Future Proof, Data Centers and ETF "Slop"

Emile (00:00)
the number of products coming to the market there's a dizzying pace.

thousands of funds. I think it's a question of innovation versus slop.

John (00:12)
Hello, everybody. Welcome back to the Advisor Upside Show. This is your host, John Manganero. I'm a senior reporter here at the Daily Upside. Thrilled to be bringing you another episode. This week we're joined by my colleague Emil Hillet. He was recently appointed to be the managing editor of the publication, now that Sean Alaka has has left us. but really excited to be speaking with Emile today. He's a fantastic reporter and editor. We've had the pleasure of working together since I joined the publication in February.

And I've learned a lot from Emile about the ETF marketplace in particular. That's his real area of expertise. he's also a great editor. As I said, I really enjoy our conversations every morning with Emile and the team where we talk about what we should cover in terms of the markets, in terms of advisors, businesses, in terms of just the evolution of the wealth management industry in general. He's a real asset to the team, and I'm excited for you guys to get to know him a little bit here. So without further ado, let's bring on Emile Haley, managing editor here at the Daily Upside.

John (01:09)
Emil, first of all, how are you doing today?

Emile (01:12)
Doing great. Thanks for having me on, John.

John (01:14)
Yeah, I appreciate you taking time out of your your busy schedule. I know we're both kind of on deadline editing pieces today, so we'll we'll try to keep this a digestible episode, but I'm I'm excited to bring you on. We had Griffin Kelly on a few episodes ago, and it was really cool to kind of feature him and and learn a little bit about his background because I I think it's important for the the readers to get to know the folks behind the daily upside. So in that spirit, Emile, you know, we want to talk about future-proof in this segment, but I'd love to start just by asking you a little bit about.

your background and how you got into financial journalism. I I know it's not your first career. Maybe you could tell us about that and and also your recent role change here at the Daily Upside. Your responsibilities have evolved a little bit now that Sean Alaka has departed the publication. So maybe you could tell us a little bit about that.

Emile (01:59)
Yeah, sure. So I'm managing editor over here now. was senior reporter before. and let's see, my path getting here. I started off in tissue banking. So I think that explains itself. No, I'm

John (02:13)
Mm-hmm.

Emile (02:13)
just kidding. so I when I got out of college, I was trying to get into medical school. I was kind of on that path and I I got a job making bone grafts from cadavers. basically working at a bandsaw in a clean room.

for I think about six years. during which time I realized that I couldn't really ignore how much I loved writing, and learning about different things, kind of taking the master of none path, as as you're familiar with. so I went back to college for journalism and then got a job out when I graduated from there at a a weekly newspaper in Colorado.

covering local governments, education, crime, kind of everything, writing features in there too and taking all my own photos as well. just kind of, you know, doing wearing all the hats. and then I after a couple of years there, I moved to New York and started working at part of the Financial Times covering the the mutual fund business. and I've had a couple of jobs since then and

Really like the opportunity at the Daily Upside and getting to write the way that we do for the audience that we do. It's a it's a pretty exciting place to be.

John (03:34)
well, that kind of brings us to the the topic of the day, or at least of this segment, and and that's the fact that you know, recently the two of us were on the ground at the Future Proof Festival in Huntington Beach. First of all, beautiful venue. We we were lucky enough to have nice weather and, you know, a decent hotel, a little bit of a shuttle ride away from the beach, but that you know, that was all right. But I I wanted to ask you, Emile, I think it was your first time at at Future Proof. What what were your high level sort of takeaways? It's it's a pretty impressive

Impressive event, certainly very large and and pretty interesting to be on the beach. What did you make of it at a high level?

Emile (04:07)
So I think like just going on the trend of where conferences have gone over the past decade, maybe, I think like it a nice aspect of them is that it seems socially acceptable to wear comfortable shoes. And so Futureproof obviously goes a lot farther than that. It was it was really nice to wear shorts and a polo and a hat.

hat kind of necessary given that we were outside all day. but you know just running into so many people that I don't get face-to-face time with normally, that was really nice. yeah, it was it was a really interesting event. What were some of your highlights from it?

John (04:49)
Yeah, same. It it's always really nice to be on the beach and and to see all the familiar faces. to me, just you know, walking around to all the booths and it's really kind of gives you a sense of where the wealth management industry is at today. And and that is sort of the introduction of AI tools and and just sort of all the different providers that are there kind of trying to prove their worth and and trying to get in front of the financial advisors. That that's always a very a big thing and future proof. The

Generally,

I think the sessions are are quite interesting. I mean, the a lot of them have an AI flavor, but you know, some of them are are not involved in AI. I know my my panel, for example, we talked about sort of tax management going mainstream and that was a lot of fun. We we didn't really get into the AI topic. But yeah, I mean, I I think it's a great event. As a as a reporter, you have a tremendous opportunity to really kind of get to know your sources and and sort of see them in a bit of a more relaxed environment, kind of see how they carry themselves.

sort of outside of the the boardroom, w which I think is interesting. And then the Yeah. Yeah. Yeah. That's true. We've been w working together.

Emile (05:48)
And you, John, I got to meet you. Sorry to interrupt. We hadn't met face to face. nor have a lot of us at

at at the Daily Upside, because we all work remotely. a lot of folks are

John (05:58)
Yeah.

Emile (05:59)
obviously in in the major metropolitan areas, a lot of folks around New York New York, New Jersey. So they've met face to face, but I hadn't met a lot of them in person, so so that was nice

John (06:08)
Yeah.

Emile (06:09)
too.

John (06:09)
For sure. It it's kind of a nice opportunity for us at the Daily Upside to to come together. We had a a nice representation there on the ground. Some of the sales folks were there, other operational folks, and yeah, to kind of bring everybody together was was pretty awesome. the the breakthrough or breakaway, I think they call it breakthrough sessions where you kind of do this one on one sort of almost speed dating networking. That that's always a lot of fun. I will say though, by the end of, you know, several days of that, you're all kind of in a big tent.

talking and you really kinda have to project your voice, it it's quite easy to lose your kind of lose your voice coming into the end of future proof. I don't know if you've felt a little bit of that, Emile.

Emile (06:45)
I didn't maybe next year I will try to do those. I I I felt like it was gonna be kind of tough to make time for those. but maybe they could enable something where people can use their noise canceling headphones and and chat with each other. Just a thought.

John (07:01)
Kuder, could do.

Emile (07:02)
Might be a little technologically complicated, but yeah, it's daunting. There was there was a mass of humanity in that tent.

John (07:11)
Yep. Several thousand people at a time. I think

Emile (07:13)
I mean

John (07:13)
there was like between four and five thousand attendees at the conference. What one question that I would have for Matt Middleton is, you know, is it gonna get bigger? Could it possibly get bigger? I I think their the March event, the future proof citywide that's held in Miami Beach, also a great event. Matt has said that that's that's capped out in terms of size. It's a little bit smaller, that the venue's a little bit more intimate, which is kind of hard to say when you have three to four thousand financial advisors on the ground.

our panels were really well attended, which I think speaks to the the quality of speakers that we were paired with. But I I was lucky enough to h host

Robert Paradiso from O'Shaughnessy and Franklin Templeton, as well as Sirion Sculpone from Goldman Sachs. And we had a great session about this idea of tax management going mainstream. Predominantly we talked about sort of the emerging opportunity for advisors to bring together four distinct things. You know, one is sort of direct indexing slash tax loss harvesting. Second is this sort of concept of long short positions and how that can fit into a tax management strategy.

And then we also talked about options overlays for portfolios and then finally exchange funds, which you know, all of these things are are pretty emerging and interesting topics. And to me, it was striking, you know, advisors wanted to learn about that. We we had standing room only at my panel. And and I think people are particularly interested in like the, you know, this long short idea or exchange funds that have been getting a lot of headlines. We've we've written about that. I learned a lot from that discussion and and you know, it really demonstrated, I think, that.

advisors are and as we well know, you know, very interested in bringing more advanced tax management into their, you know, into the work they're doing for clients, into the portfolio management process. so I was very pleased with the the turnout at at my panel. But I I have to say I was I was blown away by how many people were attending your session email. I I got a a text from Jimmy Mook that he's a a PR person and he he said, you know, John, you gotta come over and check out a meal's session. It's like double standing room only. And it it really was impressive.

What what did you talk about with your panel? Any any quick highlights?

Emile (09:20)
Well yeah, when people when they see my name on the event,

John (09:24)
They come running.

Emile (09:25)
I think they wonder, who is that?

John (09:27)
Ha ha.

Emile (09:29)
There was a long line of people afterward who wanted to talk to the speakers. No one was lined up to see me. They don't yeah, it's just a model. I had nothing

John (09:37)
I I was there. I was there to congratulate you, but

Emile (09:39)
I had nothing to offer other than like facilitating the conversation and that's how it should be. no, mine was about organic growth and it was with

James Kennol, who is founder of Root Financial. They're a very fast-growing RAA. And then Aden, I I don't want to butcher her last name, Aveda. and I'm so sorry if I did Aden.

John (09:59)
Mm-hmm.

Emile (10:00)
she is one of the co-founders and the CEO of Finney. That's an AI service for advisors that helps with prospecting and and other aspects of their business. And yeah, organic growth, it's interesting. It's like the thing to me that I think

It wasn't just about organic growth for the sake of getting acquired, but increasingly for the companies that are out there shopping for an IRA, or sorry, RIA, not IRA, they're looking at organic growth as one of their top considerations. So it's it's kind of funny that they're trying to buy, you know, the secret sauce that these fast growing RIAs have. And that's really like a lot of it is about personalization and good customer service.

Can you buy that? I I d I I I guess so. that that certainly was not something that James was interested in. He he said, you know, we're we're growing organically because we want, you know, we want to to grow and provide good customer service, not not because we want to get acquired. but it is it is one of the top considerations for enterprise value these days.

John (11:09)
Yeah. And especially like if we just think about the the fact that market growth has been, you know, so important to a lot of firms seeing their AUM go up and and a lot of firms are, you know, struggling with that secret sauce of organic growth. And yeah, it does feed back into this conversation about potentially being acquired. I thought one part of the conversation as I was sitting there listening in that was interesting was when he was talking about this idea of like having to step back from being like a client service advisor, like having to kind of

pass his clients off to other people in the firms and how he said that was kind of emotionally difficult to do, but he said, you know, pretty much a hundred percent retention. And I I think his basic his basic lesson there was just to kind of be forthright with your clients, you know, have a process to kind of explain to them why you're passing them off and and the fact that you're going to be sort of focusing on the enterprise value and and building the business as more of a CEO executive type figure in the place of being an advisor. So that that stuck with me. I thought he had some some interesting feedback there.

I don't know if if anything about that jumped out at you.

Emile (12:09)
Well so I think in the use of AI, the thing to keep in mind is it's everywhere and it's trying to get into so many different aspects of the business. But what advisors are and I I imagine everyone's really well aware of this, that people don't most people don't love interacting with AI. you know, I think that if it interferes in you the relationship that you have with a client, regardless of how easy that makes your day, that's a problem for your business.

So I think there's just a balancing act that's people are aware of that is going to become even more critical in the future.

John (12:45)
Yeah, one hundred percent.

another thing I wanted to talk about was the the raft of sponsored and editorial video that we recorded on the ground of Future Proof Emil. That that was

Emile (12:54)
Yeah.

John (12:54)
one of the main reasons why we were there and it took up a a lot of our time. But you know, we did probably seven or eight sponsored videos and and were also able to do some editorial-driven videos. So one that I would recommend that I did that that folks really check out, and of course they should watch all the the videos, but I had a really great conversation with John Love, who's the president and CEO of USCF Investments.

We taught he a very sort of frank discussion about you know, energy prices and and the war in Iran. for example, we talked about the the potentially diminishing role of OPEC in terms of, you know, managing the the price of petroleum and and energy. I thought that was quite interesting. we talked about sort of the the price movements in gold over the past few years and how he, you know, really sees some interesting upsides in in terms of commodity investing in the future. copper in particular was

a commodity that he's quite interested in, just given sort of the importance of that and sort of the e economy in in China in particular. So I I I really found that was a a great conversation. And then the other one that I, you know, particularly enjoyed or that I thought was memorable was a conversation that I had with Bert White, who's the CEO at Carson Group. super sort of

forthcoming just about where that firm stands today. They they just marked their 50th acquisition, 50th integration of a firm, which was a big milestone for them. We talked about the importance of their W-2 channel, you know, for for advisors over there. And I think that's an a pretty interesting, important trend. So th those were all great discussions. And then Bert, as optimistic as he is about artificial intelligence in in terms of you know business development for Carson and for the wealth management industry.

in general, he also shared some pretty frank fears that he has about, you know, how artificial intelligence and just the sort of technology landscape in general may, you know, may affect young people, may affect his kids growing up, how they, you know, are able to find a career or or sort of their their balance between using sort of technology and and developing their own critical thinking skills. So I I was very appreciative of of Bert to kind of offer more of a personal take on on that. So

Emile, what did you shoot any videos that you'd want to call out? Anything that sticks with you?

Emile (15:03)
see, I had a good conversation with Lisa Gusto from Global X. and I think like the question the the

The answer to the question that stood out the most was, you know, asked her where she saw like what trend she she wanted to call attention to that it was gonna be a bigger deal in five years. And it's like, you know, it has to do of course with AI. But the data center build out being, you know, r really enormous from an infrastructure standpoint, so that affects like you know

demand for steel, concrete, manufacturing equipment, the fills the facilities needed to make that stuff, building roads, you know, and then obviously the grid, which is a huge problem. I don't know if you have you know they had a major electricity problem in in the US and the reliability of our of our grid and having to bolster that and then you know

get more power to power everything. so looking at where things are going there is interesting.

John (16:07)
Yeah, agreed. and as we sort of wrap this session up, I w I was just also reflecting on some of the conversations we were having sort of on on the side of the conference. I I can't what's the name of the firm who had the robot sort of walking around and they do a lot of ETFs that have to do with the the memory build out. I I can't remember off the top of my head, but that that was quite interesting. They they literally had sort of an AI powered robot crane

Emile (16:31)
I think that's crane shares.

John (16:33)
I believe you're right, just sort of walking around.

Emile (16:35)
Yeah, I brought a robot

out of box. Kind of unceremoniously putting it back into it. I thought it's gonna remind me that. Someday.

John (16:37)
Yeah, they were that was Yeah. At the end of the conference we were yeah, we

were watching them pack up the the robot and it was it was pretty funny to s to see it just being dumped into a box. But yeah, I mean it it just really kind of shows you where where we're at in terms of technology. There there was a a robot walking around having conversations. Apparently it speaks seventy eight different languages and I had suggested to the crane chairs folks that we should bring one of their reps along with the

along with the AI robot onto the podcast at a certain point. And they they were they seemed game for it. So in an upcoming episode we we may have the opportunity to bring on our our first non human guest. But I I thought that was a kind of a fun I

Emile (17:16)
Be nice to it, John. Please be nice to it.

John (17:19)
I will I will. I always thank Chat GPT whenever I'm asking it to do tasks for me. So

Emile (17:23)
Yeah, anytime

I I say anything to Siri, I'm like, please, thank you.

John (17:27)
For sure, for sure. Well, any other any other closing thoughts about Futureproof to end this segment, Emile? I mean, it's it's become a pretty important staple, I think, for a lot of folks in the advisor industry. I've had the, you know, the good fortune to to go to, I think, four, five or six of them now, including the Miami event. Great for for brand exposure, I would say. And and Sean and I have had this conversation before, but you know, I I think it's important for industry folks, you know, as an advisor out there

You know, if you're running a practice and you have young people kind of joining your firm, you know, send them to these types of events, whether it's future proof or I know, Emile, you're you're going to Schwab Impact coming up. Just a

Emile (18:04)
Mm-hmm.

John (18:04)
a great way to get to meet people. Number one, you prep you hone your networking skills. You kind of get to see the the sort of the state of the industry conversation. So it is, you know, the travels can be painful sometimes. Obviously the the expense of sending people to events like this can be meaningful, but in my opinion, it it's worth it. You know, you you sort of really get to

get to know the industry in a way that's hard to do purely on the phone or, you know, purely on one on one meetings. It it's really kind of a a meeting of the mind. So that that would be my closing thoughts about Future Proof. Any anything on your end?

Emile (18:35)
Well, so as far as a meeting of the minds goes. There was a panel that I went to that had Dan Ives and Tom Lee on it. And guess what they were talking about? It would it was AI. That was that's a big thing. AI and technology. They

John (18:45)
Yeah. Great question. Yep.

Emile (18:48)
said basically like the the industry isn't ready yet for what they called physical AI, so AI that powers the robots. but that basically it's just gonna change everything and that the most kind of

You know, the best financial services companies these days often resemble tech companies more than anything, where they're putting their investments there. But kind of on that AI note, there was another one with industry leaders that I went to and Van Eck CEO, Jan Van Eck had mentioned that there was some social engineering, possibly powered by AI, that had

affected their company recently. They got hacked. I don't think that that was actually reported anywhere, but he he mentioned it in his panel discussion and it wasn't something that was able to get anywhere near clients or client accounts. but is, you know, it's very it's very concerning and that it's just, you know, those things are gonna keep happening more and more and just something to be aware of.

But then after that, I mean we didn't get to you and I did not go to the final nights event. We didn't get to see Jim Class. I mean, I I like Gym Class Heroes. My my kid really one of my kids really likes Gym Class Heroes. I was thinking about going to that. But you and I didn't. We got our own private concert from the

John (20:10)
We did.

Emile (20:13)
the Rap and Chaplain.

John (20:14)
Yep. Yep. We met a a a very colorful, very nice

Emile (20:18)
Joshua Brook.

John (20:19)
nice advisor who you know, he's both military reservist and an advisor trying to build a business and was was open with us about the challenges there. So I thought that was very interesting. And he did it. We ended up going to a a brief happy hour after the the final day wrapped up before the concert and and he he did treat us to his his unique skill, which was freestyle rapping. Not

Not too bad, Emile. I don't that surprised me. He he was he was joking

Emile (20:46)
I don't have those skills. I wouldn't either.

John (20:50)
about it and I was not quite sure what we were getting in for, but yeah, put some music on and he managed to, you know, sneak a reference to the Daily Upside and the Low Group in there and and All Spring. So I was I was impressed. I was impressed.

Emile (21:03)
That takes a level of confidence that is impressive.

John (21:06)
Agreed. Agreed.

John (21:08)
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John (21:45)
Okay, folks, welcome back to another segment here on the Advisor Upside Show, joined once again by my colleague and editor, Emile Hillet. Emile, thanks again for being here. I wanted to spend this segment talking about a subject that's near and dear to your heart, which is evolution in the exchange traded fund industry. folks may know that you sort of came on board primarily to start the ETF upside, which is one of our three sort of business-to-business verticals, and you would come to that after.

sort of reporting on the mutual fund and and ETF industry. You've you've since kind of taken a step to be managing editor of the publication. So, you know, I know ETFs are still near and dear to your heart, but maybe not writing quite as much about them on the day to day as as you were previously. But one topic that you wrote about fairly recently is the the emergence of sort of leveraged ETFs that would reset up to six times a day. I was curious for your views on that. I mean

We've had many conversations in the newsroom just about leverage products and and just this idea that, you know, there's almost a segment of the ETF industry that feels more like gambling than than investing. What have you seen there? And do you have any thoughts about where, you know, where that may be heading?

Emile (22:56)
Well, yeah, as far as like covering ETFs, I I gotta say it doesn't feel like a normal workday if I'm not combing through SEC filings first thing in the morning. So

so I'm very much in the habit of that. And a couple of weeks ago I came across a filing for

a range of funds from defiance that would have hourly reset on them. So six times a day they reset. they're 2x leveraged. So they are in that regard, they are kind of within the limit that the SEC allows on leverage presently. There are some there's some ETFs out there that have three times leverage, they're triple leverage, but they that's limited to certain issuers that were grandfathered in. No

new issuers can't do that. or higher. The SEC is currently I don't I don't even know if they're considering letting triple or higher leveraged funds trade or list and trade. they're looking at novel ETFs, but that's a separate matter. the hourly reset thing is I mean it's interesting because basically my understanding is that it would expedite what we call

decay or or roll decay is how some people have explained it to me. Basically you can have something appreciate and if every time there is something is magnified by that leverage, its effect on the value, it's you know it it works both ways.

John (24:28)
Right.

Emile (24:29)
If you suffer a loss one day and it resets at that value,

If the stock price, let's like, let's say you're this is one of like a single stock fund, if it goes back to what it was the prior day, that doesn't mean that the the assets in the ETF go back to that level or the value of the ETF goes back to that level. It doesn't. It doesn't got get up quite as high. And so because of that, if something is super volatile, you know, those those kind of lock-ins and those resets make it harder to keep up with the actual stock or whatever security it is, it is tracking.

So yeah, volatility and that many reset periods. That said, this is that that's something that is intended for people who are definitely holding it for very short periods of time. So I'm sure there are traders out there who would want something like this, but it's certainly nothing that that most buy and hold investors would want to consider.

John (25:29)
Yeah. And that as a retirement sort of first reporter, the these products really are are so far away from the sort of bread and butter of of long term dilig you know, diligent savings that that I tend to write about and cover. So to think about, you know, actually using these products and and not getting burned by them is is kind of a tall order. You you really would need to be a pretty sophisticated investor to get into that.

It reminds me too of the sort of the coverage we had from earlier in the year, Emil, from the South Korean market, where, you know, they over their regulators sort of allowed pretty, you know, very aggressive leverage funds onto the market. And at one point there were questions about market stability. And I don't I don't think we're really there here in the United States. It's kind of it's a very different situation, but it will be interesting to see what comes out of the the SEC. As you mentioned, they're they're kind of right now looking at

this just broad topic of of novel ETFs. I don't I don't know if you have any thoughts about that, but I'm sure there will be lots of comments, people writing in, probably both in in favor and and maybe sort of asking the SEC to pump the brakes on this. any thoughts there?

Emile (26:35)
Yeah, so the novel ETFs issue is is, I believe, separate from the leveraged one. Those are products that would resemble prediction markets or events contracts, basically, you know, can I call it gambling? the idea of of betting in an ETF. And what's interesting to me is that in the past couple of weeks, and so by the way, I don't know or I have no idea where the SEC is going to come down on that. I've talked to some people who are very optimistic that they're going to allow it and potentially have some rules around it, but I don't know what those look like yet.

whether the leveraged, you know, the the the hyper leveraged issue there there were like many issuers that had filed for triple to even quintuple leveraged funds that the SEC contacted them privately and said, hey, don't like, don't list those. You cannot you can't list those. So what happens with those, I don't know. But as far as the novel products go, I think an interesting development there is that there have been

in the past few weeks, a number of issuers that have filed for hockey and then as of today, baseball team ETFs and including some leveraged products there too. And and

John (27:46)
No.

Emile (27:46)
these are a little bit different from your other like prediction market style ones. So they may not fall into the same category. These track indices that are set up to track the performance or represent the performance of a team over a season.

And they're just futures contract based.

Anyway, it brings the world of sports betting into ETFs. And what happens there? I I don't know. It there are dozens and dozens of these things that that could hit the market fairly soon. And I don't know who they're they're targeting with those other than sports fans or or people who feel like there's a really good case for your local favorite sports team or or just

Whoever you like to do well over a season.

John (28:39)
Yeah. I I find those products so hard to wrap my head around because it it I mean, you're getting so far away from the the basic principle of investing, which is like backing companies or economies that you think will do well in the long term and diversifying your risk. I mean, this is this is the opposite of that. and interesting to hear hear about the baseball filings from from just today. I guess, you know, what what other sports are are left? Basketball at a certain point and who knows.

Emile (29:05)
You're a cyc

you're a cyclist, John. Like what if there was a what if there was a UCI

John (29:09)
A tour de France futures, who knows?

Emile (29:12)
ETF? Track your track your

John (29:13)
Yeah, could could be.

Emile (29:15)
favorite professional cyclist over a whatever season they have.

John (29:19)
Yeah, we'll

we'll have to see. I I was born and raised in Pittsburgh and I think there's enough diehard Steelers fans out there that that wouldn't mind back in back in the team. So but you know, we'll see. so that that's that's very interesting. And yeah, we'll we'll definitely be tracking the the SEC novel ETF rulemaking process, you

Emile (29:38)
Yeah.

John (29:38)
know, on on the ETF upside without a doubt. So folks can continue there. I'd I'd probably venture that the the real takeaway for advisor listeners out there is just to be

aware of this sort of, you know, this wave of product development. And and the the truth of it is there are a lot of Americans who, you know, enjoy sort of sports gambling. It's part of what they do. And and so you should be aware that your clients may have sort of a new temptation, if we want to put it that way, to sort of put their money by, you know, maybe sort of behind the veneer of an ETF wrapper. It it it might feel less like gambling, but it's it's important for advisors to be aware of of what's out there and and make sure that their their clients are investing in

appropriate, you know, s products and and that there's sort of some guardrails put up. I you'd probably agree with that, Emile.

Emile (30:24)
For sure. I haven't ever talked to an advisor who says, you know what, I'm really happy that we can get prediction markets in an ETF wrapper. No one said that. No one.

John (30:33)
Right. Right.

Emile (30:34)
Yeah, or even like single stock, leverage single stock. It's it's so far removed from, you know, the the day in, day out what advisors do. It it's not for

them.

John (30:46)
For sure.

Yeah, agreed. another story that you wrote recently was just, and I think you kind of already mentioned it a bit, but the electrification ETF trend. the sort of the story you got into is that it's it's important to look beyond just the the high level fund theme and and actually kind of look under the hood, right? Because just because a product has a certain name doesn't mean you're gonna be able to fully understand what's in it. And and I think advisors really need to engage in their due diligence is that.

Is that the long and short of it?

Emile (31:18)
Yeah, I mean, I was curious about this because of just the the interest that I have in in our our grid system and the news that has been there. There was a scary New York Times story that presented these reports about the vulnerabilities to the grid if I think half a dozen substations all went out at once that it could cause a nationwide blackout that would take eighteen months or longer to recover from. And that's because of bottlenecks in our system. These are like very serious

problems with replacing equipment. and all of that is exacerbated by the demand for data centers or the demands that data centers have. I mean it's just a specific type of steel. I think it's called like grain-oriented steel. There's one mill in the country that makes it. So you know if everybody is competing for these things, you know, how long is it going to take to replace a transformer? A long time. But as far as the ETFs go,

There's just a range of performance. There are numerous ETFs that that focus on it. And I just looked at the return characteristics and some of them are doing a lot better than others, which just goes to show you that if you're looking at a theme, and this is a problem with thematic ETFs, it it's a little bit hard to define and or define and and w how they approach it is different too. So just research what you're getting. I don't think that's news to any advisors, but there's just a range of things out there and

Some of them work better in certain environments than others.

John (32:48)
Yeah. Yeah, that I did read that that article that you mentioned and and pretty pretty scary prospect to think about a, you know, year, multi year blackout. But, you hopefully, hopefully that doesn't happen. I I will say, you know, I assume that, you know, the well performing, you know, well priced funds in in that sector are probably attractive right now, at least in terms of returns. I guess at this point you might be chasing returns, but it it's still probably a long term investment trend. I mean, the demand for power, the demand for data centers, that's not going anywhere anytime soon.

Emile (33:18)
Does not seem to be, no.

John (33:19)
Yeah.

another piece, and and this is going back a little further, but I think it's interesting, and and feel free to expand on this however you want. But just thinking about how Vanguard's purchase of altruist could sort of have an effect on ETF platform fees. what did you report out there and and what should folks understand about sort of how the the in the ETF infrastructure may be changing and and sort of just where where we may be heading? obviously we've talked about it.

Probably

the first thing to say is that the Vanguard Altruist deal is probably the biggest headline that we've covered so far this year. What what do you think?

Emile (33:53)
absolutely. Yeah. And so this is a distribution story for ETFs, and it has to do, I think, with dual share classes too. It's it's it's a fact there that you know, with the wrapper kind of becoming less important. for anybody who's not in the know about this, forgive me, but the the SEC has basically allowed mutual funds and ETFs to offer share classes of one another. So if you have

a product that you want to to add in and that's that different vehicle, you can. They're just because of the the specifics and the plumbing of it, but not that many companies have actually moved on it. dimensional has been really big on them and there are there are some other companies that are exploring them. But I think part of the trouble of you know getting your mutual fund structure into an ETF

Is that custodians and some broker dealers don't have the means of being compensated in the way that they are with with mutual funds, and so they may not allow those. And there are also ETF fees that some have for shelf space basically, and if you're not

willing to pay up for that. Then there are ticket charges that the customers have to pay for transactions. And yeah, so the Vanguard issue means that there could be pressure on those fees at at competitors. because it did not seem as though that's a direction the Vanguard wants to go. It certainly wouldn't want to have those for its own products, of course, but wouldn't wouldn't be like

a great look to do that for competitors, but you know, who who's to say what happens.

John (35:50)
Yeah. That to me it's just been interesting to see Vanguard move in that direction. And and obviously they they really stake stake the flag in, you know, sort of low, low cost products for for consumers and and to think about the f as you were saying, the the fee pressure that it could put on the the industry in general. It's an it's an important story. Pro I mean, who who's who's to really say? We'll have to see how it turns out, but at the end of the day, it will probably be good for consumers overall. I mean to cost, you know, cost competition is

It can hurt for the asset managers, but for the, you know, the end consumer, the end client, you know, that's it's a positive thing just to see firms really have to think about how much they're charging and what platform fees look like. so, you know, hopefully at the end of the day it results in, you know, a positive economic benefit to to end consumers, but we'll we'll have to see.

Well,

Emil, to maybe wrap it up, I just want to tee you up with a an open ended question. you know, we we've talked about leverage products, thematic funds, ETF share classes. You know, what what's one big structural change or what's one thing happening in the ETF industry that you would leave us with here here in the episode? Maybe something that we can expect to see more of in the the ETF upside moving forward. Any anything come to mind?

Emile (37:01)
Well, so you know, we we've already talked about this a little bit, but it's just the number of products coming to the market is it's a there's a dizzying pace. we're at a record and we're beating last year's record, thousands of funds. I think it's a question of innovation versus slop. Because there are some there are companies that are just like kind of launching anything and everything and something is probably gonna win, something's gonna

you know, something's gonna stick, people are gonna gravitate toward that and it is a little bit it can be a little bit hard to predict.

But I think it's kind of emphasized the importance of not being short-sighted in your investment considerations. You know, there's always gonna be something new and shiny out there. And I think that if you look at the flows, you know, it's it's a lot of, you know, the the big index funds are still pulling in tons and tons of assets.

And a lot of those are with some of the top asset managers and issuers. but I think there what's been interesting this year is that more people are aware of the risks posed by concentration.

And it it seems like there's been more interest in equal weight funds to kind of couch that kind extreme concentration that the big indexes have in technologies or technology and AI.

John (38:34)
Yeah, one one hundred percent. And I we've written a lot about concentration risk and and those I think products have a an interesting answer to that. So, well, in any case, Emil, we we could talk for hours about this stuff and and we do throughout throughout the day. so I I appreciate you jumping on the podcast here. I I know how how busy you are, but again, thank you for your time. This has been a fun conversation and we'll go ahead and end this segment there. Hope hope you have a good one, Emil.

Emile (38:59)
You too. Thanks, John. Nice chatting.

John (39:02)
Well, I hope you enjoyed that discussion. It was fun getting to know Emil a little bit. I love his his sense of humor and and just his approach to covering the the wealth management industry and the ETF marketplace in particular. I've got a particular affinity for his ability to really keep on top of trends and and filings in the space. it's not easy to to you know understand exactly what the asset managers are up to all the time. The filings can be hard to find, hard to parse through. So always very impressed by his ability to.

figure out exactly what's going on in the ETF marketplace. with that, we'll go ahead and close today's episode. I would just encourage folks to subscribe to the podcast wherever it is that you'd like to listen. You should know that we're also on YouTube as well if you would like to see myself and my guests each week. if you'd like to get involved in the podcast, you can contact us by emailing podcast at the dailyupside.com. We'd love to get your pitches for guests or

Topical ideas, or if you want to throw your hat in the ring and get involved in the podcast, we'd love to consider bringing you on for an episode. finally, I would just suggest that you subscribe to all of our newsletters here at the Daily Upside. Of course, we have the flagship daily upside newsletter. It's written for consumers, but we like to think that advisors could find some value in there as well. But particularly important for the listenership is the advisor upside newsletter, from which

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gets its name. We also have the ETF upside, which Emile and I discussed at length today. And finally we have the retirement upside. We like to think that if you subscribe to all of those newsletters, you'll get a timely, up to date and entertaining slash lighthearted view of what's happening in the wealth management industry. So with that, we'll go ahead and close today's episode and we'll be back at you next week with another great episode. Thanks so much for your time and hope you have a good one.