

Okay. And in this moment in time, And we are basically consultants for free. And believe it or not, we're not at a business and convincing people to launch UTS. I think the market does all that work for us, right? Most people are going to knock on the door and they're going to be excited

and they've knocked on the door for a reason already. So I have no interest in, you know, persuading people to launch ETS. In fact- Yeah, you're not cold calling firm saying, hey, you should start an A&F. No, and we're certainly not going to like be, allow somebody to be naive to the realities of the ETFs and how challenging it can be to grow

ETFs because we're only going to win like economically we only win if they win right otherwise it's a waste of everybody's time and money so so that first decision is do you they want to launch a ETF we're going to be there to give them a lot of information sometimes we're pouring a lot of cold water on things right this is like are you sure you want to do this are you sure you want to do this what's your sales strategy what's your growth plan, you know, you go back to an earlier example, Jeff, right? We see things come through the door. It's like, I've got this model thing that I've run on it, you know, in an envelope for,

you know, the last three years, I have a back test and I'm going to deliver S&P 500, you know, plus 100 basis points and my sharps a little improved. All these like, if I, if I'm hearing nuanced improvement, I'm pretty much short it right out of the gate because it's just like not enough differentiation in a world where you're competing with all of the juggernauts and thousands of thousands of products. So it's a mix. We tend to focus most on the product and the growth in sales strategy. So the product has to wow you. It has to be like, oh, cool, I haven't heard of this before. Unless you have like a BYO, bring your own assets, strategy and massive sales force, or there's certainly a lot of firms that say, listen, I get it.

I need to be in this for the long game. I'm going to need to build sales teams. I'm going to need to heavily invest. And I know it might take five years for me to really create significant performance. Well, those are reasonable expectations. We're happy to work with institutional grade managers who have healthy expectations. We don't want to work with institutional grade managers that have not realistic expectations because that leads to tears essentially on the playing field, right? You just don't want to do it. So that's the, that's the first decision.

The second one is the one I referenced a few minutes ago, which is the build versus buy. Right. So now that manager is saying, yes, I want to launch an ETF. And we're looking at them and saying, that seems reasonable. Okay. So now, now we're going to the build versus buy. Obviously, I have some bias at this point, right? And I don't want them to build everything alone, otherwise they're not going to work with us.

But back to the flexibility, we really hear them out and understand what they do or do not have in place. And then we look at that honestly and say, okay, we can fill certain voids and certain gaps. And based on those voids and gaps, that might be like the full stack solution, Jeff, where it's our serious trust. It might be the Raymond James example where we just stepped in on trading account markets. There's a spectrum there with more nuance, but really just trying to figure out like where they want to be met. Give them a almost custom solution, right? And that's something that we can look at together and say we think combined, you prospect plus title are going to have a better opportunity for a good outcome

than you would have without title, right? If we don't truly believe we're going to be additive, we're going to walk away because, again, it's not going to end up in a good outcome. The third part of the decision. So if they're yes to an ETF and yes, they want to outsource something, Okay, now we get into like hardcore sales. Like, why is title better than anybody else? Right.

We go down that path. That's where you get into the more classic business development. But step one and step two are probably 80% of the conversations we have. And again, I would just call it free consulting. So we spend a ton and ton of time with great entities, great prospects that are focused on question one and question two before we even remotely get into should it be title or should it be somebody else. That comes last. take me through some of the step ones of like, hey, I've got a great symbol, and that's all they have. Are you saying no?

Like, what are some of the conversations you have up like, hey, great talking to you, but this isn't nearly enough flushed out? Yeah. So like a bad example would clearly be, you know, repeating myself a little bit that like mildly nuanced, you know, S&P exposure with not some kind of massive bring your own ass. You've got a better sharp. You know, you can't eat sharp. It's like, like how much of the ETF buying community knows what a sharp ratio is, right? I would say less than than most answers would be given. So.

Or that a 0.6 sharp is meaningfully better than a 0.5 sharp. Yeah. Is that really going to use a new product, a new manager with maybe wires front? So when we look at the product, if it's significantly differentiated and we like to use, use a word like white space, right? Are you really doing something that's hitting white space? Is it, you know, the first CTA is it, you know, one of the first five long, short equities? Okay, you can start to get excited, right? You have a much limited, much more limited pool of competitors. Therefore, your opportunity for success is probably much higher than it would be.

If it's not a truly differentiated product, if it's not close to or literally, literally, white space, then you've got to get into an understanding of who they are, right? Well, you're a 20-year asset manager with an amazing tracker record with the sales team with reasonable expectations for growth. They're in it for the long run. They know it's not like, oh, I'm just going to launch your product and the assets are going to run through the door. Those are amazing conversations.

We love to work with those partners. And there, what we're going to do is kind of enhance their existing resources and enhance their understanding of the ETF ecosystem just to make them a little bit better and increase their odds a little bit more of success. So it's kind of a tale of two cities there. It's like really, really awesome IP in the form of a product or a franchise that has a true understanding of asset management and understands how to grow a product and has reasonable expectations. And what do you see in your career and title as a whole? Like the, right, I think it's, in my opinion or what I've seen, if you're first, you have a great chance of success.

Yeah. Right? If you had that first idea, you're the first CTF, you're the first ticker, it starts trading, you get the first assets. But we've also seen, okay, someone had the idea, and then the big behemists come in, copy it, and then just their scale kind of overtakes it. So is better to be first or to be that franchise? Well, yeah, I think both can win.

And we can use specific example. So let me, let me use a really good specific example that I had nothing to do with. So it's really like just easy to talk about, right? So I go back to the to find outcome space. Innovator ended up being first. Okay. So we're going to give them the first mover advantage of ETFs. They obviously built a multi tens of billions of dollar business that ultimately culminated

in sale in the Goldman Sachs for $2 billion. So that was a massive success, right? You can't argue it. And listen, the DNA of that firm was legacy ETF players. They understood what they would need to do. to be successful. But first and foremost, they were first mover advantage. I think first mover advantage in ETF industry is not just highly rewarded, but probably way more than other industry. It really gives you a significant edge that actually lasts longer than people

would expect. Staying with defined outcome, though, who was the second big player? Well, it was best, which was actually DNA that came out of some of my type of world, right, at banks. But then they partnered with first trust. So they weren't first, but they had the distribution figured out, right? So there's a clear example of number one being rewarded for first mover. Number two, first and foremost, in my opinion, not everybody will agree, but like, you know, first trust with vest had the distribution. So clear room for both of those franchises to be very, very successful with defined outcome.

Then, though, this is where it gets negative, right? Then you had a long tail of other entities following or chasing that growth. And broadly speaking, really nobody had much success. And certainly nobody had really any significant success. You could say Allianz had some success, multi-billion. But, you know, they were obviously a large entity with a lot of assets that they could go and just grab, too. So I think that is actually the poster child example, where first mover is rewarded,

second mover can win with distribution. But beyond that, you might as well get back to the lab and try to figure out the next big idea. Unfortunately, what I see across industry is a little bit of laziness, right? It's like easier to see what somebody else is doing and then go and try to copy it.

Truly being in the lab and truly coming up with a unique new idea is harder, right? But a lot of people are going to... You can't patent it? What does that look like? That, yeah. Forget that, right? I mean, this is like, this is good and bad, right?

Like, on one hand, everybody would want somehow. And it's even, you know, it's kind of, there's this new call for feedback from the SEC on novel product. And layered into that, by the way, from the staff is the potential of being able to maybe file without it being public. I would like that. Yeah. And I think a lot of participants would like that because it would take some of the game. away from the industry. On the other hand, though,

like, if you're operating in a highly competitive marketplace and you think you're a highly competitive player, who cares, right? Like, like, when, like, yeah, if you want, if, yeah, sure, the game would be easier, I guess, if I could somehow say, I'm the only entity that can do option income overlay strategies. But man, what a terrible outcome.

Let's go back to the end investors. It's a terrible outcome. Yeah. Right? One firm is just, yeah. Yeah, competition breeds good outcome for end investor. Let us drive our costs down. Let us make sure we're continuing to innovate to be the best example of that product there is.

You take that away, and I guarantee you the end of consumer loses. We can go off and talk about all kinds of other industry. I mean, imagine what it would look like if there was one car manufacturer, right? We'd all be driving a shitty Toyota Crolla. One search engine. Oh, wait. Well, when you're really good, you can operate as a monopoly or ish for a period of time, right? When you're really, really good.

And then you mentioned the distribution, huge part of it too. So their first mover, it's a great idea. You love everything. And they're like, no, I just, let's launch it. And the assets will come. You're like, eh. Like, that's not how it works. Securities are sold, not bought.

But that's a tale of two cities. So what's interesting is if you go back to like the way I was framing it earlier, first mover, you know, really white space, innovative idea, that's going to rhyme with the retail segment of the market, where the BIOA, the sales team, that's going to rhyme with the more institutional segment of the market. Now, I want to be careful with those words, by the one. Yeah. When I say retail, you know, I go back to the use of direct-to-consumer.

I'm talking about a self-directed individual on a platform like Robin Hood who sees a product that they think they want to buy, they press a button, and they have bought it. Right. That is the truest expression of retail. That is where there are literal, you know, dream, field of dream outcome for ETF. systems when they launch a first mover thematic ETF with no sales, maybe a little bit of marketing, and there's a virality around the product, right, in the Reddit spheres, the YouTube, you know, spheres, wherever.

And all of a sudden, a crowd of these truly self-directed retail investors go and buy product, right? That market... You think that's like a hundred million or a billion? Like, what can that get to with just that, like, grassroots stuff? Okay. So that is exactly the right question, Jeff. And I'm going to give you exactly the answer. answer.

Perfect. Ten years ago, I was educated on topics like this, and I was taught that your first number was the right answer. Literally, right? I could be quoted. Okay, Gavin, retail matters, but it can only get you so far. You'll get to a hundred million, but if you want to get to billion, billions, you're going to have to be institutional.

Now, by the way, I don't think they were wrong 10 years ago. I think 10 years ago, that was probably right. Today, that is wrong, and I know it's wrong because I have examples from my partners that I've worked closely with that have built not just billions, tens of billions in assets that are 98, 99 plus percent retail. So the dichotomy has completely changed and shifted where you build a very successful business in either lane, retail or more institutional. And by the way, there are certain examples that can live in both lanes, right? And you can absolutely grow in both lanes successfully. And sometimes it starts one, you know, it starts in the retail channel. And then over time, it's a more institutional channel, right?

It's all different examples. And do you think that actually is grassroots or they're paying for to have posts on Reddit and they have YouTube ads and they're doing like more guerrilla marketing, I'll call it, instead of like traditional. I have an ad in the Wall Street Journal or whatever? Definitely a mix of things. However, just, you know, going back to some of these firsthand examples. Yeah.

With very small budgets and just a little bit more, I'm not even going to say creativity, a willingness to embrace new channels of distribution and marketing, massive success. So this is not first and foremost a world to pay, play to play. You can do this pretty grassroots, pretty organically, but what you do have to do is you have to respect those mediums and channels, and you do have to embrace them. What I mean by that, like, to make that tangible, I'm really just talking about, like, you know, YouTube channels that are dedicated to specific niches of investing, like income investing, and a willingness for our clients and the PMs to go on those channels, spend an hour, talk about their investment philosophy, right? And that creates actually an amazing opportunity for the more entrepreneurial new entrance because they probably have a willingness or at least they have like, you know, some heat at their back where they're saying, okay, I got to do something here. And I'm going to be creative. I'm going to go outside of like the traditional bounds to make this work versus, right, like the very traditional old school asset managers and those PMs.

You ask them to go on a channel like Darth dividend on U-10. And they're going to like, no, what are you talking about? No way. So it actually creates a really nice edge for this newer community. And there's countless examples on the title platform, countless examples off the platform where, you know, they're starting to embrace those channels. But again, I think that's early innings.

And that's going to grow and expand and change rapidly. You could see some like suited up Boston stock guy running a value fund. Like, I'm not going on that site. It's kind of stuffy and like, no, no, that's not what we do. That's not how this works. Even if the individual had a willingness, the mothership would probably, you know, throw them out of the front door, right? You don't get work here anymore, buddy.

You mentioned pay for play, so I'm going to mention it. Like, cool, we've had this talk. I've gone step one, two, three. I've got the idea. I've got, I'm bringing, well, let's quickly say, how much mine do I need to bring and seed this with? And then to, 10. years ago or you tell me when was it I just as long as I had a ticker it could really be traded anywhere and nowadays no you have to be over this amount or your entire fun platform needs to be over this

amount in order to be on Schwab or in order to be it yeah what's gonna call it so what are what are some of those hurdles that are real hurdles for guys yeah so we'll start with the the question around like seed right and of course none of these things this is good for the conversation none of these things really work in isolation yeah if you if you've got again a truly special first mover product, something that like just is interesting IP and and there's going to be demand for it, it doesn't matter, right? Because especially the true retail community, if they want the first photonic ETF, they're going to buy it, whether it's a million dollars in AUM because of market maker seed in it or it's 100, you know, 100 billion, right, from true allocations.

It doesn't, it's not going to stop them. So, they've got like the posters all over the wall their room. They're like, I'm buying this. That's it. Forget. Right. Yeah. Yeah. So, so if you're on that like bleeding edge of innovation, first mover product, truly innovative, that conversation kind of goes out the window right now. Again, that's not a common scenario though, right?

Most people are not on that bleeding edge, the first mover. Most people are somewhere else. So then we start talking about specific numbers, 2050, and 100. And it actually bleeds into the second part of the question. So. we have found that 20 million is absolutely the number that seems to call it like grease the wheels for allocators. So this is like not science. It's not a scientific number. I didn't read it in a book.

It's not because it gets approved on platforms. It's just through experience, we find that the average RIA allocator who has flexibility can look at a product and say, that's probably a healthy product. on not taking a huge amount of risk by allocating to it. And it makes sense, right, because in the $20 million range for most product you're getting towards about break-even. So it probably means the product's going to be around.

It's not going to close down, right? And that's important to an allocator. So $20 million is the first number we tend to talk about. If you're not innovative and you don't have a clear path to at least 10, don't launch. Like that that's what we tell people, right? Just don't launch. The zero to 10 is you're in purgatory. it is painful to live there, and you can get stuck there forever.

And clear path to 10 isn't, oh, I'm going to run Google ads or something. No, a clear path. It's like I have this RIA that's funding it. Yeah, and P.S., you better have the list of RIAs that add up to $20 million. To get the 10. And then you hair cut it by 50%, and then you have a clear path to 10, right? because that happens more often than not as well. But 20 is when we've seen the wheels are greased.

It's just easier in an allocation. 50 and 100, right? So one, you're just extending that same story of like the product's looking better and more and healthier. So more and more allocators are going to be willing. But now you're also talking about the second part of question, Jeff. Like you're getting into platforms, you're getting into the opportunity to be approved. Right. So you can look at 50 and 100 million. Those platforms, right, the private wealth channels, the independent broker dealers, all the names that we all know, they all have, you know, hurdles. They all have certain thresholds. They all have different numbers. By the way, those numbers have tended to increase over time, unfortunately, right? So they're not going down. They're going up. And here's a real piece that nobody talks about. Okay. It's amazing. You've got an ETA. Right. It's it's crossed 100 million. You're now ready.

you're now capable of being approved at Morgan Stanley Private Well. First of all, that doesn't mean you're approved. It's not an auto approval on the vast majority of the platforms that really matter, right? So now you're just engaging with the gatekeepers. Okay, fine. You go through that process. You get approved. You celebrate.

You know, you're having a celebratory dinner. You're off to the races. Hold on a second. Just because you're approved on the platform, how are you actually getting your story? How are you getting your product in front of all of the things? thousands and thousands and thousands of advisors, right? And that work is, is, is totally different, by the way. It's different than hand-to-hand combat with RIAs. You know, you're talking about how they're insulated in their own ecosystem. Yeah. So that journey, that journey is long and slow

and you do a block by block. But obviously, if you're coming into this business and you're taking get seriously and you're planning for longevity, you're absolutely thinking about that all from day one, but you're not necessarily focused on getting approved at Morgan Stanley when you're out of million. You've got to get to 10. You got to get 20. You've got to get 50. You've got to get 100. And different moments in time, depending on the product, depending on the partner, will have it focus on different channels. And that's where we're here to help our partners do that, do that well. Is there any number where your auto end on those places? A billion, five billion? Not the ones that matter, right? There's some platforms that

But they're smaller, they're regional, whatever. You know, what is, again, going back to the retail side of things, you know, just going to use Robin Hood as the example, because it's probably, you know, the one that most people would insert into a conversation like this. Back to the direct-to-consumer. I mean, this industry is goddamn amazing, Jeff, right? You have an idea. You can, if you can move quickly and file that product, you can do that in days. you've got a 75-day review period with the SEC. So call it, you know, at its most rapid speed, 80 days, 80 days from idea to, in my words,

fully manufactured product, right? And then on day one, that product is ready to be bought by, you know, my word, the retail community, the Robin Hood is an example. That product is on the shelf. right? So when you think again, if you zoom out and you want to go to like a different industry if you're making like tomato sauce, right? Okay, it's one thing to like, I'm going to start a tomato sauce brand. I don't know how long it takes to make jars of tomato sauce, but I'm sure it takes time, right? But then you've got this distribution problem, which feels more of like the traditional

distribution problems of ETOs. But you have this huge, huge channel, right? And again, it's direct to consumer. So why have other industries like sneakers, right? Why have they just said, you know what? I don't want to deal with getting my sneakers in the stores of Walmart and Costco because it's too hard. It's too difficult. I have to spend money to do it. Instead, I'm going to stand up a website and do some viral ads or whatever they might partner up with an influencer, whatever they're doing, right? You got to get eyeballs and then you got to make it easy to buy. And that's the direct-to-consumer NIST that can be applied to ETFs. And when it's done well and you have a really cool product,

the opportunity is massive and only growing with time. So put a bow on it all for me. So I'm me. I want to start my ETA. Time, we just said time. Could be three to six months. I need to come with at least 10 million, you said. Well, again, to bang on the product,

if you've got a truly awesome idea and I can give me ranges. My team looks at and says that's an awesome idea. No problem. But yeah, more traditionally, let's say you at least have a really clear path to 10 million. I agree, Jeff. All right. More's better.

Yeah, but at least 10. What do I need in the bank account to make it, you know, my favorite line? No one doubts you're a pioneer. It's whether you're going to starve in the Rockies. Yeah. So without going to all the inputs into the answer, I would just say top line,

you probably want a couple million. I would take two to five and operating capital. How do I roughly get there? Well, one, I probably want you to be able to take a few shots on goal. If you only have capital for one product, I've seen, we've all seen, amazing product. You could be absolutely right. The product's amazing. You could still do it at the right time, but something works against you, right?

Some outside factors. So I don't really love to engage with one trick pony sort of like clients, right? Like you should diversify your shots on gold. So that's one factor. And then it's buying time. You know, the good news about ETFs is the ETF industry market tends to actually tell you pretty quickly if you have something on your hands or not. So that's good. But still, I mean, you certainly need to run the product for a year.

I would say only two years. So, you know, you kind of go three ETFs, two years running to really give yourself. than a healthy dose, you add some marketing costs, some direct costs, XYZ, you know, probably need that 2 to 5 million operating expense ballpark. You can scrape it together for less, but the odds that you're just going to burn it are much, much higher. And then what are some other metrics? Like you should have a list of 5,000 RAs or you should have like so many relationships or something like some like kind of fuzzy metrics of like, cool you've got all that money but if you don't have you know what kind of metrics could you put

around the sales it's some mix of all those factors right so you just like at the end of the day you got to have a well thought out plan that you can clearly articulate and we we know when when that seems to be the case and we know when it's not the case and it doesn't have to be one ingredient it doesn't have to be a specific mix of those ingredients but you've got to see you've got to see it And we've got very different, very, very different examples of massive success. But to me, it's all about eyeballs in some form or another and how are you going to get in front of those eyeballs? That could be hand-to-hand combat. It can be marketing.

It can be, you know, you look at somebody like Tom Lee that we work with who has a $5 billion dollar ETF business in under two years. Well, it's because he had a massive following already that was paying for his research, right? So it's a little case-by-case, but there's definitely only so many. there's probably 10 ingredients that kind of matter, right? It's just a mix of those ingredients that they think are going to be the driver of their success. Are you, you're sometimes like, who's going to sell this thing? And the quant guy's like me.

And you're like, yeah, I don't see it. Yeah, 100%. Right. It's so good. It's going to sell itself. Well, if you're not talking about like in the, to the tune of like a really significant outperformance opportunity, it's not going to do it. 100 basis points of outperformance over the S&P is not going to

get the job done. It's going to take more. All right, I got three quick things. And we'll wrap up for you. You mentioned you've gotten on all those platforms go out to celebrate. Where are you going to celebrate in New York? In New York, right now, I'm going to give you a really odd answer. You ready for this? Okay. Perfect. Yeah. You know, the underappreciated Houston's, which is just reliable and high quality.

And I dropped in there at like 9 o'clock the other day, grabbed the bar, and got sushi that was like probably nine out of ten times better than two times as expensive. Than nobu. Yeah. All right. That was for sure out of left field. And then I don't know if you can do this quickly, but prediction market ETFs, single stock future ETFs.

Those are kind of two new growth areas or you're seeing some people talk about those? Prediction market's getting a lot of attention. Single stock futures less so. On the prediction side, we're mostly going to wait. and see, right? I think this is a very appropriately scary topic for the regulators. Yeah. And I think they have already shown that they're going to take that very carefully. And as I honestly think they should, I love innovation. I love pressing the boundaries. But this is an example where if you, if you get prediction market ETFs out in the form of ETFs, well,

then it's like boundary lists, right? You can, yeah, you can have prediction markets on anything and we know what that could mean. So I think that's going to be slow going. We will see. So we're mostly going to be watchers there. We're going to learn as we engage with regulators and clients. But we have Jeff definitely engage with clients. We did a filing recently for one client. So we're a participant, but in a pretty mild sense so far. But like all things, it's going to be so fun. Like I just so fun to watch. And the example I've heard thrown around, right, is the like, will the Dems win the House or the Senate in the midterms or something? Like, and that's an ETF.

But then it confused me. If they don't, it goes to zero. Well, that's exactly the first thing. I started thinking about Jeff is like, you know, binary, right? I mean, so designing a product that can go to zero. And then can you be selling it all the way down? Like very outside of the like foundational base of what you would expect an ETF to do. And you have real questions there.

Like, I guess you could design that it doesn't go to zero, right? Maybe you only invest 99% so you never get to zero. There's all kinds of design elements and structuring things that you can start to think about. Yeah. But that's probably another hour. Yeah. Then the single stock futures, I look at that more as like obviously we could use as long as they become liquid, we could start utilizing them in an ETF. I don't, I don't see any regulatory boundaries there.

For firms like title, like that's great, right? It's just more tools in the tool chest that allow you to design things, give you more flexibility, give you more flexibility, give you more. more options right to express certain outcomes. So it'd be a really nice tool to have once they're liquid and, and, and ready to trade. Awesome. Any last thoughts before we let you go? I love you, Jeff. It's been a pleasure. I love working with your four.

All the good stuff, but listen, no, I think part in, parting thoughts are, I love this industry. Hopefully that came through a little bit. I truly think from an economic standpoint is an extremely attractive industry. And I will double down on my earlier statement. I'm going to say inning two or three, not beyond. And I will come back on and, you know, eat my hat. If I am dead wrong on that, I will, I will happily bet on it.

And I basically have, right? I basically bet my. Yeah. I like to seen you, right? Like, it's hard. You're drinking through a fire hose 24-7. Like, but that's the fun part. That's what you signed up for, right?

That's what we all signed up for. Jeff, you're doing the same. So it's all good. All right, ma'am. Great seeing you. Thanks, buddy. We'll talk soon. Thanks again.

Awesome. See you soon. Okay, that's it for the episode. Thanks to Gavin for coming on. Thanks to RCM for sponsoring. Go check out that new website. Thanks to Jeff Berger for producing. We'll be off next week.

Got to go out to Seattle for a brother's wedding slash baby thing. That's its own podcast story. But we'll see you the week after that. Peace. listening to the derivative. Links from this episode will be in the episode description of this channel. Follow us on Twitter at RCMaltz and visit our website to read our blog or subscribe to our newsletter at RCMALTS.com.

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