The transcript from this week’s, MiB: Ron Carson, of the Carson Group, is below.
You can stream and download our full conversation, including the podcast extras, on iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
~~~
VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: This week on the podcast, I have an extra special guest, Ron Carson, CEO and Founder of the Carson Group started way back in 1983 practically in his dorm room in Nebraska, has been one of the leaders in the RIA space not just through Carson Wealth, the asset management business side, but through Carson Partners, which is sort of temp plus for independent RIAs who were looking for succession planning and help on the backend of their business with technology as well as Carson Coaching, which is a program that came about in response to demand from RIAs who were looking for little more help and little more assistance in running their businesses.
If you’re at all interested in the business half of how asset management is changing, the impact of technology, the impact of alterations to the fiduciary rule, the general trend towards fiduciaries and away from commission-based brokers, you’re going to find this conversation to be absolutely fascinating.
With no further ado, my conversation with Ron Carson.
VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.
RITHOLTZ: My extra special guest this week is Ron Carson. He is the Founder and CEO of the Carson Group which covers several different companies including Carson Wealth and we’ll discuss the different business lines.
Ron is also the author of “Proven in the Trenches” and most recently, “The Sustainable Edge” to bestsellers on Amazon. The Carson Group manages well over $12 billion for about 34,000 families. Ron Carson, welcome to Masters in Business.
RON CARSON, FOUNDER AND CEO, CARSON GROUP: Barry, thanks for having me. It’s a privilege to be here today.
RITHOLTZ: So, I’m kind of intrigued by your history and your story, this kind of a Michael Dell background, you started Carson in University of Nebraska dorm room in 1983, am I exaggerating that at all?
CARSON: No. I grew up just north of Omaha in a farm. I thought I was going to be a farmer my entire life and those that remember the early ’80s, interest rate 21.5 percent, farmers were going broke, my parents went broke and I was forced to do something else.
And I was reading a money magazine article that talked about the top professions of the future and one was to become a CFP and you know what, that’s what I’ll do and I literally ran three years at that Napa Valley wine auction and there was a pre-event cocktail party and some lady said, you’re from Nebraska, what do you do, and I told her and she said, how did you get into that, I said, well, I read this article. Her face lit up and she goes, you’re not going to believe this but I wrote that article.
RITHOLTZ: That’s amazing.
CARSON: And I’m like, well then, I owe you my career.
RITHOLTZ: That’s amazing. And I go back to 1983, you and I are similar ages and when I was in college in ’83, I was trying to scrape up your money. I wasn’t thinking about, I know, let me launch a new business in an area that really nobody else is in. You had to be one of the first independent advisors. Is that a fair statement?
CARSON: I absolutely was. And in those days, it wasn’t even viewed — I didn’t know that — I mean, I was total unconscious and competent. I didn’t know what I did know.
And so, I like the idea of being independent and — but there wasn’t a lot of places to even go. The broker dealer community was super small, didn’t have a a lot of technology for a lot of products. But that’s how I got started.
And to this day, it was a great growing up experience. I feel like I grew up with the advisory world. I remember in 1994, 11 short years after starting, I was so excited when I realized I can become an RIA and truly be a true fiduciary for clients. And as you all know, our space has changed dramatically several times over the last 30 years.
RITHOLTZ: To say the very least. So, what was it surrounded by farms going broke with interest rates at 21 percent that made you say, I know, I’m going to focused on financial planning.
CARSON: So, initially, someone called me — so, I was down in Nebraska to play football and I — in my first part of the season, I ended up becoming injured. I’ve redshirted and — but I came from a family where my parents were struggling, I didn’t have any money and someone said, you can sell life insurance to make money, and I thought, well, I always had a knack for selling things even as a kid.
I went to auction schools. I told people, let me do an auction for their junk and I had a little popcorn business. I had a lot of little businesses. I always had this entrepreneurial spirit and for six months, I just called out — called out of a phone book and Amica Life had just come out with life insurance in those days, (inaudible) come out with universal life and I didn’t like trying to talk someone into buying insurance whether they needed it or not.
And shortly after that, I want to get my securities license and I was fascinated by the stock market and the capital markets and how they function and it’s just — I feel like I have hardly worked a day in my life. First two years were tough. There’s just couple times I thought I was — I hate it, I was going to quit the business.
But once I got some, I call it epiphany around just taking care of people and really putting people’s interest first, not only did the profession become a lot more fun but I grew incredibly fast. And I’ve always stayed in this line of work and I’ve always been a nontraditionalist, I’ve always thought of different ways of doing things and sort of allowed me to not only being in a business that I enjoyed but it gave me a lot of creative space in order to try different things.
RITHOLTZ: I love that phrase that you hardly — you’ve never worked a day in your life. My wife used to tell people I’m gainfully unemployed, which I guess is sort of the same spirit.
So, since you started back in ’83, you’re coming up on 40 years soon, do you recall who was your first client, do you remember the first person who said, Ron, you seem like a trustworthy guy, here’s all the money I have in the world, try not to screw it up?
CARSON: I do. I thought I was — they owned a drug store in the middle of Nebraska, it was a small, small town, and I remember them writing me a check shot and I pulled out of town, of course, there was only gravel road in and out of a small town and I remember pulled my car over, I got out and I ran around like six times jumping out and down. You would have thought I won the Powerball lottery.
And those — they passed on shortly after they became client maybe a couple of years and then she was a client until probably about five, six, seven years ago and then their children are clients today and — but that was a very, very first one. You’ll never forget the first one.
RITHOLTZ: I have to say that’s a great story. Let’s talk a little bit about this division of the Carson Group. Tell us what is Carson Wealth and how does it fit into the bigger umbrella organization which seems to have a number of moving parts.
CARSON: So, we have Carson Group and in Carson Wealth, Barry, it’s the very, very first part of Carson Group. It’s our retail offerings. So, we’re a registered investment advisor. We manage close to 13 billion in asset for several thousand families around the United States and our mission is to be the most trusted for financial advice.
And as I’m driving down the road, I don’t know anything about our profession. I’m listening to this, I’m like, well, doesn’t everybody want to do that. And I would say maybe how many — I don’t — how many people consciously think of it but we’re in a profession unfortunately that — and financial service is a huge category, Barry, but 65 percent of Americans do not believe that their adviser or the institution they represent were going to put their interests ahead of their own.
And that’s really the mission of what we’re trying to do. Nobody owns the space and it’s so fragmented to this day. There 288,000 financial advisers. There’s roughly a half a million in the mid-90s. Of the 288 today, nearly 111,000 are going to retire. We call them rich and tired. Most of them may have a lot of money and they just don’t want to keep up with all the technological change and we see that as a real opportunity to grow market share but do it the right way.
We have quite a few offices around the country. We have our proven process. We have very specific ways of delivering the value proposition. But ultimately, I feel that we have a real shot at owning or co-owning that in the future.
When you think about Vanguard owns, as far as the brand, low-cost investing, Fidelity owns the retirement plan market. But no one really owns the trusted wealth management market.
RITHOLTZ: Quite interesting. You alluded to something that I want to circle back with you because you went by it so quickly, 65 percent of the public do not believe that their financial institution has their best interest.
CARSON: Yes. And, Barry, to this day, most people do not — so, I travel around the country pre-COVID. I probably give 60, 70 talks a year and many of those to retail clients of ours and I always ask the question, who in here can tell me they do understand a fiduciary and a broker, and anywhere from zero to one hand will go up.
RITHOLTZ: Right.
CARSON: I mean, I was speaking at a CEO institution last year. There were 65 CEOs from all over the world, not one of them knew the difference between a fiduciary and a broker. And to this day, a broker is not required to put your interest first. It’s only suitability. That’s it.
I mean, if they disclose it in a 1,000-page perspective and it says they can do it and they can charge it, target it makes it, quote-unquote, “legal” and we have a saying at Carson, just because it’s legal doesn’t mean it’s right. And I think we still have a massive gap between understanding fiduciary versus brokers.
Now, often in those talks, I say, listen, if you get this one thing right, do you understand a true fiduciary versus a broker, and you passed it on to someone you love and they get it, you’re given a true gift that will give for the rest of their life.
RITHOLTZ: Now, here’s one of the really interesting things about the RIA industry. Over the past 20 years, a lot of who we think of as big brokers, UBS, Merrill-Lynch, Morgan Stanley, a big portion of their employees have moved either be hybrid broker RIAs or just registered investment advisors, RIAs. Is the fiduciary side of the street is the fee only, no conflict of interest versus the brokerage sales commission side? Is this side winning? Do you see that as the trend that’s taking place?
CARSON: I do. I mean, the trend is accelerating, Barry, and let me just say something because I think this is a fact that gets lost on a lot of people. It’s everybody has a conflict of interest, right? You can’t help it.
I’ll use an example. Let’s say you got an RIA who has a hundred million dollars under management and its largest client has $50 million worth sum (ph). And its largest client comes and says, hey, I’m thinking about taking $50 million out and buying this business, that advisor has a conflict because he realizes if he losses client’s asset, he may not be able to stay in business.
But we all know that the conflict is, are you going to do — remember what I — I said, put your client’s interest ahead of their own interest. So, that’s advisor to say, listen, yes, let’s do that and give them the best invest even at the demise of his own company. It’s a conflict but it’s at least a conflict that a client I think consciously knows they’re going in, am I going to get the best advice because it get hurts his business.
And there’s also conflict, Barry, unfortunately, even on the fiduciary side. More so that are more nuance like cash. When moved back, we had deals, there’s some fiduciaries that in order to — they would not take the time or effort to sweep a client into the highest yielding cash and let it sit somewhere where they weren’t earning a lot of cash. That’s a conflict especially if you got a custodian that’s going to charge you or the client some additional fees if they’re not making the return on the account.
I still think our profession has quite a way to go. The fiduciary is the future. But I think even as fiduciaries, we can get better at putting the client’s interest first and being more transparent.
RITHOLTZ: I love that story of the sweep and some time ago, I know you must have a ton of war stories, I do also, we figured out — very often you run with a little bit of cash and account in case a client asked for disbursement or something whether it’s 40 or 50 or 60 basis points, it’s something relatively small, and very often when a market is going higher, it’s a slight drag on performance.
And we figured out a long time ago, it was much better to sweep the cash into one of the higher-yielding money market accounts. We figured out — we did the math, we analyzed it, we sat and played with it and said, net-net, this creates a few hundred thousand dollars of positive gains across all our clients but we’re relatively small. Shop like yours sweeping cash into a higher-yielding money market account, have you ever sat and figured out the math on how much additional gains that generates for clients?
CARSON: Yes. Last year alone, we estimated — it was in the high single digit $7 million, $8 million …
RITHOLTZ: Wow.
CARSON: … directly to our clients because we did the sweep. And, Barry, how crazy as I think about banks, I’ll pick on banks for a second, most clients, if you go, do you love your banks, they go, yes, I love my bank. What you’re getting on your cash and your savings and most of them are getting almost zero …
RITHOLTZ: Nothing. Right.
CARSON: … yet the bank can turn around and get – let’s think ’19 of the Fed funds rate, I’d say, can you imagine if they were crediting you that and at the end of the year they said, hey, we want our fee to be 95 percent of what you made.
Clients if they are writing that check back would go crazy but because they never see it, it’s a huge hidden drag on their performance but they really don’t consciously think about and that’s one of the things. We want our clients to think of every single penny they’re paying, how they’re paying it.
And we — you know and I know we’re big planners, people will make an investment in their future but no one wants to pay something and not see value beyond the doubt for the investment we’re asking them to make. And I think cash is a great example of that.
RITHOLTZ: I want to follow up with what you’re saying with the issue of free trading and let me point out, neither of us have a horse in this race if trading is $8 or if trading is free. It’s essentially the same thing as far as I’m concerned with the average portfolio size.
However, when you look below the surface of all the companies offering free trading, that cost of carry, that return on cash is where they make all their money and it turns out free trading, when you look at the numbers, is pretty expensive.
CARSON: It is, Barry. And then you got order flow payment, an invisible pack that consumers don’t see. I guess that’s there’s a lot I think we can still do as a profession to become even more consumer friendly than we are today.
RITHOLTZ: I don’t disagree at all. Let’s talk a little bit about your coaching business, what is Carson Coaching?
CARSON: So, Barry, and I guess I started a retail in 1983, in 1993, I was giving a talk in Boston at the organization at that time called the IAFP, I don’t know if you remember that, International Association of Financial Planners, and I was talking about the different things I was doing in my business and two gentlemen came up and said, hey, would you coach us, and I said, sure. And that’s how my coaching business started.
In 1993, I launched Carson Coaching. I had seven people come out to Omaha, Nebraska and I — and we’ve had quite a following over the years. I mean, we have around 1, 200, 1,300 offices today that we provide consulting services and coaching services to. We have tens of thousands of alumni, people that come in and out of. They’ll be in the program for a year or two, come back out, come back in again.
And a lot of independent advisors are — they feel like they’re isolated islands out there and they really want to have community, they want to have best practices, they want to have place that they can bounce ideas off of.
Today, we have — I think we have 11 executive business coaches that specialize in a variety of different areas and I have learned a ton from having our coaching organization. I always like to say we’re better together. None of us is as smart individually as we are collectively.
And just — this group has pushed me to get better. I’ve learned so much from them. But it’s really a cool community that’s all committed to continuous improvement.
RITHOLTZ: Quite interesting. When I was kicking around your website, I came across a page of Carson Group Partners, are those folks affiliated with Carson Coaching? Are they affiliated with Carson Wealth? And by the way, that page was just scrolling, scrolling, it has hundreds of people along.
CARSON: So, coaching is different than partner. So, we have our third — so, we have our retail, we have our coaching and then we have Carson Group Partners and what I learned to the coaching business, Barry, and you — I think you’ll appreciate this, those many years you’ve been around being a mentor to people either directly or indirectly, is that old saying, you can lead a horse to water but you can’t make him drink, is …
RITHOLTZ: Right. Right.
CARSON: … you can give them all the ideas but very few people — I used to get questions all the time like, Ron, how can you give everybody your secret. So, I said, well, first of all, I want our profession to be better and I believe it’s us against the evil empire out there, the conflicted model.
But number two, most of them won’t do anything with it and it’s not a really competitive threat. And that’s why Partners was launched in ’12 as a lot of these clients of ours say, can’t you do it for us? So, then we evolved into a model today where we are succession solution. So, a lot of these firms have Carson. We bottom or we own a minority or we own a majority. We are very flexible.
But we do their technology. We do their trading. We do their compliance. We do their marketing. We do everything with the exception of actually sitting down and meeting with the client. We have CPAs, we have attorneys on our team. We have a trust department.
I mean, we have insurance department where we can provide all of that in one single pane, think of an Amazon experience, and most of the smaller independent advisors can’t begin. They’re so stuck in the whirlwind of trying to run their business day to day. They can’t really emerge and then think creatively and proactively and that’s really what Carson Partners does for them and we do it together. It’s bottoms-up innovation.
They come up with some amazing things that that’s what we implement into the model but we also ideate top-down because there’s a lot of — none of us knew the iPhone was possible until Steve Jobs came up with it. Right now, we all love it, can’t imagine a world without it.
But we’ve also ideated stuff that they’re going, wow, I didn’t even know that was possible and it’s been really an exciting partnership with our partners around the country.
RITHOLTZ: So, this is a TAMP, this is a full turnkey asset management program, is that right?
CARSON: It is. Correct. Yes. And a lot more of this isn’t (ph) just a TAMP, Barry. It’s everything else. I mean, literally, we will write their RFP, we will present to an endowment or foundation.
It’s not like only a backup (ph). Our team in Omaha is their team. And if you go to our Partners’ website, you’ll see that a lot of them are brand at Carson. Some of them continue to go under their own brand. But it’s – a lot — I think of a TAMP of providing just asset management. That’s one of 10 services we provide to our partner offices.
RITHOLTZ: Quite intriguing. How many different offices are you working with with Carson Partners? Because it looked like hundreds.
CARSON: Right now, I have 135 offices.
RITHOLTZ: Right.
CARSON: Yes.
RITHOLTZ: Did you ever expect coaching and partnership to develop into two completely different businesses from financial planning? Obviously related but totally different aspects of the business.
CARSON: Barry, no, and I never expected the success I’ve had. I mean, I surrounded myself with really great people and it’s really their success that has allowed this to happen and, no, I never dreamt in a million years that we would be doing what we’re doing.
And because of that, Carson Group is really focused on impact, local impact, community impact, national impact, global impact, and we spend considerable amount of or I said (ph) that we make big investment. My wife and I make big investments into our communities and so did Carson.
And I can’t say — I can’t talk about our success without talking about what I feel. Our personal obligation is to lift people up that struggle. And I think when I got started in the ’80s if you work hard, you could go out and you could make it.
And there’s parts of the world today and especially, there’s even parts here in the U.S., it’s really hard to emerge. And so, with that success comes I think an obligation the we’ve embraced to have this big impact on our community as we possibly can.
RITHOLTZ: Quite fascinating. So, the future of the asset management industry, you talked earlier about technology and how challenging that is, how has technology changed the landscape currently and what does this mean going forward?
CARSON: So, Barry, I go to a place called Singularity University. I’ve done it for the last two years and it’s out in Palo Alto and it’s Peter Diamandis and Frank Kurzwell (ph) and these people that are talking about the things that are coming and Frank made a comment two years ago, he goes, the technological change is nothing up to this point. It’s been a trickle and the avalanche is near.
And I share that view, I am being what’s going on with artificial intelligence, with data and I see a world where a lot — this is controversial, right? I mean, when you — for example, I have three children. My son not on social media, hates Google and because they read our email and I’m on the opposite end of it. It’s like I love it, get to know me as well as you can know me and help me — help make my life easier.
So, I understand our listeners are going to fall in one of those categories (inaudible) somewhere in between. And so, we made big investments at Carson last year and the year before into what’s known as data warehouse. So, we have all of our data. We have very clean data.
And the other thing that’s cool about that is we call — we used to say that we have a high degree of IQ, and that’s implementation quotient, because when it’s all said and done, more gets said than gets done almost in …
RITHOLTZ: For sure.
CARSON: … every business.
But now, it’s AQ as well and that’s adaptability quotient. Because none of us can possibly anticipate, all the amazing technologies are going to emerge out of the garage so to speak. And so, if you are in the old traditional way of having technology, if you’re going to switch from one application to another, it was a major migration. I mean, it was a big deal to make the switch.
Well, now, at Carson Group, we’ve got a data warehouse. All we have to do is consider what’s known as an API, nothing that’s too technical for listeners.
RITHOLTZ: Sure.
CARSON: But think of just plugging in a hose and all that information come flow to any application that we want and we can put out an application overnight and I’ll use Amazon as an example. You’re Amazon user, right, Barry?
RITHOLTZ: For 20 something years already.
CARSON: And how’s the experience overall? How would you rate it on a scale of one to five?
RITHOLTZ: Pretty rare that it’s not a five. Each time, every time.
CARSON: Right. And, Barry, tell me then, from the time you started using Amazon to today, how many different technologies were swapped out behind the things that you weren’t even aware of?
RITHOLTZ: God, it’s got to be countless. Biggest of all, Amazon Web Services, look at how they took their own infrastructure and powered so many others. So, to me, it’s just a web interface but there has to be bajillion things going on behind the scenes.
CARSON: And you don’t even care, right? You could care less. You just want to have a great experience, right, to go on.
RITHOLTZ: It works. It just works. That’s all you care about.
CARSON: It did work.
RITHOLTZ: Yes.
CARSON: That’s the future of financial services. What we believe is we built this single pane of glass for the consumer to have everything they want like Amazon. It’s super simple to use and to see and to interact and that is the future.
But you better have great data because I believe the risk always has been, always will be as far as ruining someone’s financial plan is a consumer doing the wrong thing at the wrong time. Why did they do that? Because they get caught up in the noise and everything going on and they make really poor knee-jerk reaction kind of move.
For example, just talking about Donald Trump. How many people wanted to just to cash before Trump got elected and the market had a major run up? How many people went to cash in the middle of COVID because the world can never recover from this or at least for the next several years?
When in fact, if they were to just had their risk budget right and then taking technology a step further, we get to know when a client is logging on, what’s going on in their lives, what is the reading and we can anticipate now move that they’re going to make that might be counter to what’s in their best interest so we can get out ahead of it, we can have a meeting with them, we can talk about it, and this is just the very, very beginning.
I saw a technology — I spoke at (inaudible) last year in New York and I talked about the future of artificial intelligence and a lady comes up to me says, I’m developing that, you got to see it, and I brought this back to my team and they’re like, well, we don’t think anybody is that close.
They did a demo for us, Barry. We were asking this engine financial planning question and it was giving us answers and we thought we were talking to another person on the other end. It was that good.
RITHOLTZ: Really?
CARSON: And this stuff is going to continue to get better and better. Just imagine today, if I — if we sit down with a client, we got a lot of technologies, it used to take me a weekend really to get ready for big client review and all the things we needed to do and talking to their tax professionals and their attorney and their insurance agent.
Now, all that stuff is set in and we can be ready and have a really productive meeting in an hour. But the future is all of this stuff, tax, legal, risk, cash flow, all of that is going to be looked at 24 hours a day, 365 days a year, and there’s going to be alpha actions that can be generated because of the technology.
That’s the future of financial services and it will be mind blowing the kind of value we can add and the consumer is being expected to — they want an Amazon and Netflix, a Google kind of experience and that’s what we’re going to have to deliver. I don’t think each — financial advisors look at each other as a competition. It’s really those experiences that were going to continuously be compared against as they compete against in the future.
RITHOLTZ: So, when the first sets of the various automated advisors rolled out, people call them robo-advisors but I think that’s a bad moniker. But shops like Betterment and Wealthfront, there was a general backlash, this can never do what an advisor can do. Do you think that eventually we’ll get to the point where, hey, Uber will be self-driving cars and financial advice will be some bot telling you what is best for your financial circumstances?
CARSON: I think it’s going to be a combination. So, my view, Barry, is technology, at the higher end where there’s more complex needs, is not to replace the financial advisor but it’s going to enrich the experience for both the advisor and the consumer and allow us to do a much, much better job anticipating some of these needs before they even know they have them.
At the lower end, I think there are people that — and today, I mean, I went and signed up for all of those and they just — there wasn’t a lot of substance there. There wasn’t a lot of wow that was really, really good or you really help me. But I think it’s a place to get started.
I think the future is going to allow people to migrate, start there, move up to a hybrid experience as their complexity grows, eventually have a full-on traditional kind of relationship. But sometimes, a client considers that higher traditional light relationship, there’s not a lot of changes, there’s not a lot going on.
And then I go, do I really want to pay X for this and today, the only choice they have is fire their advisor or they have an uncomfortable conversation about reducing their fees. Under this I think future model, they’ll be able to ratchet down to a different service offering without them to go through liquidating and all the tax ramifications, all this friction, even the bid-now friction that come with that.
But I think technology is going to give consumers a lot more choices and a lot easier way to measure, am I getting the value for the investment that would be enough to make in a form of asset management fear of financial planning fee or retainer fee.
RITHOLTZ: Really interesting. You alluded to something earlier that I have to follow up on where you talked about a lack of young people in the industry and a number of people retiring. But I want to go a step beyond that and ask you — let’s throw this out in three parts.
The first part is, how do we get more people interested in financial planning? Secondly, how do we get more women interested in the field? And third, how do we bring more people of color into the field?
CARSON: So, we’re now seeing a major diversity and inclusion and next gen initiative at Carson, Barry, because I think as a profession, we’ve all sat around and waited for someone else to do it. And we’ve been experimenting at Carson with an intern at the higher program. We’ve gone into colleges and had interns and we really interviewed them if they’re going to come to work for us and we do offer them a job at the end up if they perform well and we asked them to interview us at the same level.
But we are building office campus here in Omaha. We have Carson University today. So, we do a lot of pitching and get young people interested. But we’re going to take that to a whole new level.
The other is, I mean, people of color — I mean, you — it’s been a while — it’s been you and I, right, it’s been you and I in this profession forever and …
RITHOLTZ: Right. For sure.
CARSON: …it’s still — I still scratch my head and go, why, why have we not been more successful because it’s — people think it’s a sales job. It’s not. There’s so many different tracks that you can take and by the way, you got a huge tailwind behind you because we have — more than of who’s in it today is going to be gone or going to be retired. And there’s more people over the age of 80 on our profession today, Barry, than under the age of 30.
RITHOLTZ: That’s amazing.
CARSON: Right. And so, we at Carson are going to take a major lead in this. So, we’re going to put real money behind it. But I think it’s not only bringing people in and training them but letting them know here’s what your career path can look like and here’s one of five different paths that you can take to be successful.
So, I think it really is going to come within the trenches, education and where — I guess — we’ve been working on this for a good six, eight months now and we’re going to be announcing I think a really exciting initiative around this in the next few weeks.
RITHOLTZ: So, your timing on that is really good. Let me stick with the idea of all these over 80, over 70m over 65-year-old advisors that are thinking — I think you described them as rich and tired, are they going to retire, are they going to hand off their business to somebody junior, are they going to sell it, what does the — and it’s a barbell, I think it’s like 30 or 40 percent of the profession is over 60, maybe even more than that. What are those folks going to do with their practices, with their businesses?
CARSON: It depends on the advisor. So, there’s really three different flavors out there. You’ve got the advisor who has next gen people there. They can’t afford to buy in and this is where we’ve been successful in helping the next gen actually buy out the founder.
Our Chicago office is booming and this was a great example of it was a CPA firm, the founder of the firm was like, I love my clients, I want to take care of my clients but they — but I’m not going to give my business away. So, I want to cap in (ph) and finance than buying out the next generation. So, that’s one model.
The other model is you get some of the same people that retire but they’re not – they don’t tell their clients they retired. And what I mean by that is …
RITHOLTZ: Yes.
CARSON: … they’re just — they work in a few less hours every year on a daily basis, they play more golf, more time with grandchildren. They’re not really bringing any new clients and if they lose a client or client passes on, they’re not really that aggressive about going out to the next gen. The problem with that, they’re not making huge investments into the next — into really what it takes to stay competitive in the field.
And then there’s the third bucket and they’re just — they want to exit the business like I don’t really care about the next gen and I don’t care about my clients, I want to get the highest check possible. And we see all three of those going on today. Of course, we focus on the next gen, someone that really cares.
We did a deal recently and the office was in Vermont and this guy, we are never the highest price payer. What we’re really looking for is alignment of interest and …
RITHOLTZ: Sure.
CARSON: … we really want the founder to stick around and make sure that it’s going to be a super smooth transition. And this guy, man, the due diligence and the way — it’s like if I can have a hundred of this, I’ll do a hundred of them every year and it’s been a super easy transition. He’s happy, clients are happy, and he’s now, as he will say, entering the third chapter of this.
VOICEOVER: IBKR is the professionals gateway to the world’s market. IBKR offers commission starting at zero dollars for U.S. listed stocks and ETFs, enhance price execution via IB Smart Routing and access to our powerful trader workstation, web, mobile and API trading platforms.
In addition, our clients enjoy the lowest-cost access to stocks, options, futures, Forex, fixed income and more in over 135 markets in 33 countries. Learn more or open an IBKR integrated investment account at ibkr.com.
RITHOLTZ: So, let’s talk about that space a little bit because I’m intrigued by it. We get people offering us firms to be sold all the time and we’re not in the business of buying firms. How do you go about finding these businesses? Do you sell finance them and what do you think about the role of private equity in the rollup/acquisition space?
CARSON: So, allow me to just be clear, Carson — we’re building a hundred-year firm. I started in ’83. We’re building this new building and I said, I want to have shirts for everybody when we move in, picture the building and says for the next hundred years because we’re not building it to sell it.
But a lot of people are and that’s where private equity has actually stepped in and we have a small minority interest in private equity. I brought them in, I plan on keeping control as long as I’m adding value to the business. I’ve got two generations of succession. I’ve got my next succession already done.
Private equity has been fantastic for coming in and helping us professionalize the firm early on. They gave us an M&A strategy that we didn’t have before. But I think private equity is like a mutual fund, Barry. They come in so many different flavors.
Some are in and say, how can we change — how can we financial engineer you to get you the highest price and get the heck out? That’s a totally different relationship. And when I did the deals with private equity, I knew I was looking for some know-how intellectual capital and I took a much, much lower price but I also got really patient capital that was willing to give us pretty much full control on how we run our business. So, really, I think it depends on the type of private equity.
RITHOLTZ: So, when you — I’m talking generally so you get a specific and detailed or 30,000-foot view as you prefer, when you’re looking to do a deal with someone in Vermont or someone in Chicago or wherever they happen to be, is that something that you’re funding with private equity dollars, is it something you drive yourself?
What does that deal look like, is it a buyout, is it an earn out? Because I’ve seen a million variations, a ton of different flavors and I want to hone in on exactly how you guys go about it.
CARSON: Yes. So, Barry, up to this point, so, the private equity money we took was to build all the tech infrastructure that I talked about because it wasn’t available within our profession. We’ve been fortunate up to this point we’ve been able to self-fund all of these but we’re getting to a point — matter of fact, I had team — meeting with leadership group this morning that we’re getting enough additional deals to look at that we’re probably going to have to either rate a little more seller (ph) equity or rate cash or we don’t have any debt as an organization and maybe take a modest amount of debt potentially under the balance sheet.
As far as terms go, it depends on the seller. Our preferred deal is just have a minority interest and to have the next — have us financed the next gen. As far as buying in 100 percent of a firm and then leaving, that’s really not what we want to do and if we do do that, it’s going to be on an earnout basis because if they’re going to stick around …
RITHOLTZ: Make sense.
CARSON: …they’re not going to take care of the clients, we’re not going to take the risk on it. And the most important thing, Barry, in all of these deals is culture. Is there a cultural alignment? We are — we probably look at eight deals and do one. And the reason we don’t do the other seven is there’s not a cultural set.
Hey, can I just make a quick comment back on …
RITHOLTZ: Sure.
CARSON: … the retirement piece with your wife?
RITHOLTZ: Sure.
CARSON: And this was for everybody out there. I love to say that most of society is on this unconscious journey to arrive at death safely and what I mean by that is we get into this routine where it’s just — we live life and days and weeks and months and years go by and then all of a sudden, it’s all bias and we’re like, gosh, where did that go and did I accomplish what I wanted to accomplish.
And I feature thing in my coaching program called Blueprinting, live your life by design, not by default. And I think most — everybody can work their way into that kind of life with a conscious effort. One of my favorite all-time books is Napoleon Hill’s “Think and Grow Rich.”
RITHOLTZ: “Think and Grow Rich.” Sure.
CARSON: And it’s — and we’re in a profession where people want to get a retirement, which I hate that term like, I’m going to do all this and all this time doing things I don’t love to do so I get to spend a little bit of time doing the thing I love to do when I’m the oldest and I’m not as healthy as I can be. So, I challenge people to say, if you start moving in that direction, you can’t change it overnight but you can get there a lot faster than you think and just to accept, this is my life, I don’t love it but I don’t hate it, that’s that unconscious journey to death.
RITHOLTZ: Quite interesting. Today, in confirming my priors, I have Ron Carson on telling me everything that I believe in and me just nodding my head vigorously in a sense.
So, let me ask you question, you referenced earlier that you don’t usually use debt. Let’s talk about a subject that’s a little controversial, the Paycheck Protection Program. I know your firm participating in this, my firm participating in it. Tell us where you are with your PPP loan and I’ll do the reveal on ours also.
CARSON: Yes. So, Barry, when this — so, we also have another business, it’s an events business that really for financial advisors. We’ve been doing this for — going back to 1993 and we had an event we canceled in Vegas. It hit our company to the tune of $4 million or about $4 million.
We had 80 other events that we cancelled around the country and we have a lot of people that work in the events business and there was nothing to do. And so, when we looked at our Carson Group, our RIA doesn’t need, right?
But our events business needed it, we have a transformation business that needed it and we also are building technology. And just with the uncertainty around, at one point, our AUM had quite the dip as everybody did and we’re like we’re going to — before the Paycheck Protection Program came out, we were going to have to lay off a fair number of people and I would hire them back at some point and — but not yet this year.
And so, the whole purpose of that program as the government said was to keep people employed that we, otherwise, would now keep them employed through the downturn. There’s been a lot of hotshots. There’s some gentlemen who I’ve never met back East, doesn’t know me, doesn’t know our business and he’s trying to shame us and so I’d taken it and I’m like, I’d like for you to meet with these families that continued to have a good job but I want you to tell them why they shouldn’t have gotten that benefit.
And so, we take — we took it, we thought it was a good program. By the way, we helped a lot of our business owner clients. I think Nebraska at least at one point had the highest success rate relative to our population of anybody and we had a big hand in that because Jamie Hopkins who works at Carson really was on top of the CARES Act and really had all of our advisors very well educated on it the second there’s action that could actually be taken.
And that’s indirectly what I was talking about earlier being super proactive with our relationship thinking about things that a lot of people aren’t thinking about.
RITHOLTZ: I could tell pretty much the exact same story about the non-advisor related businesses and our thought process, my thought process in this has evolved.
CARSON: Yes. And this is the potshots where you’ve taken money from somebody else and, again, I want to know these people taking the shots, why is one family’s employment more important than another family’s employment. That’s really what they’re saying is we want to pick and choose the — and all these are people making less than $100,000 a year and, Barry .…
RITHOLTZ: By the rules. The rules say that.
CARSON: The rules. Those are rules. We are faced with another dilemma, this fall, we have — you know how this works, we contractually committed for a large conference this fall in Omaha. We’ve got 500 hotel rooms that were on the hook for. Because social distancing, we don’t have enough room to bring people in and actually consume all those rooms. So, guess who gets to write a check for that.
RITHOLTZ: It’s amazing to think that — and it’s — that’s before the second wave comes in. What we’re dealing with today and especially along the Sunbelt has been a spike in infections that still part of that first wave. This isn’t even the second wave.
CARSON: Yes. I don’t think the same is done by any stretch of their imagination. I think it could — I think it should have been handled a lot differently. I think we should have quarantined those that were high risks.
But to put — to do what we did to our economy and, of course, money morning — core marketing is great.
RITHOLTZ: Sure. Right.
CARSON: But in — hey, our leaders — this was unknown. We still don’t know the full ramifications of how this will impact our society for many years to come.
RITHOLTZ: If you look at places like Germany and Switzerland and New Zealand, they seem to have come up with the right balance. They were very aggressive not only was quarantining but with testing and contact tracing and our numbers are still not going down the way they should. At least the mortality rate has improved, the number of people who were dying from this is — it’s taking up more slowly than it was, it’s not accelerating.
But it certainly seems like more and more people continue to get infected every day especially if you back out the early states, back out Washington State, New York, Connecticut, New Jersey, the rest of the country ain’t looking so hot these days.
CARSON: I agree. I mean, we’ve been fortunate in Nebraska and we got — I still go up to our family farm pretty much every weekend and the whole county up there have five cases, I mean, and you got to drive three miles and see another person.
RITHOLTZ: Right.
CARSON: So, it’s been nice having — we’ve been — we social distance our whole life when we’re up there, we didn’t even know what we were doing.
RITHOLTZ: That’s right. But before we get to a spin round, there’s a couple of questions I missed during the broadcast portion that I have to ask you. One of which is what’s a day in the life of Ron Carson look like, how do you spend your time every day?
CARSON: So, I get up super early. I typically get up between four and 4:30 in the morning. I love my morning coffee. So, I get my cup, put the dogs out, get my coffee. I catch — I read, I love to read, I read. I think. I meditate. I do little bit of breathwork and then I work out.
And then I move into — I’ve got meetings pretty much throughout the day. And then the evening is — I’m so lucky I have my kids, I have one daughter who lives five minutes north of me, another daughter that lives four minutes west of me. I have a grandchild. I have another one on the way. I’ve got a son who just graduated who lives about 15 minutes east of us.
And so, we’re spending time with family and I normally sound asleep by 10 o’clock at night. So, it’s — and I got to tell you, I love — I got my life to where — I get to spend my life doing things I love to do, Barry, versus the things I have to do and I can just hear it in your voice. I mean, you’re a man of passion and it’s just — I get out every day with a ton of enthusiasm and I tell people, hey, if you start to get the snooze button and you hit it up more than twice, something is wrong. You’ve got cancer developing on your enthusiasm. So, reorganize your life in your day to where you can’t wait to get out of bed and get started with the day.
~ I totally agree and I’m going to horrify you a little bit, snooze button, if you’re still using an alarm clock, you need to change your lifestyle. But that’s a whole another conversation.
CARSON: Well, I use the phone metaphorically as my alarm clock, mu iPhone, yes.
RITHOLTZ: I’m fond of saying this podcast is the most fun I have all week but it’s a pretty high steady-state. This is just the peak of it.
And speaking of podcasts, tell me about the Framework Podcast, is this a new venture for you guys, what are you doing with that?
CARSON: It is brand new. Jamie Hopkins, who joined us about a year and a half ago, is running that and, Barry, there’s so many podcasts out there that it’s like, my gosh, there’s a really room for another podcast, and he’s done such a great job with it. He’s had really an eclectic group.
We just had Ashton Kutcher on through — Jamie and I got to know Ashton and Mila through our — we belong to the same called The Reserve out of Napa Valley and his technology knowledge and they’re very much philanthropists. We just had them on talking about Thorn, their company and technology about stopping child sex trafficking.
But then also he’s a tech genius and then all the way over to Tyrone Ross, very successful …
RITHOLTZ: Love Tyrone.
CARSON: … African-American advisor and he’s like — and I was listening to the podcast, I’m going, man, I learned some stuff I didn’t know and it’s — and he had his — Jamie was talking (ph) with Michael Phelps and had his coach on and I learned something there. It’s like they never took a day off for five years in training whenever he says, you need to take time off to rest.
So, it’s — yes, Framework has been awesome. It’s not around financial services. It’s around interesting topics and Jamie has gotten a pretty decent following fairly fast with it.
RITHOLTZ: I love that. I love that. And then the last thing I want to ask you before we get to the speed round is about your philanthropic efforts. I know you and your wife have a number of different projects underway. Tell us what you do when you want to spread some happiness and some inspiration for people.
CARSON: Yes. So, we decided early on that we weren’t going to leave our kids much money. I’ve seen just the flip side of that and how awful it can be. And by the way, our kids have celebrated it and it was a pride. They know — they’re going to — I’ll take a quote from Warren Buffett, we’re going give our kids enough they can do anything but not so much they can do nothing, and the rest was going to our charitable foundation.
And Jeanie and I were like, well, let’s be given it away while we’re alive and we started a foundation called Dreamweaver where we do end-of-life dreams for the terminally-ill, financially unfortunate elderly. That’s been tremendous.
We’re now funding some projects in the Dominican Republic around coral restoration. Anybody that wants to know more about coral, there’s a great Netflix documentary called “Chasing Coral” but it’s a crisis in our ability to feed the world.
At Carson, we have three schools in Africa that we’re feeding. We’re involved with Scott Harrison’s Charity Water. We’re giving over 1,200 people a day freshwater from wells we’ve driven.
But we’re just getting started, Barry. I mean, we, as an organization, really want to have impact and we’re looking for more and more ways to help people. And I personally believe private enterprise can do a much better job than the government can in figuring out who needs it and being very efficient in trying to deliver needs for causes that can very efficiently invested.
RITHOLTZ: Quite interesting. So, let’s jump to our speed rounds although we should feel no time pressure, you can answer these as quickly or not as you like. You mentioned that Netflix documentary about coral, what are you streaming these days, give us your favorite Netflix or Amazon Prime video, what are you podcasting listening to, et cetera?
CARSON: I love Joe Rogan. So, I listen to his podcast all the time. When our kids are being out of the house, Jeannie and I, we just got through watching the Michael Jordan, “The Last Dance.” That was fantastic.
RITHOLTZ: So good. So good
CARSON: And we’re both avid readers and I’m reading on “The Tattooist of Auschwitz” which is really, really good. Right now, “Essentialism” which is another great book that I love.
And I spent a lot of time going on walks and hike. I think most high-functioning creative people can gain a lot by just going and not having anything. Just letting your mind go to wherever it goes and Carson Partners was actually born on a hike.
I’m trying to summit all of the 14,000-foot peaks in the U.S., Barry, and a lot of them I’ve alone. I’ve been 57, I have 12 left. I got to get a knee replacement before I can finish out. But some of my best ideas have come on these several-day mount expeditions that I’ve gone on.
RITHOLTZ: You’ve done 57 14,000-foot peaks, is that what I heard you say?
CARSON: Yes.
RITHOLTZ: And it only cost you one knee? That’s a fair trade.
CARSON: Well, it costs me both but I got to get the other one fixed soon here. COVID — I’m supposed to have it done in March but COVID hit and that didn’t happen.
RITHOLTZ: So, let’s talk about your mentors, who influenced your career, who helped make you into the Ron Carson we know today?
CARSON: My mom and dad. My mom growing up — my dad was a hard worker, hard farmer. My mom though, she was, Ronnie, you can do anything you want to do. I mean, this is — being a kid, she had me convinced if I want to be the President of the United States, that’s going to be it and she encouraged me on any businesses that I ever wanted to do or start and she was my partner a lot of times. She passed away five years ago, Mother’s Day.
And then I got to know Warren Buffett here in town, back when I was the business editor and his nephew was in YPO Forum with me and just his wisdom and advice. And then there’s a gentleman here in Omaha, self-made billionaire, Howard Hawks who really started …
RITHOLTZ: Sure.
CARSON: … his business later in life just really gave me a lot of great advice growing up in the business.
And — but ultimately, it’s my partners, too, and my coaching group. I mean, you — if you have an open mind and you take the philosophy that the older I get, the less I know, and I don’t defend what I know or what I’m comfortable with but embrace the unknown, you will learn something new every single day of your life.
And a lot of it is very useful. I call it truthful, cool and useful information. Truthful information, as long as you don’t think you’ve arrived or you figured it all out, I love that. There’s a poster with an ape scratching his head. It says, as soon as I figured out all the answers, they change all the questions, and that’s so true. The questions are changing rapidly.
RITHOLTZ: So, one of these days, I’m going to have to lean on a favor and my collection of podcasts will be incomplete until I get Warren Buffett under my or Charlie Munger under my belt, I don’t suspect that’s going to happen anytime soon given the lockdown. I think I sent them a snail mail about five years ago and I never heard back from them, but it was still early days. I should probably follow up again.
You mentioned a couple of books earlier that you’re reading now. What about books you recommend to people who say, hey, I want to learn more about investing finance, the economy, what books do you recommend for those people?
CARSON: I really have never read any of those books, Barry, to tell you the truth.
RITHOLTZ: Really? That’s amazing.
CARSON: Yes. And here’s why –I mean, I’ve read — I read a handful of them but I’m a little different in my belief and that is this is that most people are trying to find a silver bullet of investing and it’s just — it doesn’t exist.
And the silver bullet is is that it if you stick to a plan and you get your risk budget right, you can be successful with the value, you can be successful with momentum growth, you can be successful with passive, you can be successful with ETFs, with mutual funds.
But as soon as you start reading this book and then you read that book and then you get distracted and you think that you’ve got something that the black box, I mean, trying to have it happen in a hurry, Barry, just doesn’t happen. And my nearly 40 years in this business, the client said, follow the plan, not got emotional, they got more wealth than they could possibly spend in 10 lifetimes.
But I’ve had those clients that are always chasing the hot dot or they read this or that book. I mean, I like unexpected returns, the value investor, I mean, I’ve probably read 20 books over the years. But I really hesitate to give a book to say, this is — this was really what you — which you really have to follow because it’s the consumer behavior that’s going to drive their success not what the market does or not what investment philosophy they have.
RITHOLTZ: So, just recommend “Thinking, Fast and Slow” by Danny Kahneman and that will scare them off everything else.
CARSON: Right.
RITHOLTZ: So, what sort of advice would you give to a recent college grad who came to you and said, hey, I’m am thinking about a career in finance, what would you tell them?
CARSON: I had this conversation yesterday and I try to have them any day I can because at LinkedIn (ph) I have kids reach out to me all the time and I told them this is the best time to get into financial service. I said, you don’t realize that you’ve won five Powerballs, and they’re like, what are you talking about.
I said, let’s just count them up here. First of all, you’re a mammal, do you know what the odds are for you to be a mammal? And then you’re a human. And then you’re in United States of America. And then financial services if you choose has the most disruptive time possible.
Every single relationship is in play because consumers start to look and say, am I getting a return on the investment I’m making? And then I give them the stats that we’re going to have a huge capacity issue because we don’t have enough financial advisor and it couldn’t be a more powerful, powerful tailwind.
But do it right. Don’t go to the wires. Don’t go to the brokers. Go find an RIA that really is mission focused, is not building up a solid (ph), that is really about being a consumer advocate and you will do incredibly well.
And by the way, when you prove your worth, negotiate a way to participate in equity and that way, you won’t have to make — don’t move around a lot. Find a place, stick with it and don’t be afraid to ask for equity at some point in your relationship.
RITHOLTZ: Good answer. And now our final question, what do you know about the world of investing today that you wish you knew back in 1983 when you were first getting started?
CARSON: I wish I — my own advice because early on, I was doing commodity futures. I mean, this is stuff I was doing on my own account, Barry, and I mean, I actually had cattle delivered to me. I never realized that a paper contract to turn into real cattle and I went through that, I had someone who said, Ron, American businesses are like a yo-yo going up a flight of stairs.
The market is going to fluctuate. Short term, I love what Buffett said, he says, our markets are capitally relocation centers. They relocate well from the inpatient to the patient. And my own take on that is they relocate well from those that have a plan from those that don’t have a plan and I wish earlier I would’ve figured that out for myself so I could then apply that to clients.
And investor behavior will dictate your success not what the market does because you know, Barry, there’s always places to make money regardless what’s going on in the market.
RITHOLTZ: Thanks, Ron, for being so generous with your time. We have been speaking with Ron Carson, Founder and CEO of the Carson Group.
If you enjoy this conversation, well, be sure and look up an inch or down an inch on Apple iTunes and you could see any of the previous 300 plus conversations we’ve done over the past, wow, six years, that’s a long time. You can also find us at any of your favorite podcast hosts, Spotify, Overcast, Stitcher, wherever you find our podcasts are sold.
You can check out my weekly column on bloomberg.com/opinion. Follow me on Twitter @ritholtz. Sign up for our daily reads at ritholtz.com. I would be remiss if I did not thank the crack staff that helps put this conversation together each week, Michael Boyle is my producer, Maruful is our audio engineer, Michael Batnick is my head of research, Atika Valbrun is our project manager, I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.
