How To Build Wealth With Professional Money Manager Gil Baumgarten

Wes Schaeffer: [00:00:03] Gil Baumgarten, founder and -- well, author of Foolish -- I love this -- "Foolish: How Investors Get Worked Up and Worked Over by the System," all the way from my adopted hometown of Houston. Welcome to The Sales Podcast. How the heck are you?

Gil Baumgarten: [00:00:21] Thank you. I'm doing just fine. Appreciate it.

Wes Schaeffer: [00:00:24] So why did you write this book? I mean, you're still an insider. You're one of those guys, aren't you? Are you talking out of school here, man? You have to look over your shoulder before you can --

Gil Baumgarten: [00:00:35] My brother asked me when I first published the book whether I had bought a bulletproof vest to go with it. [chuckles] 

[00:00:43] You know, I got out of the brokerage business 11 years ago and I run a fee-only fiduciary business where it's in my best interest to tell everybody how the sausage is made and how everything works, and they hire me if they want me to help them navigate that, and so that's essentially how the business operates. There's a lot to be told about how it works and how it could be done better.

Wes Schaeffer: [00:01:11] Right. You know, so 11 years ago, so around 2010?

Gil Baumgarten: [00:01:14] Yeah. October of 2010 was when I started my fiduciary firm.

Wes Schaeffer: [00:01:21] How did the Great Recession of '08 contribute to you making that move?

Gil Baumgarten: [00:01:27] It contributed somewhat. You know, at that point, I didn't feel like I had that much to lose. The market was already on the rebound and and I knew it would come back. And the other impetus to that is that my stock options with my former employer, which one time were probably worth close to $1 million, went to $30,000. So 97 percent of the market value got obliterated. And I just looked around and thought -- and frankly, I had thought about the move for more than a decade. It just really dawned on me how much sense it made to go ahead and jump. And at that point in time, technology has had also changed, allowing me to buy off-the-shelf applications that would help me run my business. And so it was time, and so I made the jump.

Wes Schaeffer: [00:02:22] Yeah. I mean, you talk about how the sausage is made. I mean, it's a dirty, ugly business behind the scenes, isn't it?

Gil Baumgarten: [00:02:30] Yeah. It is a dirty, ugly business and it's not what clients perceive it to be, I don't believe. And so I make my living helping clients navigate that in the way that works for them. And the easiest way to understand it from my perception is that there's a lot of black area, there is a lot of white area in terms of what's allowed, what is totally off limits or whatever color you want to give that. But there's a giant gray area in the middle about things that maybe we should do; could we make money at it, or should we not be in that business? And so that being the case, the brokerage firms really want to own all of that gray area, and I want the clients to own all that gray area. And the way that I operate my business and the type of strategies that we employ for our clients can help us stay in control of that gray area and make sure that clients continue to own it.

Wes Schaeffer: [00:03:27] Mm-hmm. How difficult is it to operate at that level, right? I mean, my sons and their friends are playing around with Bitcoin and they're putting $1,000 in there, like, I got a 300 percent return. You know, if you've got a $10 million or $100 million portfolio, it's kind of hard to get a 300 percent return. You know, is it a lot of managed money, like, don't lose it; or can you still beat the markets at these higher valuations or larger portfolios?

Gil Baumgarten: [00:04:08] I think that people with a lot of money -- let's take a $100 million dollar client as an example -- when you really get down to it, they want two things. They want relief from the mental anguish of wondering what to do next; and more importantly than that, they want to make sure that they stay wealthy. The $100 million dollar guy going down to $50 million is probably more problematic for him than the euphoria he would feel from taking his $100 million to $150 million. At $100 million he's probably already flying private. He probably owns every house that he wants to own in anywhere he wants to own it. At $50 million he probably can't afford to fly private. He might lose his $12 million house in Aspen.

[00:05:02] So the difference in lifestyle that happens from $100 million and up versus $100 million and down is very different, and people are cognizant of that. They also tend to understand how they've tangled with the tax man in the past, and they tend to place more emphasis on after-tax return as opposed to so-called beating the market. That's sort of the entry-level game is to try to hit the 300 percent rates of return because, hey, I only got $1,000 at risk. You got $100 million at risk, it's a whole different ball of wax. You just tend to play the game very differently.

Wes Schaeffer: [00:05:39] Mm-hmm. So this may be going down the rabbit hole, but like I've studied these markets since 1991. I was still the Air Force Academy and have an older stepbrother who's savvy about this. And I'm like, hey, how do I learn about money? He's like, buy a subscription to Money magazine, read every episode, cover to cover for a year, then you'll have a foundation. I'm like, I'm 21 years old, like, that's not the answer I was looking for. There's got to be a magic book somewhere. Just give me the shortcut -- there's no shortcut.

[00:06:17] But as I have learned -- like "accredited investors," people like that, there are two or three or maybe four sets of rules that the general public doesn't know about. But like as I watch this market right now, the government is so involved, the Federal Reserve is so involved; I mean, are the deck -- are the decks stacked against the little guy, especially like right now? I just feel like -- I feel like something bad's coming; valuations are thrown away and we're just waiting for the government to do what they're going to do.

Gil Baumgarten: [00:06:57] I don't think the decks are stacked against the little guy. I think the little guy stacks the decks against himself rather than be patient, let their money compound, control the taxes and the fees that they pay, let time percolate along and produce profits for that investor. They get in a hurry. They chase flashy objects. And I tell people, just like a fish should never chase a flashy object. Investors get ensnared in the same problems that fish get and they get they get caught.

[00:07:33] And actually, the worst thing that can happen to somebody is they make a highly speculative bet and actually make 300 percent on their money, because then they're going to try to parlay it by taking -- you know, they're going to go out and sell their car and take their $25,000 and make a real bet because, hey, I know I can make two or three trades and swap my car for a new Ferrari if I do this correctly, and then they blow themselves up and get completely obliterated by a risk they never saw coming. And so the little guy tends to fall into a lot bigger traps than the big guy does, and the big guy probably did that early on in his investing career and learned never to try it again.

Wes Schaeffer: [00:08:13] Mm-hmm. Is there a common theme or thread you see that helped, let's say, first generation wealthy become wealthy. Obviously, if there's old money -- if we're not born into it -- I was not born into money. So are there some common themes you've seen for those that are first-generation wealthy things that they've done that others can replicate or emulate?

Gil Baumgarten: [00:08:42] That's a really good question. In my book, "Foolish," we talk about an experience that I had when I went into branch management with E.F. Hutton, at that point was becoming Shearson back in 1989, and my first job as a branch manager trainee working for the divisional management of E.F. Hutton at the time was to call the 100 biggest brokers at the firm and find out what common threads they had. So there were 25 questions on my questionnaire. So I made these phone calls to these 100 guys and asked them -- tell me about this, tell me about that. And we isolated their success down to a couple of key elements, and the one characteristic that more of them shared than anything else was financial trauma as a teenager. So their family, the dad lost his job, they got evicted, a parent died; any one of -- a divorce -- any one of a number of things could prove traumatic, and the person was forced into a position -- which frankly, my parents were divorced when I was 11. I had financial trauma. My mother declared bankruptcy. She supported me and my brother when we were kids and ultimately got us educated in college. But that financial trauma taught me -- and I used to have the saying that I would say to myself, "if it is to be, it's up to me."

[00:10:11] And I just decided that I had to figure out how money worked. I had to develop resolve. I had to develop a sense of grit. And it's essentially resilience and your ability to bounce back from setback that is really the key to the whole thing and not wait for somebody else to fix your problem for you; to become self-sufficient and to develop the discipline that it takes to pick yourself back up and keep at it. And that same discipline is what can make a millionaire out of -- I know a guy who -- he's passed away now, but he never made more than $124,000 a year in his life but he was a multi-multimillionaire at retirement because he constricted his expenses down to the point where he had a lot of money left over.

[00:11:00] You know, wealth is the sum total of money that you've never consumed. And that being the case, anybody can be wealthy if they just simply restrict their consumption down to the point that they have a residual and let that residual compound over time. Anybody can be wealthy. It just takes discipline.

Wes Schaeffer: [00:11:21] Come on, man, YOLO, man. You only live once!

Gil Baumgarten: [00:11:25] Yeah, exactly. Well, a lot of people, a lot of people don't have a desire to be wealthy. They have a desire to be perceived as wealthy. They want the fancy car. They want the $200 sneakers. They want a latte in their hand every morning. They want all of these things maybe they can't afford that. And if they spent their money a little differently -- $1000 here, $1000 there, compound that over 30 years at 8 percent, and you're talking about a million bucks.

Wes Schaeffer: [00:11:56] I know, man. God bless my wife. We're planning a trip this weekend, so she turns 50 on Father's Day. So we've got the whole family, the whole extended family, and we've got like four rooms going to Palm Springs and her brother's like just keeps beating her up, like, could it be any hotter? I mean, it's going to be hot. It's like hey, there's air conditioning and we're going to golf at 7:00 a.m. It's all right. But she will bring our Keurig. She's like, I'm not paying what they charge for coffee. She'll pack that. She's got a little bag she travels with. "I'll bring my own coffee."

Gil Baumgarten: [00:12:25] And see, I would not consider your wife to be tight. I would consider her to be creative.

Wes Schaeffer: [00:12:30] She's creative, she's frugal -- and we needed it back in the day. And now I just appreciate it. I'm like, you know what? I'm not paying that either.

Gil Baumgarten: [00:12:38] I find that -- I find that to be a compelling attribute.

Wes Schaeffer: [00:12:42] Oh, yeah. She has strung -- she has stretched the pennies I have made over these years to put food on the table for seven kids and me and her.

Gil Baumgarten: [00:12:53] I think that's awesome.

Wes Schaeffer: [00:12:57] She will find the deals. People say -- hey, 26 years ago, she she quit her day job and moved to Mississippi with me. We made it work on one income.

Gil Baumgarten: [00:13:10] Yeah. That's awesome. Yeah. 

Wes Schaeffer: [00:13:12] And we've only had two new cars ever. One was a Tesla we bought a couple of years ago, but the base model and all the incentives are rebates. It was cheaper than a Camry, you know? And the gas -- we look like geniuses now. Gas is $4.50 out here. And yeah people are like they're asking for my link because you get a referral link, you get free miles, free charging. I'm like, use my link, man. I want those 1,000 free miles.

Gil Baumgarten: [00:13:40] Exactly. That's awesome.

Wes Schaeffer: [00:13:43] Oh man. I love that. You don't want to be wealthy; you will be perceived as wealthy. And that's -- there's so many fakes and frauds out there. But anyway, you're talking about chasing shiny objects. It's like why, does the physician want to invest in crypto but the technologist wants to invest in biomedical? Like, why don't we stay in our lanes and invest in the things we know about?

Gil Baumgarten: [00:14:08] Well, that's the only chance that you would have for any actionable insights. The reality is that because the Internet processes information so quickly, the distribution curve of new information is so flat, the ability to get some angle on some other investor that they've never thought of before that would lead to a mispriced asset is just not going to happen. You know, people will wake up and say I think marijuana is going to be legal in all states eventually. Therefore, marijuana is a growth business. Therefore, all I have to do is buy a marijuana company and I'll just get rich. Whoa, whoa, whoa. Wait a minute.

[00:14:53] Back in the day when people were thinking that there was 100,000 people who had already had that thought at that moment and priced all of the pot stocks based on the exact same information that you had with their exact same expectation for the future. There's nothing insightful about that. And as a matter of fact, if they don't hit the growth trend that everybody had anticipated, the stocks are going to get creamed. And that's exactly what happened. Tilray was a $25 IPO, and the thing was trading at $150 in the first month and I think it went to $5. Anybody who thought, man, this thing is going to go to the moon and I'm going to buy this pot stock and I'm going to get rich, they just got their clock cleaned.

[00:15:38] And so people just misunderstood that -- misunderstand all the time that what they have as a thought process as to the future has already been thought of by 100,000 other people, and the current market price already takes all those assumptions into account. There's just a whole lot better way to invest your money if long term profits are what you're seeking, as opposed to the glory of being able to tell all your friends that you're the latest crypto wizard, which is a lot of what we're looking for, is ego reinforcement from our periodic wins and we don't know the value of our periodic losses and how they harm our overall average.

Wes Schaeffer: [00:16:17] Yeah. As this market evolves, I mean, we're at nosebleed levels and it's like there seems to be no end in sight, but you mention --

Gil Baumgarten: [00:16:33] Stocks aren't as expensive as they were in 2000 on an earnings basis, just to put it in perspective.

Wes Schaeffer: [00:16:39] Oh, interesting. Are they close?

Gil Baumgarten: [00:16:42] No. The average P/E multiple -- I can't quote exactly, but there were there were a lot of infinity P/E multiples back in 2000. I think the Nasdaq traded at a P/E above 60 and nowadays it's about half that. So I think those numbers are correct, but I'm not positive.

Wes Schaeffer: [00:17:03] Okay. So you talk about grit and resolve and bouncing back to these folks that they had this financial shock, so regardless of the economy, are they business owners? Were they just W-2 people that just lived below their means and socked it away in a 401(k)? And did they do some side things to accelerate that growth?

Gil Baumgarten: [00:17:35] Yes. So the guy that made the $124,000 as his maximum income ever probably spent the majority of his prime earnings years in his 40s and 50s back in the 1960s and '70s. You know, he probably was making $40,000 or $50,000 a year. And yes, he had a side gig as a photographer. And so he would do weddings on the weekend, and when he goes out to dinner, he splits a meal with his wife. He finds all kinds of ways to sort of slim down his overall cost carry and ended up putting a large percentage of his paycheck every month into a 401(k) and he became a multimillionaire. And it's doable for the average person if they can simply have delayed gratification. And we are not wired for delayed gratification.

Wes Schaeffer: [00:18:42] So when you say that $124,000 was the most he made, is that in total or was that just in his W-2 job, then he made more on his side gig?

Gil Baumgarten: [00:18:50] Well, he retired as a photographer probably in his 50s, and then that's when he went into his prime earnings years and was probably making $100,000, $120,000. And then when he retired in 1994, he was making $124,000 and was a multi-multi millionaire and never had Apple stock or Amazon or never had a story stock, some kind of a magic compound or never a speculator, just a plodder in regular investments.

[00:19:25] And that's the key, is suppression of your consumption if your income is not high; or in the absence of a high income, become your own boss, become an entrepreneur, start your own company; figure out what's wrong with the way your employer does it and take your risks that way rather than going out and buying cryptocurrencies and hoping you can find a greater fool than you. You're a lot better off in investing in yourself, developing skills and taking your company's spread with you. That's how you can go from being $100,000 a year employee to $1,000,000 a year employee if you own the company. So I definitely encourage people to be entrepreneurial if getting rich is what drives you.

Wes Schaeffer: [00:20:11] Mm-hmm. So for those that can stay the course, I mean, is there is there a good rule of thumb? Would you say, buy an index fund, keep it simple, dollar cost average and just stay with it? Or would you say try to look at some trends, maybe do some asset reallocation here and there? You know, if we do get back up to 40 and 50 and 60 multiples, okay, maybe shift a little bit?

Gil Baumgarten: [00:20:43] I think that tactical methodology will not work for most people. They may get lucky every now and then. But frankly, the stock market goes up in 81 percent of all 12 month time periods. If you start trying to bob and weave and try to do this or that, you're going to mess up the 81 percent and make a larger number present a bad case for you rather than the 19 percent that would otherwise apply to you.

[00:21:14] Furthermore, there's tax friction from most bobbing and weaving, and people tend to overlook how long they let their cash become a drag on their performance; because people who tactically allocate also have a tendency to leave extra cash sitting on the sideline as their opportunity fund, and that ends up dragging down performance over a long time period and giving someone less than a pure experience of what risk taking would have really looked like if they would have taken all the assets they had allocable and allocating them to a risk stature. 

[00:20:43] Frankly, I'm speaking from personal experience. These are the mistakes I've made in my own account. And I will also say that me and other clients who have been individual securities investors have. Recognize how much riskier an individual stock is versus an S&P 500 index fund, and as a countermeasure, we leave cash off to the side. This essentially requires that our individual securities selections outperform because we have cash assets sitting off to the side that has a zero return that is dragging down all of our performance when we would have been way better off to have chosen an S&P 500 index fund and gone to fully invested.

Wes Schaeffer: [00:22:40] Cash is not zero percent. I think I'm getting 0.01 percent, so, I mean, it's not zero.

Gil Baumgarten: [00:22:47] Okay, you got me on a technicality. [chuckles] I was rounding.

Wes Schaeffer: [00:22:54] [chuckles] And then we're taxed on it. That's a capital gain.

Gil Baumgarten: [00:22:56] Oh, my gosh. That just makes me sick to my stomach.

Wes Schaeffer: [00:23:01] [chuckles] The heck is going on? Well, for the very short time, I was a full blown stockbroker. I remember this guy saying, you know why stockbrokers aren't rich? Like, I do not know why; I thought they were. He's like, they don't believe their own bullshit.

Gil Baumgarten: [00:23:16] [laughs]

Wes Schaeffer: [00:23:17] Like, oh -- and that has stuck with me for quite a long time. [chuckles]

Gil Baumgarten: [00:23:22] Yeah. The industry does create a situation that it benefits from all of the products that they create and all of the illusions of insight and the like. It's just not what it appears to be on the surface. And because they have a standard of care for clients, which is called suitability, as long as what they recommend is suitable, it does not have to be best. And that being the case, they build -- their whole infrastructure is all built around suitable choices that they make a lot of money on. And they trade against clients. They do all kinds of things because it doesn't violate their suitability standard. And that being the case, it's buyer beware. 

Wes Schaeffer: [00:24:15] Yeah. I just had this conversation with a friend of mine whose brother is in the business in New York. And it's been a little while since they were doing this, but they had a big client in like a $50 million account and they didn't like the guy and they would trade against him, just because they could, they didn't like him. Like, holy crap.

Gil Baumgarten: [00:24:42] Well, some things are outside of the suitability realm. Frontrunning on your client's trades is generally not allowed. However, frontrunning at the corporate level is allowed if the transaction occurs inside of the spread between the bid on the ask.

[00:25:02] So how does that manifest? I would not be able to go out early in the day and buy 100 shares of stock in, let's call it ABC Company and I buy the stock at $50 a share and I buy it later in the day and my clients pay $51 a share. That's not allowed. It would also be against the rules for me to throw in a market order for my own account and then follow that with a 10,000-share market order to buy for client accounts that would drive up the price of what I had just bought. That's a classic example of frontrunning.

[00:25:39] What is allowed is for the XYZ brokerage firm to have a broker drop a ticket to buy 10,000 shares for his clients and one hundredth of a second before that trade gets executed they show that to a high-frequency trading firm out on the West Coast and their algorithm can run right out in front of the client and buy the stock right in front of their 10,000-share order and make money.

[00:26:09] Now, that essentially is the spot that the old specialist used to be. And back in the day, the specialist made $0.125 on every share. So if you were the specialist for XYZ Corp, you were making $0.125 when you were facilitating a trade. Spreads nowadays are a penny or less, and so this high frequency company makes a whole lot less money than the specialists used to, and that's contracted spreads and made liquidity in the marketplace exceptional.

[00:26:41] But you are essentially showing your hand, and clients, in fact, are losing that fraction of a penny that they could have had for themselves. So it's a little bit of moral hazard. On the one hand, clients benefit from it -- and that also is what has driven commissions to zero on, say, the Schwab and Fidelity platforms, because they do it, too. So I don't know. I kind of have a moral hang-up about the appropriateness of frontrunning, even when it's allowed in this narrow distinction.

Wes Schaeffer: [00:27:15] Yeah. I was in the test and measurement industry for years in fiber optic cables, and it was so eye-opening to me where big firms' exchanges, they were running their own fiber optic networks to get that fraction of a second on a trade. And yeah, that's when I realized, okay, these are the guys that are too big to fail.

Gil Baumgarten: [00:27:40] That's right. Yeah.

Wes Schaeffer: [00:27:42] [chuckles] I mean they get to play by different rules.

Gil Baumgarten: [00:27:44] Yeah. And the little guy -- it applies to everybody. I mean, I don't care if you're doing a $100 million trade or a $100 trade, everybody plays by those same rules. So, back to the little guy -- I think the little guy has probably never been treated better than he is right now. The system's not perfect, but cost for everybody have come way down.

Wes Schaeffer: [00:28:09] Mm-hmm. So based on valuations, you're saying the market may have some room to go. But getting back to what we're talking about, if somebody just is Steady Eddie, just stay the course, are you a fan of 401(k)s and when employers match?

Gil Baumgarten: [00:28:37] Yeah, absolutely. You should at least participate to get your employers match. Pretax savings comes as a double-edged sword. On the one hand, it's difficult to not see the value of deferring taxes and having the government's money sit in your account for 30 years and earn interest or growth. But on the back side of that, the government knows that they're going to outlive you and they will always force you into taking that money as ordinary income.

[00:29:05] And there's a differential tax law based on capital gains versus ordinary income. I could easily draw an illustration of someone who is, say, the owner of the company who should never participate in his 401(k) because he'd be way better off just to own the stock of the company outright, which would be tax deferred. As long as he never sold it, there wouldn't be any income taxes if it never paid a dividend and it would be tax-free when he died and left it to his wife. So a 401(k) is not nearly as powerful as that, and hence, that's why Mr. Biden wants to change that tax rule. And I say good luck with that.

Wes Schaeffer: [00:29:44] Yeah, the powers that be have a lot of power, don't they?

Gil Baumgarten: [00:29:47] Yes, they do.

Wes Schaeffer: [00:29:50] [chuckles] So the average person, though, 401(k), let them match. Should they try to reallocate here and there and just buy an index fund and let it ride 10 years and look at it when they change companies?

Gil Baumgarten: [00:30:08] The answer to that question lies in how those people respond in the face of bad news. When their accounts have already lost 27 percent of their market value, are they then in reallocating? Well, if they are, they better be reallocating to the riskiest strategy, if they're in reality reallocating to the lowest risk strategy because they just got blown out of their saddle. That's the person that's going to get themselves in trouble. You cannot be reactionary. You have to be proactive. And proactive is to lean into risk in the face of risk.

[00:30:46] And the reason why is that minimum prices occur at the point of maximum uncertainty. If you are certain about the what the future holds, I guarantee you you're overpaying for that asset class if high, certain high degrees of certainty cause very high prices. High degrees of uncertainty cause very low prices. Back in March of last year, prices were falling through the floor and that's when we had a point of maximum uncertainty, and the S&P has jumped 70 percent since then. If you are leaning into that in the times of maximum uncertainty, you will be very wealthy if you do that over time. That's why we always buy the dips.

[00:31:31] So in my own account -- I'm 62; I could have retired years ago. I worked because I like to work. And so that being the case, I'm still in accumulation mode. I'm not trying to protect my assets. I'm not trying to prepare for retirement. So my goals and objectives are different maybe than the typical 62 year old. But you do not want to find out on the the day after 25 percent market decline that suddenly you don't have the tolerance for it. You should have decided that before it ever occurred because you're not going to be able to anticipate what to do next.

[00:32:06] So when you talk about reallocation, if somebody starts out their allocation as 20 percent in the bond market and 80 percent in stocks and then stocks double and double and double over 20 or 30 years, you're going to get pretty close to being 100 percent invested in stocks just because your bonds are going to get averaged out of the equation if that person doesn't have the tolerance to give some of that money back because stocks are volatile, they should be perpetually rebalancing to make sure that they never find themselves blown back on their heels.

Wes Schaeffer: [00:32:37] Mm-hmm. Can the average third-party administrator at a company, though, give them that kind of advice?

Gil Baumgarten: [00:32:46] Oh, absolutely not. They're not allowed to. Third-party administrators in 401(k)s are not allowed to give investment advice, so you have to deal with the wealth management adviser if you want advice and have that person comment about what types of investments that are offered in your 401(k) would be appropriate, given the risk level that has been described and the portfolio that you have built, separate and apart from your 401(k) and your overall liquidity, your overall debt level.

[00:33:17] What I find to be a crazy thing is that people will let their credit card balance run up and they're paying 18 percent to their credit card company because it's easy to ignore our debit balances; and then they'll turn around and leave cash either in a savings account or they'll have it in the bond market earning two percent. Well, my gosh, if you would have sold your bond holdings and used it to pay down your credit card debt, you could have saved 16 percentage points. Those are the kind of things that people don't always look at.

[00:33:47] And frankly, many people engage in a pattern of behavior that is self-deceiving because they can avoid watching their debits and they look at their $10,000 in their brokerage account and they feel rich. Well, when you just went out and bought a new car and you owe $20,000 on it, you still got a negative net worth. Don't feel too good about that $10,000 merely because you've deceived yourself into believing that you're suddenly rich. You're just using selective scrutiny.

Wes Schaeffer: [00:34:18] Yeah. So what's that average employee to do, I mean, can they hire a wealth adviser, like on an hourly basis or once a quarter? Once a year?

Gil Baumgarten: [00:34:31] Well, there -- therein lies the problem. You know, people like me with $1 billion of client money and 200 clients and our average client's got $5.5 million with us, somebody walks in the door with $10,000 to invest, I'm not going to spend 30 seconds with that person. That just is not in my business model.

[00:34:53] And so I think doing business with a new broker who's looking for clients you find somebody that you trust and even though you're not going to get as good a deal from that person as you would from somebody like me, who's kind of an institutional sort of an operator, that's better than not having any advice at all. So overpaying for a little bit of financial advice through commissions it might be too high is certainly a great way to access some other information that could help that person get on a path to a better overall financial outcome.

[00:35:29] So I don't want to belittle the value of the brokerage community. I just don't think it's particularly competitive with the advice only and fee only portion of the community. But there's a large barrier to entry because we pretty much have a $5 million minimum. 

Wes Schaeffer: [00:35:47] Right. Well, and that's what's tough. That's what I learned when I was a stockbroker. It's like - I didn't know anything. I passed my Series 7 and my 65 and did't know anything. I certainly didn't know how the markets were trending. I knew what management was pushing me to sell, and I had to sell to make commission to put food on the table. I didn't have the time or the wisdom at 27 years old to tell somebody -- give them any good advice.

Gil Baumgarten: [00:36:25] Some good advice along these lines could also come from a CPA. So it's not only the financial advisors that have products to sell that would be a source of good information. And frankly, some of the best things that somebody can do are the simplest things that they could do. If they understand what equity returns are over time, if they understand how to keep the taxman at bay with a CPA can tell you, focus on very inexpensive products and focus on risk exposure that you'd never take your foot off the accelerator, that's going to be a very profitable strategy over the long haul and anybody can do it.

Wes Schaeffer: [00:37:05] Mm-hmm. Very nice. And your book is going to, at a minimum, give them a little insight or at least say -- like the old adage, right, if you're sitting at the poker table and you don't know who the chump is, it's you.

Gil Baumgarten: [00:37:21] That's right. The book drives a lot of that home. And frankly, if people were to read the book, they'd have, I think, a very good understanding of what a good path could be. And so my book is called "Foolish," and the subtitle is "How Investors Get Worked Up and Worked Over by the System." It's a number one best seller on Amazon.

[00:37:47] People can also log on to my website. My firm is called Segment Wealth Management. That's SegmentWM.com. You can go there to my blog. People can sign up for a free blog post. We don't charge anything for it. We don't solicit business from that. Nobody gets emails from us other than just the informational newsletters that we send out periodically about did you know about interest rates? Do you know about how sales loads works? Do you know -- so it's basically a new topic all the time. So people can go there and and sign up for that for free and probably get a pretty good education over time about what the dos and don'ts are.

Wes Schaeffer: [00:38:23] Mm-hmm. All right. I got that pulled up. I will link to that. And we're linking to your book. And I get to Houston about once a year; I will give you a holler.

Gil Baumgarten: [00:38:36] That'd be great.

Wes Schaeffer: [00:38:37] Thanks for coming on the show.

Gil Baumgarten: [00:38:38] Thanks for having me.

Wes Schaeffer: [00:38:39] All right, man. Have a great day.

Gil Baumgarten: [00:38:40] Take care.