The Power of Mentorship in Wealth Management With John Grace of Investors Advantage Corporation
Okay.
John Corcoran: 15:36
Right.
John Grace: 15:37
So yeah that’s that’s probably not the best way to to go about business. But if you’re paying for research where they don’t have anything to sell except information. That’s different. All right. And if the information is doing something unlike most firms, rely on looking at the buying and selling behavior of consumers based on age.
Well, that’s different than looking at the data relative to how much of what you sold.
John Corcoran: 16:04
I want to go back, though, to this this idea that you you believed you were less than good and you paid more money for independent research. What else did you do in order to convince yourself that you were less than good? Did you do personal development? Did you read inspirational books? Did you start hanging out with a crowd of more successful people?
Like, what are the specific things that you did?
John Grace: 16:29
All of the above. And on top of that, I managed to secure a supervisory license so that I could talk to other supervisors about what my peers are doing. So now I can and, you know, so I had a number of people where I was a supervisor, but I also had access to other supervisors where I could get from them. What are you guys thinking? What are you guys doing?
What are you preparing for? I love engineers because they their logic is let’s look at the worst case scenario, see if we’re prepared for that. If we’re ready for that, we’re probably ready for just about anything. But they don’t look at it from the standpoint of give me the rosiest story you can pass on. They don’t like that pie in the sky stuff.
Their attitude is particularly aerospace engineers. And guess what? We work a lot with engineers. Their attitude is, listen, we put a man and a woman on the moon. We brought them back safely.
So what have you done? You know.
John Corcoran: 17:27
And fortunately, in Southern California, there are a fair amount of aerospace engineers. There have been over the last 30 years. There’s a lot of aerospace companies. How did you. It’s one thing to know I like working the engineers.
Did you just kind of like build a reputation working with some of the clients, and then they recommend you to their peers and colleagues.
John Grace: 17:45
Okay, so here’s my first time with a group of engineers. A client introduced me to her boyfriend. We became friends and turned out that we grew up in the same neighborhood. But I did not go to the high school that I was supposed to go to. So we never met.
But he managed to start doing business and he posted me coming in to a TRW member in Manhattan Beach back in in the 70s and 80s and had me do a presentation in front of his peers. It was a round auditorium, as I recall, and I will tell you, I had practiced. I met with my supervisors, my mentors. You know, I thought I was ready, man. They asked me some questions.
I walked out of there, like with my hat on, and the door wasn’t open. I mean, I just slid underneath the closed door because I got obliterated. So when I got back to the office and everybody’s going, how’d it go? How’d it go? I said, well, I have to tell you the truth, It did not go well and I will be back.
So I used that to say, okay, that wasn’t fun. But these are smart people. And man, if you can work with smart people, that’s a good way to go. So I kept working on my, my presentation and, and the ideas and tested them with other engineers and got back to a couple of other presentations a year or two later and and we’re off.
John Corcoran: 19:07
So, so so it actually had a result of motivating you to 100%. Yeah. To to be more prepared the next time to answer the questions, the engineers probably ask very detailed specific questions.
John Grace: 19:19
Very specific questions. And they look at you to see if they can discern your lying through your teeth. They will call you on it. Okay.
John Corcoran: 19:28
So they’re so they’re a tough crowd.
John Grace: 19:30
They’re not afraid of a of conversation okay. They they’re they’re not afraid also to be mistaken or they’re willing to learn. Well gosh darn it, that’s healthy.
John Corcoran: 19:40
Yeah, that’s an interesting insight that you realize that that was the that was kind of psychosomatic qualities around the, the type of client that you were drawn to.
John Grace: 19:52
Yeah. Yeah. So we’ve got engineers of all stripes now. I love these people because they, they, they are good at critical thinking. And I mean, couldn’t we use some more of that?
John Corcoran: 20:01
Yeah. Yeah. I want to ask I want to ask about.
John Grace: 20:05
They don’t have a problem with math. Maths. The only four-letter word Americans are afraid to use.
John Corcoran: 20:10
Yeah. Right, right. I want to ask you about you. You started the company in the 80s. There have been so many booms and busts in that period of time.
You know, just so many from the .com meltdown to Covid to the 2008, you know, Great Recession. What do you think that has been the reason that you’ve stuck around all these years. You’ve managed to survive?
John Grace: 20:36
Yeah. Well, you know, it’s we’re willing to learn. And we’re learning. We’re willing to apply the technology and also look at do some introspection and look at how the average advisor works. And it’s a great question, because I submit that millennials have a problem with many of my peers because they saw their parents go through not one, but 250% losses.
- That’s two in a decade. Okay. Now, by the way, it was in late oh six that my leading math man and I was new hire at the time, and I went to a workshop where the speaker said this, ladies and gentlemen, let’s be ridiculous. There’s been 150% loss so far this decade.
Let’s be ridiculous and imagine there could be 250% losses in the same decade. On the way back to the office, I looked to my leading math man and go, you’re better at math than I am. And I’ve been looking at some technology that I think could be useful, but I can’t tell which ones are good. So here’s the one two punch we need to work on immediately. He got my attention with the question.
Nobody asked a question like that. But I love the question. Who knows what’s going to happen? Please look at the technology, figure out what we can use, and let’s see what we can do to start as early as possible. Going to our clients to say, here’s what we think makes sense for you to do.
In the case that losses are around the corner, where we might be able to limit your losses. Okay. And that’s what we did. And we started to be better to be lucky than good in January of oh seven. Long before 2008 saying, hey John, here’s some things we think you can do to they’re not here yet, but they could be around the corner to limit your losses.
And some clients say, oh yeah, let’s do that. Some clients said, we’re fine. And then in oh nine, the ones who said, yeah, let’s do that. They come back going, that was a good thing. And the ones who didn’t said, is this what you were talking about?
Maybe we should we should do what you had in mind. But notice. Look, the good news back then, like your parents, right? They were making contributions to their 401 K accounts to their retirement accounts. So those 50% declines was actually a blessing when you’re making contributions.
Yeah. Now that blessing becomes a curse when you start taking withdrawals. So one of the reasons that I love doing what I’m doing is because we don’t we don’t look nor talk like most of my peers who say things like, write it out, don’t look at your statements. I mean, really live with the losses. No, no no, no, no, I’ve got good news for you.
There are ways that investors have been successful at limiting their losses. You might want to see what others have done in the event the next time is worse than the last two times, and it takes even longer to recover. This is a good time to see what you can do in advance before the dam breaks, to see how you can limit those losses, as opposed to get kicked in the assets again.
John Corcoran: 23:39
Yeah. I want to ask about, you know, how do you push back on clients. You mentioned that, you know, in in 2007, you had you went to the clients and said, okay, we think you should be prepared for adjustments, losses in the future. How much do you how do you know how much to push back against the ones you’re like, oh no, it’s fine. This will keep on riding.
John Grace: 24:04
Yeah. No, you leave them there. This is your money. This is your call. You make the call.
But I let’s put it this way. I would rather be the canary in the coal mine before the grits hit the pan. To say, I don’t know that this will play out, but here’s some things that we now see are available to you. You want to partake? Yeah.
You don’t know. And if you do, fine. And if you don’t, that’s fine. But I won’t feel guilty if the grits hit the pan again and your engineer counts down 50% again when it didn’t need to be, because we had that conversation about what might happen and you chose to put it on ice. You chose not to take any action.
John Corcoran: 24:45
Only so much you can do, I guess. Yeah. Yeah.
John Grace: 24:49
To water.
John Corcoran: 24:50
Almost or almost out of time here. But I want to ask, you know, you mentioned when you first got into the profession, there weren’t many that looked like you. And you know, they were you know, most African Americans are at the time were known for sports or music or something like that. How do you think the profession has come along now? Is it a more diverse profession now?
John Grace: 25:12
It’s not really. I mean, it’s I, I don’t know the numbers, but let’s let’s put it this way. We’re with LPL financial. They are 25,000 licensed advisors around the country. Best I can tell, they’re there may be.
well. Let’s see. I like to look at not just African Americans, but all ethnicities. This is America, and I guess some people have a problem with the browning of America. But it is real and it is happening.
So what I believe I’m looking at are the numbers that I’m aware of, whether it’s Latinos or Asian Americans or African Americans. I would be surprised. I would be absolutely surprised if the number was as high as 400 out of 25,000. Wow. So not much has changed.
John Corcoran: 26:04
Wow. And so why? What do you think can be done about that?
John Grace: 26:09
Well, I think it starts with this. We need to encourage each other to do critical thinking. We need to recognize that we just can’t buy the biggest house and expect life to be fantastic. We need to encourage each other to do math, to really assess what’s important to you, to encourage folks to recognize, let’s do what it takes for you to see how you might make work optional on your terms. And and and we’ve got to we’re going to.
It would not surprise me that we see some big surprises where people made some magnificent bets that played well for the last 30 years, and so they get 100% comfortable with this tree still going to grow to the sky. And, you know, if we have a real reckoning as far as the economy, which would not surprise me, where the things that people got really high on and they’re, they’ve got like one client who happens to be an engineer. He’s got a lot of money in his 401 K, but their five paid-off homes. That’s probably 75% of his net worth in one asset class. If that’s not a situation that’s poised for an awful moment, I don’t know what is.
And whether it’s Nvidia or Amgen or, you know, one friend of mine has 12 houses. People have made some big bets in the economy and the great gains have been so fantastic. They’re not looking to see what the Yales and the endowments are doing, where they only have 3% of their portfolio. Last I looked Yale endowment in US stocks. The industry is still suggesting you, your mother, your parents, and your sister.
Everybody 6040. You know, we can agree that’s a two-legged stool. And we look at the endowments like Yale and Harvard. I count five, six, seven legs under their stool. I also notice that their portfolio is no more.
Not one position is larger by than 24%. So for most of us, that’s a small bet.
John Corcoran: 28:10
Yeah, yeah. Well, John, this has been great. Thanks for your time. Where can people go to learn more about you and learn more about Investors Advantage?
John Grace: 28:19
Well, you can see us at Westlake Financial Advisors. Investors Advantage. We’d love. By the way, John, we’d like to take 15 minutes with folks to see how we might be of value. Maybe we can, maybe we can’t.
But we want people to be better prepared than they ever have been because things have a way of going, oh, in the middle of the night. And now it’s spoils. And maybe, like I say, you know, if we look at the Great Depression, it took 25 years for stocks to come back. It took New York real estate 40 years to come back when life expectancy was 57.
John Corcoran: 28:55
Wow wow wow. Yeah, yeah.
John Grace: 28:57
It’s a long time. And remember, with the stocks for 25 years, you had to do what? Not sell a share for it to come back.
John Corcoran: 29:03
Yeah. Yeah. John thanks so much for your time. Appreciate it.
John Grace: 29:07
My pleasure, my friend. Thank you. Good to be with you. Take care.
Outro: 29:10
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