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Two things. I'm wearing glasses you are, which does not matter to our listeners. I kind of feel like I am wearing a costume.
I don't know, totally different person wearing feels like it.
The other point that I wanted to make is that I'll be wearing these glasses at a party tonight.
A party, Yeah, specific party.
No, at your party. I'm going to your party.
Party having Yeah, I'm hofually stopping by my party. The time this airs, the party will have happened.
That's true, soup, Yeah, exactly. Things go dramatically south. This will not be included in the podcast, but if you're hearing it, assumed that it went well and we had a great time.
It was great. What a great party.
This is sort of a birthday party, right in that sense for money Stuff, which turned ten years old.
Right, it's not my birthday, not even really, money says Earth there. It's just like a month ago. And even that is like the accounting is a little fuzzy. But we're going to say it's the tenth anniversary of money Stuff. Yeah, sh anniversary observed, anniversary party. What a great time it has been. Hello, and welcome to the Money Stuff Podcast. You're a weekly podcast where we talk about stuff related to money. I'm Matt Levin and I write the Money Stuff column for Bloomberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
What are you talking about today, Katie?
The Fattest Fingers in the World twenty three and me and Wheaton, Illinois, Wheaton, Illinois.
I have a funness for whet In Illinois because I have a wheatened tarrier. But oh, that's not really really at all. No, never mind, all right, fat fingers.
Yeah, man, what is going on over at City Group? It seems incredible.
Yeah, I don't know. Like City Group has had a series of like very public and very comical, like mistaken payments of which the greatest, honestly was a few years ago in twenty twenty they sent out nine hundred million dollars to some hedge funds and they're like, sorry, we didn't mean to do that. In hutch Ones we're keeping it,
and there's a court case peal that was great. But recently there's been reporting on like a couple of times last year, they sent out like extremely comical mistake and payments, but they got those back. That was fine. That was like a typo. It was like in one case they meant to pay two hundred and eighty dollars to some customers ask crow account like theyk in Brazil, and they put in eighty one trillion dollars, which is much much more money than the City group has. So you can't
do that. But you know, it's not like then the money left and like the customer fled. It's like they reversed the payment like the next day, and they told regulators it was a near miss. So they had some near a near miss. It's an internal transfer right like on cities books and records. They briefly credited the customer with eighty one trillion dollars. We like the money left the bank and then they took it back the next day.
So you know, City has gotten grief from regulators about like it's systems and processes and techno, and it's been sort of like understandably. So yeah, it's been like trying to kind of turn the page and be like we're really good at not making mistake in payments. So when they very publicly make or almost make mistaken payments, and when they are very comically large, that's embarrassing for them. It like sort of puts them in an ill light
with regulators. But they it's not like they lost eighty one trillion dollars would amazing.
Well, there was eighty one trillion dollars, which was amazing in and of itself. That actually made the six trillion dollar fat finger that came six billion the next day.
The next day, Bloomer reported on a six billion dollar mistake and transfer that they had actually done like a week before the eighty one trillion dollar one. So like they had this private wealth customer. They had to send this customer, my impression is like a few million dollars, but they typed the account number into the amount field.
So instead of typing like three million dollars, they typed ten digit account number began with the six, and they sent six billion dollars to this customer instead of a few million dollars. And then again quickly discovered that it was a mistake and took it back and it was all fine, but you know, it's like it's a near miss. They had to report it to regulators and the Bloomberg story reported that the head of wealth management, who like kind of just started.
It, provoked audible frustr vote.
Audible frustration, which is a great way to describe swearing. But so they were pretty sad about that until like a week later when they did the eighty one trillion dollars things, and they're like, ah, six billion is nothing, not so bad.
I tweeted a joke that, you know, a great way to make this stop happening is just not let city get the money back, and several people brought up Revlon that they tried, they really didn't.
Get the money. Well, they did, but they could.
I actually forget how Revlon ended. I remember the headline they got.
The money back. They did. So Revlin was interesting because first of all, it wasn't an internal transfer. They actually sent the money out of a bank right to people's accounts at other banks. But secondly, like the accidental payment was like part of an actual intended transaction that was a sort of aggressive debt restructuring by Revlon that was like basically hosing some of its creditors, and so the creditors who were getting hosed randomly got nine hundred million
dollars and we were like, sweet, we're keeping this. And then City's like no, no, I have to go back and they're like nope, we're not giving back because like you were trying to restructure this debt in a way that was bad for creditors, and so they sued or they kept the money and City sued them and they defeended themselves saying we were actually owed this money because like they were, the money is not right then and City made the payment on behalf of Revlon and we're keeping
it and they actually won in the trial court, but then it was her first on appeal. It was like the right answer. But yeah, it was like fun for all.
So we weren't around when Revlon happens. But I was trying to remember, why have we discussed City fat fingers on this podcast before? And then I reminded of a different type of fat finger incident that was uncovered back in May. Do you remember that fat finger stock trade were fined by the UK like sixty two million years
if you round up. In that situation, a trader had intended to sell a basket of equities that was valued at fifty eight million dollars but made an error while inputting that value, and as a result, the basket was actually valued at four hundred and forty four billion dollars being created instead.
So this is the thing. All these things, it's like screens with like a big box with like seventy five different fields. You can fill in different fields. So if you want to sell fifty eight million dollars worth of stock, there's some field that's like sell fifty eight million dollars. If you want to sell fifty eight million shares, there's
a different field that's like sell this many shares. And this person, I think, put like the dollar number in the shares field, so like the shares are worth like hundreds of dollars, and so you multiply the amount by hundreds of dollars. But it was just like going fast in a complicated interface and just put it in the wrong box. Same thing with the account number person who put the six billion account number into the amount field
and sent out six billion dollars. It's just like there's too many things on the screen.
Well, if I had prepped better for this podcast, I would have gone back and listen to the episode we recorded in May, because I recall fuzzly that at the time we talked about how there were a bunch of warnings that popped up, at least when it came to the stock trade.
There are too many.
There are too many, and you kind of get numb and you just click down. How do you fix this? It seems to happen uniquely often at City, so I don't know if their processes differ greatly from some of their peers.
One thing they seem to have done is like this is in the six billion dollar story, the wealth management group has a new set of Actually I think the whole firm has a new set of warnings, where like there's some threshold of like large anomalist transfer, where like someone not pressing the button gets an alert. Like the head of wealth management gets like, hey, we're sending six billion dollars to someone for no reason.
I sure expressed the audible so much I said, it.
Might not actually be him. But like someone gets a warning. So it's not just the person pressing the button ignoring the mornings, but someone gets a You know, you gotta do it judicially, right, Like you can't pop up two hundred warnings for every transaction because then everyone's gonna ignore them. But like you know there's some level of like it should not be possible for anyone at city to wire or to send eighty one trillion dollars to anyone because
that's more than they have. Yes, but even six billion dollars, like there should be someone checking that.
Maybe I want someone to ask Jane Frazier about this. I want this. I don't think it necessarily will come up on the next earnings call, but I want to see this in an earnings transcript.
It's very funny to imagine these big material risks to the bank, right, like a bank going bankrupt because it accidentally wired out eighty one trillion dollars. But they're not really like they're symbolic risks. They're like you should have better tech so that you don't mess stuff up. But it's not like any one of these was like that serious. The Redlin was bad, but like not that happening.
You have to imagine that this is certainly a symptom of something that maybe.
Is like a symptom of like bad computer screens, like the eighty one trillion dollar transaction. The reporting on that is wild. That wasn't like putting the wrong thing in
the wrong field. That was they use some sort of rarely used backup screen to make the payment that was prepopulated with fifteen zeros, so you had to delete the fifteen zeros to type in the amount, and if you just type in the amount, you like override some of the zeros and you sent out trillions of dollars and that's what happened, which is just like you could just not do that, You just not have it automatically populate with fifteen zeros and then like you've saved yourself a
problem right there. So it is just like a lot of it I think is like software design. Yeah, and it's not always a priority for the CEO of a bank to be like we need the like internal software to be more user friendly, but you know it might be for Jane Fraser at.
This point, you know, I would imagine it's moved up the priority list a few notches.
Like someone is asking Jane Fraser about the you know, user interfaces on the payment software.
Maybe we'll get some answers regulator, maybe like, yeah, I do love the point that you made in Money Stuff that maybe this is a reason actually to bank with City. You're basically by opening up a with them, buying a lottery ticket.
Stereotypically, banks sometimes make mistakes. Yeah, I write about a bank doing some error, and people be like, I think you're being too generous to the bank. They never make errors in the customer's favor. It's always in favor of the bank. It's like, well, no city makes yours in the customers faver all the time. They don't like, necessarily get to keep the money. You probably shouldn't try to bank with a bank that makes mistake in payments all the time. That's more likely to end badly for you.
But it would be kind of fun to get eighty one trillion dollars in your account.
And what if it's like a really small amount, you know, language a casual like half million dollars that they would they even notice. I don't know.
Just thinking about my account number by bank, which has nine digits, it should be nice.
Do you want to say them here? Should be cool?
My account number.
Is twenty three and me, uh, segue this is I really like this story, mostly because when we were talking about this at my desk before we recorded this podcast, then I was like, you know what, don't talk to me, We'll just talk about it. In nineteen twenty three and meters is a really fascinating story because I think it's still a household name.
It kind of is.
And the last time I thought about it, it was going public via spack. It was twenty twenty one. Things were great, the market was frothy, and I didn't realize that it's been slowly in a death spiral since then.
Yeah. I don't entirely understand it, but my impression is that like the recurring revenue of selling genetic dusts to be like you kind of only need to find out your ancestry once.
Yeah, but there's so many people in the world people, But like.
I also think that it's become less popular as people get worried about like privacy concerns and like they were hacked. Yeah, she took a bad databaseically get hacked, you know.
Yeah, specifically in twenty twenty three, they were hacked.
And I think the time before then they've never made money.
Yeah, that's true. Yeah, And I was I was searching for a reason why because you think about I feel like it was really peak twenty seventeen, twenty eighteen, they were really popular as as gifts around the holidays. Remember Elizabeth Warren took a genetic test to prove that she had Native American heritage. That was basically the peak actually, because apparently twenty three and me and also their competitors, Ancestry being one of them, have just seen sales steadily declined since then.
Yeah, and to their credit, they went public at the top and.
The halcyon days in public in.
Like twenty twenty one, a three point five billion dollar valuation. Oh know, anyway, I think they did this back mar journally twenty twenty one, and they had like a three point five billion dollar valuation. It's currently in the ballpark of one percent of that, so not great.
I mean the shares are treating hundred two dollars right now. I think the absolute high was well above three hundred.
Yeah stocks, but yes, that's right. Yeah. But so anyway, the founder and CEO and forty nine percent shareholder and Majiski wants to take it private. I don't actually know how much she cashed out of this, but like took it public at three point five billion dollars. Wants to take a private at not zero dollars, but like quite close to zero. She wants to pay public shareholders something like ten million dollars for the company, which is like
forty one cents per share. And that is an interesting negotiation because she's the controlling shareholder, and you know, the board of directors is in charge of negotiating with her and trying to get a fair price for the public shareholders. I don't know what they think about the future of the business. Like she clearly thinks it's worth something because she wants to buy it and like put some more money into it. But she's offering ten million dollars to
the public shareholders. By the way, that's much less than the current trading price of the stock. She's offering forty one cents per share it now at like a buck fifty or something like that. So she's offering a take on her you know, she's saying shareolders are diluted about the value of this company. I want to pay you much less. Part if I were a director, I'd have a really hard time accepting a deal like that, because like you're gonna get sued. You're saying, I want to
sell this company for you know, a big discount. Not only too, it's like all time, Hi not only did Sie to its price today, it's like a tough deal to take, and so she offered not that deal but a similarly sort of like loaded negative premium deal last year, and the directors said no, and then they all quit because she's the controlling shareholder and like she could fire them, and so they were like, well, we're not going to take this deal, and so there's the only thing you
really can do here as directors, and so they all quit, and so she was the only director of the company, and she went and appointed new independent directors and for a new much lower price to take the company private, and they all said no again this week, so they're back to the square one. They have it resigned.
I was thinking she shouldn't, you know, do any elon musk and just get really friendly board members who maybe are related to her.
Well, right, when all of the directors quit, she got to appoint the new directors. And there are two ways you can go with that. You can appoint your relatives who will then sell you the company at forty one cents a share and get sued. Or you can to point like reputable independent directors who like you know, you've had conversations with you hope that they will take your proposal seriously. You hope that they will see the reasons behind you're wanting to pay much less than the current
price of the company and will take your deal. But you haven't specifically signed up to that because that looks bad. And so then if they agree to your deal, you look good, right, Like when you get sued, you can say no, no, these independent directors like really did their due diligence and accepted my deal. So I think that's what was happening here, is like these directors are not
her relatives. They come from real places, Like they look like good independent directors who could consider her deal and if they signed off on it, it wouldn't be a rubber stamp. But then they didn't sign off on it. So oops.
Yeah, And I mean, I don't know where this company goes. Obviously there's some deep fundamental flaws here.
You occasionally see these take hunters. You see these deals where a company is not viable and someone will buy it for like much less than at stock price and say, we're gonna put a little bit more cash on the balance sheet, We're gonna keep the company alive. But like the shareholders are diluted and they're not getting that much money and the board will be like, yes, that's true.
It sucks for the shareholders, but we're doing it. But it's like, that's a tough thing for a director to do, particularly if you were just apported to do the deal right. So it's it's like a tough spot, Like if she's right that it's kind of a melting ice cube and it's not worth what the public shaholders are paying for it, Like it's gonna be hard for her to persuade directors of that, even if it's true. And then like, you know, where do you go?
Yeah?
I think they're exploring other strategic alternatives, right, but it's tough to do that when you have a forty five percent shareholder.
Yeah, I was thinking maybe they could pivot into dog DNA test kits. I know that that's still a very popular market. I think the company has warned that it needs to raise cash or find some solution or else it won't be around for much longer. So I know it'll be fascinating to follow. I mean, it just feels like a company that would naturally want to go private right now. And also I was surprised the question is the.
Price you know and like? And it was just he does not think it's worth forty million dollars.
Yeah, for a little bit. I mean she had a partner, and that's also part of the problem. Yeah, a new mountain, and I think like the bid that she offered the forty one cents a share, wasn't that eighty four percent or something below.
The new Mountain bod which in turn was lower than the bid last year that the director's resigned over her. Bids have been getting lower, probably for reasons. Yeah, yeah, it looks bad. It's a bad process. Normally the board like negotiates you up here they're negotiating or down. Uh not great.
I don't know. I mean I hope that the genetic testing universe continues to exist and perhaps thrive. Is because you think about true crime. I listen to a lot of true crime podcasts, and there have been instances where like these sort of kits where you can find your family members, long lost family members have been uncovered through little kids like this.
I think I read an interview with her or she talked about that as a negative for sales because like you know, serial killer for sure, a little genetic testing and then like your cousin gets arrested in the serialcular. I wish I hadn't bought that Kip.
It's good for society, maybe bad for sale. But again as someone who I don't know, maybe I am related to a serial killer, but I think that these should exist in some form. I think it was the Golden State killer who was found through something like this, which was wild. Yeah, it definitely didn't help the share price, right.
It's not like a good advertisement for like the privacy practices of the genetic testing industry, you.
Wouldn't offer up your saliva to potentially help capture a murderer.
Even depends how close a family member this murderer is cousin. I feel like I don't know an advance with family member of mine did this murder.
I mean, you'd probably have some suspicions, honestly, if you were in this scenario. I mean, I could probably guess you know what.
You are you most likely to I don't have a problem with it, but I'm guessing none of my family members about everyone's like that. I can't till their cousin is the Golden stateuler.
I can't wait to revisit the next city fat Finger where twenty three amigos when one of your cousins gets arrested. Yeah, moving swiftly along. I love this story from Emily Grafeo and Max Abelson. I know that they've been working on it for a long long time. A really great deep dive into First Trust, which is an ETF issuer based in thet This one actually you led money stuff with it, so this wasn't even my influence.
Love an ETF story. ETF sales channels, right. One is advisors. Like a financial advisor has a client and the advisor says, this is the menu of stuff that I'm going to put you in, and the client is like, sure, whatever, right, And so the advisor just picks the ETFs, and the advisor is a fiduciary for the client and has an obligation to try to put the client and ETFs that
are good, right, But like the advisor's pick media. And then the other kind is like Robin Hood right, Like there's an enormous mass of self right that investors, A lot of them buy vanguard s and P five hundred at ets right, Like, yeah, huge business of self directed investors buying cheap index ETFs. But also clearly a huge business or some business of like Robinhood people buying triple lever at ETFs and like weird stuff to make weird pets.
And I don't really know how that gets sold. I don't know if that's like you're like searching Robinhood for fun tickers, or if it's like you're on Reddit reading about the latest cool ETF. But I don't have a great sense of like what the split is like away from like the vanguard s and P five hundred, like a weird ETF. Is that like always mostly an advisor product, or is that like reddit boards are selling that to robin Hood people.
A weird ETF like the triple triple lever the buffers buffer feels like an advisor.
Product, but I don't know.
Yeah, I think that that's fair to say that buffers are popular with advisors, but sort of the shiny stuff, the funky, high octane, the.
Thing that's like we double lever you and you put like one times your money in gold and one times your money in bitcoin, crazy product that seems like it could sell in Robinhood.
Yes, that's probably where you're finding it. And even I mean some of the bitcoin your advisor's.
Not doing that well your advisors. I don't know.
But for example, I mean I wrote up Blackrock added ibit, their bitcoin ETF to their model a portion of their model portfolios for the first time. That was really advisor driven financial advisors asking Blackrock to add it because I want to put my clients in this.
I understand that, Like I can see an advisor wanting to put their clients and IBT, but like when they launched ibet it was a but I'm saying.
Like their clients, if they couldn't get it through their advisors, they would then they would probably go to a platform to buy it, right.
I think of of a bitcoin ETF as being in the first instance a product for self directed retail because the first instance of like people want to buy that, they'll buy it on robin Hood and then like you know, later an advisor might add it in. But it's not like an advisor product. Yeah, the buffer I can see being an advisor.
Product, yeah, big time, and an endowment product apparently first Trust first Yeah, get.
Us distracted, but like First Trust that makes advisor products.
Yea exactly. They have about the last I checked, about two hundred billion dollars in AUM their average fee though is seventy eight basis points, which is pretty high. The industry average is fifty eight the industry average. So that includes all the funky expensive leverage stuff in addition to the stuff that costs like three basis points. It's not no, no, it's just pure Yeah, it.
Funds.
I prefer this podcast like an hour before I have time to do that. But the point being that, yeah, well yeah, the point being that it's a relatively small issuer, but it makes a lot of money for its size because it has a pretty high fee. And there's just great quotes in here about the sales tactics that have been employed by First Trust, which, according to our own reporting and some other outlets, is actually under investigation by friendra for them.
Right, because like the way you sell advisor products is some combination of like to give the advisor something cool to show to their client, like a buffer ETF is like, oh, look, I've given you stock upside with no downside. How nice? Right, But the other way is to like take the advisor out to dinner and be like, hey, why don't you sell my ets instead of Vanguard's ets? Because Vanguard doesn't take you out to dinner. Maybe they did probably not
that much. And the implication of the Finner investigation and of the Bloomberg reporting is that First Trust leans heavily on entertainment. They are like quotes from the First Trust salespeople saying, this company was built on entertaining. It was and still is the one leg up on our competition. And another guy says, you're selling the most expensive ETF with mediocre performance, you better do something different. And that's what we did. And something different is like, so they
took them at dinner. They had like conferences in nice places. So if you're in a advisor who like sold a lot of their atfs, you could go to the nice conference and they'd pay for you to go to a nice conference.
Also, performance coach, performance came performance. Yeah, I'm not familiar with the concept. What is a performance coach in this context?
Like one like negative mean way to characterize what's going on here is like they're like bribing the financially right, They're like giving the financial advisors stuff for the financial advisors that benefits the financial advisors, and then the financial advisors are putting the clients into like these ETFs that charge very high fees and don't have like amazing performance. But that's like to mean, like, what's kind of going
on here is you're a financial advisor. You're sort of like holistically trying to be good at it, right, Like one thing that being good at it means is like putting your client and investments that go up or whatever that you expect to go with. But there are other things, right, and like one of them is like sales and like being personable and answering your clients questions and they have questions and just being like a good effective financial advisor and how do you do that or a variety of things.
But like they're coaches who can tell you how to do that, right, who can tell you how to get better at your job. And so First Trust will go to the advisors and be like, we have this performance coach who will help you be a better financial advisor. And the financial advisors that's great. That's great for me. It's good for my clients if I'm better, right, if my performance is better. So they take the coaching, And is it possible that a condition forgetting the coaching is
that they put their clients into the First Trust CTS. No, that's not what you're that's regulatorily is not allowed, but like through some implication, some internal emails that maybe there are some hint of that. But like the coaching, like if you're a financial advisor, you're not like experiencing that as like I am taking a bribe, right, Like you're experiencing that. It's like I'm trying to do a good job for my clients, and one way to do a
good job is this coach will coach me. And like you know, like as part of doing a good job for my clients, I'm putting them in this expensive ETF. But it gets me this coaching that makes it so good.
Yeah, don't worry about the performance.
We've talked about this actually, like like Vanguard cutting fees, right, and you have mentioned there are people the financial advisors, yeah, or like I don't like Vanguard cutting fees because they don't invest in having a good website, right, answering questions Like that's a real legitimate concern for a financial advisor, right, is like my clients are in the CTF, Like if I have questions about the ETF, they have questions about the ETF. If I can't get an answer, like that's bad.
Whereas a really expensive ETF like they've got customer service people. They answered the phone when the advisors call. That could arguably be good for the clients. That's expensive. The clients are paying for it, but like, right, you could imagine an advisor making a fiduciary decision saying, I want the client in this more expensive thing because the customer service is better, and like the client needs that too.
Yeah. No, it's a it's a super fair point and easy to use, intuitive website goes a long way with some of the folks that are in these ETFs.
I should say the Bloomberg story talks a little trash about the website for First Trust too, but that's not the point.
It looks like a pixel hasn't changed since you know, it was first put up. This story is a joy to read the because it's so deeply reported. So let's talk about some of the emails that Max and Emily dug up. I liked this one in particular. I was thinking of you as I read this. Apparently, in one email five to six years ago, a managing director chided colleagues, writing that pay to play is obviously illegal, but we have wholesalers, which means salespeople doing it repeatedly, So there you have it.
I wrote about this with some sympathy because, like, if you're a person at a financial firm and you notice that your colleagues are doing bad stuff, it's very tempting to email your colleagues to say you're doing bad stuff, please stop it. It's illegal, right, Yeah, Like that's a good email to send, but it's not really because like then you have an email you have a record of,
like your colleagues are doing bad stuff. Even if they knock it off immediately, it's a bad thing to have an email, And if they don't knock it off immediately, it's much worse.
Yeah, I hope I.
Uh on the phone and you say, hey, guys, knock it off.
I always think, like I would hate to get my email searched for so many reasons, but also like for telling my auditor it's illegal for you to edit my piece this much. It's a crime actually to limit yes, exactly, but you know, some things look different under different lights. I don't think that this email was a joke.
Though I don't think it was a joke either. Yeah, I think the the rest of the reporting.
Is, like, you know, I'm not saying it's a joke, just to be clear, just to draw I'm just drawing a contest between what I said and what this email said. I think geography is really important here. I think it came through in the piece as well. But certainly, you know, talking to Emily about this, we sit back to back and a lot of the ogs in the ETF world happened to come from Wheaton, Illinois or around it. And I think that is also very important too. As that
person who quoted said, we've always been about entertainment. The fact that First Trust was located in sort of a flyover zone allowed First Trust to just really run this industry wh it comes to places like Dayton, Ohio, Whichita, Kansas, et cetera, which I think is interesting. I think about geography a lot because also the vanguards of the world, like Vanguard specifically isn't on Wall Street.
Yeah, but like again, like the thing they're doing is covering the financial advisor in Dayton, right. Yeah, they're like going to that person and they're buying them stake or whatever, but they're also like talking to them and being like, yeah, how can we help you? And that advisor is going to naturally be in cliented to put their clients into the ets of a firm that talks to the advisor
and listens to their concerns. Then a Vanguard fund where Vanguard never talks to him, but like, you know, they charge one basis plan, so it's.
Like yeah, or you know, black Rock isn't flying out.
To It's like the coverage is not a straightforward like pay to play, right, It's like something a little different. It's like coverage. It's like paying attention to the advisors and like creating good feelings that the advisors like. Arguably that's bad, right, Like arguably the advisors of producie for the client they should only be concerned with, like very specifically what is the best ETF for the client's portfolio.
But like they could take a more holistic view and be like, well, you know, I'm getting service that allows me to help my client, and so I'll put them in the more expensive ETF.
I don't know, Well, we'll see.
I do want to say a reader email. The three remind me of a Charlie Munger anecdote. Charlie Munger would ask business school students, is it possible for a company to like raise the price of its service and thereby increased sales. And you know, people think about it and they'll be like, well, you know, raising the price can signal higher quality and so people might buy more of it, and like there's examples of that, like in like, you know,
beer marketing. But I think Charlie Munger points out also that like raising the price can give you more money to like effectively bribe the sales channel to like pay more to sales people, pay more to intermediaries who will then put the ultimate buyer into the product. And you see that here, right, Like Vanguard has a good business of selling ETFs at like very very low prices, but like there's also a business to sell ats at very high prices and invest the money into a sales process.
And that's kind of what's arguably happening here.
Well that's the thing. If there's one takeaway from this other than maybe don't you pay to play, also don't get divorced. The reason that this came to light the man who runs First Trust, his name is Jim Bowen. He got divorce and it came to light in his ex wife's lawyers asking for more money that he's apparently making a ton of money like Jamie Diamond level money, maybe.
Like thirty four point eight million dollars in twenty twenty two. It's the thing that's like wild money, like in weird pockets of asset management.
So apparently her lawyers honed in on his expenses at restaurants in Naples, Florida in twenty twenty one, asking about more than one hundred and forty seven thousand dollars spent at Sea Salt, an additional one hundred thousand dollars spent at Continental steakhouses, also seventy thousand dollars spent at seafood places, and he explained that I'm dining, I'm entertaining in twenty twenty two in a court appearance, and then his ex yfe attorneys asked him on the stand in the same
year whether that's seventy thousand dollars alcohol bill at the Naples Ritz Carlton was related to First Trust. He answered, mm hmm, Is that a yes? The lawyer asked, that's a yes. The judge asked yes. Bowen said, so that was kind of the smoke around this fire.
That's going to be like the alcohol bill for the money stuff party from so my favorite expense from the divorce proceedings. Yeah, he spent like forty eight hundred dollars at ar Mez one year on a hall. It included scarves, he said were for workers in Chicago's hotels and restaurants,
so not for financial advisors. No, this is like he takes financial advisors out to dinner at hotels and restaurants in Chicaio and he says, some of my best customers are high maintenance, and these people, meaning the hotel and restaurant workers, are the ones that handle the high maintenance issues. So like basically he takes like high maintenance customers to like fancy restaurants in Chicaio, and the waiters take care of these people, and then he gives the waiters as scarves.
It's like a third level business expect It's very generous.
Gotta give it to him.
No, it's like it's very smart. It's like it's like, Okay, I want to sell ETFs to retail investors in Dayton, Ohio. How should I do that? I should buy fancy scarves for waiters in Chicago because I'm going to take the advisors of those people in Dayton to restaurants and I want them to be well treated and so like. It's like the sort of third level of paying for like the people to that will ultimately trickle down to like the ETF sales.
I'm not much of a seafood gal, but I would have loved to be at one of these dinners. Sounds like a blast, really good service.
And that was The Money Stuff Podcast.
I'm Matt Livian and I'm Katie Greifeld.
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Thanks for listening. To the Money Stuff Podcast. We'll be back next week with more stuff.
I have a party to go get ready for. Actually, so you do too.
I'm not gonna make it.