Our guest today on The Long View podcast is Rick Ferri. Ferri is an hourly fee-only investment consultant at Ferri Investment Solutions; he's also a CFA charterholder. Prior to starting his new firm in April 2019, he was the founder and head of investing at a $1.5 billion advisory firm that specialized in low-fee asset management using index funds and exchange-traded funds. Prior to that, he worked for a brokerage firm, where he was an early adopter of inexpensive index products for client portfolios. Ferri is a Marine Corps officer and retired fighter pilot.

Introduction and Background

"The conversation about asset allocation comes later, and the conversation about investments comes after that." Ferri discusses how his definition of value-add has changed over the past 10-15 years. (0:55-3:24)

"I've been through the whole gantlet." Transitioning from broker to Registered Investment Advisor. (3:25-5:14)

On clients who have needs that go beyond investment management. (5:15-5:56)

"You get the work done, you pay for the work." Why Ferri's new advisory practice charges clients by the hour, not by their assets under management. (5:57-9:44)

"Advisors talk about how they add value behaviorally; I think a lot of that is created by the advisor and not so much by the client." The role of advisors in managing client behavior. (9:45-11:12)

Asset Allocation

"There are no average investors." How investors of the same age can vary widely in their appetite for equity risk. (11:13-15:03)

"Those are the things that are going to add value to a client's portfolio." Focusing on keeping taxes and investment costs down, not trying to play factors. (15:03-18:21) 

"There seem to be a lot of factor renters, rather than factor owners." Ferri is skeptical that factor investing will outperform in the future. (18:23-20:44)

 "I don't use anything that doesn't have an expected real return." Why Ferri sticks with plain-vanilla asset classes. (20:45-21:56)

How to go about making return assumptions for the major asset classes. (21:57-24:14)

"It depends on how much money the client has." A total bond market index as a one-stop option for fixed-income exposure. (24:15-27:20)

International bonds as a core asset class. (27:21-28:46) 

"I don't think they're pivotal." REITs as a direct allocation.  (28:47-31:45)

Decumulation  

"There seem to be better ways of doing it than the classic way in which we've been taught." On whether the traditional declining equity glide path makes sense. (34:20-39:28)

Indexing and the Legacy of Jack Bogle

"I don't see it as big of a threat as other people do." Should investors be worried about concentration in very few ETFs, and do index funds and ETFs own too much of the market? (42:10-44:07)

"I was having a real moral dilemma." How influential Jack Bogle was in shaping Ferri's career path. (44:08-46:08)