Caring for Caregivers: How to Avoid Becoming a Financial Burden to Your Loved Ones

Plus, I'll respond to e-mails about my election indecision

And how fixed income ETFs and digital assets can help your retirement savings strategy

Ric Edelman: It's Friday, October 4th. On today's show, caregivers. Plus a conversation with Anna Paglia, the Chief Business Officer for State Street Global Advisors, about some exciting new innovations.

Yesterday, we talked here on the podcast about DNR. Do Not Resuscitate. These are the orders you give medical professionals if you do not want heroic acts provided when you're in a bad physical condition. The link to that podcast, if you missed it yesterday is in the show notes. Today, I want to talk to you about not being a burden to your children, when you get old and infirm.

Unable to live independently, where do you want to live? Do you want to live with your kids? You want to live in a nursing home? Or do you want to stay in your own home? 77% of those surveyed about this subject say they want to stay in their own home.

Not a surprise at all but think about this if you're going to live in your own home and you don't want to be a burden to your children and you're unable to live independently. You need help with the activities of daily living. You need help getting out of bed. You need help getting to the bathroom. You need help dressing. You need help getting out of a chair. You need help with, eating, let alone cooking and taking care of the house. If you need help with all this stuff and you don't want to be a burden to your children, meaning you don't want them doing all of these chores for you, then you're going to pay for in-home care.

That now costs an average of $33 an hour across the country. If you need 24/7 care, the tab is now over $300,000 a year. Can you really afford this? A lot of people turned to long term care insurance, but only 10% of Americans own that. And think about the impact here. If you cannot live independently, but you insist on living in your own home, or you insist on living in your kids homes and they're going to be caregivers for you, well, think about this. 40% of family caregivers say they never feel relaxed. The most taxing of all is providing care to a patient with dementia or Alzheimer's. They say that the physical demands, the financial demands, the emotional impact is massive.

And get this, a third of caregivers provide care for five years or more. So, this is quite a commitment that you are asking of family members. And this is why you need to be thinking about this now. If you have the opportunity, you're in good enough health to qualify for long term care insurance, and you are financially able to pay for it, that can go a really long way to helping ease the challenge on your children and spouse who might otherwise be burdened with caregiving 100%.

So, I encourage you to talk to a financial advisor about it because this kind of scenario is incredibly common today and it's going to become more common in the future as our population ages.

 Ric Edelman: I've had a huge number of e-mails come into me over the past couple of weeks. You'll recall, several weeks ago, I did a podcast on my dilemma in choosing whether to vote for Kamala Harris or Donald Trump. And I expressed that I was at the time undecided.

By the way, as of today, I remain undecided. And I invited you to send me your e-mails giving me your viewpoint as to why I should vote for one or the other. Or as many of you did, you gave me an e-mail telling me why I shouldn't vote for one or the other, which I suppose is an equally valid course of action to take.

And in that podcast where I talked about my uncertainty, I cited one reason why I was having real problems voting for Donald Trump. And I cited one reason I was having a real problem voting for Kamala Harris. The reason regarding Kamala Harris, her proposal to tax unrealized gains in the stock market generated one big set of e-mails that I received. Over this next month here in October, I'm going to share with you many of the comments that I got from all my listeners, because the comments that I got were mostly brilliant, very thoughtful, insightful, well-considered and well-articulated. And there were a few who were a little bit outlandish, full bias and frankly, some venom. But the vast majority of you show yourself to be very, very thoughtful and considerate in your viewpoint. And I am finding all of your comments to be very, very helpful.

And I'll share many of them with you over this next month, in an effort to help those of you who are like me undecided, because we know what the polls are telling us, that the race is incredibly close, too close to call. And that there are, depending on the poll, anywhere from 5% to 15% of Americans who label themselves undecided. And since the election is too close to call, we know that it is the undecideds who are in the end going to choose who our next president is going to be. So, if you are among the undecideds, I think you'll find this content helpful, in your effort to deliberate.

Anyway, the first topic I want to cover with you is the tax on unrealized gains that Kamala Harris has put forth. Here are three e-mails I got…this one from Mike in Fort Lauderdale. Here's what Mike wrote to me.

Mike: “If Harris gets her wish of taxes on unrealized gains in the stock market, won't that affect the stock market?”

Ric Edelman: And, here's another e-mail.  I got this one from Chris, he's in Virginia.

Here's what Chris wrote:

Chris: “Hey Ric, I've been seeing in the news lately that the Harris administration is proposing a 25% tax on unrealized investment gains. Could something like this even be put into law? This seems incredibly destructive for my 401(k). Please shed some light on this. Cheers.”

Ric Edelman: And finally, here is an e-mail I received from Greg from Homer Glen, Illinois:

Greg: “I'm disappointed to see you take a significant political position and avoid endorsing one candidate over another. Your statements on the economy and crypto, with a direct statement stating that Kamala Harris is bad for those topics, is very one-sided, and you are showing bias to Trump. Please keep politics out of your broadcasts. I've followed you for years, and you always seemed to be impartial, but not anymore.”

Ric Edelman: Greg, you're right. If you've followed me for years, you know that I've always seemed to be impartial. I have never tried to impose my political views on anybody. What would be the point of that has been my attitude. I mean, half my audience supports the Democrats. Half my audience supports Republicans.

No matter what I might say, politically would only antagonize half my audience. Why would I bother doing that? So, I've always tried to be impartial. I've always tried to be factual, simply saying, I'm not going to tell you if this is good or bad. I'm simply going to tell you, "here's what happens if" or "here's the implication of."

My opposition of student loan debt is not because I don't like Joe Biden.  My opposition to student loan debt is because it is such a bad economic strategy that doesn't accomplish what he's trying to accomplish. So that's the tone I've always taken over the past 35 years. And it's the tone I'm continuing to take today.

So, I don't know that I agree with you that I'm being one-sided and showing bias to Trump. In the case of crypto, which you specifically cited, Donald Trump has specifically come out endorsing crypto. He's personally engaging in the sale of crypto coins and tokens, which itself is a huge conflict of interest and ethical error on the part of the former president, but nevertheless, he is hugely supportive of crypto. Kamala Harris is part of the Biden administration, which is hugely opposed to crypto.

So, there is no question on the topic of crypto, which is all I specifically said on the topic of crypto, you cannot be supportive of Harris. End of story. That's a factual statement. That's not bias.

Put that aside. Let's talk about this issue of taxing unrealized gains in the market. I did a big conversation in my podcast on this already.  So let me just answer the specific questions from Mike and Chris. Mike asked, would the tax affect the stock market? And my answer, as you saw in my conversation earlier, yeah, it would have a devastating impact on the stock market. And this is something that Kamala Harris either doesn't understand or doesn't care.

Neither of those answers I believe is to her credit. So yeah, you should be downright worried about your 401(k), about your IRA, about your brokerage account. If you own investments in the stock market, and she persists in pursuing a tax on unrealized capital gains, yeah, this is going to be extraordinarily bad news for the stock market. Perhaps irreparably so.

Chris, meanwhile, has asked, could this even be put into law? I don't think so. I think it's a ridiculous proposal. I cannot conceive that she'll get the votes necessary in Congress. I'm also not sure it would survive a legal challenge. Because I'm not convinced that the Constitution grants the government permission to tax unrealized gains.  So, you're right. It does seem incredibly destructive for your 401(k), which is why I'm astonished she would even propose it.

Does she hate billionaires so much that she's willing to destroy the retirement security of ordinary Americans? You know, it's kind of like saying, I hate the pilot on my airplane. I hate him so much I'm going to shoot him, causing the deaths and an airplane crash of everybody on board. I mean, I just don't get it. Kamala, do you really hate billionaires that much that you're willing to behave so recklessly? So yeah, it would be incredibly destructive to your 401(k). It would be incredibly harmful to ordinary Americans. It would cost millions of jobs as companies are discovering their stock prices collapsing. But no. I really don't think it would be put into law, which is why it's so absurd. Why raise an issue that you can't possibly make a reality? I just don't get it.

So, this is why I'm so concerned about the issue, because if she's going to put forth extreme views like this, then, what other extreme views is she going to put forth that have no bearing on reality, that aren't in sync with the desires of the American public that frankly, aren't in our national best interests.

So that's my big problem. Now, don't come yelling at me, Greg in Homer Glenn, Illinois. Don't come yelling at me that everything I just said shows bias toward Trump. I didn't say a word about Trump. I could argue just as easily that he's got a lot of proposals that are equally ridiculous. His proposal to make Social Security benefits tax free, to make tips tax free, to make overtime pay tax free. Those are equally ridiculous.

Neither one of these candidates are offering policy proposals that are good for the American economy. Oh, I think they're pretty good to help them win votes, which is why they're doing what they're doing, but I'm looking for leadership. I'm looking for someone who's going to do something for the greater good.

That's going to help improve our economy and our national security. And I'm not seeing it from either one of them. So Greg, back off. Don't tell me I'm showing bias to Trump simply because I express extreme criticism over Kamala Harris's economic proposals. By the way, economic proposals that are so absurd, even the Washington Post says they are.

So take it for what it's worth. I'll have more to share with you on a variety of other topics that'll anger some Trump supporters and some that'll anger some Harris supporters, because I'm going to give it to you both ways to help you understand why, as I'm suggesting today, I remain undecided.

One thing I'm not undecided about is Wednesday, October 9^th.  Yeah, we're doing our webinar: “Crypto for RIAs: Yield, Staking, Lending and Custody. See What’s Beyond the Spot ETFs.” You're going to learn all about the investment opportunities that go beyond buying Bitcoin ETFs. So check that out. It's Wednesday, October 9^th at 1:00pm EDT. It's free. You get one CE credit. You can register by clicking the link in the show notes. See you there.

You're listening to the Truth About Your Future.  I'm very happy to welcome back to the show Anna Paglia. She is the Chief Business Officer for State Street Global Advisors. It's one of the world's largest asset managers with more than three and a half trillion dollars in assets on a global basis.

Ric Edelman: Anna, it's great to see you again.

Anna Paglia: It's great to see you, Ric.  Thank you for having me.

Ric Edelman: So, your new position as Chief Business Officer, that's not a C-suite title that I think most people are familiar with. So, tell us how Chief Business Officer differs from some of the other C-suite executives.

Anna Paglia: Sure, that's a really good question, because when I joined SSGA it was the first question that I asked to Yie-Hsin Hung, the CEO, and my new boss. It is very unique. It's not a role that you hear about in the industry. And the way she explained to me, and that's the way the leadership team operates at SSGA, is really easy and at the same time it's really compelling. The leadership team is divided across pillars that go really deep in their subject matter expertise.

So, we have distribution, we have investments, we have a COO that includes ops and technology, and then we have the business officer pillar, which is where I sit. And my team is very much responsible for setting the strategic direction of the company, working together with the CEO for setting up goals, looking at growth plans, at five-year growth plans, at three-year growth plans, across the different business lines of SSGA.

That includes ETFs, it includes cash, it includes retirement as well. And my team is also responsible for product innovation. So, cutting across the different wrappers, mutual funds, ETFs, CITs, SMAs, putting together really, the innovation engine and new product development at SSGA.

Ric Edelman: So, I think it demonstrates the forward thinking and broad-based view that State Street has in its business modeling itself, the fact that this kind of a position would even be created, something that as you said, you don't normally see, in financial services and asset management firms. I think that really says a lot about how State Street positions itself to be able to serve its investors and advisors.

Anna Paglia: That's right. That's right. And I would tell you, Ric, this is the one thing that I found really attractive about this job. We have known each other for years and I was really happy at my other job. But this new leadership vision, at SSGA was the one thing that I found incredibly compelling.

The other thing that is really exciting is to see how these different business lines work together and are complimentary to each other. So, the one thing that people know very well about SSGA is its leadership in the indexing and ETFs segment of the market. With more than $1.3 trillion in ETFs and $2 trillion in index institutional mandates. It is something that the industry really knows about SSGA. But then our cash business is bigger than I thought it would be when I came here. More than a half a trillion dollars in cash and money market funds. And growing by the minute it feels, and the retirement business. So, the focus that State Street Bank and SSGA is placing on retirement is really, really tremendous and there's three different business lines that are not in competition with each other. So, there is a very organic way by which they complement each other when it comes to addressing clients’ needs. So, it's really phenomenal.

Ric Edelman: So, I can really appreciate why they recruited you, as chief business officer, a role itself that's unique. You're kind of unique yourself, Anna, in our industry. I mean, you have a wonderful Italian accent and in Italy, you got a law degree from Rome. As opposed to most folks in this business with business degrees. And then you went and got two other law degrees. You got one in London and you got another one, a master's in Chicago.

So talk about your background in law and why you find it so applicable and gravitating over to the asset management field. Because that itself is unusual.

Anna Paglia: Yeah. So Ric, that's a fun question. And, my journey was anything but linear. Somebody asked me, how did you decide to specialize in finance or financial markets?

At what point in time did you discover financial markets? And my answer is always, I did not decide, the financial markets found me. That was, I want to say kind of a coincidence or being in the right place at the right time. I started studying law and my dream was to become a lawyer.

And, when I graduated law school, I found a job in a global law firm, with offices in Rome. And I was again pursuing my dream of being an IP lawyer. I was doing trademarks, copyrights, and I was lucky enough to work in the entertainment department of the law firm.

Ric Edelman: Oh, fun.

Anna Paglia: And, if you rewind the tape, it was 1999 and, something had just been approved in Brussels called the UCITS Directive.

Mutual funds were very new to the European landscape, which is something that surprises people in America because the history here dates back to the 1940 Act. Well, the 1940 Act in Europe came in 1999. So, it was a point in time where there was really very little expertise about mutual funds and collective investments.

And that's where my law firm decided to open and start an investment management division. They had no associates, they had no expertise, and the chair of the firm in Rome decided to tap me into that department. And I thought my life was over. I thought my professional journey, my dream was being crushed, that I had no choice but venture into something I knew nothing about and I didn't want to do.

But, I kept an open mind only because, there was no other option. In this day and age, people have so many options. And if they don't like their jobs, they move on. At that time that was the only way to pay rent for me. So, I had to get on board with it. And little did I know, I ended up finding my passion, my love for the financial industry, which was something that was new to me.

I found it to be very attractive. I was also attracted by the negative implications of the financial industry, realizing that at the time it was not for everybody. So, you needed assets to become an investor. You needed money to make more money. Picture that I was working with hedge funds doing IPOs. Back at that time, if you wanted to buy mutual funds, you had to meet a minimum amount of investments, which was in the range of $5,000 to $15,000. My dad made probably $12,000 a year, as a school teacher. So, to me, that gap between the wealthy and non-wealthy was very interesting. And that's why when I came across ETFs, which was around 2000, they were very new concept for the industry.

And it was also a very controversial concept, at the time, not everybody believed they would be “a thing”. Not everybody knew how to spell ETFs. I've made it a point of spending whatever time and intellectual capacity I had to contribute to that industry, because I thought it was incredible.

I thought that it was the bridge between the wealthy and non-wealthy individuals. The idea that with as little as $25 or $50, you could be in the market was unheard of. So, I thought, this is my future. And I want to see where this journey leads me to. Because again, to me, it was about passion at that time. It was not anymore about having a job. It was doing something you believed in.

Ric Edelman: And I think that wonderful story typifies the unique aspects that you bring to this industry, right? We've known each other a really long time and frankly passion is the key word as opposed to simply wealth. There are a lot of people as you know who are in this business who are simply doing it because they're trying to make a lot of money. And they're not necessarily trying to make lives better, for others. But your focus has been exactly that with your full history and focus on your dad's scenario, recognizing that ETFs demonetize and democratize the opportunity for ordinary folks to engage in the financial markets.

I think that helps drive you. And I've seen it in the decisions you've made, the products you've built, the investment opportunities you've created. And that's what you're now doing at SSGA, at State Street Global Advisors. And it's really exciting to see. So let's delve into some of this now, directly.

There are key trends that are always going on at any given moment. You've been in the ETF world from pretty much the beginning. We were too, in my financial planning practice, we were, as one of the earliest users of ETFs back in the early 2000s. The industry has morphed, it has adopted and changed, over time with technology.

What's going on right now? What would you say, Anna, are the key trends in asset management that financial advisors and investors ought to be paying attention to?

Anna Paglia: One thing that continues to fascinate me about this industry is that ETFs keep evolving. The asset management landscape keeps evolving.

The other thing that I keep reading or questions that I keep hearing are around, Has this industry peaked? Are we looking at an inflection point for the ETF industry or the asset management industry in general? And I do think that the answer is no, because, as you may appreciate this industry keeps pushing boundaries. Evolving and morphing itself based on the needs of clients.

And the needs of clients keep changing as well. We are about to witness the biggest transfer of wealth that this economy has ever experienced with a new wave of investors coming into the market. They are younger. They are not as patient as their parents.

They want immediate satisfaction, so I don't know how comfortable they are going to be with a story about the longer term performance. And they use and consume information in a way that is a very different compared to what we have done in the past, our parents have done in the past, the prior generations have done in the past.

So, the fact that this industry keeps changing, it means it has not peaked and we are seeing some new trends developing. We have observed that everything that happened in the last five years, the pandemic, the 60/40 portfolio, that doesn't work as well as it used to, the birth of new asset classes.

Investors have embraced fixed income ETFs after the liquidity of fixed income ETFs was proven during the heat of the pandemic. So, I look at these trends as being the roadmap to future innovation. Those trends are definitely in fixed income. For decades the fear that in a liquidity crunch fixed income ETFs would not have been able to operate that fear has been lifted.

The theory has been put in practice. We have seen it. We have seen the worst of a liquidity crunch and fixed income ETFs have shown their resiliency. It's not a coincidence that this year alone, 1/3 of the flows in the ETF market come from fixed income ETFs. And if you think about their market share (so they account for 20 percent of overall assets), and they have captured one third of flows, it means they are growing faster than the rest of the market. The other trend that we continue to see is flows to low-cost ETFs. It doesn't matter if we are in a bear market or if we are in a bull market, low-cost ETFs continue to be the instrument of choice for clients to get exposure to big segments of the market.

We also see trends with regard to new technology, new investments, digital assets. The story about the cryptocurrencies and digital assets is also a story for the textbooks of the future, when people are going to look back to what we are seeing now, and they are going to write books about bitcoin, ethereum.

Let's put it into context. It took three years for SPY to cross a billion dollars.

Ric Edelman: And SPY, remind everybody what that ETF is.

Anna Paglia: Yes, SPY is the SSGA, the State Street S&P 500 fund, which is to date the largest ETF in-market. It accounts for over $550 billion in assets. And, it was launched 31 years ago. It was the first ETF to be approved, in market. So that's the story of a first. And I like the story. I like the tagline that SSGA used one year ago on SPY crossing 30 years. So when they said, we launched the one fund and we created an industry.

Ric Edelman: It's really true. That fund was the shot heard around the world.

It revolutionized the financial services and asset management industry. And , I just want to emphasize this for everybody, half a trillion dollars in a single ETF. That's just astonishing. And your point that it took three years for that fund to really generate a significant asset flow though.

Anna Paglia: That's right. So, if you think about where the industry is today with new asset classes and new technologies, it took two days for the first synthetic Bitcoin ETF to cross a billion dollars.

Ric Edelman: What it took three years for spot.

Anna Paglia: Exactly. And, this year at the beginning of the year, the SEC gave the green light to spot Bitcoin ETFs. And, the combination of those ETFs now has exceeded $50 billion in less than one year. So, if you think about that, and you look at the numbers, you can see another trend materializing, which is new technologies, is cryptocurrencies, is digital assets, is the fact that clients are really keen on getting an exposure to their portfolio into new and upcoming technologies.

So, we keep looking at all of these different trends to really write a road map about our growth aspirations. But Ric, products are not just products anymore. So, while we look at flows to build a story about products, we also look at client behavior. And our clients are not the same clients that we had 20 years ago.

ETFs historically were used by institutional clients because of their liquidity. They were in time, also embraced by wealth advisors to build portfolios for their clients. What we continue to see right now is an acceleration in the direct channel. And these are do-it-yourself investors, buy-it-yourself investors.

The trend started during the pandemic. We all, as an industry, we were watching it, trying to understand, is this a glitch? Is it just a Covid story that, is gonna move away once the markets reopen. The concerns about pandemic are lifted. It was not a Covid glitch. That segment of the market continues to accelerate and, it is now double compared to where it was in 2020.

These are not disintermediated investors. They are investors who either work with an advisor or place their trades in parallel to what they are doing or working with advisors. But it's definitely a trend that we pay attention to because not only does it influence what we think about products, but it also influences the way by which we communicate with them.

Our language has to evolve. Our marketing standards, our marketing strategies have to evolve because now we need to talk to a different audience that was not our traditional audience 20 or 30 years ago.

Ric Edelman: So, you mentioned the three major categories of change. One, a new and important emphasis on bonds, fixed income, because we are now in a changing economic and interest rate environment for the first time in years, and I think everybody is well familiar with what this means. We're all paying close attention to that.

State Street, one of the leaders in the offerings in the bond market. The emphasis on cash, which is a huge business. You're right. It was surprising to me too. When you cited the statistic on how much cash State Street has. ‘Cause I don't really think of them first and foremost as a place to maintain cash.

I think of them as stocks and bonds. So that really shows how strong and powerful a business State Street has, in the cash money market, and retirement plan environment. That's second. Third, low cost. State Street has always been a leader in low-cost ETFs, which is one of the reasons I think that SSGA has been so successful.

And now you're adding the notion of blockchain, digital assets, tokenization as the newest asset class, and State Street has been, very active proactive, I would say, in the launching of those investments. We'll talk more about that in a second. But what I want to do is now go little bit beyond that.

On the one hand, you've got digital assets, ETFs. What about the business operations itself? Do you see the blockchain technology itself, the tokenization technology changing the way SSGA manages assets, operates its business? Might it have an impact on how advisors provide service to their clients?

Anna Paglia: Tokenization is definitely going to reshape the financial services industry. You may have seen some recent announcements that the bank issued a few weeks ago with regard to the digital assets working group and the, desire to tokenize assets. We have seen that in particular now with our money market fund business, because  tokenization is this word that everybody keeps throwing around in the hope that somebody will understand that.

In a few words, tokenization is a powerful concept because it's all about frictionless transactions. How do you use your assets and consume your assets without having to wait for settlement periods or settlement times or dealing with the transfer agents or how do you get access? And I'm talking about ownership of assets that are not transferable today, or require huge amounts of investments to be transferable.

So for example, real estate, real assets. We have been working with a number of partners, including the State Street Bank, to tokenize money market funds. Again, if money market funds become a currency, that's a powerful way of using cash. It becomes frictionless and it becomes as easy as swiping a credit card or even faster than that.

So, tokenization is definitely going to be a powerful tool and not only for us asset managers, but also for our clients are getting access to cash or property. Everybody starting with tokenization of money market funds. So that's the easy thing to put on a chain, but then you will transition to other things.

Like, real estate with one click, you may become the owner of a building and your assets may go up and down based on how many units in that building are rented at any given time on any given month. Again, this goes to show that tokenization will continue the concept of democratization of assets, but it will do that. It will be, ETFs on steroids, because at that point, not only is that access, but it's also frictionless.

Ric Edelman: And how far away do you see this happening? How long will it take?

Anna Paglia: Well, I don't think it's going to take that long, Ric, because the technology is there. The technology to tokenize a money market fund, tokenize an ETF, tokenize a good or a property, the technology exists already.

Now it's really about the deployment of that technology, is finding a number of use cases, and providing access to clients and financial advisors, because it's like a puzzle, you open a box and you find, a thousand pieces, they are all in the box. But now you are going to have to match the black with the black and you are going to have to make sure that every matching that you do makes sense in the wider context.

Ric Edelman: Yeah, I think it will be exciting and opportunistic for so many. There are already, as you said, a lot of examples of tokenization in place. The St. Regis Hotel, in Aspen, Colorado tokenized many years ago. You can own a piece of that hotel for $10 by buying the St. Regis coin. There's condo building in Manhattan that was tokenized in 2018, So yeah, I think it's coming in when it does, it's going to be like a dam opening up and it is going to flood the market with these new investment opportunities. So, it's important now for advisors to learn about this tech so that you're prepared and ready for when these products come onto the market so that you're able to adopt them.

And figure out which you ought to be providing to your clients. So, I imagine State Street is going to be spending a lot of time in investor and advisor education over the next couple of years.

Anna Paglia: Yes, absolutely. To me this is going to be the next iPhone moment.

You open the box, you look at the tablet, you look at the device and next thing, you know, you cannot think of a day where you didn't have it. So it is gonna take a while to get there, but it's gonna become this big revolution that is gonna be just as obvious as unexpected.

Ric Edelman: Do you see the regulators slowing things down or causing delays as we move from here to there? Or are they favorable? Do they like this idea? Are they helping it along? What's the viewpoint you're seeing?

Anna Paglia: Well, I do think that the regulators are going to do their jobs, and, you know what they say, once a lawyer, always a lawyer. We talked about that, so I cannot help but think of myself as a lawyer when it comes to these things.

Ric, it’s all about the risks and controls. Innovation cannot be unregulated innovation because, otherwise it will put investors at risk, which is something nobody wants. In the end, these studies are only as powerful as we ensure that the right risks and controls are in there. And regulators are going to do their jobs.

Regulators are going to regulate. To me, the question mark is going to be in the balance because over-regulation is going to push business away. We live in an environment in which geographic borders mean nothing for financial markets. Now, going back to years ago, when you couldn't buy a spot Bitcoin ETF in the U.S. That was not the end of it.

If you really wanted to buy a spot Bitcoin ETF, you could buy it in Europe, you could buy it in Bermuda, you could buy it in Canada. So, the success hinges on the balance. So how do you balance a healthy framework of risks and controls with the opportunity set for investors where financial markets are more open than they used to be?

But I know regulators are going to do their job. I respect tremendously what they do because, again, we all want the same thing, which is investor protection.

Ric Edelman: And so along those lines protecting investors, do you see any emerging threats to the ETF vehicle or to the ETF industry broadly? Anything we should be worried about?

Anna Paglia: I don't know that I would classify this as a threat, but I think it's a challenge. And the challenge is, everybody today is an expert in financial markets and social media. If you look at, how many people, how many blogs, how many different means of communication, out there talking about the securities, the stocks, the public companies, segments of the markets.

It's a little bit of, an unregulated mess. I'll give you an example. I am a FINRA member. I cannot post anything on social media without having compliance read through that and make sure that the message is always fair, is clear, is not misleading. If you are not a FINRA member. If you are just a blogger on Reddit or on X or any other social media channel, you don't go through that level of scrutiny.

Ric Edelman: You can say whatever you want.

Anna Paglia: You can say whatever you want. And I read stuff that gets my hair on fire. And I'm really worried about the amount of overflowing of information and the inability to really differentiate between good and bad information, reliable and unreliable.

This is why it's so important for all of us asset managers, but also all the financial advisors to step into that vacuum. And again, to me, over-information creates the vacuum of truthfulness. Because you don't know what source is the most reliable. So it's really important for all of us to play a role there.

Ric Edelman: And so how is State Street helping meet that challenge? Is there anything that you're doing to protect investors and trained advisors?

Anna Paglia: Yes, if you look at our social media pages, we have tons of materials. And we always try and challenge ourselves to strike the right balance between providing enough and not providing too much. Because in the end, if you also provide too much information, people are not going to read it.

So thought leadership pieces, you have to be always ready to advise and guide advisors and clients on what's happening in the marketplace and what that would mean for their investments, interest rate cuts. Whenever there are news about that, we make sure that, we have thought leadership pieces, disseminated cascaded down via emails on social media so that people can hear from a reliable source, what our macro views are and what we believe in terms of products in terms of exposure that means for their portfolios.

Ric Edelman: So let me shift the conversation a little bit to the elephant in the room, and that's, of course, the election that's coming up in just over a month. You have the advantage of having a viewpoint, or I'd say an observation tower, from Europe.

You grew up and worked in Italy. Italian politics are widely known as being, very emotional and very frequent, and so give us some perspective if you . What's your take on the election this year? So many are terribly concerned about the divisiveness that is being experienced between the left and the right the Republicans and Democrats the liberals and conservatives. How does this compare to what you have seen in European elections?

Anna Paglia: Well, Ric, I can tell you that, this is not different. What's happening here is not different from what I have seen in Europe. The one thing that is different this time around is the, you named it, the divisiveness. This election, just like the past election, is very polarizing, which is new to this country, new to this economy, but it's nothing new to other countries.

You watch on TV, some really entertaining I would say episodes that happened in other countries, amongst the politicians of very different parties. I'm hoping that the election will lift doubts about the future of the country, one way or the other. And I think that lifting that uncertainty is going to be helpful for people to start the planning into 2025. And I really hope that as a country, we can unite against whatever outcome of the election can have.

Because I think nothing is as bad as the uncertainty and divisiveness that we are suffering today. So, anything is going to help.

Ric Edelman: Let me go back to the crypto conversation. State Street has offered recently new digital asset and crypto ETFs. Everyone I think who's listening to this conversation is very familiar with the bond funds that State Street offers and certainly the stock ETFs led by SPY, the oldest and largest by far ETF in the marketplace, but the crypto ETFs are new and different, and many people are new to this market.

Very few investors yet participating, but there's a lot of curiosity and interest. So, talk with us a little bit. Explain the offerings that you have available from SSGA

Anna Paglia: Last week I was at Future Proof. And this question came up. So I'll probably, I have to apologize for those people who were at Future Proof because I'm going to repeat myself here.

But when I think about this, I just thought about a couple of weeks ago, my boys asked me to watch the Avengers Endgame. And, I had not seen the movie before. But there is one part of the movie where the villain, and I don't remember his name, Thanos or Stanos, the big monster, the villain. He's talking to Captain America and says, “you think I'm a bad guy. I'm not a bad guy. I am simply inevitable.”

So, to me, that got me thinking about cryptocurrencies. And just bear with me, there is a connection there. And the connection is, it doesn't matter whether you hate it or love it. It's inevitable. Having that conversation with your clients is inevitable. As an asset manager, not providing those tools to your clients makes for a very inevitable conversation.

Why not? So, if you believe, and again, what you believe is not really about what you believe, it's what your clients believe. Because what we think ultimately doesn't matter. The only thing that matters is what our clients think. And if our clients really want to get that exposure, it is imperative for us to think about: how do we give that exposure to our clients.

This is something that is so inevitable that we have to pay attention. So when looking at the landscape and the future of the industry and also the flows into Bitcoin ETFs, all the attention about cryptocurrencies, we have to ask ourselves a question, which was, how do we participate in that industry?

And of course, we are really good at what we do. What do we do best is ETFs. What we don't do as well as others is have a deep knowledge of that ecosystem. Because cryptocurrencies do not live in isolation. You don't get coins being originated out of nothing. There is a big ecosystem supporting that. And we decided to partner with a crypto native.

Again, recognizing that this is an area where we are not as big as experts as we are in ETFs. We decided to partner with Galaxy. Galaxy is a crypto native company and they bring the other side of the coin. They are an asset manager, but they are not well known for ETFs. They don't have ETFs, but they do have mining companies.

They do cryptocurrency trades. They are the experts when it comes to digital assets. And by working together, we just decided to look at the ecosystem. So now we have single currency ETFs. When I think about Bitcoin ETFs, I think about single stock ETFs. Okay, now that you have access to one single asset, how do you use that asset in the context of a portfolio?

And if you want to stay in the digital assets ecosystem, what are the companies that are gonna derive their revenues by participating in that industry? And it's not just the cryptos, it is definitely crypto exchanges, crypto natives, but it goes outside of that. It includes blockchain technology, artificial intelligence, banks, credit card companies.

So how do you give clients the exposure to that ecosystem in a way that is actively managed and really designed to participate in the growth of that segment of the market. So we launched three funds. One is really about the digital assets technology. It's not a tech fund, this industry really doesn't need another technology fund, another growth fund, but it is a tech X.

So it is digital assets technology, an active management that spans across industry, different market cycles between growth and value. So it's very dynamic. And then we brought two portfolios that really zoom in on cryptocurrencies. One is hedged and the other is not.

What we like about bitcoins is volatility. What we hate about bitcoins is volatility. So, if you love the volatility of cryptocurrencies, you have a portfolio that is unhedged. If you want to get that exposure, but you are nervous about volatility, we have the hedged version. So, I'm really excited about these products, about the partnership with Galaxy because I believe that this is another tool in the toolkit that we are giving to our investors.

Ric Edelman: I was really excited when I heard of your announcement of the partnership with Galaxy Digital. I've known the folks at Galaxy for many, many years. And in fact, I'll be doing a webinar pretty soon with Chris Rhine, who is their PM.

Of course, you know Chris well. So, big fans of Galaxy, and I think you've really shown another area of strength at State Street. Too many fund companies, you've seen this over the decades, Anna. So many fund companies try to act like they're experts in everything. And they come up with this broad array of suite of product. And most of them are mediocre because they really don't know what they're doing, anything special compared to others who really do have expertise. Since you quoted a movie, I will too. I'm a big fan of the Dirty Harry movies with Clint Eastwood back in the 70s and Dirty Harry made this great statement at one point just before he blew up Hal Holbrook in his car he said "a man's got to know his limitations."

State Street knows its limitations. You are, as you said, one of the leading experts in the ETF space. Perhaps nobody bigger and better than State Street, but crypto is a brand-new thing. It's a totally different beast. So rather than trying to pretend you have the expertise, just partner with it. And like you said, you have the best of both worlds.  So, I was really excited that you did that. It showed the self-awareness at State Street and the maturity and the dedicated focus on what's serving clients best. And Galaxy is one of the top crypto fund managers out there.  I think it is a really good match. So, I was excited to see that.

And I would encourage advisors and investors to take a look at these ETF products that are now available through the Galaxy SSGA partnership because it is definitely something you should be looking at. So final question for you, Anna, and I've just been thrilled to have this conversation, with Anna Paglia, the chief business officer at SSGA.

Personally for you, Anna, what's the best financial advice you ever got?

Anna Paglia: Best financial advice was, leave it to an expert. Because I've been in this industry for almost three decades now. I don't do my own investments. I have an investment advisor. I rely on my investment advisor to build my portfolio and to manage my retirement assets.

For one reason, it's easy to get emotional. Ultimately, you buy what you like and you buy what you believe in, which may not always be the best way to manage your assets. I was, a couple of years ago, in a holiday conversation, I was sitting down with my brother, by the way, never get financial advice from my brother.

And I asked him what he had in his portfolio. And you name it, you have it. It was like Amazon. Tesla, Microsoft, and then, stocks of an Italian soccer team, which is like, I don't even know how you hedge that investment. But anyhow, you buy following your emotions. Which is not always good.

So, you really need somebody who takes the emotions out of your investment decisions. And I find that working with an advisor is the best way to do that, regardless of how experienced you think you are.

Ric Edelman: That's terrific advice. I’m glad you follow it. I think a lot of other folks ought to be following that as well. That's Anna Paglia, the chief business officer for State Street Global Advisors. You can learn more about State Street. We've got the link for you in the show notes. Anna, thanks so much. Always a pleasure to talk with you. Look forward to seeing you again before too long.

Anna Paglia: Same thing. Thank you. Ric. Thank you so much for having me.

If you like what you're hearing here on The Truth About Your Future, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube, and remember to leave a review on Apple podcasts. I read them all. Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. 

 

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State Street Global Advisors Disclosure Page:  https://www.thetayf.com/blogs/disclosures/important-ssga-disclosure-information-read-here

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Subscribe to podcast updates: https://form.jotform.com/223614751580152

Ask Ric: https://www.thetayf.com/pages/ask-ric

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Links from today’s show: 

Link to yesterday’s podcast regarding DNR policies: https://www.thetayf.com/blogs/this-weeks-stories/why-merely-signing-a-dnr-isn-t-enough

September 18, 2024 podcast includes capital gains discussion: So You Think You Know Who I’m Voting For?  https://www.thetayf.com/blogs/this-weeks-stories/so-you-think-you-know-who-i-m-voting-for

State Street Global Advisors: https://www.ssga.com/us/en/intermediary/etfs/capabilities/spdr-core-equity-etfs/spy-sp-500/cornerstones

State Street Global Advisors Disclosure Page: https://www.thetayf.com/blogs/disclosures/important-ssga-disclosure-information-read-here

10/9 Webinar - Crypto for RIAs: Yield, Staking, Lending and Custody. What’s beyond the ETFs?  https://dacfp.com/events/crypto-for-rias-yield-staking-lending-and-custody-whats-beyond-the-etfs/

10/23 Webinar - How to Factor Longevity into Your Financial Planning: https://www.thetayf.com/pages/october-2024-webinar-how-to-factor-longevity-into-your-financial-planning

9/25 Webinar Replay - Unlocking Alpha in Crypto-Equities and Beyond: https://dacfp.com/events/unlocking-alpha-in-crypto-equities-and-beyond

9/20 Webinar Replay - Q4 Crypto Outlook: What You Need to Know Now: https://dacfp.com/events/q4-crypto-outlook-what-you-need-to-know-now

9/11 Webinar Replay – Rates are Poised to Drop, Now What?: https://www.thetayf.com/pages/rates-poised-to-drop-now-what

Become Certified in Blockchain and Digital Assets: https://dacfp.com/certification/

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Follow Ric on social media: 

Facebook: https://www.facebook.com/RicEdelman

Instagram: https://www.instagram.com/ric_edelman/

LinkedIn: https://www.linkedin.com/in/ricedelman/

X: https://twitter.com/ricedelman

YouTube: https://www.youtube.com/@RicEdelman

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Brought to you by: 

Invesco QQQ: https://www.invesco.com/qqq-etf/en/home.html

State Street Global Advisors: https://www.ssga.com/us/en/intermediary/etfs/capabilities/spdr-core-equity-etfs/spy-sp-500/cornerstones

Schwab: https://www.schwab.com/

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Important Risk Information

The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.

The views expressed in this material are the views of Anna Paglia through the period ended September 23, 2024 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investing involves risk including the risk of loss of principal.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

Past performance is not a reliable indicator of future performance. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value.

Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.

Passively managed funds invest by sampling the index, holding a range of securities that, in the aggregate, approximates the full Index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index

The Fund may invest in companies within the cryptocurrency, digital asset and blockchain industries that use digital asset technologies or provide products or services involved in the operation of the technology. The technology relating to digital assets, including blockchains and cryptocurrency, is new and developing and the risks associated with digital assets may not fully emerge until the technology is widely used. The effectiveness of the Fund’s strategy may be limited given that the operations of companies in the cryptocurrency, digital asset and blockchain industries are expected to be significantly affected by the overall sentiment related to the technology and digital assets, and that the companies’ stock prices and the prices of digital assets could be highly correlated. Certain features of digital asset technologies, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack. Restrictions imposed by governments on digital asset related activities may adversely impact blockchain companies and, in turn, the Fund. Companies within the cryptocurrency, digital asset and blockchain industries may also be impacted by the risks associated with digital asset markets generally.

The Fund may invest in companies that rely on technologies such as the Internet and depend on computer systems to perform business and operational functions, and therefore may be prone to operational and information security risks resulting from cyber-attacks and/or technological malfunctions. Successful cyber-attacks against, or security breakdowns of, a company included in the Fund’s portfolio may result in material adverse consequences for such company, as well as other companies included in the portfolio, and may cause the Fund’s investments to lose value.

Concentrated investments in a particular industry tend to be more volatile than the overall market and increases risk that events negatively affecting such industries could reduce returns, potentially causing the value of the Fund’s shares to decrease.

The Fund is actively managed. The sub-adviser’s judgments about the attractiveness, relative value, or potential appreciation of a particular sector, security, commodity or investment strategy may prove to be incorrect, and may cause the Fund to incur losses. There can be no assurance that the sub-adviser’s investment techniques and decisions will produce the desired results.

The value of certain of the Fund’s investments in cryptocurrency ETFs and ETPs that invest in crypto assets and in publicly traded securities of companies engaged in digital asset-related businesses and activities are subject to fluctuations in the value of the crypto asset, which may be highly volatile. The market for crypto asset futures contracts may be less developed, and potentially less liquid and more volatile, than more established futures markets.

The Fund’s use of options involves speculation and can lead to losses because of adverse movements in the price or value of the underlying stock, index, ETF, ETP or other asset, which may be magnified by certain features of the options. The Fund’s successful use of options depends on the ability of the Adviser to forecast market movements correctly.

Companies that provide products or services that are supporting or accelerating the disruptive potential of novel technologies (“Transformative Tech Accelerators”) are engaged in emerging industries and/or new technologies that may be unproven. Transformative Tech Accelerators are vulnerable to rapid changes in product cycles, and may have limited product lines, markets, financial resources or personnel. Companies that rely heavily on technology tend to be more volatile than the overall market and are subject to additional risks specific to their industries. Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs

Brokerage commissions and ETF expenses will reduce returns.

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Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., member FINRA, is distributor for SPDR® S&P 500®, SPDR® S&P MidCap 400® and SPDR® Dow Jones Industrial Average, all unit investment trusts. ALPS Distributors, Inc. is not affiliated with State Street Global Advisors Funds Distributors, LLC. SSGA Funds Management, Inc. has retained Galaxy Digital Capital Management LP (“Galaxy Digital”) as the sub-adviser. State Street Global Advisors Funds Distributors, LLC is not affiliated with Galaxy Digital.

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