The transcript from this week’s MIB: Kathleen Fisher, Alliance Bernstein is below.
You can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.
This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST, MASTERS IN BU.S.INESS: This week on the podcast, we have a special guest, her name is Kathleen Fisher, she is the head of wealth and investment strategies at AllianceBernstein. Bernstein manages about $540 billion, they’re just a giant company in 22 countries, 3,500 employees, I think that something like 200 analysts and 150 portfolio managers, they are just a behemoth and she runs all of wealth and investment strategies.
If you’re at all interested in asset management and what it’s like working at a giant firm or what it’s like to be a woman at a very senior level and really Wall Street still is a male-dominated profession, this is really an interesting conversation.
There are a few people who know this business and know the human side of it as well as Kathy, she’s just tremendously knowledgeable and insightful and full of all sorts of intelligent commentary.
I think this is the sort of conversation so if you’re at all interested in asset management, wealth strategies, investment portfolio strategies, this is the podcast for you. With no further ado, here is my conversation with AllianceBernstein’s Kathleen Fisher.
My guest this week is Kathleen Fisher, she is the head of wealth and investment strategies at AllianceBernstein, a firm that manages about $540 billion with 3,500 employees in 22 countries. She joined the firm as a senior portfolio manager and member of Bernstein’s private client investment policy group. Before joining Bernstein, she spent 15 years at JPMorgan, most recently as managing director advising banks on acquisitions, divestitures, and financing techniques. She graduated from Bates College and has an MBA from NYU.
Kathleen Fisher, welcome to Bloomberg.
KATHLEEN FISHER, HEAD OF WEALTH AND INVESTMENT STRATEGIES, ALLIANCEBERNSTEIN: Glad to be here.
RITHOLTZ: And I’m going to call you Kathy instead of Kathleen.
FISHER: Yes, thank you.
RITHOLTZ: I know that is your to the article you Kathy Kathleen. I know that is your everyday name. You started as an equity analyst, what attracted you to finance in the first place?
FISHER: Let me back up say I started as a young economist, I started at the Federal Reserve Bank of New York, I was there for three years, I did monetary research as well as GDP research. It was an amazingly wonderful learning experience to do high quality research. It was very academic but I learned the importance of getting your facts right which today is more relevant than ever, isn’t it, when we have a word that’s called fake news.
RITHOLTZ: Fake news.
FISHER: But it was a great learning experience about the importance of footnotes, about citing your sources that has followed me in everything I have done since then.
Having come to New York to do that job, I did start meeting people who were in investment banking and equity research and lo and behold, someone I met gave me an opportunity to go to Morgan Stanley to be a bank stock analyst and that’s how I got into equity research which back then, it was still a relatively new field, very exciting, and for me, very intellectually rewarding to focus on relative valuations but to also learn that what you think is so right often takes the market much longer to agree with or perhaps never agree with.
So it’s a great learning experience.
RITHOLTZ: Any particular example stand out?
RITHOLTZ: This was quite the memorable experience.
FISHER: I was covering bank stocks at a time when bank stocks were very much out of favor, and therefore no one wanted to hear a word I said for quite some time. So let’s just say that in it of itself was a great experience.
RITHOLTZ: So you spent a lot of your career at JPMorgan after Morgan Stanley, what was that experience like? What did you do for them?
FISHER: My turning it JPMorgan was incredibly fortuitous because I did a lot of bank M&A at a time when bank M&A was absolutely a huge trend in the late 80s, early 90s, mid-90s, so it was a very active space and tons of activity so it was really — a wonderful experience and one captured both all that one does in M&A and corporate finance valuations and the right price to pay for a deal.
But also it brought in the human side of things because the bank mergers, needless to say, cost reduction and people reduction, and you had to get your head around that and the important thing is in a world that makes sense over time, it didn’t makes sense for the banking industry to shrink. Those job cuts would come eventually, those mergers accelerated them but it was something that you have to stand back and so now what’s going to happen over time regardless of when.
RITHOLTZ: So your tenure at JPMorgan, I believe, that predated the Jamie Dimon era, is that correct?
FISHER: Very much predated, it was pre Chase merger, actually.
RITHOLTZ: Oh, okay.
RITHOLTZ: So I was going to ask you how much time you spent working with Jamie, but obviously…
FISHER: Quite a long time ago.
RITHOLTZ: Obviously not.
So what led you to AllianceBernstein although if memory serves, when you joined, it was Bernstein still, right?
FISHER: Now I joined in 2001 and the merger occurred in 2000. And so I came post the AllianceBernstein merger, I joined AllianceBernstein because several of my colleagues in JPMorgan had migrated to AllianceBernstein over time and therefore they enticed me to join the firm.
RITHOLTZ: And you’ve been there ever since?
FISHER: I have been there ever since 2001?
RITHOLTZ: So your current title is head of wealth and investment strategies, what does the head of wealth and investment strategies do?
FISHER: Well I am blessed to work with a team of 35 extraordinary experienced professionals who are in two separate groups. One is the Wealth Strategies Group which developed the models that help our clients preexperience the likely financial outcomes of decisions they can make. Whether those decisions are around wealth transfer strategies or retirement or charitable giving, the idea that you have many variables you can control and therefore how to think about different asset allocations, different structures, we help our clients think through all those options.
RITHOLTZ: Are you running Monte Carlo simulations or what are you actually doing to derive those variable outputs based on different decision?
FISHER: Our core model does indeed utilize a Monte Carlo engine but it’s one that we have developed ourselves over the years because we — as a research-based firm, want to make sure we are informed by history and therefore we want to take responsibility for embedding relationships that make sense over time. So it is our model but using a lot of the important quantitative techniques that are important to getting that right.
The other team is the team, the private client investment policy group which works on asset allocation advice and strategies for clients once when they had made the appropriate decisions about their goals and objectives and also the specific execution strategies using the different investment portfolios that we offer at our firm.
RITHOLTZ: So one side of the group is planning, the other side is actually asset management and you want the portfolio to match the plan. Am I oversimplifying that or…
FISHER: That is very good. And it’s actually,, we are not the asset — we are not the portfolio managers ourselves, we’re making the asset allocation advice using the portfolios that are managed at the firm.
RITHOLTZ: So all internal, so in other words, you’re creating a salad from ingredients made within, is that two….
FISHER: That is a good analogy, good — no, no, no, no, we all eat salad, that is good, yes, yes.
RITHOLTZ: Some of us, less than we should.
FISHER: That is good.
RITHOLTZ: So it’s in-house portfolios that are created from — it’s an in-house asset allocation model using various funds and assets that are also managed in-house. So really you — do you use outside managers as well?
FISHER: So we use — we use ETFs where appropriate but the bulk of our services are indeed managed in house.
RITHOLTZ: Let’s talk a little — last year 2017 was kind of an unusual year, we had very high returns in the United States even better returns overseas especially dollar-denominated and incredibly low volatility and very, very low drawdowns, what do you make of the way 2017 played out?
FISHER: You captured all the anomalies and no one knew going into 2017 that they would occur.
So it’s a great reminder that you don’t know in any given year what’s going to happen especially the overseas returns with our base investors. We started the year with all the focus on the U.S., but the global thinking is recovery, the benefit to earnings around the world, all of these were very positive surprises that led equities to do quite well but the fact that there was such calm around the globe like the geopolitical issues which the market really has absorbed very nicely, the calm made the Sharpe ratio for the year probably one of the highest on record, right?
Returns relative to the unit of risk given the volatility in the market was really quite remarkable. So it’s an extraordinary year, it was actually probably a perfect year and that we had no months when there is a negative return on the global stock market. And so lots of record-breaking events in 2017, and when we look forward, we think a lot of those good things are still in place, the challenge though was we would also argue that a lot of the good news is already in the market.
RITHOLTZ: Already priced in.
And so one of the things I find fascinating is when you have as you folks do a global allocation, do you get pushback from clients not in 2017 but you know, 2015 or 2014, hey, U.S. stocks are doing great, why are we wasting all this time with all these overseas holdings? What sort of pushback does the diversified portfolio generate?
FISHER: I will say, we spend a lot of time with clients reminding why you have diversification, right? You never know when things will change and therefore, we remind there will always be times when you hold something that is out of favor or doing less well than you would like and certainly holding non-U.S. stocks ever since the financial crisis has been a drain on returns until 2017.
But we know that over time they will trade places, they do, they have 2017 show that this year, non-U.S. stocks continued to outpace the U.S. for dollar based investors and that is the power of diversification for long-term investors and our clients are long-term investors. So they do embrace the idea that diversification will help them get the returns they expect that the amount of risk they’re willing to tolerate over time.
RITHOLTZ: What about the general trend towards indexing, how do you — you guys are an active set of managers although you do use ETFs, how do you see this overall trend away from active management and towards indexing playing out especially your client base tends to be a fairly sophisticated high net worth group of investors.
FISHER: Clearly active and passive should and can coexist. There is a role for passive and as a research based firm, we have to acknowledge if we do that the cheapness of passive which has come down a lot in the past 40 years means that investors can indeed get very cheap access to all the many pockets of the market they couldn’t before. So for clients who have relatively short time frames, who are very focused on getting market returns, there is nothing wrong with passive.
But for clients who want a chance of outperforming over time and do have a longer time horizon where active has time to play out, more — I think it would be more options now that they had before in that active managers know they need to really show their value, they can’t be indexed, they need to be — have conviction in their strategies and how to be able to communicate why they should play it over time. But you do need time for active strategies to work and concentrated portfolios, high conviction portfolios, it look very different than the market…
RITHOLTZ: You mean high active share?
FISHER: High active share, exactly.
RITHOLTZ: Very little correlation with the benchmarking…
FISHER: And in fact, we have services that are benchmark agnostic, equity services which — you know, don’t even think about benchmarking us, we have some concentrated portfolios of 2025 stocks and when you have that conviction and the time to have it work, those are nice satellites to have around core portfolios.
RITHOLTZ: So you are a broad allocator, let’s talk a little about the other half of the portfolio, the fixed income portion. I have legitimately been hearing for 10 years that this bond bull market is over, it’s dead, it’s done and then next year I guess maybe this is the year. We have seen rates start to tick up, what does that mean for fixed income and are we really at the end of the bond bull market?
FISHER: You are right, we have been talking about it for a long time. I think some clients are beginning to think it’s a broken record but when you think of how strong the global economy is and although inflation has been a mystery here, inflation has been so low for so long. If the economy continues to be as robust as it has been, it is likely inflation will take up a bit and even a little bit will encourage central banks to become less accommodative, we expect rates to move up gradually and modestly over time, we can’t wait though, this is getting a little bit tiresome to have rates stay as well as they have.
RITHOLTZ: We’ve already seen some signs of inflation picking up around the world and fairly recently, early 2018 there are signs — in late 2017, there’s some signs of small amounts of wage pressure, is that going to continue? What — how do you look at that and integrate that into a portfolio?
FISHER: We do think the pockets of stress in the job market indicate that wage pressure can develop, but we’re not — we do not have a crystal ball on this, but we do expect that to be a source of upward pressure. So we do think that race will rise and that as I said, gradually, our current forecast though is for fed rate hikes in 2018. And we do think we’ll start to see rates picking up a bit from here, especially as the Central Bank and other parts of the world fall into step as well.
RITHOLTZ: So I see a lot of pushback on bond funds versus individual bonds. Is that an issue you ever deal with clients, this seems to be some sort of confusion around do I own individual bonds or am I better off in a fund and not have to pick individual bonds, how you manage that in your portfolios and what do you think of the difference?
FISHER: There has been enormous press over the years about problems of bond funds which our clients understand are not true i.e. people who hold individual bonds usually don’t mark their bonds to market and therefore are not paying attention to the actual price loss they may have when rates rise. On funds in contrast, especially intermediate bond funds that are intentionally diversified across the term structure are looking to take advantage of changing yield curves, shapes, they are looking to take advantage of short-term rates rising, you name it, so they can reinvest coupons and higher yielding bonds when rates rise and therefore bond funds are very flexible especially when rates rise to let you take advantage of the changes that occur.
There is another factor which is very important is the bond liquidity is no longer as broad as it was…
RITHOLTZ: It disappeared.
FISHER: And therefore bond funds are much better for clients who need to pull money out of their funds as opposed to selling individual bonds at a very poor price in a less liquid market.
RITHOLTZ: Let’s talk a little bit about what it’s like for you as a woman working in a field that’s been so male-dominated for so long, have you seen any improvement? Have things gotten better? Are there more opportunities for women in this field?
FISHER: Things have definitely gotten better, it’s very obvious that the industry wants women for the right reasons, i.e. we want diversity — for diversity of thought, we want women, we want people of color, we want to have much more and different kinds of input, so many studies have shown how much better teams are when they are diverse and we want to have that advantage also.
And also our clients expect it, which is good, I think you can get a lot of positive reinforcement, and I do think one of the reasons things are getting better is that companies are so much more flexible than they ever were before, and that is good for men and women. All right, the fact that there is much — you can work remotely, these are all good things that encourage a fluid and adaptive workforce that benefits everyone.
RITHOLTZ: The pay differential between men and women, is it as bad as it was? Is it getting better?
FISHER: The problem with any kind of pay measurements is that it’s very hard to actually look at identical jobs. I would argue that certainly at my firm and every firm I know people get the same pay for identical jobs, it’s really — that is the challenge is actually saying each job how you measure each job.
RITHOLTZ: Michelle Meyer of Bank of America Merrill Lynch specifically cited a lack of women at the top of the industry as a challenge for women in finance and I’m assuming she means a lack of role models, a lack of mentors, what was your experience coming up through Morgan Stanley, JPMorgan, and now ,AllianceBernstein.
FISHER: So with everything, I am a partner at our firm and that is wonderful and that I and my other senior female colleagues are very focused on coaching, mentoring, and sponsorship of young women, that is absolutely a dominant force. When I was younger, I was kind of lucky in that I never felt the need to fit in and that meant that I wasn’t looking as much for female role models as perhaps some people might have been back then. And therefore, it didn’t stymie me because I always thought that if you had good ideas and were contributing, you would be rewarded.
So I was very lucky that it didn’t trouble me too much but…
RITHOLTZ: Am I reading too much into this? Are you suggesting you stood out as a woman and there was an advantage to that?
FISHER: I will not go that far, I will say that the — and that I think some of the frustrations that some people may have had in their careers, I didn’t have and was very fortunate in every firm I worked for not to have those.
RITHOLTZ: So what do you think is the current state of affairs in gender relations this past year is really — feels like a major turning point in the roles of genders and what is and isn’t acceptable behavior am I overstating that or…
FISHER: I think the fact that conversations are being held at the company level in public forums is really good and everyone having conversations they might not have had before and openness leads to good results and good outcomes and much more honesty, candor, and effectiveness.
So I think this is indeed a good spot to be in. Time will tell but I most focused on how exciting the brilliant young women that are coming up are doing and the impact I think they will have because there is so much more conversation about really making sure their voices are heard, about taking care not to in any way, make anything seem like it’s male oriented and I think there’s a lot of good things are happening because of that.
RITHOLTZ: Holding aside, what — what’s the right thing to do with the social issue aspect of it when you look at the recent financing at Uber which is known as a sort of frat house bro mentality, it cost them tens of billions of dollars both the founders, the employees, the outside investors because of that you know, juvenile frat house approach, have we reached the point where corporate America has said enough is enough? This is real money and we have to get serious about it. Are we at that stage yet?
FISHER: You know, you raised a really good point which is that the transparency that the Internet has permitted has made it hard for companies to hide, and that’s a good thing. So I do think there is a much greater awareness that good behavior is necessary and I think that’s going to be very helpful in enforcing more good behavior down the road.
RITHOLTZ: Let’s talk a little bit about what you see as head of wealth management and investment strategies, you work with a big spectrum of investors from individuals to institutions to everything in between. How do these different investors differ and in what ways are they the same?
FISHER: We are going to focus just on the private client business.
FISHER: And what’s interesting there is that it has nothing to do with asset size, people are people and everyone has their own personal preference risk and return, and you could have two people exactly the same amount of money and they can have a whole different view as whether they have enough or they are going to run out of money and both could be in very good places but they each have a very different perspective.
So we clearly focus a lot of make people understand the likely financial outcomes of all the decisions they can make sure so that they have the confidence and the understanding to actually make very good judgments about long-term planning.
RITHOLTZ: That fear of running out of money I’ve heard that, I’m sure you’ve heard that from people who really, unless they start looking at Picassos will never run out of money, why is this such a significant concern from people who you would otherwise think are totally financially secure?
FISHER: It has nothing to do with intellectual knowledge it has everything to do with embedded psychology. And as I said, you don’t know until the person explains you know, whether it’s something in their background, it is their personal makeup which makes them very conservative and fearful that terrible things could happen that could indeed wipe out there their financial misstep.
RITHOLTZ: How do you respond to that?
FISHER: It really gets to what I said before about modeling and if we can show that even in very poor market conditions they will be in a good place, that is very reassuring to people so we do indeed, do are planning to the 90 percent confidence level to make sure people know that even in very poor conditions they’ll be fine.
RITHOLTZ: What about inflation, what sort of the inflation assumptions do you build into those sort of plans?
FISHER: We let inflation, it is a variable, i.e. we are not saying we know where inflation go, when we do forecast, we do 10,000 trials and inflation is one of the factors that does unfold over time, it can be very high, it can be very low, and remember deflation can be as bad as inflation but we want to show a range of expected outcomes for inflation as well, because you’re so right, inflationary environments that are extreme can be very dangerous.
RITHOLTZ: That is quite interesting.
So tell us about your day-to-day, what does that look like? Are you — because you work with two different groups of both planners and the asset management side, you’re working with clients? What a day in the life of Kathleen Fisher like?
FISHER: Well, I have the incredible luxury of a lot of diversification in my daily life. My team is working on long-term asset allocation projects, we are working on long-term planning projects, we are publishing for both our clients, we’re creating communications for advisors, we’re meeting with clients, if our perspective can be useful to a client meeting so we have a vast array of different things going on in any given time, we speak in front of public forums in terms of groups, so lots of diversification but what is good about all of it is that we have a lot of interaction with clients and therefore can see what issues really matter to people and where we can be helpful and more clear in communicating.
RITHOLTZ: So we mentioned outliving their money, what are some of the other large concerns clients have these days?
FISHER: We didn’t talk too much about outliving money bunt I’m glad you raised that because that indeed longevity risk is we always remind clients the biggest risk they have. Nothing…
RITHOLTZ: Say that again.
FISHER: Longevity risk is the biggest risk clients have. People worry about market returns but just think that nothing in human history has prepared people for a world where they work for 40 years and then they have to live on what they save for the next 30 or 40 years.
Now for very wealthy people, it’s a different dynamic but still it’s a very different thing when you’re talking about living perhaps as long as you have worked, right?
When you go back to why social security was created, people use to die a few years after they retire, so it’s a very different ball game. So the dynamics have changed dramatically and it’s very important now to think about, you know, money lasting for many, many decades.
RITHOLTZ: So we have technologies in health and healthcare changing, we have all sorts of things taking place in terms of genomics and in oncology and down the road, what happens when human lifespans, when 100 isn’t a rarity, when that becomes ordinary and then we start seeing hundred 110, 120 as not tremendous outliers. Are we going to eventually have a problem? Are we going to have to reconfigure how we think about our portfolios when we turn 68 or 70 and not shift to that much more of a conservative portfolio?
FISHER: Absolutely. And that has been the case for at least a decade now with rates — interest rates being so low. You know, the old, decades ago when people used to talk about switching to bonds bond returns were in the mid-single digits and of course at these level, that would be unconscionable to have had a bond weight if you need the money to work for decades to come.
So most firms having to encourage clients to maintain a good equity weight when they retire, it is ever more important because of longevity and the other thing that’s important is to assume that your expenses grow with inflation over time see so you capture the risk of living for quite a long time.
RITHOLTZ: So we talked earlier about the shift from active to passive and how they could coexist but underlying that has been the shift from pricey to cheap and we’ve seen what some people call the Vanguard affect pressuring fees across the whole industry, what’s your take on this and what do you see happening going forward in terms of fee compression and everything associated with that?
FISHER: It’s a really interesting topic because I do think there is going to be much more segmentation in that getting cheap exposure is a good thing for many people but paying fees for a broader advice model also make sense. I think there’ll be an appropriate demand for transparency of fees and for clear value in what our client is getting for those fees. So I think there’s — these are good trends for clients.
RITHOLTZ: So transparency, value and what was the third bullet point in this?
FISHER: I think fees have to be appropriate to the value offered.
RITHOLTZ: That makes perfect sense. So you are seeing some changes that have taken place in the financial industry over the past few years what do you think is the most significant change that has occurred so far and what should we be on the lookout in the future?
FISHER: I would have to say speed and information, I love looking at video clips from 1987 market crash because you see a reporter standing at the top of the New York Stock Exchange with pages giving them handwritten notes about what was happening on the floor.
FISHER: Nowadays, obviously we all know that everyone can get real-time quotes on their phones and there’s a ton of information you can look at all day long, the problem is a lot of it’s not very good. So information is not judgment, information is not assessment, it is not perspective, and so the challenges is cutting through all the information to get to truly good advice.
And so that has created actually more of a challenge because the more information people have the easier it is to react to as opposed to keeping their eye on the long-term which for most individuals is indeed the right thing to do.
RITHOLTZ: Do we suffer from information overload?
RITHOLTZ: Is there just to the firehose of not judgment assessment or perspective but just raw news and headlines and political volatility? What does that do to an investor’s attitude, and how does that affect their tendency to shoot themselves in the foot?
FISHER: Well it does create those new risks, and you know, studies have shown that back in the day when people can only look at their accounts once a year maybe once a quarter, they stayed long-term investors. But now that they have daily information, they tend to do more things more quickly.
So continually keeping the eye in the long-term is really important and I — I tease about everything we are doing here today and that because there is 24/7 news, there is going to be a lot of talking heads all the time telling people what to do, what to buy, what to sell on and you have to stay away from taking that advice too seriously.
RITHOLTZ: So one of the things I noticed since you brought up the information flow after the election in 2016, all investors seem to want to ask was what is Trump going to do for my portfolio? And if you remember early on, this guy is going to kill my portfolio and then that very quickly became oh this guy is going to be great for my portfolio. How do you respond to questions about politics when 2017 is a perfect example. Probably the most politically volatile year in my lifetime and at the same time the lowest volatility in the markets.
FISHER: It is a fascinating situation isn’t it? We actually look back over time at all the geopolitical events back to about World War II to show it that actually has always been the case that geopolitical events get a lot of headlines but have very little impact on the markets.
And the only time they do is when something political works into the real economy so for example on the OPEC oil embargo in the 70s which did affect the economy of course, but many other things that we think of, the Cuban missile crisis, you name it, they really had very little impact on the market and I think that as time has gone on, there has been more appreciation of that which is one of the reasons markets have been relatively complacent through lots of scary headlines.
Because what matters over time of course is what companies are doing in terms of earnings growth, in terms of getting momentum for the long run and that’s what investors really have been focusing on this year.
RITHOLTZ: We have been speaking with Kathleen Fisher of AllianceBernstein, if you enjoyed this conversation be sure to hang around for the podcast extras where we keep the tape rolling and continue discussing all things investment. We love your comments, feedback and suggestions, write to us at MIBPodcast@Bloomberg.net.
You could follow me on Twitter @Rithotlz, check out my daily column on BloombergView.com, I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.
Welcome to the podcast, Kathleen, thank you so much for doing this and I’m — we have been looking forward to this since I saw you having a conversation, I think it was with Tom Keene, might’ve been some time ago.
So Bernstein is a giant firm, I mean you are half a trillion dollars, plus it’s what almost 4,000 employees, is that about right?
RITHOLTZ: 3,500, so that’s a substantial firm. What’s it like working in a shop that large as a person who’s as visible as you are for the company?
FISHER: Bernstein, when I say Bernstein, because that is the brand we used.
RITHOLTZ: You started…
RITHOLTZ: So you started after the merger.
RITHOLTZ: And I realized the merger was 2000, I thought it was after.
FISHER: The AllianceBernstein merger is 2000 and actually our brand now is AB which is great, nice and snappy, and it’s a wonderful firm and that everyone is — heard someone saying we are just providing great outcomes for our clients because we only do one thing, right? We do invest in research and management. So that’s a real luxury relative to being in a financial conglomerate that has tons of different unrelated business.
RITHOLTZ: You don’t have to cross sell insurance or bank accounts or any of that…
FISHER: We focus on providing great financial returns and the appropriate risk-adjusted returns for our clients whether they be institutional, private clients, or retail channel.
So it’s a really wonderful place to be working since everyone knows our goals and objectives and how we apply resources to achieve them.
So I think it’s a great model because I do believe strongly that companies should up the core competency to exploit in a world where depth and breadth matter more than ever.
RITHOLTZ: So I remember Bernstein back in the 90s when constantly top ranked on the institutional investor in terms of the research team, the individual analysts, I could pull some names out, Paul Sagawa was on telecommunications, I remember him downgrading Lucent, Cisco, a bunch of telecoms and 99 people thinking he’s crazy and all the stocks then dropped 90 percent so Bernstein was known for their research following the merger with Alliance, has the business changed all that much? I’m trying to remember, do you guys do syndication IPOs, those sort of stuff or is it purely investment management and planning?
FISHER: It is investment management and research and our sell side, particularly Bernstein continues to win accolades in the quality of the research they provide.
RITHOLTZ: Now that business model is undergoing some pretty serious changes. At one point in time, that was a big profit center for the big banks, now it is the research department, they are in service of the rest of the asset management firm how to — how is that working these days?
FISHER: On the Bernstein sell side research group is incredibly well-regarded and well-positioned to gain marketshare in a world where pressures are indeed changing the nature of the business quite substantially.
RITHOLTZ: Yes, there has been a lot of decompression in that space and you mentioned the lack of liquidity on the bond side that half of the sell side business has changed dramatically also, but you guys are fortunate that your focus is pretty single-minded and that’s relatively unusual in this industry.
FISHER: I think it’s a real advantage to clients to have a firm that really does know what it’s doing and why it’s doing it.
RITHOLTZ: To say the least. So let me jump to my favorite questions, these are the questions I ask all of our guests, what’s the most important thing that people don’t know about your background?
FISHER: Well, you might have gotten the sense of a pretty disciplined person, I work a lot, I don’t — my young colleagues now I’m not in any social media.
RITHOLTZ: No social media, no Twitter, no Facebook.
FISHER: No social media at all.
RITHOLTZ: LinkedIn, not even LinkedIn?
FISHER: Makes me a bit of a Luddite, I admit, but the thing they are learning sometimes that I read lot about what’s going on so I am actually much more up-to-date on what’s trending than they would expect me to be. And the other really interesting thing for most of my younger colleagues is that I do believe that we are in the Golden age of television, I do think that the Sopranos unleashed the most amazing set of programs ever and so when I have any free time on long holiday weekends, I do binge watch everything that I haven’t seen, just like a teenager might.
RITHOLTZ: Okay, so give me some names I have my favorites, tell me what you’re watching and enjoying.
FISHER: Well, to keep it the nice and light, I did do The Crown over the holidays.
RITHOLTZ: One of the guys in my office loves, I can’t get into it.
FISHER: I think of people think it’s slow but I think it’s riveting because I’m a bit of an Anglophile, and I do love House of Cards and I will probably still love it without Kevin Spacey, I love Orange is the New Black.
So I could go on.
RITHOLTZ: Orange is the New Black is a tough watch, I find that is like a little gritty.
FISHER: I think men have a harder time with it than women do.
Have you seen the Marvelous Mrs. Maisel on Amazon?
FISHER: I have read about it and I know she was the young woman on the House of Cards so I want to see that.
RITHOLTZ: My wife and I binged through the whole thing over the holidays and it it’s really tremendous. Tells us about some of your early mentors, you talked about what you’re doing at AB now mentoring women, who were your mentors?
FISHER: You know, I wish I could say I had a couple of incredibly important ones. I really didn’t and I regret that because I do think it’s so important. The one thing I did learn though is to make sure I got diverse opinions from people because everyone has biases and everyone has some blind spots so I have found it’s really good to ask multiple people questions over time to get help.
RITHOLTZ: What investors influenced your approach to asset management?
FISHER: One thing I love about investing is connecting the dots and everything is interconnected, everything can have unintended consequences, when I was young at Morgan Stanley, Barton Biggs was at — he has since passed away and Barton Biggs used to take a big trip every year and write about it. And the reason I’m highlighting that is that clients loved it because it reminded them of the big picture. It reminded them to keep focusing on the long term and recognized all these interconnected issues as opposed to being very, you know, focused on one particular stock or something that was really quite several as opposed to the longer-term.
So I gave him enormous credit for helping people think broadly.
RITHOLTZ: This is everybody’s favorite question, what are some of your favorite books be they investing or not investing related, fiction or nonfiction, what are you reading?
FISHER: I confess I’m not reading anything now. I tend to be in high work mode this time of the year, but I love books, again, that help connect the dots, a book that I read that I recommended to many people is Gotham, which is I think it’s Gotham History of New York to 1898 or so, I think it was written maybe 20 years ago, I forgot the author’s name but there is second version coming out but it is it is a very big book and the reason it’s so wonderful is it actually goes through the first 300 years of New York City and highlights both the — all the accidental forces that made New York become what it is today and the primary one is that the Dutch influence on New York is really what made it such a commercial center from inception.
We tend to think about the English influence but you know, the Dutch influence is really much more important to what the city became overtime.
RITHOLTZ: Gotham, A History of New York to 1898, Edwin Burroughs and Mike Wallace.
FISHER: Yes, and Mike Wallace has just — just done a second book which goes from I think 1898 to 1917 or something like that so it’s a much shorter timeframe but gets into the next period.
RITHOLTZ: Greater Gotham, a History of New York City from 1898 to 1919.
By the way I don’t know any of this, Google and Amazon are my backup. What else have you been reading or…
FISHER: Let me tell you another book that I recommend to everyone which used to be quite well known, I don’t think anyone under 15 knows of it, but All the King’s Men by Robert Penn Warren, does that ring a bell with you? Yes.
RITHOLTZ: Sure, it was a movie also.
FISHER: Was but the book is much more important than the film and I think it was written in the 40s but it was written about the 30s, it was a little bit based on Huey Long, but more importantly, it’s about, it’s got so many themes but it’s about history, it’s about how you — you have to we have to accept and learn to accept you history but also change, unintended consequences of actions is a big theme of the book, it’s magnificent, and I it also reminds that geography and climate are something we don’t think about as much anymore but when you read that book about the South in the 30s, you feel the heat and the humidity and the dust and you realize how that affected the way people lived in ways that we are sort of immune from today.
So it’s a great American novel that brings in many important social themes.
RITHOLTZ: I just finished How We Got To Now and one of the six factors that led to modernity was simply air-conditioning.
FISHER: I would say air conditioning is the most important invention of the modern era.
RITHOLTZ: It has changed where people live, it has changed the political dynamic.
FISHER: Computing power, we couldn’t have computers that are…
RITHOLTZ: Right, it’s really you don’t think about that, we take it for granted but that’s a huge innovation. So we talked earlier about how things have improved for women in the industry. Generally speaking, what you think is the most significant changes we’ve witnessed in finance over the past 25 years?
FISHER: You know, like with most industries, I think the power of the consumer is really a big trend, right?
FISHER: You see that on every industry, right? The consumer preferences have to be met, they have so many choices and that’s certainly true in private wealth management, right?
There are many different choices I think it’s really good for clients and that they are seeing a broad array of different models and every firm is therefore going to have to figure out what’s the model that works best for them and the clients they want to serve.
RITHOLTZ: That makes a lot of sense.
So given that, what you think the next shifts that were good to see are going to be?
FISHER: So I figure there’s technology coming sort of from the bottom and that the [robo] advisors have highlighted the opportunity to use technology to give clients quick information and let them do a little iterative work on their own but at the higher end, you’re seeing that there is actually more need for good advice than ever before. Tax code changes and lots of different issues as the investing landscape changes, all these things demand that good advice be available.
RITHOLTZ: Tell us about a time you fail and what you learned from the experience?
FISHER: You know, I think you’re looking for something very idiosyncratic. I got to tell you that the most important thing that ever happened to me with getting through 2008 and 2009 with private clients because — and the reason I know how important that was — I realized I don’t remember anything about that year except for work because we basically dropped everything to make sure we can work with our clients.
As you know, it was a stunning time and anybody in stocks saw their stocks go down and happily our clients often had high quality municipal bonds that really helped offset those losses but it was a time when wit the faith and the way the world worked was shaken to its core and that affected me as well, I had to say the note is everything I believe to be true about investing still true and really had to work through that.
And it was a very important experience to say yes indeed the world does still work on but it did require that our firm and many others really focused on risk control in ways that we haven’t had to do before that.
So we developed some very powerful risk control tools that have been very — added to our clients ever since then.
RITHOLTZ: It’s hard to stop and realize it was only 10 years ago, it feels like it is so much further away, but it’s 2018, it’s just a mere 10 years later, that — isn’t that astonishing.
FISHER: Many people are still scarred by it.
RITHOLTZ: But there’s a posttraumatic stress disorder amongst investors who I can’t tell you how many times I speak to people, what do you mean you’re 50 percent cash? Well I’m on 50 percent cash, I was 100 percent cash through 2015? Really? That some serious scarring.
FISHER: Well, if — we used to talk about people that the depression era…
FISHER: Right, it’s the same thing, people that lost a lot of money in ’08 and will never trust markets again, it takes a long time to get over that.
RITHOLTZ: The line I remember from many years ago is when you look in 1929, it did not get back above those levels till 1954, it was 25 years later and someone said you needed a whole generation of people to be born, grow up, and start working again before you even had a chance breach those levels.
Tell us what you do to relax outside of the office, what you do to stay either mentally or physically sharp?
FISHER: So having been a working mother for most of my career, my children are now adults 31 and — so 32 and 28, I always had to really focus on my job and my family and kind of let other things fall by the wayside and that luckily worked for me. I’m also on some boards that are very important to me but the — I don’t have a high need for fun which is really good.
My fun is with my family, I have a wonderful husband and wonderful children and now a grandson and so I spend most of my time focusing on seeing them as much as I can. I do have a trainer, I have a trainer once a week who pushes me to do things that I would never do by myself which I think is wonderful.
But I will tell you I don’t have any dramatically interesting outside hobbies like bungee jumping or anything like that.
RITHOLTZ: You didn’t strike me as a bungee jumper, it wasn’t the first thing that…
FISHER: No, no, discipline.
RITHOLTZ: So you mentioned work with some younger women in the firm. If a millennial or recent college graduate came to you and said they were interested in a career in finance what sort of advice would you give them?
FISHER: I would get the same advice I’ve been getting for decades which is you have to love the content of what you do, you will always be competing with people who do love that content so if you don’t, you’re going to have an edge. So you have to know why you’re in the fields and find — if you like finance, if you like markets, you know find a spot that really lights your fire because it is competitive, it should be and therefore you want to love what you do and the rest will come.
RITHOLTZ: And our final question what is it that you know about investing in markets today that you wish you knew 30 years ago?
FISHER: I think, patience and never ever letting yourself get swayed by the short term is something that you know when you’re younger it’s hard to do sometimes.
I look back at from the things I did back then and only I’ve held onto certain positions that I didn’t, it would’ve been a whole different story.
RITHOLTZ: To say the very least. We have been speaking with Kathleen Fisher, she is the head of wealth and investing strategies at AllianceBernstein. If you enjoyed this conversation, be sure to look up an inch or down an inch on Apple iTunes, sound cloud, overcast or wherever finer podcasts are sold and you could see any of the other 180 or so such conversations we’ve had.
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I would be remiss if I did not think the crack staff who helps me put together this conversation every week Taylor Riggs is our booker, Michael Batnick is our head of research, Medina Parwana is our audio engineer/producer extraordinaire.
I’m Barry Rithotlz, you have been listening to Masters in Business on Bloomberg Radio.