May 23, 2025 • 42 mins
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The wealth management industry is transforming through fragment consolidation, increased democratization of investment opportunities, and technology-enabled customization of client services. Today's episode of Skeptics Guide discusses wealth management with Chris Guarino of Alpine Strategic Partners.
• Private equity access is becoming more democratized, with quality boutique managers offering differentiated opportunities for smaller investors
• ETFs now outnumber individual stocks, shifting focus from stock picking to thematic investment approaches
• Technology enables "made-to-measure" investment solutions previously unavailable to all but the wealthiest clients
• "Analog is the new digital" - as technology handles routine tasks, human advisor interactions become more valuable
• Advisors typically lose clients during wealth transfers because of relationship/coverage issues, not investment performance
• Holistic coverage is increasingly important across client segments, with high-net-worth individuals expecting private banking treatment
• Inflation and housing costs present significant long-term concerns for investors, particularly those on fixed incomes
• Technology that enables proactive client engagement (like alerting advisors when clients frequently check portfolios) can enhance relationships
Alpine Strategic Partners LLC is an institutional consulting firm and is neither a broker-dealer nor a registered investment advisor. The views and opinions expressed by the firm are solely our own and are provided for informational purposes only. Nothing contained herein should be construed as an offer, solicitation, or recommendation to purchase or sell any specific securities or to engage in any investment strategy. All information is subject to change without notice and should not be relied upon for investment decision-making.
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Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Clem Miller (00:00):
until you're ready, if you want.
Steve Davenport (00:03):
Hello everybody , this is Steve Davenport, and
I'm here with Clem Miller as ourusual skeptic's guide to
investing, and we have a specialguest today the managing
partner of Alpine StrategicPartners, Chris Guarino.
Christofer has been in thisindustry for the last 20 years,
(00:23):
with time spent at Citi andprior to that with Strategas, as
an advisor to RIAs and othersin the industry who need to find
the right data, the rightanalysis, but also the right
system, staff and the rightpartners so that they can offer
(00:45):
the best opportunities to theirclients.
And I really think that Christoday will help us understand
what's on the edge of new firmsand what a firm's doing, and how
are they trying to consolidateand grow such that they can do a
better job servicing theindustry overall.
(01:05):
So I'd like to say welcome,Chris, and why don't you start
by just telling us a little bitabout what's in the you know
day-to-day, what do you do totry to help make advisors and
RIAs more successful?
Chris Guarino (01:24):
Thanks, Steve.
It's great to be on and you'vebeen a great friend and industry
colleague for the last over adecade now, so just wanted to
say again thanks for having meon and I appreciate getting to
share with you a little bitabout what I'm seeing in the
industry across the wealthecosystem.
I would say the biggest trendsare what I call fragment
consolidation Analog is the newdigital More holistic demand
(01:49):
from clients and clients lookingfor more democratized access
not only to investment productsbut also to a certain level of
servicing.
As you see, the family officeslooking more like institutions,
the high net worth looking morelike the ultra high net worth
client and the retail clientexpecting and looking for a more
customized experience.
Steve Davenport (02:10):
Do you really think that it's democratization
when we have the bestfoundations and endowments,
getting the first access to someof the alternatives in the
private space, and then iteventually moves down?
Does what moves down to thelower levels really equal the
quality of some of the higherend private equity and private
(02:34):
alternatives?
Chris Guarino (02:36):
I think there's some great smaller managers that
have emerged and what we'reseeing is the large institutions
really have to go with thelarge wealth managers and the
sorry the large wealth managershave to go with the large wealth
managers and the sorry thelarge wealth managers have to go
with the large private equityfirms because they have to be
able to apply it across such alarge number of clients.
It's hard for a big firm to beable to allocate to some of
these niche managers and there'ssome great niche managers out
(02:58):
there.
So I do think that you can getaccess to some differentiated
opportunities within privateequity if you're a boutique and
you find other great boutiquemanagers that come on as well.
Steve Davenport (03:10):
Yes, I've seen some great boutique managers and
I think it's true.
It's just, if I'm an investorsitting at home right now, I'm
thinking, well, where are the?
How do I get them?
Where's you know where?
How do I determine what's agreat boutique manager and how
do I know that this isn't justI'm the first person in line for
these dollars, and just becauseI put my money in doesn't mean
(03:34):
they're a boutique manager, doesit?
Chris Guarino (03:36):
No, not necessarily.
And I think it looks a lot likewhat you saw, you know, 10, 20,
30 years ago with the hot IPOthat people wanted to be with
the big firms because they gotaccess to the hot IPOs because
they had an investment bank.
Now what we're seeing is firmsare staying private for longer,
and so the private managers areessentially getting their
clients access to companies thatwould have been at the IPO
(03:57):
stage and they're not IPOingeither ever or not until they're
a much larger cap company thanthey would have 10, 20, 30 years
ago.
So it's a lot like when peopleused to have to trust whether or
not to buy a stock on an IPOwhen their broker came and
called them on it, versus today,where you're trusting more
investment managers to go outand pick these managers for you
in a lot of cases, rather thanthe traditional brokerage model
(04:19):
of the past.
Steve Davenport (04:21):
And how do you think we are?
When you look at the industrytoday versus 10 years ago, how
would you characterize how we'veimproved and maybe how we've
not improved, um what we'reoffering people?
It feels to me like, the mediaand the imagery of CNBC flashing
(04:44):
what stock is up or down todayhas never been the best way to
motivate investors and itdoesn't seem like it's changed
much overall.
I mean, how do you feel aboutmedia and the way that
investments are offered topeople?
Do you think we're gettingbetter?
Chris Guarino (05:03):
Well, I haven't had any tacky drivers or Uber
drivers pitch me stocks latelyand I feel like that used to be
the case, where there was a lotmore stuff.
You know, people wanted to knowthe hot new thing and they
wanted to go out and buy a stockin their own personal account,
and I think now we have gottenbetter at people being a little
more patient and not justchasing individual stocks better
(05:26):
people being a little morepatient and not just chasing
individual stocks?
Steve Davenport (05:33):
And how do you feel about the selling solutions
or products versus actuallycreating what's right for a
client?
Do you think that people arestill I mean, is passive too
massive?
Is there a reason to be alittle more careful about not
owning everything and trying toown the things that are better?
Or do you think that activemanagement is dead?
Chris Guarino (05:53):
I don't think active management is dead.
I think that technology ismaking it easier for firms to
provide a more made-to-measureservice for clients where they
have their best ideas and theywant to be able to apply that
across multiple client accountsclients where they have their
best ideas and they want to beable to apply that across
multiple client accounts andit's something that in the past,
had been harder to do, whereperms had to mainly allocate to
mutual fund managers.
Now you're seeing more of theseadvisors being able to pick
(06:14):
ETFs and pick individual stockbaskets or allocate to SMA
managers and provide notnecessarily a custom experience
for each individual client, butcertainly something that was a
little more made to measure thanthey had access to in the past.
Steve Davenport (06:27):
So you'd say we're getting better as an
industry.
Chris Guarino (06:31):
I would say we're getting better in general.
If you look today, there's moreETFs than there are stocks.
So there also is presented thisargument of should you be
picking individual stocks?
You should be picking more ofthe thematic trends and picking
individual ETFs, and do youactually have more opportunity
and more choices if you go withthe 5,000 plus ETFs that are out
there from which to choose orthe 4,000 and change stocks that
(06:53):
there are to choose?
Steve Davenport (06:55):
Doesn't that get back to?
Every time you add anotherlayer or another provider,
you're going to add another fee.
Chris Guarino (07:02):
But you have seen a lot of fee compression.
So it's about whether you'regoing to have the trading
turnover of buying eachindividual security or you're
going to be allocating toanother layer of manager in the
middle.
Also, the ETF fees are a lotlower than the fees had been on
a lot of the mutual funds in thepast and the SMA managers are
also providing that secondarylevel of analysis and security
(07:23):
selection and in a lot of casesthose SMA managers aren't
charging the same rates that youwould have seen from things
like some of the structuredproducts and mutual funds in the
past.
Clem Miller (07:37):
So I've got a few questions.
Steve, may I jump in here?
Sure, sure.
So how do you get clients to bea little bit tempered on the
themes?
I know sometimes clients canget very excited about a
particular theme, for example AI, and how do you get them to be
(08:00):
a little bit more tempered aboutthat, more realistic about that
?
Chris Guarino (08:05):
So I find that a lot of wealth institutions may
chase some of the trends on theperiphery but a lot of them
don't move client accounts fromone strategy and one theme whole
hog into another.
I think part of that'sobviously the taxes.
People don't want to sell outof one thing unless it's really
not working, because the taxthat can be so impactful that it
(08:26):
really is making people want totake more of a buy and hold
perspective.
Clem Miller (08:31):
Is that true also of the ESG theme?
Chris Guarino (08:34):
The ESG theme is funny because I feel like you
had a layer of what peoplecalled greenwashing occur, where
strategies didn't necessarilychange but the marketing did.
And even if ESG has fallen awayas a big headline topic, it's
still something that's reallyimportant to a lot of
foundations and endowments andsome of the ultra high net worth
(08:54):
families that are thinking moreabout how their money is being
invested from an impactful wayrather than just a returns
perspective.
Clem Miller (09:01):
Do you think that the political environment that's
sort of shifting away fromgreen and ESG, has affected what
people are interested?
Chris Guarino (09:10):
It certainly has from a returns perspective.
If people were saying, okay,there's a lot of momentum around
this trend, we want to investin the momentum versus we want
to invest in the underlyingtrend itself.
If the momentum has moved away,then people who are looking for
where they're seeing moreupside may look to other themes
today than they did in the prioradministration or in the prior
(09:31):
part of the economic cycle.
Clem Miller (09:34):
What trends do you see in SMAs, especially some of
the smaller SMAs?
You know minimums, the abilityto customize.
You know what do you see inthat space?
Chris Guarino (09:45):
There's some technology out there that's
making the ability to customizeyou know, what do you see in
that space?
There's some technology outthere that's making it easier to
customize and easier for firmsto manage SMAs and UMAs at scale
than there had been in the past.
So I think we're going tocontinue to see more of these
pop up and people looking tohave the unwrapped version of
some of these solutions or atokenized version of some of
these strategies coming down thepike.
The other piece of this isobviously that you've got
(10:11):
clients that really can'tallocate to SMAs because the
account is not large enough.
So if you can have an ETFportfolio, it allows for another
layer of customization withoutas many individual Q-SIPs in the
client account.
Clem Miller (10:19):
Okay, what about this?
I don't know.
It sounds kind of new, thiswhole indexing trend, sort of
indexing without having to do itin an ETF.
Chris Guarino (10:34):
Yeah, there's some nice overlay tools that are
out there.
So, especially firms that dohave an investment policy
statement that restricts accessto certain verticals or certain
companies or certain activitiesrestricts access to certain
verticals or certain companiesor certain activities there are
groups that are out there thatallow you to screen out for some
of those names or to be able todouble down on things.
There's also new technology outthere on the AI side that's
making it easier to do portfolioconstruction using natural
(10:55):
language processing, to come upwith your factors and themes, to
screen through indices and thenturn those into tradable
baskets.
But again, it also comes downto what's suitable for the
client, and does the client haveenough assets in their account
to actually be able to allocateacross 50 or 60 or 100 different
Q-SIPS?
Clem Miller (11:12):
Okay, and since you speak about factors, you know
that used to be a very hot thing.
Do you think it's still hot ordo you think it's sort of fallen
by the wayside?
Chris Guarino (11:24):
I think it's still hot.
I think that we're looking atfactors not just from a quant
perspective now, and I thinkwe've always looked at factors
in one way or another.
If you took a look at the oldmutual fund grids in the past,
you had the value versus growth,you had the more aggressive
versus more conservative, youhad the yield components.
(11:45):
We've always looked at some ofthese factors and it had been,
in the past, part of our mutualfund screening process.
That then was applied down tothe individual securities, and
now I think we're still seeingit in a more thematic way and
technology is making it easierto do it with more natural
language than having to do asquantitatively driven, a process
(12:05):
that restricts you to justcertain factors that are
available in a grid or through apivot table.
Clem Miller (12:10):
Right, because I recall you know you can get
pretty granular when it comes tofactors.
I think the last time I lookedat a Bloomberg they had
something like 60 or 70different factors that you could
play with, which is kind ofcrazy if you think about it.
Chris Guarino (12:26):
And then you're also seeing the shades in
between.
So instead of using quintiles,maybe it's using deciles and
then people looking for amomentum bend without being a
full momentum trade or thingsthat have a yield bend without
being a full high yield stockportfolio construction theme.
Clem Miller (12:45):
Do you find that investors are becoming more
defensive lately, or moreaggressive, or just the same as
they've always been?
Some are aggressive, some aredefensive.
Chris Guarino (12:57):
I think a lot of people kind of held their breath
the last three months.
I think there was maybe alittle bit of chasing going into
the end of last year and thebeginning of this year with the
skepticism about what way thingswere going to go, and the only
thing that seemed certain wasthat there was uncertainty, and
so I think getting closer tosome level of certainty one way
(13:18):
or another is helpful for people.
But we've ended up in this sortof stop and go traffic for the
last few months and I think alot of firms have tried to just
stay the course or trim fromthings that they felt had
overreached and buy things thatthey thought were looking cheap
from a longer term perspective.
Clem Miller (13:34):
Okay, and then my last question for now, okay is
you know if you mentioned youwere talking about private
equity with Steve, and you knowwhat's your thought about?
About investors, especiallysmaller investors, buying the
private equity stocks as opposedto taking a private equity
(13:56):
position, in other words, buyingBlackstone, buying Apollo,
buying Aries.
Why wouldn't you buy those,since obviously, the managers of
those companies are going toown their stock?
Chris Guarino (14:09):
It's a great question.
Alpine works with some privateequity companies that are
involved in the wealth ecosystem, either investing in FinTech
and or wealth companies, and Idon't want to call out any
individual names in terms ofpurchases, but I would say that
you're seeing the potential ofinvesting in the fixed income
managers that are doing privatecredit but are a public listed
(14:29):
company.
Or you're seeing just like whenpeople wanted to invest in gold
but there wasn't a GLD optionout there in the past and they
didn't want to go buy physicalgold, so they bought the gold
miners.
So it's a way that you can doit with your equity allocation
and it's a way you can do it ina scalable way across client
accounts, as opposed to thosemore mass affluent clients who
really don't have access to theprivate equity directly, so you
(14:52):
can only get access through theproxy.
Clem Miller (14:54):
So you just mentioned gold, which leads me
to ask you I happen to right nowhold a lot of gold in my
portfolio, which has done quitewell over the last few months,
and so do you have a lot ofinvestors who are doing likewise
.
Chris Guarino (15:14):
Gold has proved to be the longest running hedge
against inflation volatility.
It does better againstinflation volatility than just
inflation historically, so Ithink you will see more people
continue to see that as a moredefensive part of their
portfolio.
The pushback to gold right nowis that you're also seeing yield
(15:35):
on higher rated securities andgovernment debt so high that you
want to buy an asset that isn'tyielding anything but is a good
protection and store of value,versus buying US treasuries
where you're going to get paid4% or 5% on a US treasury.
Clem Miller (15:52):
And of course I was just going to say, and of
course treasuries are.
There's a lot going on in thebond market right now.
Steve Davenport (16:03):
Yeah, I mean, I'm still becoming more and more
skeptical about treasuries andwhat could happen if.
China were to do something inTaiwan with a blockade.
I mean, this has been a thoughtI've had and I don't know how
you feel about the idea that,since we've kind of weaponized
(16:25):
the SWIFT system with what Bidendid with Ukraine and Russia and
capturing assets that were inthe system, do you think that we
would ever do something withour treasuries?
That you know, if a nation wasdoing something and we didn't
like, aka China, that we wouldnot pay the coupons on the bonds
(16:47):
because we don't like what thecountry is doing?
Because we don't like what thecountry is doing, do you see the
treasury system staying asintact as it is as the default
value of what most peopleconsider?
Chris Guarino (17:01):
to be safety.
Being the reserve currencycomes with certain blessings and
a certain amount of curses toit as well.
I think it depends on if youlook at your fixed income as a
tradable asset class or as a buyand hold, because if you mark
to market, may the portfolio goup or down.
That's one thing versus if youplan on buying it as just a
store of wealth, and it'ssomething that provides yield
(17:22):
and your intention is never tosell it.
Would the US government defaulton a foreign actor during a
time of war?
Potentially, but are they goingto default on the American
bondholders?
That seems like it's very, very, very, very, very, very very
unlikely.
Steve Davenport (17:40):
Right, but wouldn't the volatility that
would create if certain actorswere denied payment?
Wouldn't that volatilitycompletely break what's been the
image of something that iscomplete safety?
Chris Guarino (17:53):
And I think that's why it's very different
if you're a macro hedge fund andyour trading rates versus if
you're a retiree that's lookingfor a buy and hold investment
that may again go down on paper,but they're just there to clip
that coupon.
Steve Davenport (18:09):
I see, chris, that you're also a trustee for
Mount St Mary College, and Ithink about different locations
of where asset class ideas andinvestment ideas get discussed.
How do they invest versus theaverage investor in terms of you
(18:33):
know doing things with moreless, you know less liquid
alternatives, or do they do morethings with stuff that's
related to their mission orvalues?
How do you see the differencesacross those two investors?
Chris Guarino (18:50):
I can't comment on anything that the portfolio
is doing directly on a granularlevel, but I can say from a
thematic perspective.
It goes back to what Imentioned earlier, which is some
of these foundations andendowments and religious groups
have an investment policystatement that restricts
investments that go into thingsthat are contrary to the mission
or the values of anorganization, and those may be
(19:11):
different from one institutionto another.
You could have one that has tobe Sharia compliant versus one
that has to follow the Catholicbishops guidelines versus one
that has a customized investmentpolicy statement to meet a
certain family's objectives fortheir own endowment or
foundation or charitable trust.
So again, I think this goesback to some of the larger
(19:33):
long-term investors who reallyhave an infinite time horizon.
Endowments by their nature aresupposed to last for forever.
Family trusts and endowmentsare also supposed to last from
one generation to the next, tothe next to the next.
So I think that perspective inthose investments, both from a
duration perspective and from aninvestment selection
(19:56):
perspective and from an assetallocation construction
methodology, is different fromwhat you may see from somebody
who's 22 years old and lookingfor growth because they're not
planning on retiring and theyneed enough money that's going
to be there in 40 or 50 yearswhen they are.
Money that's going to be therein 40 or 50 years when they are,
versus an endowment that'slooking to perpetually have
resources available foractivities or a family trust
(20:19):
that's looking to make sure thatassets are preserved for one
generation to the next and thatmaybe an underlying asset, like
a home or a preserve, is alsomaintained and never has to be
sold or a preserve, is alsomaintained and never has to be
sold.
Steve Davenport (20:39):
You think what's happening with Harvard
and these colleges and thecurrent administration is
setting a dangerous precedentfor how the long-term mission
can be maintained will alsosatisfy short-term reactions to
government to what's happeningon campuses.
It feels like this is we'regoing down a path that we've
never gone down before.
Do you think it's concerningfor those foundations and
(21:02):
endowments?
Do you think we could see more?
You know people challengingwhether they deserve the right
to have their non-.
Chris Guarino (21:13):
So the nonprofit status comes up, obviously in
part because we're overhaulingthe tax code.
So anytime you really start totake apart the tax code, you
start to look at all of theexempt organizations and
deductions.
So it's part of that process.
It's natural that somethinglike this would come up when
you're doing something that issuch a deep overhaul of the tax
(21:35):
code.
I'm not sure if it in the longrun, changes some of the things
of these universities that havebeen around for three or 400
years.
Does it impact certain thingslike grant funding?
Maybe does it mean that theyhave to tap the endowment for
certain programs that had beengetting a government grant in
the past?
That's down to each individualorganization to have to sort out
(21:58):
and at the end of the day itcomes down to are people going
to want to go to theuniversities themselves on one
side or the other?
Are they going to be a negativereaction?
Is it going to make people feeleven more so that they want to
go to a certain universitybecause of a contrary view as to
what's happening, or is itgoing to make somebody not want
to go to a university becausethey agree with some of the
(22:20):
things that are coming out ofthe White House?
Steve Davenport (22:24):
When we sit down with the guests, we usually
try to summarize and say wheredo we feel we are and where do
we feel we're going in the nextyear or so.
It's not always easy to predictsix months, two months, three
months, and certainly today isone of those examples where it
seemed like everything had gonegreat.
(22:46):
Trump's getting the billthrough the House was a big win,
and now we turn around andstart to criticize NVIDIA and
Apple and others and you realizethere are no sacred cows
anymore.
Can you give us you know whatyour perspective is for the next
six months to a year and anyideas you think that are not
(23:09):
being completely listened to orpromoted by the mainstream media
, Because we like to think ofthings outside of whatever.
If everyone in the boat is onone side, we think there's
opportunity on that other sideof the boat.
Chris Guarino (23:27):
Yeah, I feel like we're probably going to
continue to be in this sort ofrange bound market from a macro
perspective.
Whether that range is between$5,500 and $6,000 on the S&P or
$5,000 and $6,000 on the S&P,depending on some of the factors
that are driving volatility,remains to be seen.
But I think, as we've tried toapproach $6,000 again, we've
(23:47):
been turned away a little bit.
I think part of it is investorslooking for an excuse to pull
back versus actually seeing somedramatic change from crossing
one psychological line toanother.
The longer term outlook in someways is harder to break right
now than I think, the short term.
I think short term we stillstay in this back and forth
(24:08):
until we have resolution one wayor another.
The thing that I think isconcerning from a longer term
perspective is just the cost ofliving globally.
We're seeing issues in Europe,we're seeing issues in the US
and Canada where the cost ofliving, and especially the cost
of housing, is having somepretty strong impacts, I think,
on people's productivity andtheir will to work and the idea
(24:29):
of how much money people have tohave saved with demographically
so many of those entering theretirement part of their life
when they're living on a fixedincome.
If that fixed income can't keepup with the inflation
volatility, what does that meanfor society and governments and
capital markets?
Steve Davenport (24:47):
So does that lead you to like inflation index
notes and some of that space alittle more?
Or do you feel like REITs andequities are the best solution
when you really think aboutinflation, because they tend to
keep up?
Or how do you feel personallyor I guess, and professionally,
(25:12):
about the alternatives thatpeople are seeking to get
through this uncertainty?
Chris Guarino (25:18):
Personally, I feel like your biggest hedge
against inflation is to borrowin today's dollars to pay back
in tomorrow's and not to getoverextended on your leverage.
So if the income doesn't keep upwith the rest of the cost of
living, you've got to be able tocover whatever your leverage is
.
But being of the mindset thateverything has to be purchased
(25:38):
for cash today, when maybe thatcash is going to be worth less
in five or 10 years.
If you can appropriately take acertain measure of risk on
borrowing today, I think thatthere's fewer opportunities for
us to get out of the debt levelswe have than to inflate our way
out.
And I think that we've seenfrom a demographic perspective.
(25:59):
You still do have growingdemographics in the United
States.
So if you're a US investor andyou're looking, the millennials
and the Gen Z generation arestill larger than the
generations that came before,versus if you're in Europe or in
your other parts of the world,where the demographic view is
different and you may have adifferent perspective and your
opportunities and your risks arealso been different.
Steve Davenport (26:22):
That sounds great.
Clint, do you have any otherquestions for Chris or any ideas
you want to close on?
Clem Miller (26:28):
inflation.
Yeah, I got a few questionshere, not on inflation per se,
but do you find that people,that investors, are more
skeptical of sort of traditionalasset allocation I mean I don't
mean necessarily bond stocks,alternatives, I mean like within
(26:50):
stocks, you know, like domestic, international, emerging
markets, you know do you findthere's some more greater
skepticism than there was in thepast about, about asset
allocation?
Chris Guarino (27:02):
I find that investors haven't necessarily
changed their viewpointsdramatically.
I think some have changed howthey invest, from bringing some
more of the investments in-houseor changing from a 40-act
traditional closed-end oropen-end mutual fund to
utilizing ETFs as more of theirportfolios for their clients
(27:27):
clients.
So I think some of the toolsmaybe have changed, but I think
people's investment processhasn't necessarily changed that
much.
People are looking to add morealternatives, or those who have
alternatives are looking forways to get access to them
without paying as many layers offees and with more
customization and liquidity forclients.
And then there's the balance oftrying to invest in an
inherently illiquid asset with amore liquid structure.
So there's changes again, Ithink, to how we're investing
(27:51):
from the building blocksperspective, but I think the
themes and the underlying focusthat investment firms tend to
have necessarily hasn't changed.
If you're looking for more of agrowth at a reasonable price
type of investment opportunityand you had picked your favorite
active fund managers and nowyou've gone to using those same
managers in SMA format or buyingtheir ETFs for clients instead
(28:15):
of buying their mutual funds,your process may not have
necessarily changed as much inpractice as it did on paper.
Clem Miller (28:24):
Are you okay?
So another question this is atough question.
I think it's more of a not aMac.
It's a macro question and abehavioral question, which is do
you think that there, thatinvestors are becoming more or
less charitable over time?
Chris Guarino (28:46):
charitable over time?
Do you mean individualinvestors?
Clem Miller (28:49):
Yeah.
Individual investors, yeah, Imean, obviously there are
charitable organizations andthey're always charitable.
But I mean, are you seeing,when it comes to individual
investors, are you seeing themmore interested in preserving
wealth for future generations?
Are you seeing them moreinterested in preserving wealth
for future generations or do yousee them becoming more or less
(29:15):
willing to sort of give away alarge portion of their wealth to
charity?
Are people becoming morecharitable or less charitable is
what I'm getting at.
Chris Guarino (29:22):
So it's a good question.
I don't work with anyindividual investors, but what
I'm seeing in the data and whatI'm getting by proxy through
working with wealth institutionsis that people still see that
as part of their trust in thestate's planning.
I think that people are tryingto do some of the giving while
they're still alive and they cansee the benefits, whether
that's intra-generational, wherepeople are giving money to
(29:44):
their children to help purchasea home.
If you look at the data rightnow, the generation that's
buying secondary homes today isessentially the same generation
that was buying secondary homes30 years ago.
As part of that co-purchasingwith their children.
As part of that, they'relooking to buy a home in another
market and rent out theirexisting home because they don't
want to give up the mortgagerate they have on their existing
(30:08):
home.
So they buy the second one forcash and they can use the
primary home either as asnowbird address or as a way for
them to get incremental yieldby renting it out.
So I think what you're seeingis people want to be charitable,
but this idea of charitybeginning at home, I think is
resonating more with some peoplethan gifting to some of the big
(30:32):
institutions or gifting to moresmall, local charities.
People want to see their moneyhave impact.
So I think also people arelooking more deeply into how the
dollars are actually spentrather than feeling like they
have a lot of discretionarydollars to give away.
So they don't necessarily lookat each individual penny and
where it goes as closely.
I think technology has made iteasier to look at that today and
(30:54):
I think that it's allowing formore charity at a micro level
where people will do a GoFundMeto help somebody's dog and I
think people still want to goand help and do those little
activities.
So people may do more smallactivities but maybe not do as
many medium-sized activitiesversus the large activities are
always going to happen.
You know, being on the frontpage of the Boston
(31:18):
Philharmonic's list of donors,that group's going to have the
elasticity to still give duringdifferent times.
But you know, the second andthird page may start to move to
the fourth and fifth page forthe smaller donations and the
smaller donations that may go tomore close at home activities.
So the cash to help out aneighbor or being able to again
(31:39):
help a friend whose dog needssurgery and do a GoFundMe or
just a Venmo to somebody.
I think you're seeing a lot ofthose little activities that
don't get picked up in the bigdonor data.
Clem Miller (31:50):
So I have two additional questions.
I know we have to close in afew minutes, but you touched a
little bit on AI earlier and I'mwondering what you know.
Where do you expect the use ofAI to be?
And I'm wondering where do youexpect the use of AI to be in
the future and sort of relatedto that question is what's the
(32:12):
area that when you look atadvisor offerings, where are the
gaps?
What?
Chris Guarino (32:23):
are advisors not offering that you think would be
valuable?
Yeah, I think more clients arelooking for holistic coverage.
I think the high net worthindividuals are looking to be
treated more like private bankclients of the past and I think
the more mass affluent clientsare used to a lot of things
being customized for them andthe rest of their lives and
getting content and informationfor free.
So now they're looking for thatsame level of customization and
(32:44):
impact from their advisor, evenif they're a smaller client.
I think that's where technologyenables firms to be able to
cover clients more holistically,cover clients more granularly
and more customized than theywould have necessarily been able
to do in the past and at betterscale.
But I also feel like the otherside of that is what I call
analog, is the new digital.
(33:04):
Other side of that is what Icall analog is the new digital.
It makes the human interactioneven more important because if
technology takes away so many ofthe more redundant tasks and
commoditized tasks and if it'sable to better empower advisors
and client coverage people to beable to serve their clients
better by prompting them orproviding more granular data or
providing access to ways oftracking client engagement
(33:26):
across their investments who'sbeen looking at their portfolio
today.
And maybe you reach out to theclients that have opened up
their account five times thatday because they're a little
worried.
Or it alerts advisors to whentheir client has a large cash
deposit, without the clienthaving to call and say, hey, by
the way, I just sold my house.
Maybe now they get a promptthat says, hey, this cash went
(33:46):
in.
Let's think about how to investthat for the client before the
client reaches out to them.
And I think that proactive levelof service is really more
important, necessarily, thanreturns, because what I've found
is advisors seem to loseclients more than they do on the
investment side, from theircoverage side.
So whether that's when moneychanges hands from one
generation to the other, or whenthe head of the household
(34:09):
passes away and then the newhead of the household maybe
doesn't have the same level ofengagement or relationship with
the advisor that their spouse orother significant other may
have had, or it's a parent ontothe children and the children
haven't had that relationshipwith the advisor for the last 20
, 30 years that their parentsdid.
So it's that relationship leveland the coverage level that, in
(34:33):
a lot of ways, is where peopleare having impacts.
So I think technology is goingto help not only on the
investment side from portfolioconstruction and analysis and
security selection but I thinkthe technology is really going
to help enable advisors andclients to have access to better
information about their wealthand better cover those clients.
Clem Miller (34:48):
That sounded great, chris.
Yeah, I got one last question,steve.
No, I think we probably coveredthat question.
So, yeah, okay, I'm good, steve.
All right, I was getting alittle skeptical.
No, actually, actually no, no, Ido have one more question.
(35:08):
I do have one more question,and that is I always have
questions, but this will be mylast question, I promise Chris.
You know you look around andthere's a lot of information
that's out there.
Steve talked about you knowwhat.
You know what might be on CNBCand, and obviously, different
client, different advisors, uh,put out you know different kinds
(35:33):
of information.
Um, you know it used to be along time ago as newsletters.
Today it's like you know theysend out.
You know missives every week orevery month or every quarter,
with lots of information, lotsof discussion about the Fed,
about what's going on with youknow, last week's market.
(35:55):
I mean, do you think that?
Do you think that individualsfind this or advisors find this
kind of information valuable, orare there?
Is there, is there this kind ofinformation valuable?
Or is there some kind ofinformation that would actually
help advisors and individualsmore that they're really not
(36:15):
getting right now?
Chris Guarino (36:17):
So the macro talking points are still, I
think, important because peopleare always going to want to talk
about what's going on intoday's world and how that
impacts their investments.
Even if they have a 30-yeartime horizon, they want to know
how tomorrow's portfolioperformance may be different
from yesterday's.
So I think on the macro side,you're still seeing people who
go to the front page of the WallStreet Journal and they watch
Bloomberg and CNBC or they atleast have it on in the
(36:39):
background in the office andthey go through and probably
have alerts set up, eitherthrough some of the more
AI-enabled companies that areputting together morning notes
for people for internal use orprivate use, or even helping
them to create notes to send outto their clients on a more
frequent basis than if they hadto build everything, every word,
from scratch.
And the traditional forms ofmedia still do hold sway.
(37:01):
People go back to opening upthe Wall Street Journal and it
may be on an iPad as opposed tobeing in physical form, but I
still feel like some of the moretraditional ways of getting
access to media and informationare important.
I think clients in general notjust in the newer generations
are looking to technology, butpeople now, just at any age, can
(37:21):
open up their app and take alook and see what their assets
are doing on a daily basis andthey don't have to wait for that
quarterly statement to comefrom their advisor.
But it also means the advisormay have to stay on top of
things intra-quarter.
I had three meetings this weekwhere firms were talking about
wanting better technology to beable to support their client
statement reporting and otherclient communications around
(37:44):
their individual clientperformance, rather than being
an asset manager who is puttingtogether their monthly reports
and putting that up, or you'reseeing the performance on a live
basis for the publicly tradedETFs and mutual funds.
What I'm seeing is you've gottechnology that's out there
that's able to help support someof those firms.
(38:05):
Different technology supportsdifferent firms depending on
their client base and theirinvestment approach, so one
firm's needs may be differentfrom another.
I always use the analogy ofit's like a restaurant what you
need to have a steakhouse isdifferent than what you need to
have a sushi restaurant.
So what one wealth firm needsfor their clients is different
than what another firm may need,and the firms that I spoke to
this week ranged from a billionin asset center management to
(38:28):
over 500 billion in asset centermanagement with clients around
the world.
So it's not just somethingthat's impacting the big firms
that have thousands of clientsand hundreds of advisors, or
thousands of advisors, versusthe boutiques that may have a
hundred clients and only four orfive people.
It's really impacting firmsacross the industry.
Clem Miller (38:46):
Okay, thank you very much, chris.
Steve Davenport (38:49):
Thanks, Chris.
Chris Guarino (38:51):
Thanks, Steve.
Steve Davenport (38:52):
I guess I just want to give you one last chance
.
Is there anything about AlpineStrategic Partners that you
think we need to understand, orthe general community needs to
understand, in terms of whereyou're positioned and where your
greatest opportunity is?
Chris Guarino (39:13):
Sure thanks.
You know, I founded Alpine twoand a half years ago because I
wanted to have an openarchitecture firm that took the
independence of a traditionalbusiness consultant and brought
the sort of solutions mindsetyou get from the sell side of
the industry to come in andprovide advice, services and
solutions through third-partypartners to be able to help
firms to manage and grow theirbusiness.
(39:34):
We do things like successionplanning and M&A advisory for
more episodic opportunities thatfirms go through once in a
generation.
We also do things like helpfirms with their technology
resources.
Where are they staying in touchwith the latest that's out
there to help a firm like them?
So it's great to work withfirms across the wealth
ecosystem fintech companies,rias, banks, broker-dealers and
(39:57):
firms of all sizes because weget a great cross-section of
what's going on across theecosystem rather than being so
narrowly defined into one sleeve, and because we're open
architecture, we can look forthe right solutions, partners to
take our advice and turnstrategy into reality, versus
only being able to offer anin-house suite of products.
Steve Davenport (40:15):
Thanks, chris.
I think your insights are greatand I think that we need always
to be looking around at whatour industry is doing well and
not doing well, and then how dowe help incorporate in our own
business, you know, the thingsthat are going to satisfy
clients and ultimately deliverwhat we can in return, but also
(40:36):
in a risk adjusted way that'sgoing to satisfy everyone.
So thanks for listeningeveryone on Skeptic's Guide and
we really appreciate yoursupport and we want you to send
us a like or any questions youhave.
We are going to be working onmore and more interviews as we
go forward, because we find thatthere's so much going on in
(40:58):
this industry that we need toget more and more experts in to
help us understand it.
So thank you everyone and Ihope everyone has a great
Memorial Day weekend and we lookforward to working with you
again soon.
Bye-bye.
until you're ready, if you want.
Steve Davenport (00:03):
Hello everybody , this is Steve Davenport, and
I'm here with Clem Miller as ourusual skeptic's guide to
investing, and we have a specialguest today the managing
partner of Alpine StrategicPartners, Chris Guarino.
Christofer has been in thisindustry for the last 20 years,
(00:23):
with time spent at Citi andprior to that with Strategas, as
an advisor to RIAs and othersin the industry who need to find
the right data, the rightanalysis, but also the right
system, staff and the rightpartners so that they can offer
(00:45):
the best opportunities to theirclients.
And I really think that Christoday will help us understand
what's on the edge of new firmsand what a firm's doing, and how
are they trying to consolidateand grow such that they can do a
better job servicing theindustry overall.
(01:05):
So I'd like to say welcome,Chris, and why don't you start
by just telling us a little bitabout what's in the you know
day-to-day, what do you do totry to help make advisors and
RIAs more successful?
Chris Guarino (01:24):
Thanks, Steve.
It's great to be on and you'vebeen a great friend and industry
colleague for the last over adecade now, so just wanted to
say again thanks for having meon and I appreciate getting to
share with you a little bitabout what I'm seeing in the
industry across the wealthecosystem.
I would say the biggest trendsare what I call fragment
consolidation Analog is the newdigital More holistic demand
(01:49):
from clients and clients lookingfor more democratized access
not only to investment productsbut also to a certain level of
servicing.
As you see, the family officeslooking more like institutions,
the high net worth looking morelike the ultra high net worth
client and the retail clientexpecting and looking for a more
customized experience.
Steve Davenport (02:10):
Do you really think that it's democratization
when we have the bestfoundations and endowments,
getting the first access to someof the alternatives in the
private space, and then iteventually moves down?
Does what moves down to thelower levels really equal the
quality of some of the higherend private equity and private
(02:34):
alternatives?
Chris Guarino (02:36):
I think there's some great smaller managers that
have emerged and what we'reseeing is the large institutions
really have to go with thelarge wealth managers and the
sorry the large wealth managershave to go with the large wealth
managers and the sorry thelarge wealth managers have to go
with the large private equityfirms because they have to be
able to apply it across such alarge number of clients.
It's hard for a big firm to beable to allocate to some of
these niche managers and there'ssome great niche managers out
(02:58):
there.
So I do think that you can getaccess to some differentiated
opportunities within privateequity if you're a boutique and
you find other great boutiquemanagers that come on as well.
Steve Davenport (03:10):
Yes, I've seen some great boutique managers and
I think it's true.
It's just, if I'm an investorsitting at home right now, I'm
thinking, well, where are the?
How do I get them?
Where's you know where?
How do I determine what's agreat boutique manager and how
do I know that this isn't justI'm the first person in line for
these dollars, and just becauseI put my money in doesn't mean
(03:34):
they're a boutique manager, doesit?
Chris Guarino (03:36):
No, not necessarily.
And I think it looks a lot likewhat you saw, you know, 10, 20,
30 years ago with the hot IPOthat people wanted to be with
the big firms because they gotaccess to the hot IPOs because
they had an investment bank.
Now what we're seeing is firmsare staying private for longer,
and so the private managers areessentially getting their
clients access to companies thatwould have been at the IPO
(03:57):
stage and they're not IPOingeither ever or not until they're
a much larger cap company thanthey would have 10, 20, 30 years
ago.
So it's a lot like when peopleused to have to trust whether or
not to buy a stock on an IPOwhen their broker came and
called them on it, versus today,where you're trusting more
investment managers to go outand pick these managers for you
in a lot of cases, rather thanthe traditional brokerage model
(04:19):
of the past.
Steve Davenport (04:21):
And how do you think we are?
When you look at the industrytoday versus 10 years ago, how
would you characterize how we'veimproved and maybe how we've
not improved, um what we'reoffering people?
It feels to me like, the mediaand the imagery of CNBC flashing
(04:44):
what stock is up or down todayhas never been the best way to
motivate investors and itdoesn't seem like it's changed
much overall.
I mean, how do you feel aboutmedia and the way that
investments are offered topeople?
Do you think we're gettingbetter?
Chris Guarino (05:03):
Well, I haven't had any tacky drivers or Uber
drivers pitch me stocks latelyand I feel like that used to be
the case, where there was a lotmore stuff.
You know, people wanted to knowthe hot new thing and they
wanted to go out and buy a stockin their own personal account,
and I think now we have gottenbetter at people being a little
more patient and not justchasing individual stocks better
(05:26):
people being a little morepatient and not just chasing
individual stocks?
Steve Davenport (05:33):
And how do you feel about the selling solutions
or products versus actuallycreating what's right for a
client?
Do you think that people arestill I mean, is passive too
massive?
Is there a reason to be alittle more careful about not
owning everything and trying toown the things that are better?
Or do you think that activemanagement is dead?
Chris Guarino (05:53):
I don't think active management is dead.
I think that technology ismaking it easier for firms to
provide a more made-to-measureservice for clients where they
have their best ideas and theywant to be able to apply that
across multiple client accountsclients where they have their
best ideas and they want to beable to apply that across
multiple client accounts andit's something that in the past,
had been harder to do, whereperms had to mainly allocate to
mutual fund managers.
Now you're seeing more of theseadvisors being able to pick
(06:14):
ETFs and pick individual stockbaskets or allocate to SMA
managers and provide notnecessarily a custom experience
for each individual client, butcertainly something that was a
little more made to measure thanthey had access to in the past.
Steve Davenport (06:27):
So you'd say we're getting better as an
industry.
Chris Guarino (06:31):
I would say we're getting better in general.
If you look today, there's moreETFs than there are stocks.
So there also is presented thisargument of should you be
picking individual stocks?
You should be picking more ofthe thematic trends and picking
individual ETFs, and do youactually have more opportunity
and more choices if you go withthe 5,000 plus ETFs that are out
there from which to choose orthe 4,000 and change stocks that
(06:53):
there are to choose?
Steve Davenport (06:55):
Doesn't that get back to?
Every time you add anotherlayer or another provider,
you're going to add another fee.
Chris Guarino (07:02):
But you have seen a lot of fee compression.
So it's about whether you'regoing to have the trading
turnover of buying eachindividual security or you're
going to be allocating toanother layer of manager in the
middle.
Also, the ETF fees are a lotlower than the fees had been on
a lot of the mutual funds in thepast and the SMA managers are
also providing that secondarylevel of analysis and security
(07:23):
selection and in a lot of casesthose SMA managers aren't
charging the same rates that youwould have seen from things
like some of the structuredproducts and mutual funds in the
past.
Clem Miller (07:37):
So I've got a few questions.
Steve, may I jump in here?
Sure, sure.
So how do you get clients to bea little bit tempered on the
themes?
I know sometimes clients canget very excited about a
particular theme, for example AI, and how do you get them to be
(08:00):
a little bit more tempered aboutthat, more realistic about that
?
Chris Guarino (08:05):
So I find that a lot of wealth institutions may
chase some of the trends on theperiphery but a lot of them
don't move client accounts fromone strategy and one theme whole
hog into another.
I think part of that'sobviously the taxes.
People don't want to sell outof one thing unless it's really
not working, because the taxthat can be so impactful that it
(08:26):
really is making people want totake more of a buy and hold
perspective.
Clem Miller (08:31):
Is that true also of the ESG theme?
Chris Guarino (08:34):
The ESG theme is funny because I feel like you
had a layer of what peoplecalled greenwashing occur, where
strategies didn't necessarilychange but the marketing did.
And even if ESG has fallen awayas a big headline topic, it's
still something that's reallyimportant to a lot of
foundations and endowments andsome of the ultra high net worth
(08:54):
families that are thinking moreabout how their money is being
invested from an impactful wayrather than just a returns
perspective.
Clem Miller (09:01):
Do you think that the political environment that's
sort of shifting away fromgreen and ESG, has affected what
people are interested?
Chris Guarino (09:10):
It certainly has from a returns perspective.
If people were saying, okay,there's a lot of momentum around
this trend, we want to investin the momentum versus we want
to invest in the underlyingtrend itself.
If the momentum has moved away,then people who are looking for
where they're seeing moreupside may look to other themes
today than they did in the prioradministration or in the prior
(09:31):
part of the economic cycle.
Clem Miller (09:34):
What trends do you see in SMAs, especially some of
the smaller SMAs?
You know minimums, the abilityto customize.
You know what do you see inthat space?
Chris Guarino (09:45):
There's some technology out there that's
making the ability to customizeyou know, what do you see in
that space?
There's some technology outthere that's making it easier to
customize and easier for firmsto manage SMAs and UMAs at scale
than there had been in the past.
So I think we're going tocontinue to see more of these
pop up and people looking tohave the unwrapped version of
some of these solutions or atokenized version of some of
these strategies coming down thepike.
The other piece of this isobviously that you've got
(10:11):
clients that really can'tallocate to SMAs because the
account is not large enough.
So if you can have an ETFportfolio, it allows for another
layer of customization withoutas many individual Q-SIPs in the
client account.
Clem Miller (10:19):
Okay, what about this?
I don't know.
It sounds kind of new, thiswhole indexing trend, sort of
indexing without having to do itin an ETF.
Chris Guarino (10:34):
Yeah, there's some nice overlay tools that are
out there.
So, especially firms that dohave an investment policy
statement that restricts accessto certain verticals or certain
companies or certain activitiesrestricts access to certain
verticals or certain companiesor certain activities there are
groups that are out there thatallow you to screen out for some
of those names or to be able todouble down on things.
There's also new technology outthere on the AI side that's
making it easier to do portfolioconstruction using natural
(10:55):
language processing, to come upwith your factors and themes, to
screen through indices and thenturn those into tradable
baskets.
But again, it also comes downto what's suitable for the
client, and does the client haveenough assets in their account
to actually be able to allocateacross 50 or 60 or 100 different
Q-SIPS?
Clem Miller (11:12):
Okay, and since you speak about factors, you know
that used to be a very hot thing.
Do you think it's still hot ordo you think it's sort of fallen
by the wayside?
Chris Guarino (11:24):
I think it's still hot.
I think that we're looking atfactors not just from a quant
perspective now, and I thinkwe've always looked at factors
in one way or another.
If you took a look at the oldmutual fund grids in the past,
you had the value versus growth,you had the more aggressive
versus more conservative, youhad the yield components.
(11:45):
We've always looked at some ofthese factors and it had been,
in the past, part of our mutualfund screening process.
That then was applied down tothe individual securities, and
now I think we're still seeingit in a more thematic way and
technology is making it easierto do it with more natural
language than having to do asquantitatively driven, a process
(12:05):
that restricts you to justcertain factors that are
available in a grid or through apivot table.
Clem Miller (12:10):
Right, because I recall you know you can get
pretty granular when it comes tofactors.
I think the last time I lookedat a Bloomberg they had
something like 60 or 70different factors that you could
play with, which is kind ofcrazy if you think about it.
Chris Guarino (12:26):
And then you're also seeing the shades in
between.
So instead of using quintiles,maybe it's using deciles and
then people looking for amomentum bend without being a
full momentum trade or thingsthat have a yield bend without
being a full high yield stockportfolio construction theme.
Clem Miller (12:45):
Do you find that investors are becoming more
defensive lately, or moreaggressive, or just the same as
they've always been?
Some are aggressive, some aredefensive.
Chris Guarino (12:57):
I think a lot of people kind of held their breath
the last three months.
I think there was maybe alittle bit of chasing going into
the end of last year and thebeginning of this year with the
skepticism about what way thingswere going to go, and the only
thing that seemed certain wasthat there was uncertainty, and
so I think getting closer tosome level of certainty one way
(13:18):
or another is helpful for people.
But we've ended up in this sortof stop and go traffic for the
last few months and I think alot of firms have tried to just
stay the course or trim fromthings that they felt had
overreached and buy things thatthey thought were looking cheap
from a longer term perspective.
Clem Miller (13:34):
Okay, and then my last question for now, okay is
you know if you mentioned youwere talking about private
equity with Steve, and you knowwhat's your thought about?
About investors, especiallysmaller investors, buying the
private equity stocks as opposedto taking a private equity
(13:56):
position, in other words, buyingBlackstone, buying Apollo,
buying Aries.
Why wouldn't you buy those,since obviously, the managers of
those companies are going toown their stock?
Chris Guarino (14:09):
It's a great question.
Alpine works with some privateequity companies that are
involved in the wealth ecosystem, either investing in FinTech
and or wealth companies, and Idon't want to call out any
individual names in terms ofpurchases, but I would say that
you're seeing the potential ofinvesting in the fixed income
managers that are doing privatecredit but are a public listed
(14:29):
company.
Or you're seeing just like whenpeople wanted to invest in gold
but there wasn't a GLD optionout there in the past and they
didn't want to go buy physicalgold, so they bought the gold
miners.
So it's a way that you can doit with your equity allocation
and it's a way you can do it ina scalable way across client
accounts, as opposed to thosemore mass affluent clients who
really don't have access to theprivate equity directly, so you
(14:52):
can only get access through theproxy.
Clem Miller (14:54):
So you just mentioned gold, which leads me
to ask you I happen to right nowhold a lot of gold in my
portfolio, which has done quitewell over the last few months,
and so do you have a lot ofinvestors who are doing likewise
.
Chris Guarino (15:14):
Gold has proved to be the longest running hedge
against inflation volatility.
It does better againstinflation volatility than just
inflation historically, so Ithink you will see more people
continue to see that as a moredefensive part of their
portfolio.
The pushback to gold right nowis that you're also seeing yield
(15:35):
on higher rated securities andgovernment debt so high that you
want to buy an asset that isn'tyielding anything but is a good
protection and store of value,versus buying US treasuries
where you're going to get paid4% or 5% on a US treasury.
Clem Miller (15:52):
And of course I was just going to say, and of
course treasuries are.
There's a lot going on in thebond market right now.
Steve Davenport (16:03):
Yeah, I mean, I'm still becoming more and more
skeptical about treasuries andwhat could happen if.
China were to do something inTaiwan with a blockade.
I mean, this has been a thoughtI've had and I don't know how
you feel about the idea that,since we've kind of weaponized
(16:25):
the SWIFT system with what Bidendid with Ukraine and Russia and
capturing assets that were inthe system, do you think that we
would ever do something withour treasuries?
That you know, if a nation wasdoing something and we didn't
like, aka China, that we wouldnot pay the coupons on the bonds
(16:47):
because we don't like what thecountry is doing?
Because we don't like what thecountry is doing, do you see the
treasury system staying asintact as it is as the default
value of what most peopleconsider?
Chris Guarino (17:01):
to be safety.
Being the reserve currencycomes with certain blessings and
a certain amount of curses toit as well.
I think it depends on if youlook at your fixed income as a
tradable asset class or as a buyand hold, because if you mark
to market, may the portfolio goup or down.
That's one thing versus if youplan on buying it as just a
store of wealth, and it'ssomething that provides yield
(17:22):
and your intention is never tosell it.
Would the US government defaulton a foreign actor during a
time of war?
Potentially, but are they goingto default on the American
bondholders?
That seems like it's very, very, very, very, very, very very
unlikely.
Steve Davenport (17:40):
Right, but wouldn't the volatility that
would create if certain actorswere denied payment?
Wouldn't that volatilitycompletely break what's been the
image of something that iscomplete safety?
Chris Guarino (17:53):
And I think that's why it's very different
if you're a macro hedge fund andyour trading rates versus if
you're a retiree that's lookingfor a buy and hold investment
that may again go down on paper,but they're just there to clip
that coupon.
Steve Davenport (18:09):
I see, chris, that you're also a trustee for
Mount St Mary College, and Ithink about different locations
of where asset class ideas andinvestment ideas get discussed.
How do they invest versus theaverage investor in terms of you
(18:33):
know doing things with moreless, you know less liquid
alternatives, or do they do morethings with stuff that's
related to their mission orvalues?
How do you see the differencesacross those two investors?
Chris Guarino (18:50):
I can't comment on anything that the portfolio
is doing directly on a granularlevel, but I can say from a
thematic perspective.
It goes back to what Imentioned earlier, which is some
of these foundations andendowments and religious groups
have an investment policystatement that restricts
investments that go into thingsthat are contrary to the mission
or the values of anorganization, and those may be
(19:11):
different from one institutionto another.
You could have one that has tobe Sharia compliant versus one
that has to follow the Catholicbishops guidelines versus one
that has a customized investmentpolicy statement to meet a
certain family's objectives fortheir own endowment or
foundation or charitable trust.
So again, I think this goesback to some of the larger
(19:33):
long-term investors who reallyhave an infinite time horizon.
Endowments by their nature aresupposed to last for forever.
Family trusts and endowmentsare also supposed to last from
one generation to the next, tothe next to the next.
So I think that perspective inthose investments, both from a
duration perspective and from aninvestment selection
(19:56):
perspective and from an assetallocation construction
methodology, is different fromwhat you may see from somebody
who's 22 years old and lookingfor growth because they're not
planning on retiring and theyneed enough money that's going
to be there in 40 or 50 yearswhen they are.
Money that's going to be therein 40 or 50 years when they are,
versus an endowment that'slooking to perpetually have
resources available foractivities or a family trust
(20:19):
that's looking to make sure thatassets are preserved for one
generation to the next and thatmaybe an underlying asset, like
a home or a preserve, is alsomaintained and never has to be
sold or a preserve, is alsomaintained and never has to be
sold.
Steve Davenport (20:39):
You think what's happening with Harvard
and these colleges and thecurrent administration is
setting a dangerous precedentfor how the long-term mission
can be maintained will alsosatisfy short-term reactions to
government to what's happeningon campuses.
It feels like this is we'regoing down a path that we've
never gone down before.
Do you think it's concerningfor those foundations and
(21:02):
endowments?
Do you think we could see more?
You know people challengingwhether they deserve the right
to have their non-.
Chris Guarino (21:13):
So the nonprofit status comes up, obviously in
part because we're overhaulingthe tax code.
So anytime you really start totake apart the tax code, you
start to look at all of theexempt organizations and
deductions.
So it's part of that process.
It's natural that somethinglike this would come up when
you're doing something that issuch a deep overhaul of the tax
(21:35):
code.
I'm not sure if it in the longrun, changes some of the things
of these universities that havebeen around for three or 400
years.
Does it impact certain thingslike grant funding?
Maybe does it mean that theyhave to tap the endowment for
certain programs that had beengetting a government grant in
the past?
That's down to each individualorganization to have to sort out
(21:58):
and at the end of the day itcomes down to are people going
to want to go to theuniversities themselves on one
side or the other?
Are they going to be a negativereaction?
Is it going to make people feeleven more so that they want to
go to a certain universitybecause of a contrary view as to
what's happening, or is itgoing to make somebody not want
to go to a university becausethey agree with some of the
(22:20):
things that are coming out ofthe White House?
Steve Davenport (22:24):
When we sit down with the guests, we usually
try to summarize and say wheredo we feel we are and where do
we feel we're going in the nextyear or so.
It's not always easy to predictsix months, two months, three
months, and certainly today isone of those examples where it
seemed like everything had gonegreat.
(22:46):
Trump's getting the billthrough the House was a big win,
and now we turn around andstart to criticize NVIDIA and
Apple and others and you realizethere are no sacred cows
anymore.
Can you give us you know whatyour perspective is for the next
six months to a year and anyideas you think that are not
(23:09):
being completely listened to orpromoted by the mainstream media
, Because we like to think ofthings outside of whatever.
If everyone in the boat is onone side, we think there's
opportunity on that other sideof the boat.
Chris Guarino (23:27):
Yeah, I feel like we're probably going to
continue to be in this sort ofrange bound market from a macro
perspective.
Whether that range is between$5,500 and $6,000 on the S&P or
$5,000 and $6,000 on the S&P,depending on some of the factors
that are driving volatility,remains to be seen.
But I think, as we've tried toapproach $6,000 again, we've
(23:47):
been turned away a little bit.
I think part of it is investorslooking for an excuse to pull
back versus actually seeing somedramatic change from crossing
one psychological line toanother.
The longer term outlook in someways is harder to break right
now than I think, the short term.
I think short term we stillstay in this back and forth
(24:08):
until we have resolution one wayor another.
The thing that I think isconcerning from a longer term
perspective is just the cost ofliving globally.
We're seeing issues in Europe,we're seeing issues in the US
and Canada where the cost ofliving, and especially the cost
of housing, is having somepretty strong impacts, I think,
on people's productivity andtheir will to work and the idea
(24:29):
of how much money people have tohave saved with demographically
so many of those entering theretirement part of their life
when they're living on a fixedincome.
If that fixed income can't keepup with the inflation
volatility, what does that meanfor society and governments and
capital markets?
Steve Davenport (24:47):
So does that lead you to like inflation index
notes and some of that space alittle more?
Or do you feel like REITs andequities are the best solution
when you really think aboutinflation, because they tend to
keep up?
Or how do you feel personallyor I guess, and professionally,
(25:12):
about the alternatives thatpeople are seeking to get
through this uncertainty?
Chris Guarino (25:18):
Personally, I feel like your biggest hedge
against inflation is to borrowin today's dollars to pay back
in tomorrow's and not to getoverextended on your leverage.
So if the income doesn't keep upwith the rest of the cost of
living, you've got to be able tocover whatever your leverage is
.
But being of the mindset thateverything has to be purchased
(25:38):
for cash today, when maybe thatcash is going to be worth less
in five or 10 years.
If you can appropriately take acertain measure of risk on
borrowing today, I think thatthere's fewer opportunities for
us to get out of the debt levelswe have than to inflate our way
out.
And I think that we've seenfrom a demographic perspective.
(25:59):
You still do have growingdemographics in the United
States.
So if you're a US investor andyou're looking, the millennials
and the Gen Z generation arestill larger than the
generations that came before,versus if you're in Europe or in
your other parts of the world,where the demographic view is
different and you may have adifferent perspective and your
opportunities and your risks arealso been different.
Steve Davenport (26:22):
That sounds great.
Clint, do you have any otherquestions for Chris or any ideas
you want to close on?
Clem Miller (26:28):
inflation.
Yeah, I got a few questionshere, not on inflation per se,
but do you find that people,that investors, are more
skeptical of sort of traditionalasset allocation I mean I don't
mean necessarily bond stocks,alternatives, I mean like within
(26:50):
stocks, you know, like domestic, international, emerging
markets, you know do you findthere's some more greater
skepticism than there was in thepast about, about asset
allocation?
Chris Guarino (27:02):
I find that investors haven't necessarily
changed their viewpointsdramatically.
I think some have changed howthey invest, from bringing some
more of the investments in-houseor changing from a 40-act
traditional closed-end oropen-end mutual fund to
utilizing ETFs as more of theirportfolios for their clients
(27:27):
clients.
So I think some of the toolsmaybe have changed, but I think
people's investment processhasn't necessarily changed that
much.
People are looking to add morealternatives, or those who have
alternatives are looking forways to get access to them
without paying as many layers offees and with more
customization and liquidity forclients.
And then there's the balance oftrying to invest in an
inherently illiquid asset with amore liquid structure.
So there's changes again, Ithink, to how we're investing
(27:51):
from the building blocksperspective, but I think the
themes and the underlying focusthat investment firms tend to
have necessarily hasn't changed.
If you're looking for more of agrowth at a reasonable price
type of investment opportunityand you had picked your favorite
active fund managers and nowyou've gone to using those same
managers in SMA format or buyingtheir ETFs for clients instead
(28:15):
of buying their mutual funds,your process may not have
necessarily changed as much inpractice as it did on paper.
Clem Miller (28:24):
Are you okay?
So another question this is atough question.
I think it's more of a not aMac.
It's a macro question and abehavioral question, which is do
you think that there, thatinvestors are becoming more or
less charitable over time?
Chris Guarino (28:46):
charitable over time?
Do you mean individualinvestors?
Clem Miller (28:49):
Yeah.
Individual investors, yeah, Imean, obviously there are
charitable organizations andthey're always charitable.
But I mean, are you seeing,when it comes to individual
investors, are you seeing themmore interested in preserving
wealth for future generations?
Are you seeing them moreinterested in preserving wealth
for future generations or do yousee them becoming more or less
(29:15):
willing to sort of give away alarge portion of their wealth to
charity?
Are people becoming morecharitable or less charitable is
what I'm getting at.
Chris Guarino (29:22):
So it's a good question.
I don't work with anyindividual investors, but what
I'm seeing in the data and whatI'm getting by proxy through
working with wealth institutionsis that people still see that
as part of their trust in thestate's planning.
I think that people are tryingto do some of the giving while
they're still alive and they cansee the benefits, whether
that's intra-generational, wherepeople are giving money to
(29:44):
their children to help purchasea home.
If you look at the data rightnow, the generation that's
buying secondary homes today isessentially the same generation
that was buying secondary homes30 years ago.
As part of that co-purchasingwith their children.
As part of that, they'relooking to buy a home in another
market and rent out theirexisting home because they don't
want to give up the mortgagerate they have on their existing
(30:08):
home.
So they buy the second one forcash and they can use the
primary home either as asnowbird address or as a way for
them to get incremental yieldby renting it out.
So I think what you're seeingis people want to be charitable,
but this idea of charitybeginning at home, I think is
resonating more with some peoplethan gifting to some of the big
(30:32):
institutions or gifting to moresmall, local charities.
People want to see their moneyhave impact.
So I think also people arelooking more deeply into how the
dollars are actually spentrather than feeling like they
have a lot of discretionarydollars to give away.
So they don't necessarily lookat each individual penny and
where it goes as closely.
I think technology has made iteasier to look at that today and
(30:54):
I think that it's allowing formore charity at a micro level
where people will do a GoFundMeto help somebody's dog and I
think people still want to goand help and do those little
activities.
So people may do more smallactivities but maybe not do as
many medium-sized activitiesversus the large activities are
always going to happen.
You know, being on the frontpage of the Boston
(31:18):
Philharmonic's list of donors,that group's going to have the
elasticity to still give duringdifferent times.
But you know, the second andthird page may start to move to
the fourth and fifth page forthe smaller donations and the
smaller donations that may go tomore close at home activities.
So the cash to help out aneighbor or being able to again
(31:39):
help a friend whose dog needssurgery and do a GoFundMe or
just a Venmo to somebody.
I think you're seeing a lot ofthose little activities that
don't get picked up in the bigdonor data.
Clem Miller (31:50):
So I have two additional questions.
I know we have to close in afew minutes, but you touched a
little bit on AI earlier and I'mwondering what you know.
Where do you expect the use ofAI to be?
And I'm wondering where do youexpect the use of AI to be in
the future and sort of relatedto that question is what's the
(32:12):
area that when you look atadvisor offerings, where are the
gaps?
What?
Chris Guarino (32:23):
are advisors not offering that you think would be
valuable?
Yeah, I think more clients arelooking for holistic coverage.
I think the high net worthindividuals are looking to be
treated more like private bankclients of the past and I think
the more mass affluent clientsare used to a lot of things
being customized for them andthe rest of their lives and
getting content and informationfor free.
So now they're looking for thatsame level of customization and
(32:44):
impact from their advisor, evenif they're a smaller client.
I think that's where technologyenables firms to be able to
cover clients more holistically,cover clients more granularly
and more customized than theywould have necessarily been able
to do in the past and at betterscale.
But I also feel like the otherside of that is what I call
analog, is the new digital.
(33:04):
Other side of that is what Icall analog is the new digital.
It makes the human interactioneven more important because if
technology takes away so many ofthe more redundant tasks and
commoditized tasks and if it'sable to better empower advisors
and client coverage people to beable to serve their clients
better by prompting them orproviding more granular data or
providing access to ways oftracking client engagement
(33:26):
across their investments who'sbeen looking at their portfolio
today.
And maybe you reach out to theclients that have opened up
their account five times thatday because they're a little
worried.
Or it alerts advisors to whentheir client has a large cash
deposit, without the clienthaving to call and say, hey, by
the way, I just sold my house.
Maybe now they get a promptthat says, hey, this cash went
(33:46):
in.
Let's think about how to investthat for the client before the
client reaches out to them.
And I think that proactive levelof service is really more
important, necessarily, thanreturns, because what I've found
is advisors seem to loseclients more than they do on the
investment side, from theircoverage side.
So whether that's when moneychanges hands from one
generation to the other, or whenthe head of the household
(34:09):
passes away and then the newhead of the household maybe
doesn't have the same level ofengagement or relationship with
the advisor that their spouse orother significant other may
have had, or it's a parent ontothe children and the children
haven't had that relationshipwith the advisor for the last 20
, 30 years that their parentsdid.
So it's that relationship leveland the coverage level that, in
(34:33):
a lot of ways, is where peopleare having impacts.
So I think technology is goingto help not only on the
investment side from portfolioconstruction and analysis and
security selection but I thinkthe technology is really going
to help enable advisors andclients to have access to better
information about their wealthand better cover those clients.
Clem Miller (34:48):
That sounded great, chris.
Yeah, I got one last question,steve.
No, I think we probably coveredthat question.
So, yeah, okay, I'm good, steve.
All right, I was getting alittle skeptical.
No, actually, actually no, no, Ido have one more question.
(35:08):
I do have one more question,and that is I always have
questions, but this will be mylast question, I promise Chris.
You know you look around andthere's a lot of information
that's out there.
Steve talked about you knowwhat.
You know what might be on CNBCand, and obviously, different
client, different advisors, uh,put out you know different kinds
(35:33):
of information.
Um, you know it used to be along time ago as newsletters.
Today it's like you know theysend out.
You know missives every week orevery month or every quarter,
with lots of information, lotsof discussion about the Fed,
about what's going on with youknow, last week's market.
(35:55):
I mean, do you think that?
Do you think that individualsfind this or advisors find this
kind of information valuable, orare there?
Is there, is there this kind ofinformation valuable?
Or is there some kind ofinformation that would actually
help advisors and individualsmore that they're really not
(36:15):
getting right now?
Chris Guarino (36:17):
So the macro talking points are still, I
think, important because peopleare always going to want to talk
about what's going on intoday's world and how that
impacts their investments.
Even if they have a 30-yeartime horizon, they want to know
how tomorrow's portfolioperformance may be different
from yesterday's.
So I think on the macro side,you're still seeing people who
go to the front page of the WallStreet Journal and they watch
Bloomberg and CNBC or they atleast have it on in the
(36:39):
background in the office andthey go through and probably
have alerts set up, eitherthrough some of the more
AI-enabled companies that areputting together morning notes
for people for internal use orprivate use, or even helping
them to create notes to send outto their clients on a more
frequent basis than if they hadto build everything, every word,
from scratch.
And the traditional forms ofmedia still do hold sway.
(37:01):
People go back to opening upthe Wall Street Journal and it
may be on an iPad as opposed tobeing in physical form, but I
still feel like some of the moretraditional ways of getting
access to media and informationare important.
I think clients in general notjust in the newer generations
are looking to technology, butpeople now, just at any age, can
(37:21):
open up their app and take alook and see what their assets
are doing on a daily basis andthey don't have to wait for that
quarterly statement to comefrom their advisor.
But it also means the advisormay have to stay on top of
things intra-quarter.
I had three meetings this weekwhere firms were talking about
wanting better technology to beable to support their client
statement reporting and otherclient communications around
(37:44):
their individual clientperformance, rather than being
an asset manager who is puttingtogether their monthly reports
and putting that up, or you'reseeing the performance on a live
basis for the publicly tradedETFs and mutual funds.
What I'm seeing is you've gottechnology that's out there
that's able to help support someof those firms.
(38:05):
Different technology supportsdifferent firms depending on
their client base and theirinvestment approach, so one
firm's needs may be differentfrom another.
I always use the analogy ofit's like a restaurant what you
need to have a steakhouse isdifferent than what you need to
have a sushi restaurant.
So what one wealth firm needsfor their clients is different
than what another firm may need,and the firms that I spoke to
this week ranged from a billionin asset center management to
(38:28):
over 500 billion in asset centermanagement with clients around
the world.
So it's not just somethingthat's impacting the big firms
that have thousands of clientsand hundreds of advisors, or
thousands of advisors, versusthe boutiques that may have a
hundred clients and only four orfive people.
It's really impacting firmsacross the industry.
Clem Miller (38:46):
Okay, thank you very much, chris.
Steve Davenport (38:49):
Thanks, Chris.
Chris Guarino (38:51):
Thanks, Steve.
Steve Davenport (38:52):
I guess I just want to give you one last chance
.
Is there anything about AlpineStrategic Partners that you
think we need to understand, orthe general community needs to
understand, in terms of whereyou're positioned and where your
greatest opportunity is?
Chris Guarino (39:13):
Sure thanks.
You know, I founded Alpine twoand a half years ago because I
wanted to have an openarchitecture firm that took the
independence of a traditionalbusiness consultant and brought
the sort of solutions mindsetyou get from the sell side of
the industry to come in andprovide advice, services and
solutions through third-partypartners to be able to help
firms to manage and grow theirbusiness.
(39:34):
We do things like successionplanning and M&A advisory for
more episodic opportunities thatfirms go through once in a
generation.
We also do things like helpfirms with their technology
resources.
Where are they staying in touchwith the latest that's out
there to help a firm like them?
So it's great to work withfirms across the wealth
ecosystem fintech companies,rias, banks, broker-dealers and
(39:57):
firms of all sizes because weget a great cross-section of
what's going on across theecosystem rather than being so
narrowly defined into one sleeve, and because we're open
architecture, we can look forthe right solutions, partners to
take our advice and turnstrategy into reality, versus
only being able to offer anin-house suite of products.
Steve Davenport (40:15):
Thanks, chris.
I think your insights are greatand I think that we need always
to be looking around at whatour industry is doing well and
not doing well, and then how dowe help incorporate in our own
business, you know, the thingsthat are going to satisfy
clients and ultimately deliverwhat we can in return, but also
(40:36):
in a risk adjusted way that'sgoing to satisfy everyone.
So thanks for listeningeveryone on Skeptic's Guide and
we really appreciate yoursupport and we want you to send
us a like or any questions youhave.
We are going to be working onmore and more interviews as we
go forward, because we find thatthere's so much going on in
(40:58):
this industry that we need toget more and more experts in to
help us understand it.
So thank you everyone and Ihope everyone has a great
Memorial Day weekend and we lookforward to working with you
again soon.
Bye-bye.
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