How some US cites are making medical debt disappear
Ric Edelman: It's Friday, June 9th. Coming up on today's show, the business of investment advice with a visit by Ray Sclafani, one of the premier coaches of financial advisors. Yesterday I told you that Boston is now providing free community college to everybody. Now, residents of Cook County, Illinois, and Toledo, Ohio, are getting their medical debt wiped out. Pittsburgh as well. They're all joining with a nonprofit called Rip Medical Debt. It's a clever idea. Here's how it works. Let's start with the fact that 18% of Americans have medical debt that they have not paid. Now, they haven't paid the bill most cases because they literally can't afford to.
See, that's kind of the problem with medical debt. Health care issues don't really care how rich or poor you are. We're all likely to get in a car accident or trip down the stairs or be diagnosed with an illness. And so if you're the hospital or the doctor and you've got a patient that owes you money because of the services you've provided and they're not paying you, at some point, you, the hospital or doctor, you give up trying to collect. And so you take this debt that you have on your books because they won't pay the bill. You sell the debt to a collection agency. That agency pays you 10 or $0.20 on the dollar. Well, the hospital, the doctor, they figure, hey, getting $0.10 is better than nothing. The agency now owns the debt and they try to collect from the patient.
If they succeed, wow, they make a huge profit. They bought the debt for $0.10 on the dollar, and they collect a dollar. Wow. That's massive. It also allows them to say, well, we'll go to you and say, look, let's strike a repayment schedule. Pay us $0.50 on the dollar. We'll throw away half your debt. Pay us the other half. They're still making a big profit. You, the patient, get rid of the debt at a fraction of the cost. So this is a really long tried and true game in the world of debt. Big businesses who can't collect on their debts, they don't want to build a debt collection department in their company. They just sell the debt to debt collection companies.
So along comes our RIP Medical Debt. This is a non-profit organization. They play the same game, but they're nonprofit, so they're not trying to make a lot of money at this. Instead, what they do is they raise money from donors and then they take the money that they've raised and they buy the bad debts, just like those debt collection companies do. This nonprofit RIP Medical Debt goes to hospitals and buys their debt for $0.10 on the dollar. Maybe a penny on the dollar or $0.20 on the dollar, whatever they can do, they buy it for pennies on the dollar. And then they just forgive it. They don't try to collect. End of story.
Toledo is spending $1.6 million to buy $240 Million worth of medical debt. And then it's going to tell those people who owe all of that $240 million, a quarter of a billion, they're going to tell them that their debts have been wiped out. New Orleans is spending 1.3 million to buy $130 million worth of medical debt. They're paying $0.10 on the dollar. Pittsburgh is spending $1 Million to buy $115 Million in Medical Debt. They're spending less than $0.10 on the dollar.
The cities are all getting this money from President Biden's trillion dollars American rescue plan. The law gives local governments massive amounts of cash for them to pretty much do what they want. Okay, that's not totally true, but largely true. So to have your debt waived through this program, your income needs to be $111,000 or less, or your medical debt has to be more than 5% of your income. You don't apply. Rip Medical Debt figures out who qualifies. They know who the people are who owe the money, and they're able to go into tax records and other databases to determine if you owe money. And do you qualify based on being a low-income household? We begin with the attitude that, you know, wow, bad things happen to good people. It's not your fault you were in a car crash. It's not your fault you tripped down the stairs. It's not your fault. You were diagnosed with a tumor. You've got yourself saddled with a tens of thousands of dollars of medical debt you'll never be able to repay. You haven't even trying to repay it.
Along comes a way for that debt to literally disappear. Pretty cool, huh? It is, but it doesn't really solve the problem. If you think about it, this program, in the end, it's rewarding people who don't pay their bills and it punishes those who do. This is similar to the debate regarding President Biden's college debt payoff plan. He wants to forgive $10,000 with a student loan debt per person. It's in front of the Supreme Court right now, which I think is going to end up saying, no, it's in front of the Supreme Court.
The bottom line is the only people who could have $10,000 of the student loans waived are people who still have $10,000 of student loan debt. What about those who paid off their debts in good faith? What about those who didn't incur the debt in the first place because they were acting maturely and responsibly? What about those who got a second job or who borrowed the money via a mortgage? None of them are benefiting. So here we have medical debt. Some people are able to pay off the debt. Others struggled to pay off their debt. But they did so because ethically, morally, it's the right thing to do and they did it. Others, you could argue, are simply being scofflaws. They have the debt. Maybe they can pay it back even if it's only 50 bucks a month and they're choosing not to.
Now their debts are getting wiped clean. Is this fair? Is it appropriate? Is it proper behavior for a social policy to bail people out like this? And even if it is yes to all the above, the money that these cities are spending to do it, New Orleans is spending 1.3 million. Pittsburgh, 1 million. Toledo, 1.6 million. That's money that these cities are not spending on other government programs like education, police, fire, paving roads, fixing potholes, you name it. Well, there's a lot of political support for this. 71% of Americans in surveys support medical debt relief, a lot more than they support student loan debt relief. 50% support that. 71% support medical debt relief. I think it's because we're all in agreement that going to college is an option. Going to the hospital isn't. And also, this doesn't prevent the occurrence of medical debt in the first place.
So maybe we're dealing with the debts that already exist, but we're not solving the problem of our amazingly high health care costs. This whole thing, as good as it may be, is not really solving anything. And we can also argue that since cities and states are all doing this, the cost of buying that debt is going to rise. If hospitals know that there's a big piggy bank funded by the federal government. The hospitals won't sell the debt for $0.10 on the dollar. They're going to demand a lot more, which means it's going to cost a lot more to keep this thing going.
And of course, at the end of the day, taxpayers are footing the bill for it all. And in the end, isn't that true? For pretty much everything.
Why You Need to Know All About Global X ETFs
You know, you've heard global mentioned a lot here on this podcast. They're one of the sponsors of this podcast and I'm a big proponent, big advocate of Global X ETFs. But, you know, we've been talking about them and referencing them for the better part of the year. But it occurs to me, I don't know that you really know a whole lot about Global X ETFs. I mean, they're not really a household name.
So let me share with you some information about Global X ETFs. The company was founded in 2008 in New York. They're a global company with offices in London, Tokyo, Hong Kong, Sydney, Sao Paulo, Bogota and Miami. In 2016, the company just had 3 billion in assets, very small ETF company, but now they've got $45 billion in assets, a 15 x increase in just seven years. This is a real testament to the power of their investment strategy. They've now got 105 ETFs. They're serving investors in 95 countries. They're one of the biggest success stories in the entire asset management field. The company is part of the Mirae Asset Financial Group. This is South Korea's pioneering mutual fund manager. And all told, they've managing half $1 trillion in client assets, 12,000 employees, 51 offices worldwide.
The company is so innovative that Harvard Business School published a case study on them. If you'd like to read that case study, by the way, I got a link to it in the show notes. Now you know me. It's not just the numbers that matter, it's the people. When I was running Edelman Financial, we won lots of best places to work awards. Taking care of our staff was always very important to Jean and me. We knew that if we took care of our planners and our staff, they would take great care of our clients. That's all that really matters. So we always pay a lot of attention to how companies treat their employees, and that's another reason I like Global X so much.
Global X has won a lot of best places to work awards themselves, including and this is like really impressive. They were named one of the top ten best places to work in New York City by Crain's and that's pretty amazing. You think about the tens of thousands of companies that operate in New York City. I mean, there are 55 Fortune 500 companies that are headquartered in New York, and Global X is one of the ten best companies to work for in the entire city. That says a lot about their culture and their commitment to their people and therefore to their investors.
A lot of the credit goes to Global X's CEO, Luis Barriga. He's a native of Spain. He's got a long career in the asset management business. He was with Jefferies, Morgan Stanley. He's a member of the Forbes Finance Council, and he's very much on social media, which you'd expect from the CEO of a company that focuses on technology innovation for its investment strategy. I mean, everybody at Global X walks the walk. In fact, Global X is not just on LinkedIn and Instagram. They've got the largest TikTok following of any asset manager. It's like his Vanguard. Never even heard of TikTok. Luis has been the CEO for, oh, pushing ten years now. He's led that amazing 15 X growth since 2016. It's not just Luis. All the senior executives have been with the firm for 9 or 10 years -the heads of sales, product marketing, compliance operations; continuity matters.
When you're running a big business, you want to know as an investor that the people you're entrusting your money to are committed to serving you. And long tenure like this, that's not something you often find on Wall Street. I think it helps make Global X special, and these people bring a wealth of investment experience with them. Before joining Global X, they came from PaineWebber, UBS, Bank of America, Merrill Lynch, BlackRock, iShares and other leading firms. Jon Maier, their chief investment officer, was a Peace Corps volunteer in Ukraine, and now they're all doing something special together at Global X, But in the end, you want to know what makes global X different? Why invest your money in their ETFs instead of somebody else's ETFs?
Because Global X is not like other fund companies. Most of them have a huge array of ETFs and mutual funds, whatever you want they've got, and that means they don't necessarily have any particular expertise, sometimes not even a particular point of view. Their attitude is, Hey, if people want to buy this kind of fund or that kind of a fund, let's offer this kind of a fund or that kind of a fund. But Global X doesn't do that. They've got expertise in four specific areas and that's all they do. They don't have a government securities fund. They don't offer Muni bond funds. They don't even have a money market fund. Anybody can do that. There's nothing special about those. You're not going to achieve financial security because of the money market fund you pick.
Instead, Global X focuses on helping you create wealth, and they focus on four major categories thematic income, commodities and international access. And they emphasize these in every region of their operations and every one of their global offices. They focus on local risk management, sustainability and digital asset solutions. This dedication has led Global X to become a pioneer in the ETF space. Their Lithium and Battery Technologies ETF was one of the first in the industry and the thematic ETF space when it launched way back in 2010. They were one of the first ETF managers to give investors monthly distributions for income and their Nasdaq 100 covered call ETF now has 7 billion in assets and it's now available in London and Sydney as well as the US.
This is the kind of innovative leadership that you really want in a mutual fund or ETF provider. Global X's thematic ETFs are focused on exponential technologies and you know how big a fan I am of this topic. I mean, it's the basis of the title of this podcast. The Truth About Your Future was the name of my last book, The New York Times bestseller, The Truth About Your Future. Through Global X ETFs, you can invest with a laser focus in 37 different thematic investments infrastructure, robotics and artificial intelligence, autonomous and electric vehicles, cyber security, cloud computing, FinTech, the Internet of Things, Genomics and Artificial Intelligence, Video games and eSports. Social media. Telemedicine and digital Health. Clean Tech. The Millennial Consumer. The Aging Population. Renewable energy. Blockchain E-commerce, Cannabis. Hydrogen Data Center and Digital Infrastructure. Health and Wellness. Clean Water. AgTech and food Innovation. Disruptive materials. Wind energy. Solar education. Emerging markets. Metaverse and green building.
This is just an array of innovative, technology focused ETFs that you just don't find everywhere. The second category where global X's expertise is in helping you generate income. I'm not talking about ordinary bond funds. Global X uses covered calls and dividend strategies, with 27 ETFs offering alternative ways for you to get the income you need covered call ETFs, dividends from preferred stocks, income from oil and gas partnerships.
If the only place you're getting your income from is from government bonds and Munis, you need to take a look at the global income ETFs. Global X also offers four commodities ETFs, copper mining, uranium, silver miners and gold explorers. And finally, there's international investing. This is a global economy these days, of course, and there's a lot more to investing than just the New York Stock Exchange. With Global X, you can invest in the stock markets in China, Greece, Germany, Norway, Argentina, Southeast Asia, Nigeria, Colombia, Pakistan, Portugal, Vietnam. How many ETF managers give you this kind of exposure?
But let's face it, Global X is not a household name. You're probably not very familiar with them compared to, say, Fidelity and Schwab and Vanguard. That's because Global X aims its messaging mostly at financial advisors, and they are very well known and very popular in the advisory community. That's why I like to talk about Global X, not only because the advisors who are listening to this podcast know about them, but to help advisors’ clients, you, the investor, become familiar with them as well. So when your advisor mentions Global X to you, you'll have some familiarity with them.
One important way that Global X helps advisors is they have a full range of open architecture ETF model portfolios. I know that's gobbledygook to you, but if you're an advisor, you get what I'm talking about.
These models help advisors craft their client portfolios, and the fact that these are open architecture is something advisors really like. And Global X has one tool in particular that's really cool. It's on their website at Global X etfs.com. You type in the name of a company or of a stock and you'll see which of their ETFs owns it. If you'd like to try out this tool, the link to it is in the show notes.
Another thing I really like about Global X is that they're not just about managing assets. A lot of companies manage assets, but it's often hard to understand why they're doing what they're doing. Kind of like they're a black box. But Global X is different. They publish a lot of research. All of it is free for both advisors and investors, and it's all focused on those four categories thematic income, commodities and international. Their flagship research project is called Charting Disruption. They produce it every year in partnership with the Wall Street Journal. I've contributed to it and the link to it is also in the show notes. So now you know a little bit more about why I like Global X ETFs and why I'm proud to have them as a sponsor of this podcast, I encourage you to talk with your financial advisor about Global X ETFs or check them out yourself at Global X etfs.com. Coming up next on the program, the business of investment advice with my guest, Ray Sclafani.
Exclusive interview: Ray Sclafani, founder and CEO of ClientWise
Learn where the industry is going from a top coach to financial advisors
Ric Edelman: I've got a really fun conversation for you. I don't care if you're a financial advisor or if you are an investor. Whichever you are, you're going to find a lot of value in this. Because if you're a financial advisor, you know Ray Sclafani, he is one of the leading coaches in the investment Advisory Wealth Management Fields, a household name. And if you're an investor, you need to know that guys like Ray Sclafani exist, because what a lot of investors don't understand I mean, you're probably working with a financial advisor. Two out of three investors do. But you may not be aware that there's the business of investment advice. How is it that your advisor does what they do? How do they get so good at operating their practice and serving you better than ever? Well, it's because of guys like Ray Sclafani. Ray is the founder and CEO of ClientWise. He is one of the premier coaches in the financial wealth management industry, and he does training exclusively for financial advisors. He's been doing this for decades. He was 20 years at AllianceBernstein, where he was one of the company's top professionals and executive leaders. He founded the Advisor Institute at AllianceBernstein. He is a professional certified coach. He holds a master's certification in Neurolinguistics, and he has participated in the Strategic Coach program for 17 years. If you're a client of Merrill Lynch, Morgan Stanley, Raymond James Ameriprise, Northwestern Mutual, FSC, John Hancock Nationwide, MetLife, Northwestern, you name it. Odds are really high that your advisor has gotten training from Ray Sclafani and his team. If you are a financial advisor, you have probably had exposure to the advice and services that Ray provides.
So first of all, I want to start for just everybody level setting. Ray, you had a two-decade career at AllianceBernstein, one of the largest wealth management firms in the country. You were a rising executive senior executive there, and you walked away. Let's start there. Why did you leave AllianceBernstein?
Ray Sclafani: I saw a really interesting trend taking place in the industry, and that trend was an aging of an advisor who was really curious about how to remain a fiduciary, how to succeed in succession. And as I surveyed the landscape, my good friend Mark Tubergen and I had lots of conversations about who was helping advisors make this transition as a senior executive at AllianceBernstein. I had enjoyed the opportunity that I had in creating the Advisor Institute, training and developing advisors, and frankly, that got me far more excited than just the investment management piece helping advisors build enduring businesses that they could transition successfully on to the next generation got me really excited and I didn't see a firm doing that. So I thought, wow, wouldn't it be terrific to make a real difference in the industry and leave an everlasting impact if I too could build an enduring firm that was helping advisors build something multi-generationally.
Ric Edelman: And of course, Mark Tubergen, CEO of Pershing for decades, one of the most influential business leaders in the wealth management space. You know, people tend to think of advisors as just people who give investment advice to clients. You know, I'm going to give you some hot stock tip. I'm going to help you make more money by picking good investments better than you'll pick on your own. But the life of a financial advisor goes far beyond that.
Ray Sclafani: Oh, yeah, it does. That's right. Ric And you know, you think about the connection that these great advisors have with clients and their families, their children, their grandchildren. I believe in something kind of silly called the ripple effect. You know, when an advisor makes a difference in the life of a client, the impact that that financial planning has, that estate tax and trust, that investment management strategy extends into the next generation and beyond. And that ripple effect is felt for generations. And when advisors build multigenerational businesses and impact thousands of clients, they actually transform entire communities. You've seen it. You've done it as a ripple effect kind of advisor, I believe. Ric It makes the work. You've done it as an advisor. The work that advisors, great advisors doing today, it's really noble work and it often gets overlooked. Not only is it the financial planning and the estate and tax and trust and investment strategies and risk management and insurance and disability and the like. It is also all of those really tough conversations. The loss of a spouse, the helping a disabled child figure out like what's next, somebody with special needs or something as silly as, you know, being a godfather or godparent to a child. I mean, I've heard some of the most amazing stories. I, I watched once a senior advisor train his team on how to go to a wake and, you know, taking a young professional who had never been to a wake and had a console and support and care for, you know, that sense of empathy and support for a client, man, that stuff never gets written about. But that's what's really going on in financial services today.
Ric Edelman: And it has nothing to do with going to the wake so you can hand out business cards.
Ray Sclafani: No, it does not.
Ric Edelman: And that's really the key, is that advisors are good at being advisors, but they aren't necessarily good or experienced or knowledgeable about how to truly help clients in the areas that it truly matters. And your description of helping a client at their greatest time of emotional need, the death of a loved one really says it all. And that is why I think it's really important. If you're an advisor, you need to learn these skills. How do you operate your practice? How do you manage it? How do you train your staff so that you can deliver services for clients? And if you're a client looking for a great advisor, you would want an advisor who has gone through the kind of training that Ray Sclafani provides. And I think that's a really good litmus test. Ask your advisor. Have you ever heard of Ray Sclafani? Have you gone through his training? Because if they have, that tells you something about the quality and the professionalism of that advisor, which is something that I think most investors would never really think about.
Ray Sclafani: I appreciate that. Ric You know, I think back 20 or 30 years ago, you know, the advisors would go to sales training to learn how to acquire clients. Well, I think there's been a massive shift. Not only have advisors sort of extended beyond learning how to acquire clients, but the best in the business today have acquired those technical skills to know how to advise clients around investment strategy and estate planning and tax mitigation and trust services and wealth transfer and the like. But what they also have done is acquired those emotional intelligence skills. They've acquired those leadership skills because, after all, if you think about what it takes to build a successful enterprise, it requires a leader who understands how to develop others. Jack Welch had a great quote many years ago. He said, “The sign of a great leader is somebody who can develop, and somebody who can develop somebody.”
And so just like these advisors are thinking about how to support families, multi-generationally, they're also themselves trying to think about how they build a team that's in a pole position to be supportive of families and clients. Multi-generationally. That's a shift in leadership. That's a shift in emotional intelligence. It's not just the business development skills or the technical skills. It requires so much more to be a great advisor today. And frankly, that's the work. Not only do I do, but I lead a team of 25 or more coaches today. I think we're 25 or 27, but at our company, ClientWise, our focus is exclusively helping advisors build those kinds of businesses. So I think you've got your finger on it just right.
Ric Edelman: As an aside, I need to interrupt this conversation to tell you that if you're listening to this, which most folks do since it's a podcast or if you're reading the transcript, which is available at our website, I encourage you to watch the video, which is also available, the link on our website and YouTube because we're visited in the studio by my dog, Nori. She's a rescue we picked up about a month ago, a little bit of a mutt and she's wonderful, but she jumped into my lap as we began the show and she won't leave. So she's in my lap.
Ray Sclafani: She's having a good time.
Ric Edelman: Though, but she keeps yawning. She's wonderful. Ray, you had mentioned the importance of teams and the ability to train teams who can operate independently and carry on your legacy and fulfill the culture and the philosophical approach that you deliver. And that's what's something I think most investors don't realize is that today most advisors do operate in teams, often small, you know, 2 or 3 colleagues, sometimes rather large. And that's one of the things that you do so well. I spoke was it last year or two years ago at one of your events, the Business Builders Academy, you have what you call super ensemble groups. Talk about that.
Ray Sclafani: Sure. So the industry sort of looks at teams and ensembles a little differently. There are many advisors operating in a team kind of structure. And for the investors out there listening to this podcast, advisors will know this for sure mean to possess all of the technical skills associated with advising clients is impossible to have expertise just as one. So it requires technical skill set that's distributed across teams. It also requires for those that are growing a business and want the capacity to deliver client experience and client engagement at the highest levels. You've got to have a team no one person can serve. At least the industry data tells us, you know, more than somewhere between 40 and 75 clients. Some say 100, some say more. But depending upon the type of integrated wealth advising services and financial planning, it really probably is a limited number of clients. It's not an unlimited number of clients. So it requires a team for an advisor that's trying to build a multigenerational business developing the next generation.
Talent is also key, so teams really matter. But about 20 years ago in financial services, there was a fair amount of research that was done. And what we started to see was the formation of ensembles, ensembles being multiple member owned businesses, advisors that had declared that they wanted to build something enduring, which would require standing up a business, creating shares in that business, and then figuring out ways to distribute that equity over time so that that business was an entity that was then transferable. And so at client wise, we started a Business Builders Academy 17 years ago and we've got groups of advisors that are that are like in size, both in terms of revenues, in terms of number of team members, number of professionals that are advising clients, and also what stage they are in that endurance and transition and building their business.
Ray Sclafani: So we've created a series of groups. Advisors have businesses that are solo owned well, we coach and develop them very differently than we do those that are set up as teams. And then we work with those that are really set up as ensembles, whether they've got 1 to 5 million in revenue or 5 to 10 million in revenue. You came and spoke to our largest ensemble group called Super Ensembles. These are firms typically. With multi-billion-dollar businesses in terms of assets. They've got teams sizes in excess of 25 or 30 professionals and they are well on their way to transitioning that business to the next generation. Those businesses have way different challenges than a business. Maybe that set up as a smaller team with 4 to 6 people. But we coach all of that group of advisors depending upon sort of their stage. And what's fun for us at client wise Ric, is because we see the solo practitioner who's really committed to building a team, but also those largest firms that are in M&A activity and they're buying businesses and merging with others and transitioning the equity shares. It's really been exciting to build a business and help those advisors grow, but also see the range with which and the stages with which they have to transition to succeed.
Ric Edelman: And so there are a couple interesting things in there. First is the notion that any advisor, regardless of where they are in their career path, whether they are a young new advisor operating by themselves in a massive organization or they are a well, I'll say, mature, developed professional who's been in this career for 20 or 30 years, who is highly successful already and already working with a number of other colleagues in an ensemble practice. They're all continuing to get training. They're all continuing to realize that the only way they can get to the next level of their career is to continue to learn and develop and grow. And so you just have to wonder why would an advisor continue to do it all by themselves and not seek the advice, mentoring, training, skill set that people like you can provide? So that's a key question. If I were an investor that I would ask my advisor, Tell me about your resources for training and development and if the advisor merely says, Oh, I get 12 continuing Ed credits every year.
Ray Sclafani: Yeah, that's a bad answer. Yeah. Ric I'll give you two other questions. If I were an investor, I'd be asking advisors. And the first is around succession and continuity. Now, God forbid something happened to you, whether it was a disability or death suddenly, or maybe a desire to retire. What's your continuity or succession plan?
Ric Edelman: In other words, what happens to me if you, my advisor, leave.
Ray Sclafani: Right on, right on. If the family is unsure as to what happens in the event of then they probably need to look for another advisor. That's one question I would ask. And the other is if they're just in the investment management space, meaning the advisors only providing investment management solutions or suggesting they're doing financial planning and masking it as investment management, then they probably need a more comprehensive approach and a more sophisticated approach to taking a look at their overall situation in you know this as well as I do, it's not just about the investment management, it's how all of that capital markets discussion, those investment management solutions fit into a long range plan. And that's something that the best really differentiate themselves by doing.
Ric Edelman: Now, why is this such a big deal, Ray? Why? You know, it's one thing to be protection oriented that, you know, hey, my advisor might get hit by a bus tomorrow, but the bigger issue is retirement or death. And that's an issue because the vast majority of advisors in this country are over the age of 50. In fact, more than half are over the age of 60. And it's projected that most advisors are going to be retiring within the next ten years. So talk about the implications on the wealth management industry and by extension, the clients they serve on this aging issue.
Ray Sclafani: Yeah, it's a real issue. According to Barron's, who does a fair amount of research in this space, more than two thirds of advisors don't have a durable succession plan. If you listen to any of the Fidelity Institutional Research or Schwab's Institutional Research that provide custodial services to the large RIAs registered investment advisors in the US, some say it's as much as 70% have failed to provide a durable succession plan. Succession planning is at the highest level, acting as a fiduciary on behalf of the client. Doing what's in the best interest requires a durable succession plan. Full stop. I feel so strongly about this issue. And yet when you look at the age, the percentage of advisors you just laid out, the stats really spot on. If advisors have not planned for the future. It's the great irony in this industry in that most really good advisors spend their time helping clients plan for the future, but they don't do enough planning for themselves and for me.
You ask why I left AllianceBernstein after 20 years? This is really the issue for me. I think for me, financial services has been really the greatest blessing for me personally. I stepped into it at the age of 17 and was able to get an internship as a young professional and advisors. I witnessed the impact the great impact advisors have and I know there's a lot of negative press at times about advisors and the Bernie Madoff's and, you know, all of that jazz.
But my experience has been that advisors really, really do great work for clients, but they're so busy focusing on others, they fail to focus on their own teams. And I think that's got to change the implications are really big. There's over 300 million Americans and there's only about 200,000 real financial advisors in the US. So if we strip out all of the bank tellers and the, you know, the bank brokers and the credit union professionals and the wholesalers that are licensed and the asset management firms, there's a very small cadre of financial advisors in the US. So we have an underrepresented population of advisors, an aging population of advisors and really great advisors are bringing next generation talent into the profession. My older son actually entered the profession and he's an apprentice, learning how to be a great financial advisor. So the future is bright for the young ones. I think it's an overlooked career path for many. For those investors out there. If you've got kids in their 20s, it's not a sales job. There are plenty of firms that offer apprenticeships and advising jobs. And it's a fabulous profession. Ric, you and I both have enjoyed the fruits of hard work in a great profession and making a great difference and an impact in the lives of many. But it's something that's got to change. I think advisors need to further step up and figure out how to expand and grow our industry.
Ric Edelman: And let's talk about the environment we're in right now. This is a dicey time, clearly, for the world. We have great political strife here in the US. We have an abundance of social issues that the nation is facing. We are dealing with geopolitical uncertainty around the world, Russia and Ukraine, what's going on with China and Taiwan. We have the continuing saga of Covid. We are facing a budget crisis in the United States on and on and on in this kind of environment, with the spilling over effect on what does it mean for my investments and what's going to happen with my financial security in the future. What are you focusing on with the advisors you're coaching, helping them grow their businesses in an environment like this?
Ray Sclafani: Yeah, it's an interesting question. By the way. I would throw on to that pile of worry about the great debt that our country is amassing. Yeah. And the risk that puts us in when, when we amass that kind of debt, advisors who we typically work with are among the most successful Barron's advisor. Dow Jones ranks the top advisors in the US. Barron's advisor has selected our firm to be their exclusive advisor coaching partner. So we're typically working with sort of the creme de la creme, the advisors who are really committed to growth, to learning, to developing others, to building out their teams, to grow their businesses and support clients. What's interesting is this is a this is a pretty awesome time in financial services to be an advisor acquiring new relationships because of the great work that advisors have done, at least the clients we typically are coaching, they've helped, they've helped their clients navigate all of the waters you're describing now. Of course, there's a lot of uncertainty in the marketplace and you know, one nuclear weapon away and we've got a whole different world in front of us. But what I notice is advisors are doing a really good job of working with their clients to protect their plan to discuss what real financial security looks like. It's not always about making more money. Sometimes it's about protecting what you have and building that kind of durable retirement plan where there might be wealth that's transferred or a guaranteed income stream.
And so what we're experiencing is the advisors and teams we're coaching are right now in client acquisition mode. They're looking to grow. It seems, at least in my experience over the years, where there's a heightened sense of volatility and a heightened sense of like worry about what the future holds the best advisors acquire clients at a quicker rate. They get more referrals. There's more chatter at church and synagogue. There's more chatter on the soccer fields. There's more chatter among clients like, Hey, are you okay? Who's your advisor? What are you doing currently? And so the number of clients that are referring their advisors as advocates is really spiking here. And we're seeing growth rates at an increased level. What's interesting is there are a bunch of advisors that haven't done a great job. Maybe they haven't shored up client relationships, they haven't gone back and looked at the financial plan, looked at the permanence of the plan, the guaranteed income streams, the wealth transfers. I also think the best advisors are educating the next generation of clients. So I'm seeing those advisors run education clinics and, you know, they're gathering their clients children together. I'm even seeing universities partnerships with advisor practices where they're organizing finance classes and doing a really great job of educating the kids, the grandkids, the heirs of clients wealth.
So this is a pretty exciting time for advisors to be in growth mode. Ric When there's a lot of complacency and rates are at zero forever and there's just free cash flow and the markets are soaring, there's not really a need for an investor to take a second look, right? Everything's okay. Yeah, we're making money. Blue sky, things look all right. Retirement's going to be okay. But wow. In the last three, four years, have American citizens hit control alt delete And a great book by Adam Grant. The title is Think Again: The Power of Knowing What You Don’t Know. Wow. Have Americans Paused to Think Again? I'm seeing more and more advisors report to us that their clients. Moving cities. They're downsizing or upsizing. They're buying that second home. They're really thinking about what retirement is going to look like and what they want their life ahead to look like. So in some kind of funny way, I think all of this volatility and uncertainty has allowed the American investor to really stop and think again about what they want their future to be. And if they've got a really great business partner in their financial advisor, helping them think through what that future looks like, they're in a winning position. And that's what we see many of our clients doing today.
Ric Edelman: We're talking with Ray Sclafani, the founder and CEO of ClientWise. His web address, by the way, is client wise.com. The link is in our show notes. Ray, I'm glad you mentioned that book because I was going to ask you what good books you're reading right now because clearly you practice what you preach. You two are constantly engaged in learning and developing and improving your own skills. So in addition to the book you've cited, what else are you reading?
Ray Sclafani: So I'm actually reading for the second time one of my favorite books, The Gap in the Gain by Dan Sullivan. Dan talks a lot about living in the Gap, the space where you're never good enough, you can never get there. But if you sort of reframe the gap into more of a gain and every situation is a learning experience and every opportunity, there's something positive that comes out of it. It's a great reminder about the significance of the great world that we live in and all the positivity that's going on. So that's one that really stands out to me when I'm rereading.
There's also great book called Turn the Ship Around. It's written by a captain in the US Navy, David Marquette, and David is responsible for really transforming the US Navy. It's a great short story about his role in in boarding a nuclear attack submarine that had failed every inspection. All of the officers had requested moving to a different responsibility within the Navy. The renewal rate and re-enlisting rate among the 157 or so sailors was extremely low, and he was asked to step aboard and turn the ship around. And he wrote a great book, not because he didn't turn the ship around. He did turn the ship around. But it's an amazing, masterful story and leadership in a world. And in fact, I think it's a great parenting book and a funny kind of way where in many cases others are looking just to be led, Hey, tell me what to do, Coach. Tell me. Tell me what to do, Mom, what do I do? Dad, In a world of helicopter parenting or even leading teams where team members are standing around looking, wondering, Hey, what do I do next? Turn the ship around. Marquette Story of Leader to leader led environments where people work interdependently and together. Fabulous story. And then I won't bore you because I could go on forever.
One book that I've picked up and I've just finished is a book called From Strength to Strength. It's finding success and happiness and deep purpose in the second half of life. And so at 54 years of age, I've got a lot of energy. I'm excited about the future. I'm excited to be the CEO of client wise and helping advisor practices grow, and I'm going to continue to do that for quite some time. But I also am thinking about, Hey, what is the next half look like and how can I use more of my wisdom than just all the hours put in? But be smart, work smarter, not harder, about what the future is going to be. So Arthur Brooks is the author From Strength to Strength. So those are a few that come to mind quickly.
Ric Edelman: And we have in our show notes today links to all of the four books that Ray has mentioned, along with his own website, client wise dot com. Ray, thanks so much for joining us on the show here today. Continued success my friend.
Ray Sclafani: Thank you, Ric Great to be here.
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Ric Edelman: You know, Jean's podcast, Self-Care with Jean Edelman is now her own independent podcast. Jean's passionate about sharing her knowledge and insights with you on self-care, mindfulness and overall wellness. Jean's topic this week “Our Inner World”. Subscribe at Self Care with Jean.com. I'm Ric Edelman. Have a great weekend. I'll see you Monday.