AI, Inflation, and the Investment Decisions That Shape Portfolio Outcomes with Brad Long, CFA (Ep. 5)

 

Big market moves can pull investors toward quick reactions, but lasting results often come from steady thinking and better questions.

How do you separate noise from what actually matters, and build a portfolio that can hold up through changing conditions?

In this episode, Jon Meyer speaks with Brad Long, CFA, Chief Investment Officer of Wealthspire and Fiducient Advisors, about the core decisions that shape long-term portfolio outcomes. They explore asset allocation, investor behavior, taxes, inflation, AI concentration in the S&P 500, private markets, diversification, and how individuals can think more like strong investment committees when markets feel uncertain.

Brad highlights:

• Why asset allocation, investor behavior, and tax awareness often shape outcomes more than short-term market calls
• How AI concentration in the S&P 500 creates both opportunity and risk that many investors may not fully notice
• Why changing facts does not always require action, and how evidence should guide portfolio decisions over time
• What private markets can add to a portfolio, and why liquidity needs should shape how investors use them
• How individuals can improve results by reducing emotional reactions and thinking more like an investment committee
• And more!

 

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Watch us on YouTube at https://www.youtube.com/watch?v=CeO0IEra4Tw.

 

Connect with Jon Meyer:

• BGM
• LinkedIn: Jon Meyer
• Email: jmeyer@BGM360.com
• Schedule a Call

Connect with Brad Long:

• LinkedIn: Brad Long
• Website: Wealthspire
• Website: Fiducient Advisors

About Our Guest:

Brad Long concurrently serves as Chief Investment Officer at Wealthspire, Fiducient Advisors, where he leads the firm’s investment strategy, research, and portfolio construction across the platform. In this role, Brad is responsible for guiding long-term investment philosophy, overseeing research and due diligence, and ensuring consistency and rigor in how the firm delivers investment solutions for clients across wealth, institutional, and retirement markets.

Prior to joining the firm in 2012, he held research roles at Citigroup and Wells Fargo in New York, where he focused on market analysis and investment research. He earned a bachelor’s degree in finance with a minor in economics from the University of Colorado and is a CFA® Charterholder. Brad is a member of the CFA Society of Chicago and the CFA Institute.

Beyond Wealthspire, Brad is actively involved with Greenhouse Scholars, a nonprofit dedicated to supporting under-resourced college students through financial assistance and mentorship. Outside of work, he enjoys cooking and spending time with his wife and young sons.

 

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Transcript

Brad Long: 40% of the S&P is in or are directly related to ai. That’s a big bet. Many people might not know that, that they have made that bet. If they own the S&P 500,

Jon Meyer: when are we gonna stop talking about stocks at, or bonds as public stocks versus private stocks? Because private markets bring something different to a portfolio.

Jon Meyer: Um. But at the same time, there are just, are fewer and fewer publicly traded stocks and there, and there has to be a point where we say, listen, we’re to your point, maybe we’re getting too concentrated.

Brad Long: You know, if you look at the transmission of decision making, individuals make mistakes quickly.

Brad Long: Committees make mistakes slowly, right? But they tend to make the same mistakes.

Jon Meyer: I rarely hear people ask like, where do you get your information? But I think it’s a really good question to ask.

Welcome to Mastering the 360 Mindset with Jon Meyer from BGM. Join us as we explore ways to make the most out of your wealth, health, and time, unlocking opportunities for balance and lasting success.

With insights from Jon’s years of experience and guest experts, you’ll gain the tools to design a life that works on your terms. Now onto the show.

Jon Meyer: Welcome to today’s show. I’m really excited today to have Brad Long, Chief Investment Officer of Fiduciary WealthSpire with us. Now Fiduciary WealthSpire is focused on many markets from everything around, uh, pensions to family offices, to advisors like us.

Jon Meyer: So with that, I want to get started, Brad, and have you just give us a little background about how you got here and what’s driven your passion for your role as a CIO.

Brad Long: Well, Jon, thanks for having us. Appreciate being here. Um, you know, passion, it’s, it’s an interesting thing. I, I really came to this. Call it unique corner of the market for two reasons.

Brad Long: One is coming through college, I was just terrified of the Dunder Mifflin job, right? Where you kind of go somewhere, you push paper, you don’t really love what you do, uh, and investing is just always different. Even if yesterday you had all the information and the perfect approach today is new. And so that intellectual rigor, it just, it excites me.

Brad Long: It’s something that I love and, and lean into. And so just career wise, it was something that I, I, I really ran towards. Once I got into the industry though, I figured out. The other thing is I love the Ency in this pocket, right? We’re not just investing, we’re working directly with clients of working with those clients and seeing the outcomes that we produce, right?

Brad Long: The benefits that we create, uh, and, and it’s influence or, you know, if, if we misstep right, what that, that creates for those clients and so. It’s kind of that foxhole effect, right? You’re not really fighting for the cause, you’re fighting for the person next to you. And so the, the colleagues, the clients that I get to see and work with every day, it’s the reason that, you know, late at night or on the weekends when my wife’s like, get off your computer.

Brad Long: I’m like, just one more minute. I need, I need a little bit more time. Um, I think those two things really help me just love the work that I do.

Jon Meyer: That’s cool. So today we’re gonna talk a little bit about. How to build portfolios. We’ll get into a little bit about markets, but I, I also wanna be clear that a lot of what we do is about building long-term answers, not just worry about where the short term is.

Jon Meyer: So starting there, what’s two or three big decisions that drive most of the outcomes in a portfolio? I

Brad Long: mean, look, we could, we could spend the entire show on just this idea. Um, if you, if you really narrow it down to the handful of things you, you kind of gotta get right. Um, one is asset allocation. It’s the primary determinant of success.

Brad Long: If you tell me I’m a hundred percent stock portfolio, a hundred percent bond portfolio. You know, most individuals, institutions, investors, are not gonna meet their long-term goal with a hundred percent bonds, right? You need some kind of mix. And so getting that mix right, uh, matters a lot. The second is mentality, right?

Brad Long: Like anthropology, the fight or flight, right? Our instincts as humans really lead us to make bad decisions when it comes to investing. We love doing things that are comfortable and we, uh, hate doing things that are uncomfortable and right rarely. What is comfortable is profitable and vice versa. And so having that long-term approach and, uh, kind of intermediating or disrupting that emotional response that we often have helps us succeed.

Brad Long: So get the asset allocation right, get the emotions in check. That’s. Candidly, one of the reasons advisors add so much value is to help, uh, in that almost psychology component of investing.

Jon Meyer: Mm-hmm.

Brad Long: And then the third is, it’s not just what you earn, but what you keep. So for every investor around the planet, you’re taxable or not.

Brad Long: That’s talks about fees, right? All sql, higher fees is lower returns, but if you’re a taxable investor. You know, after tax and after fee is what you could spend, right? It’s, it’s your mortgage or milk or, you know, whatever it is. Um, that is critical. Having an optimal portfolio that, you know, is designed with fees in mind, but also, uh, knows that after tax is critical and having efficiency there.

Brad Long: So get the allocation right, get the mentality right, and focus on the net. Net after fee after tax. You get most of those three buckets correct? You got a pretty good chance, uh, winning the game.

Jon Meyer: Let’s jump into that asset allocation question a little bit. Um, it was easy in some ways to allocate money in a zero interest rate environment.

Jon Meyer: And now things have shifted in the past few years, like what’s changed about allocating assets over in a, in a higher interest rate environment from a low interest rate environment. And, and I say that thinking we’re gonna be in a higher interest rate environment for a longer period of time. It’s not just gonna go away.

Brad Long: I mean, one of the things that has changed and in a very good way is that fixed income was earning almost nothing. If, if not, uh, a positive real return, a slightly negative real return, you know that that is federal policy. When you sh, when you cut rates right and interest rates are low, it creates these animal spirits that make you wanna go out and buy equities and buy private equity and buy these other things are gonna have a higher, uh, return as interest rates have risen and you can generate a meaningful rate of return to help offset, you know, risk or help in retirement or achieve your goal.

Brad Long: That’s a great thing for us today that allows investors to not have to ask themselves either I’m gonna earn nothing on fixed income, or I’m gonna go take a lot of risks. Now I can say, actually, I can earn something on my fixed income and I can choose to take risk where it’s appropriate over the long term.

Brad Long: So that’s been good. Um, now in today’s market. There’s, you know, there’s a lot of nuance, right? We’ve talked about three primary themes that really influence, uh, outcomes, concentration, especially here in the United States. Valuation and inflation, you know, those three things together. They’re not new. Um, they might, they might not even be unique, but they’re important.

Brad Long: Uh, you know, 40% of the S&P is in or are directly related to ai. That’s a big bet. Many people might not know that, that they have made that bet if they own the S&P 500. So it’s not just first. It’s acknowledging that, and then it’s managing that both the offense and defense components of that, uh, valuation.

Brad Long: All else equal, right? Over the long term, as you mentioned, Jon, we wanna be long-term investors over the long term. Higher valuations is lower return. So what do we do about that? How do we manage that in this environment? And then inflation is a very important part, not just to our daily lives, right, of how much it costs to purchase goods and, you know, allocate and, and spend either pre-retirement or in retirement.

Brad Long: But it’s also really important. Input into our overall portfolios, uh, and the potential opportunities and risks. And if you zoom all the way out and you think about kind of a rubber band of inflation, you know, it’s being pulled harder and harder in different directions. You know, the inflationary one is we run, we have a very high and, and growing deficit.

Brad Long: Uh, you know, we have large deficits, uh, today here in the United States and globally, you know, we have tariffs and somewhat of a more bipolar world. Call it. China on one polar end and call it NATO or the US on the other, uh, you know, that creates more friction of goods as they move around the world. And so that’s generally inflationary.

Brad Long: Uh, on the other end, you have things like ai, right? If AI is. Really democratizing intelligence to $20 a month, not $40 an hour, um, that can be disinflationary. And that there’s, there’s a lot of important elements that we need to start understanding there. So the combination of those three in today’s world are really important factors as we, we build a portfolio.

Jon Meyer: Well, and when you say all that, one of my thoughts, and I always am this guy, is. When do you change your mind and say, we thought we were heading down this path because of this theme, and maybe we’re wrong.

Brad Long: So we always say when the facts change, our opinions may change, right? So the first thing in that sentence is facts.

Brad Long: You have to start with the evidence, right? We are not a kind of, oh, well, it feels a little different, or the wind is blowing in a new direction. That gets back to that behavioral element of people tend to make the wrong decisions at at the wrong times. So we have to evidence base the decision around facts.

Brad Long: Then you interpret those facts, right? It might tell you, Hey, your operating assumption was X, but now it’s y. Does that mean it, we should change, should we take action? And why or why not? Uh, if we were to meaningfully see a re-acceleration in inflation, uh, from what we thought would be the case, and that happens, make up a time period, June, I’m not saying that this is our, our, you know, prediction, if you will.

Brad Long: The facts have changed, right? That may change our view on where risks lie, where opportunities lie. And so, as you know, and again, getting back to that dynamic world, like something that I love, like the facts are always changing, but it doesn’t necessarily always compel action. So that interpretive layer, right, of using evidence to interpret to what is meaningful and then reacting to what is meaningful is that’s the translation error that’s critical to getting it right over the long term.

Jon Meyer: I think you point out something that’s interesting, sometimes the facts may make you not change, and making that decision is still an active decision. So I, I find that point something I try to bring up a lot with clients. So to your ques, to your point. Are you seeing anything right now that would lead you to believe that the facts are changing on the ground?

Jon Meyer: Or are you just of the mindset that no, we’re in the right, in a good spot? And, and with that, what is a good spot? Because there’s always things that diversify a portfolio more than other things in certain markets. What’s diversifying the portfolio today? Probably didn’t work two years ago.

Brad Long: Yeah. Well, well, if we’re not in a good spot, we’re not, I’m not doing my job.

Brad Long: So of course, I’m gonna tell you, I think we’re in a good spot. Um, I do though we can evidence that and it doesn’t just come through return. Right. And through intuition and analysis, um, you know, as I mentioned, AI in the United States today and the S&P 500 is a very. Concentrated bet. If you were to, again, just start with a true blank piece of paper and say, Hey, you’re gonna go invest your portfolio, how much are you willing to put into one theme?

Brad Long: Your opening bid probably wouldn’t be 40%, I might say, 5, 10, 20, right. How much confidence do you have? Maybe I’ll put a quarter of it in there. You probably wouldn’t start with something closer to 40, and so as we think about the right spot. In the right context and how we manage that. Um, there’s a defensive element to that, as I mentioned, right?

Brad Long: You don’t have too many concentrated bets, and then there’s an offensive element to it, um, where AI can be, uh, beneficial, right? So we’ve talked about the broadening and the influence of AI and what it means to certain sectors or segments or capitalizations. Mid cap and small cap, I think have certainly been an opportunity where utilizing kind of that democratization of, let’s say, intelligence, uh, whether it’s, you know, sophisticated mimicry or true intelligence.

Brad Long: We can have a different podcast for a different argument, but that is an area of the market where you can develop some conviction. And we have, and that’s been, I mean, we’re sitting here in early March. Uh, it’s been additive year to date a lot of wood to chop still, but we, you know, ha have, uh, you know, and continue to believe that there’s, uh, opportunity there.

Brad Long: But Jon, you also asked about like what is diversifying and small caps and mid cap, right? We think that’s an area of the market today where there’s opportunity. But if the proverbial spaghetti hits the fan, small caps and mid caps are gonna go down, like large caps will, the question will be the order of magnitude, and that’s not.

Brad Long: Diversifying as we think about those type of environments that create that kinda, you know, bone shaking level of volatility. And that’s where you have to come back to first principles, like what is true diversification. It’s not the fickle friend diversification. We still think high quality. Assets, whether that be across an asset class, like high quality, fixed income, um, or even quality differentiation amongst, uh, a single asset class, right?

Brad Long: Not all fixed incomes alike, right? There’s ig, there’s non ig, uh, making sure that you’re positioned appropriately. Those are the areas of market that we can and do look probabilistically across the whole portfolio and say, this is what we think the future holds. But we know that we don’t have a crystal ball and so we have to plan for some of these other.

Brad Long: Potentialities and having that true diversification and high quality is one of the things that builds resilience and durability to portfolios. You know, even though we know, um, we don’t know what the future holds.

Jon Meyer: Yeah, and you didn’t mention international, so I wanna touch on it just because. For 10 years, 15 years, even advisors for career risk, were starting to say, ah, screw international.

Jon Meyer: Right? That’s not where we’re at anymore. Um, the past year’s been decent going into this year’s been, okay, so how does international diversify it? What’s changed in the world that makes international suddenly interesting?

Brad Long: Yeah, I mean there, there’s a handful of things. So maybe let’s start. First on defense with ai, right?

Brad Long: It’s 40% of the S&P in a related ai, one of the ways that you mitigate that risk as an investor is you own something other than ai. If you look across the pond, uh, whether you go to Asia or Europe, there’s a lot less ai. A lot more things that are tangible materials, industrials, uh, financials, uh, those are areas of the market that, you know, in 2026 have certainly been, uh, compelling parts of the market.

Brad Long: Uh, but also, you know, as I mentioned, valuation, right? All l sql long-term returns, the higher the valuation, the lower expected return, uh, we’ve seen a very materially different market, uh, outside of the US than we have seen in it from a valuation perspective. So. To your point, advisors for years, they, they may have, uh, owned international or not owned international or bailed on international.

Brad Long: Uh, you know, in 2024, uh, when we were overweight international, we looked like idiots in 2025. We looked like heroes. You know, as you mentioned, year to date, it, it looks, uh, similar, but if you come back, fundamentally, uh, international from a valuation perspective is more attractive, right? We think it’s got a higher, long-term expected return.

Brad Long: Some of the dynamics that we talked about with. Us spend deficits, uh, maybe some poll position changing in the Fed. Uh, you know, those can be in the short term. Uh, dollar weakening. It’s a tailwind, right? For potential, uh, international investments. If the dollar weakens and you own something abroad, when you translate it back to dollars, that means it’s worth.

Brad Long: Because the dollar is weaker. Uh, and then you just have a true re-acceleration of fundamentals, uh, outside of the us. Uh, you can see that, you know, expectations and realization of earnings and earnings growth across, uh, Europe, across emerging markets, uh, has, has been strong and continues to grow. When you start to combine and stack those components, you build greater and greater conviction that you know, over the long term that that’s gonna be the right, you know, uh, where it’s, where the puck’s going.

Brad Long: And so again, 2024, we looked, you know, like Idiots 25, we look like heroes. We’ll see what 26 holds, but we think it still plays a very meaningful role in portfolios. And being overweight today, I think it continues to be. So now short term though, there is, AI has been kind of working its way through markets somewhat systematically, and asking or forcing people to ask somewhat existential questions.

Brad Long: Will this industry exist in five years? Or what does this mean? Software is having its moment, uh, in markets in in 2026. There’s been a reflexive element to that where investors have gone and just said, well, I’m gonna buy what is tangible, what I know exists, what will needed be needed in the future.

Brad Long: Energy materials, industrials, et cetera. Those are areas in the market in the US as well that have succeeded. But as I mentioned, just from a market structure, there’s a lot more of that in Europe, a lot more of that in Asia. Uh, and that has also been a tailwind. So a lot of confluence of factors, both long-term fundamental in nature, uh, but also shorter term that have been driving, uh, international’s relative success.

Brad Long: And year to date, it’s been pretty substantial.

Jon Meyer: Let’s about AI for just five minutes or less because I think AI is the existential question. How is that changing investing because. To your point, we’re past the phase of we gotta buy something. Just the chips we’re, we’re now in the phase of all companies can benefit.

Jon Meyer: Everybody’s gonna see potentially stronger margins, so that should change it. But then when we look at other factors, you could see maybe more unemployment. You could see there’s all kinds of things that play into this. So how should we be thinking about AI in today’s world?

Brad Long: I would say there’s, there’s.

Brad Long: Call it, uh, three components, if I had to distill it down. So one would be around what we talked about, that deflationary factor of ai, right? And that’s also could translate Jon, to your comment on higher margins. Uh, the difference between, you know, higher margins and deflationary, uh, is the connector is labor one of the big, so what the market has largely been wrestling with as of late is the hyperscalers.

Brad Long: So let’s just call them, you know, are putting. Three quarters of a trillion dollars into AI investment. And by the way, I was out to dinner with my son last night. He’s a, he was turning 11 on Friday, so I was taking him out to dinner and we were, can’t remember what we were talking about, but when we say million billion in trillion, it’s easy to forget the order of magnitude and shift.

Brad Long: Right? A million seconds as 11 days, a billion seconds is 32 years. A trillion seconds is 32,000 years. So even though it’s just a changing consonant like. A million and a billion and a trillion are very different. And so three quarters of a trillion dollars is a lot of money. And the market’s trying to answer, is this money good?

Brad Long: Is this money that is going to produce a positive ROI that is gonna benefit these business? And the jury’s out? Um, the thing that the market has not been talking about as much is labor. And so, Jon, you mentioned higher margins. If a business needs to invest less in people. Get more outta technology. In theory, it can have higher margins, uh, but the US economy is 70% consumption, right?

Brad Long: The majority of our economy is driven by people buying stuff. If people don’t have a wage to buy stuff, the US economy does not do well. So if there’s a replacement factor associated with AI and labor, then. That’s both deflationary, but it also, it might be good for a company or some companies, but not good for the economy.

Brad Long: And how do you start to square that circle? It’s difficult. Um, now I will say before anyone. Either throws away the idea of AI or believes, you know, in kind of the terminator scenario and it’s coming for us, the world likely lives in between. You know, there are, there are roles, there are functions, there are things that the democratization of intelligence will absolutely influence labor.

Brad Long: Uh, and you know, but it will probably take a long while. We don’t believe that that’s an overnight thing. We actually built a, uh, a labor and consumption model to look at BLS codes and we stress test there. AI replication, right? Can you take this role out? Um, and looked at how much do they spend across the cohorts of U-S-G-D-P.

Brad Long: And if you know, over the next three years you get pretty material replacement, you know, it could be called a quarter percent or a third of percent drag on us, GDP, but that doesn’t equal recession, right? That probably equals higher margins, albeit for individuals who lost their job. Hopefully they’re not permanently disintermediate, they find a new role.

Brad Long: Uh, but that could also be deflationary as well. And that that does start to connect the circle on. Kevin Walsh and the Fed. And what he would love to achieve his, his Pollyanna environment is that productivity increases, which is deflationary so they can lower the Fed funds rate and run a little bit hot on economic growth without uh, having subsequent levels of inflation.

Brad Long: That would be a big departure for a Fed, the Fed, which we can talk about. ’cause it wouldn’t be data dependent, it would be future looking. Um, but AI is, it’s here to stay. Um, so the question is, what do you do about it? Uh, both. In your portfolio, you know, in your business, in your life. There’s a lot of ways that we could take that.

Brad Long: I think in our portfolio, it’s the offense and defense. It’s making sure you don’t have too concentrated trade, that you have true diversification. There’s the picks and shovels element of it, of energy production, chip production, power, et cetera. Um, and then there’s the, we wanna own stuff that’s not ai.

Brad Long: Because if you’re making one singular bet, like most of the families and institutions that come to us, they don’t come to us. Because they don’t have money, right? They’re usually starting with money and first order principles. Let’s keep it and then grow it. Um, so we wanna make sure that we’re being cognizant of the risks that that could include in portfolios.

Jon Meyer: Well, you brought up the feds. Let’s talk the Fed.

Brad Long: Here we go.

Jon Meyer: Um, yeah, I, I think what’s interesting about the Fed, maybe this is a comment you can’t agree with, is that their data sometimes is dirtier than not. Um, it’s feels like Wars is saying that he wants to. Maybe change that a little bit. Maybe they’ll use AI to get better data.

Jon Meyer: I don’t know. But to your point, there seems to be maybe a shift towards thinking about looking at things more futuristic instead of just in the past. What do you think the biggest changes are gonna be? How is that gonna impact the market?

Brad Long: It’s important, I think. To remember a couple of things fundamentally.

Brad Long: So one is, you know, much has been made about, uh, Powell’s expiration Chair and Kevin War, who’s not been confirmed by the Senate, at least at the refer, you know, recording of this. Um, yet, but presume that he’s the new chair, is that the chair is not the Fed. So first off, we just have to understand the FOMC.

Brad Long: It’s seven appointed governors that have, you know, a term that expands any given president. And then you also have the, you know, a rotating regional federal governors that aren’t, or, uh, rotating regional bank presidents and the permanent seat from the New York Fed. So just ’cause your chair doesn’t mean you get to say, okay, gavel lands and here’s what policy is.

Brad Long: The other is that the Fed is made up of people. Imperfect information that all come to the table with their own biases and they try to make a thoughtful decision and really post Greenspan, that decision has been anchored and communicated via data dependency. Um, one of the things that markets love is clarity and consistency.

Brad Long: They don’t like uncertainty. When they’re uncertain. They need to move away. They need to build a margin of safety, and that usually means the prices go down. To some degree. And so the Fed has been communicating in a very programmatic way and, and that’s served well. Both, uh, the, on the employment side of the ledger, on the inflation side of the ledger, you know, outside of 2022.

Brad Long: Uh, and on the transmission mechanism from the Fed to the market on here’s what we believe and why. If you depart from that methodology and start to say, Hey, this is what the future will hold, not what the past the evidence is showing us. That is a departure for the Fed. Um, for the fed to, and this is not a statement they’re making, but this would be an example, is that they were to say, okay, AI is going to influence labor.

Brad Long: Um, it’s going to increase productivity, therefore it that can be deflationary. Labor, uh, you know, unemployment would be rising. We need to lower interest rates to accommodate greater investment in the economy to offset that risk. That is a departure, right? That would be saying the future state. Is this not the present or the past?

Brad Long: Um, I think the Fed is a long way to go to actually start thinking and acting that way. But we would see it, we would see it through their actions, through the dialogue, through the minutes. Um. And that would be one that the markets would have to grapple with and adjust because it would create greater degrees of uncertainty in fed policy, which historically has really not been beneficial to markets.

Brad Long: So we’ll see where it goes. We don’t really anticipate, especially just because of the change in chair that the Fed is now has a totally different beat to their drum and they’re doing something new and unique. Candidly, I think Kevin w is gonna walk into an environment where, you know now because of geopolitical risk, you have a headline inflation rising, yet unemployment remains low.

Brad Long: Uh, he’s not gonna have open season on lowering interest rates, and so he, he’s gonna be pretty much stuck between a rock and a hard place, uh, until you start to see a crack in the either direction of that data.

Jon Meyer: Let’s pivot.

Brad Long: All right.

Jon Meyer: You and I have had a conversation in the past, and I’m gonna put you on spot here.

Brad Long: Good.

Jon Meyer: So the conversation we’ve had is when are we gonna stop talking about stocks, uh, or bonds as public stocks versus private stocks? Because private markets bring something different to a portfolio. Um, but at the same time, there are just, are fewer and fewer publicly traded stocks. And there, and there has to be a point where we say, listen, we’re to your point, maybe we’re getting too concentrated.

Jon Meyer: Um, so let’s just talk about that for a bit. You know, what do private markets bring to a portfolio? How far away from saying we’re not gonna have the conversation about private versus public, it’s just do you wanna be in stocks? Do you wanna be in bonds?

Brad Long: If you zoom all the way out and you think, again, I want to build a portfolio that helps me get to my goal.

Brad Long: Rate of return. A level of risk, let’s just use an apples to apples comparison. In the US there’s about 5,500 public listed stocks, right, that you can buy on exchange and trade, not that you would wanna buy or trade all of them. In the US private market, there’s over 205,000 companies that have a revenue of more than $10 million.

Brad Long: So it’s not the single shingle sub shop or you know, the gentleman that, you know, mows everybody’s neighbor’s lawn, and it’s, you know, substantiated businesses that have, you know, at least 10 employees or more. That opportunity set is very, very wide, and to ignore it is to ignore levers that could potentially help your portfolio.

Brad Long: Period. So private markets, private equity, private debt, private real estate, private infrastructure are things that we should consider the more elegant version, I think of the future conversation, Jon, that you’re mentioning is, let’s not talk public and private. You know, let’s talk about tools that will help you achieve your goal.

Brad Long: But then the translation mechanism of what public and private really mean is liquidity. Um, I can buy Apple today. Change my mind and sell it today. Probably not a great way to invest, but that’s available to me. If you buy a private company or you invest in a, you know, a general partner like a fund, a private equity fund that capital’s unavailable or for liquidation for many, many years, for some investors, that’s perfectly fine for others.

Brad Long: Either mentally or practically, right? They need that liquidity in their portfolio and it doesn’t make sense. So the conversation should probably evolve and will evolve more to, okay, what is the level of liquidity needed? What is the objective you want to achieve? Should we be using private investments to help achieve that objective based on that framing?

Brad Long: Um, so it will be less, and by the way, the. The era of, because it’s private, it will outperform. You know, that was an assumption that was made, that is gone. Um, it was never there. In our opinion, uh, you should demand that it outperforms because you’re giving illiquidity or you’re getting illiquidity, you’re giving your liquidity to them.

Brad Long: Um, so you should require it. But it was never a, a pre-baked assumption that was, that was a little too back an napkin for many investors. And I think they’re, they’re realizing that, so average private markets performance is not compelling. Just as average market performance is not compelling, right. It’s you have to do better.

Brad Long: Um, so I, I do think that the conversation will evolve around public and private and just become more liquidity in asset.

Jon Meyer: Is there a decision factor that you should be thinking about if you’re gonna add private outside of liquidity?

Brad Long: Yeah, there’s, there’s a whole lot of nuances there. Uh, you know, if you’re a taxable individual and you don’t have a K one today, like, okay, that’s kind of a pain in the butt and you’re gonna have to file late and, you know, maybe your accountant is ready for that or not.

Brad Long: Um, there’s, there’s an operational component to it, right? If you commit. Whatever the number is, a hundred thousand dollars to a private fund today. Uh, you’re not writing a check today. You are pledging a hundred thousand dollars, and then they’re gonna call you when they’re ready to buy a business, and you’re gonna have to give them.

Brad Long: 20,000 in five months and you know, 30,000, like, so there’s an operational function to it. So there is, and, and many advisors, great advisors really help in setting that up and it kind of grease the skid so it doesn’t become the client’s problem. But there are other practical things that you need to check the boxes to say, okay, this, this makes sense for me in my life and what do I want to achieve?

Brad Long: Um. But you know, it’s, uh, it, it is an asset that if used in the right way, with the right context and uh, with demonstrated skill can help improve outcomes over the long term.

Jon Meyer: Yeah. Behaviorally what I’ve seen is people get excited and want to jump into private markets and they put all their, all their capital into one thing, as opposed to what you and I would even consider smart.

Jon Meyer: If you think about it from the four oh. You put money in every two weeks and you dollar cost average in the public markets, why wouldn’t you do the same in the private markets and diversify your risk over many years? So it’s just something I’ve always thought was a smarter way to get into it.

Brad Long: Yeah, you’re, you’re right.

Brad Long: People do get excited and they’ll, you know, kind of take the rifle shot, if you will. It’s the one thing that they own. Um, you wanna diversify by vintage, uh, you wanna diversify by fund. So vintage meaning you’re buying in 20, 23, 24, 25, 26, et cetera. You wanna diversify by fund, right? So it’s not just the one allocator.

Brad Long: And then also, uh, underneath the hood, you need to look at sector exposure. Geographic exposure, depending on the asset. Um, you know, a private equity fund. So there’s a company that would be one investment, a private equity fund that usually only owns, you know, seven to 10 investments. If you were to make that a public equivalent and you were to buy a mutual fund or an ETF with seven or 10 investments, you’d be like, oh my gosh, this is hyper concentrated.

Brad Long: So, you know, using those same principles of diversification, the private markets is a hundred percent right, and so you’re exactly right, Jon.

Jon Meyer: Let’s step back a little bit. Uh, you work with large institutions and large institutions allocate capital a certain way. Let’s pretend that every individual has an investment committee with you on it.

Jon Meyer: Um, what’s three practices everyone should adopt and maybe go past that, include in that one or two. Things that people currently typically do that they should abandon in helping them create a portfolio that actually works.

Brad Long: I love this question, um, because I, I have always said, and you know, I say it with I smile, but I, I do believe it.

Brad Long: You know, if you look at the transmission of decision making, individuals make mistakes quickly. Committees make mistakes slowly, right? But they tend to make the same mistakes. There was a great book, uh, that I read a handful of years ago. It’s called Wiser. It was written by a behavioral economist, uh, out of Harvard.

Brad Long: And it was really around the dynamics of committees making decisions. And they studied government and boardrooms and. What you often see out of those environments is that they committees amplify the errors of individuals. And I’ll give you the example. So let’s say you have a committee and you have the expert of the group.

Brad Long: Well, if that’s just one individual and they make their own decision, right? It doesn’t feel robust ’cause it’s just one. Well, there’s this halo effect where the rest of the committee just. Relies or defers their thinking to that individual, but it feels more robust because everybody, you know, they all vote and then the committee voted not the individual.

Brad Long: And so. We’ve actually thought a lot about that in our own decision making, right? Our own internal committees and how we’ve structured and votes. And, um, so if you’re going to build a committee, either literally or uh, figuratively, and just surround yourself with people that can help improve the outcome, the things I would focus on is first you gotta find people that you trust and that are aligned with your goal.

Brad Long: So like, let’s just say a financial advisor, by way of example, if they’re constantly trying to sell you something that’s gonna benefit them and you’re uncertain if it’s gonna benefit you, there’s a misalignment there, right? So it’s hard to figure out who are you really fighting for, me or you. So find people that you trust that are aligned with your goal.

Brad Long: And then the second, which is easy to say and very hard to do, is. You need to create an environment and have the people that have a dynamic that they’re, they’re active listeners, that are willing to question and disagree and, you know. Effectively argue and create this more robust outcome. Because committees often, you know, defer to either the, maybe the loudest voice.

Brad Long: They’re not even the expert, they’re just the loudest. Um, or they may be a true expert. Uh, and then there’s a very narrow frame of decision. So find people that you trust that are aligned with your, your goal, whatever it is. And then, uh. Create a dynamic where you have trust in an environment and disagreement so you can build a robust dialogue and a robust outcome.

Jon Meyer: The interesting thing there that I’ll point out is if you are looking for a robust dialogue, um, and I’m not trying to be super critical here, but a lot of advisors are building portfolios. Like just themselves. One, one person in a one man shop, building a portfolio using information from wherever. And so you don’t get a, a very big dialogue.

Jon Meyer: And I think that’s what’s interesting to me in, in looking at how people should be maybe asking questions different when they hire advisors. I, I rarely hear people ask like, where do you get your information? But I think it’s a really good question to ask. Um. Let’s push. I’m gonna, I’m gonna push on that question again because you didn’t really get into it.

Jon Meyer: What should some, what should individual investors abandon right now when they’re thinking about what that investment committee should look like for them? Because I think a lot of people do do it a certain way and think that they know better than not, but what should they abandon?

Brad Long: Yeah. Uh, we talked about some of the fundamental things for long-term success, right?

Brad Long: So asset allocation, not just what you earn, but what you keep. But the third component there was kind of your approach, your philosophy, walking into it and being emotionally driven with One of the things, I think one of the reasons committees tend to make decisions or. They tend to make mistakes slower is that there is this disintermediation of emotion.

Brad Long: Um, if it’s your money and your capital and you’re on your phone with your advisor and you see an event in the market that shakes you for whatever reason, you can call and just be like, Hey, I wanna. Fill in the blank. Um, you know, a committee it probably meets once a quarter. There’s, you know, people in the group.

Brad Long: That is one of the main benefits of committees is that they help either slow that decision frame so that you can almost have to remain long-term, but you also usually don’t operate on a committee. Let’s say it’s an institution where it feels like, oh, this is my money. Like it’s hyper personal. Um, abandoning that, uh.

Brad Long: Tendency that reaction to just want to let emotions drive. You know, I’ve worked my whole life for this money. What do I do? What do I do next? Or I just read this in the Wall Street Journal. Um, or, uh. I was at the country club and someone said, Hey, I’m doing this. And then you call your advisor like, should I do that?

Brad Long: Uh, those are not robust frames of decision. Sometimes, you know, you ask the question and then you go and do the work. The answer might be yes. Uh, oftentimes, you know, kind of the, whether it’s the water cooler or a cocktail hour or on the golf course, that’s not where you’re finding the things that change the world.

Brad Long: Um. So I would abandon kind of that emotional element of letting it drive your portfolio and treat your portfolio like you want it. You want it to be this really well managed, professionally allocated, long-term focused portfolio that creates an outcome that helps you win the game, right? You want to retire, you wanna keep that money, uh, achieve whatever your goals are.

Brad Long: So abandoning that emotional response is probably the most important thing people can do. And by the way, we haven’t tested that. In a long period of time, 2022, we saw some volatility, but it felt more, uh, like investors understood the driver of volatility and so they weren’t emotionally attached to it.

Brad Long: COVID, while a, a very, uh, you know. Unfortunate time in history and it there, the market reaction was about a cup of coffee. You know, it was December to March 17th or something like that. We haven’t been in an environment where we’ve been emotionally driven in quite some time, really back to probably the GFC.

Brad Long: Whenever that comes, it’s inevitable when it does. Making the right decisions at those point in time are the things that really help either clients. Make a lot of money and stay in a course or potentially make capital impairing decisions that hurt over the long term.

Jon Meyer: Does it feel to you though, like, uh, we used to say that institutional investors were better at the long-term thinking and retail investors tended to jump outta markets faster.

Jon Meyer: Does it feel to you like that shifting a little bit?

Brad Long: Yes. I, I think I, I have always been, and it maybe it’s a function of the position in which I sit in that. I will, you know, go to a multi-billion dollar endowment board meeting and then talk to a family the next day. And I’ve always been very fluid across those worlds.

Brad Long: I think the narrative of, you know, these are wholly separate and different is perhaps. Overblown. And now that, uh, whether it’s through technology or you know, the, the, the introduction and availability to retail capital and trading, and I’m talking like, you know, at a thousand, you know, fractional shares, Robinhood.

Brad Long: You know, you’ve kind of had this wave of that on the same end. Do you have public markets in the short term outperforming private markets? You know, that feels more like long-term committees and saying, Hey, we put all this money into private equity, but the S&P’s outperforming it, shouldn’t we be reacting to it?

Brad Long: So those are kind of both moving towards center. Um, you know, there’s a lot of flaws on both ends of those scenarios, but I would say that they are. Converging a bit, but the idea that these were wholly separate first was probably overblown.

Jon Meyer: I tend to agree with you on that one. So stepping back, you, I’m gonna get close to the end here with you, but I had, I have one or two questions.

Jon Meyer: One was, ’cause you mentioned Robinhood, you mentioned. And they’re, they’re always pushing the edges. What do you think we should be, and I’m not asking you to prognosticate where markets are going. What do you think is changing in investing that’s gonna be, have a big impact over the next few years for people that many people might just miss if they’re not in the markets like you and IR

Brad Long: Yeah, so we talked about AI a bit.

Brad Long: I would say, you know, we’re getting, you know, more and more. Conversations with individual investors, they’ll get deep down in ai rabbit hole. Um, and, you know, AI is an incredible tool, but tools misused create, you know, poor outcomes. Um, and they’ll have what they believe to be this kind of hyper sophisticated, deeply researched, you know, investment thesis around something, but it ignores critical errors or, you know, hallucinates in the worst way.

Brad Long: But even if there’s no hallucination, it’s. You know, like if you were to hand me a jackhammer, like I might be able to dig a hole, but if you need me to do something precise, I’m probably gonna mess it up. I’ve never used a jackhammer. So finding the ways to use these tools and not let them, uh, drive the bus, I think will be very, uh, important.

Brad Long: Moving from a. A world in which, you know, we had globalization for a very long period of time and now we have polarization. I think that that is going to be a very long-term, uh, issue that investors, if they’re not paying attention to, are not gonna see the, the seeds that it’s sowing and, and portfolio influences on the macro.

Brad Long: Um, we are in an environment where. The bill is going to come due here in the United States at some point on both fiscal and monetary spending and the level of deficits that we have today. That’s not a comment on, uh, president Trump, even though, you know we are currently spending at a rate. Which we’ve only spent at in the past, during past recessions, right?

Brad Long: So the, you know, we should be spending in recessions to offset the humanitarian or the, the labor impact from that government. Uh, and institutions are spending at a rate that we’re not in that environment yet. We’re still adding to the deficit at the same rate. Um, and. That’s not a comment on President Trump.

Brad Long: ’cause President Biden did the same. And numerous presidents that have oscillated between brew and red have still produced higher and higher and higher deficits in spite of what they say, uh, on their websites. So we are coming into an environment where eventually the bill comes due, and the way that that usually translates is, um.

Brad Long: It’s a whole lot of nothing until it’s everything. Um, and so we have to, you know, think about what that means to inflation, what that means to labor, what that means to market volatility, what that means to, you know, the long-term status of the dollar. We’re not, we’re not calling for, you know, the dollar to reserve its, uh, reserve currency status of the world.

Brad Long: Um, but you do have to think about the interplay of all these, uh, actions and the Fed we’ve talked about earlier. So there are a lot of things that. There are big puzzle pieces moving on the board, and if you’re just looking at, uh, this stock is up today or it hit or missed earnings, you’re probably gonna miss, like really where the tide is moving.

Brad Long: And there is a lot of, you know, a lot of tide moving in that, you know, in multiple directions. And so that’s really where our jobs, where we live in markets and can zoom out to macro and zoom into micro and connect the dots. Um. If you’re not a professional allocator investor, you just either don’t have the time, resources, data context history or an environment in which you can have thoughtful argument, uh, with peers to create robust outcomes because, you know, that’s not, uh, you know, that’s not the day job.

Brad Long: So, uh, I would caution kind of some of these bigger moving puzzle pieces on the board. ’cause they’re gonna be very influential over the long term.

Jon Meyer: I agree. Let’s close it up with the last question. What’s one thing I haven’t asked?

Brad Long: Who’s gonna win the Masters? I don’t know. What, what haven’t you asked? Um, you know, we, we haven’t talked about crypto.

Brad Long: It’s funny how crypto goes into a period of silence when price is down. Uh, and it goes on a megaphone when price is up. Uh, but we haven’t, we haven’t talked about that. You know, it’s not an area of the market where. We have a long-term structural thesis that crypto will replace fiat currency. Um, gold by the contrast is the shiny objects.

Brad Long: Um, you know, pun intended, it is having its own Tina moment. There is no alternative. Uh, if you’re worried about the US dollar, if you’re worried about deficits, if you’re worried about inflation, if you’re worried about geopolitical risk, and you can add a long list of things to potentially worry about, which by the way is not new.

Brad Long: That’s old. Um. Gold seems to be a place to run. The only thing new, uh, in gold’s, uh, uh, camp today is that, you know, through Russia’s invasion of Ukraine, uh, and some of the polarization rather than globalization of economies, uh. Central governments around the world are thinking they might not want to have as much money in US treasuries over the long term.

Brad Long: And so they’ve been net buyers of gold. Uh, and because it doesn’t really have much of an industrial use, its price is predicated on, you know, the net supply, um, which is fixed. And then the incremental buyer, which has been growing. And so gold has certainly had its its moment in the sun. Um, yeah, so those are a couple of areas that we hear often that we didn’t talk about, but honestly, as we think about.

Brad Long: As you mentioned at the outset, how do you focus on long-term? How do you get to actual outcomes? Even if gold or crypto is part of your portfolio, it’s probably the minority of your portfolio. It’s one to 5% where you should spend the majority of your time talked about is the things where the majority of your assets are and have the majority of influence on the long-term outcome.

Brad Long: And frankly, I’m glad we spent the majority of the time there.

Jon Meyer: Thank you, Brad. As always, I enjoy talking to you and if anyone on this, uh, listening to this wants to hear more of Brad, you can go to fiduciary.com and see his videos. He’s always fun to listen to. And with that, I wanna thank everyone for joining us and if you need to hear more from us.

Jon Meyer: You can also go to BGM360.com. Everyone have a great day.

 

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