048: Gil Baumgarten – Disrupting the Wealth Management Industry

Gil Baumgarten is a disruptive wealth management pioneer. After battling UBS in defense of 100% ETF portfolios, a direct assault on the firm’s fee-rich mutual fund business, he was on the original beta-test team of six advisors permitted to run discretionary ETF portfolios in 2002. He has since been named one of the “Top-20 ETF Thought Leaders in the U.S.” by Barron’s and The Wall Street Journal . Gil’s fee-only fiduciary firm, Segment Wealth Management, is a top-15 firm in Houston as ranked by the Houston Business Journal . Gil is perennially named a top-50 advisor in Texas by Barron’s , out of the state’s estimated 26,002 registrants. Gil is also the best- selling author of FOOLISH: How Investors Get Worked Up and Worked Over by the System.

Today, Gil joins the show to discuss his background in the financial services industry, the difference between fiduciary and non-fiduciary standards, and the psychology behind investing.

📺 Watch on YouTube

https://youtu.be/WJ-c7TCG-TU

Key Takeaways

00:57 – Jonathan introduces today’s guest, Gil Baumgarten, who joins the show to talk about financial trauma, share his experience in the financial services industry, and why he decided to pivot

08:39 – Leaving to start his own firm

10:50 – Gil talks about his book, FOOLISH:How Investors Get Worked Up and Worked Over by the System

13:10 – The Slaughterhouse Example

16:29 – Breaking into the brokerage industry and the major players out there

23:41 – The fiduciary and non-fiduciary standards and recent legislation

27:18 – Performance and return on investment

35:01 – Investor psychology and ‘cognitive bias’

42:29 – One piece of investment advice to heed and one thing to completely ignore

50:07 – The last thing Gil changed his mind about and the one question he would like to know the answer to

51:37 – Jonathan thanks Gil for joining the show today and lets listeners know where to connect with him

Tweetable Quotes

“They say that you’ll stay in a situation until the pain of leaving is less than the pain of staying. And, so I kinda reached that point with touch-point after touch-point that I was getting in conflict over some issue with the firm. It was always about what was best for the client. And I just had enough and decided I wasn’t going to do it anymore.” (08:50) (Gil)

“When you start to dissect the brokerage industry, they understand how sticky the relationship is between the advisor and the client. And they will position themselves in such a way to monetize that. They will sell information. They will sell order flow. They know that you’re going to stick with a mutual fund for a certain period of time. They also know that clients like for fees to be hidden from them. They like to understand that people in the brokerage industry are getting paid; they just don’t want to see it.” (13:52) (Gil)

“Anybody in the world can give you investment advice. Not everybody can charge for it. If you’re charging for it, you have to have registration.” (20:32) (Gil)

“Many people say the brokerage industry should be regulated out of existence and only SEC- registered fiduciaries – or a fiduciary standard – should apply to all brokerages. I say, ‘no way!’ There’s a lot of reasons why somebody would not want to do business on a platform like mine.” (26:37) (Gil)

“The purest form of beta would normally be an index fund and would have very little taxes associated with it and would have very little fees attached to it. And over a very long time period, you’re going to end up outrunning everybody who is pursuing Alpha, most often because people hop at the wrong time. They don’t buy the lowest performer off the list; they buy the highest performer. And when the market flips around and changes, they’re gonna end up buying high, selling low, buying high, selling low. Rinse and repeat.” (29:01) (Gil)

“Warren Buffet says that, ‘Minimal securities prices come with maximum uncertainty, and maximum securities prices come with minimum uncertainty.’” (36:06) (Gil)