‘Failure Is Not an Option.’ Lessons Learned From High Expectations

This podcast is brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.

Hello and welcome to Barron's The Way Forward. I'm Greg Bartolus, and my guest today is Nelre Bacha-Ali, Senior Financial Advisor, Managing Director, Investments, Wells Fargo Advisors. Welcome to the program.

Thank you. Thank you for having me.

Well, my pleasure. 2022 threw a lot of curveballs at investors. Tell me how advisors should be adjusting for that if at all, and if so, how, how much, for whom, et cetera?

Well, you know, I got to relate to my clients. I'm big on the planning. So every year at the end of the year, we're always, you know, putting plans together for the following year. But I'm also making sure that it's focused on what their goals are. So when you're looking at a bear market, and I always try to tell my clients, we're going to, we're going to go through bear markets. The market does not just go singly up. We're going to have this volatility. Here and there, and I actually think that's good for the market. I think it clears up a lot of things. But with that risk, what I try to focus on is what does that mean for them today? They get— they hear a lot of news, they're hearing a lot of noise out there. So I want to make sure, one, we're having those meetings and being very proactive with them, but really focusing on what it means to them. And 99% of my clients, most of it means, hey, we're still okay today. You still have a roof over your head. You have food in your belly. Even with inflation fears, yes, it's going to cost more for those vacations, but guess what? You can actually afford that. So I jokingly like to say I'm here to remind my 1%ers that they're okay. And so that's a big deal on there. But a lot of it is noise. It's, you know, the fear and trying to just kind of walk them off the ledge. And so So what I would say is definitely making sure you're having those conversations, giving them realistic views of what their portfolio means for them. And a lot of my clients, they're, even though the market's down in a bear market, they're still up over the longer period of time. 'Cause, you know, I've had these clients for 10, 20 years. And so, you know, the last 5 years have been quite kind to us.

But, and I've read you once said that you try to call them before they call you, right?

Yes. Yes. That, I think that's probably the biggest thing is just making sure I'm getting in front of them. So when I'm talking to my team, my whole thing is who haven't I talked to in the last 30 days? And it's really just wanting to— and it's just a call. I try to keep it conversational, check in to see how they're doing. And I call it a temperature check. Usually when I'm having meetings, the one thing I will end with after we've gone over everything, we've talked about planning, estate, and, you know, everything, everything's happening with inflation and the stock portfolios. And, and I'll say, okay, What haven't I talked— what's keeping you awake at night? That's my last kind of, tell me what's keeping you awake at night. And it usually is something funny like my shoulder. And so they're, you know, as I, as we start to talk about everything that's happening, they're realizing, you know what, you're right. I'm, I'm, we've been, a lot of them, they've been through it before. So we, that actually helps. But a lot of my newbies, I want to make sure we're, hey, I know you haven't been through a down market. Let me explain what, you know, and then I peel back the layers of their holdings. You know, here, let's talk about some of these companies and, you know, what's the likelihood. A lot of these, you know, companies you can see as you walk down the street. Where'd you spend your money this week? 9 times out of 10, they're probably publicly traded companies. So, you know, as bad as it feels, I don't think the world's coming to an end. I'm not sure, but if we're here in about 5 years, there may be some sincere buying opportunities, but we need to make sure we're strategic and smart about it.

Right. I mean, it's, as often has been said, this country has endured world wars, political assassinations, 9/11, et cetera. And yet you look at a long-term chart of the S&P or the Dow, it's just a slow, steady grind upwards. So—

Exactly. Exactly. So it's, we're going to have corrections and I stress corrections, not crashes. I think that's really important. I think that, you know, what you hear in the news or different, either flipping the channels, You know, fear sells. And so it's like, oh, the market's down 700 points, the world's coming to an end. And it's like, no, it's not, you know.

Yeah, no, it's very true. I mean, conflict results in ratings and tension. And sadly, some places exploit that dynamic more than others.

My job is to calm them down. And, you know, we have conversations and it can, depending on the year, you know, the conversations can go from markets to political and all. How does this affect and, you You know, you're fine.

Yeah.

Yeah.

I, there was a, I think it was an interview you did with us. You, you said, um, specifically to clients, uh, for money that they don't need for, for at least a year or more, you said, hey, you know that uncomfortable feeling you're feeling? That's the buying opportunity.

You're right.

And there's so much truth to that. I mean, when, when an investor's finger is hovering above the enter button where they're looking to sell, oh my gosh, precisely at that moment is probably when it should not be the sell button, but the buy button. Or at least just pull your finger or away from the keyboard, but it's such a fascinating dynamic.

Absolutely. Making sure you're allocated properly, making sure, you know, you got sound companies and things. But yeah, particularly dividends. I love dividends.

Love dividends too.

Pay you to wait.

Exactly. But you know what's interesting? Just a little bit of a sidebar here though, is like you think about now so many investment conversations are like how to squeeze out a little yield and, you know, cash is king and this is the whole zeitgeist right now. And I wonder, I'm not saying, but I just wonder if in hindsight this will be seen as like a bit of a risk-off moment because the psychology is that like the top of the internet bubble or when greed is really in the air, you would never have that conversation about yield. It would always be, so it's hard, you know, it's interesting to see. And over time this all levels out, but.

Yeah, I mean, cash is, you know, getting 4 or 5%.

Yeah, I mean, on the other hand, you can't disagree with that either. Exactly. It's pretty sweet.

Yeah, I had a client the other day, they're like, is that true? You know, we're, "We've, you know, we're getting 3, 4, or 5%." I'm like, "Yeah, well inflation's like 8 or 9 right now." So it's always going to be, you know, it's higher simply, but the cost of living is also higher. So cash is always slightly below what it costs to live.

Yeah, yeah. But right now at least cash and bonds for the first, actually look, you know, appealing.

Look kind of appealing. Yeah. So, you know, there's some, there's some opportunity there.

Yeah. Tell me what else are you hearing from clients and what else do you find effective in your communications? I mean, you mentioned the regular contact is helpful. Anything else?

—You know, don't discount their fears. I don't, I don't mock it. I actually lean into it. So when, you know, every now and then we all have the client that's just may call and, you know, make crazy accusations about the world. And I actually will lean in and go, tell me about this world. What does it look like? And, and I'll say funny things, you know, particular grocery stores that are in our area. I'm like, is that grocery store open? Yeah. Well, what do you mean? I'm like, I'm just wondering, you know, because the last correction, it was, you know, we had clients that were Gotta move out and just— it was gun, gold, and bullets. You know, that was— I'm like, okay, I want you to take your, you know, your block of gold, go to the grocery store, get me a loaf of bread, and come back with the exact change. They were like, oh yeah. I'm like, yeah, probably if we're still here. So it's trying to bring some levity, but also some realistic things. And I just use their view. I kind of put a mirror up and go, okay, this is what you feel like. Let's walk through this journey.

That tends to get them off like, "You're right, you got a good point." Yeah, let them come to the conclusion on their own as opposed to you just saying, "You're wrong." Let them explore it.

Exactly, so I think that is a good thing just to get people to kind of see that. So that's always been a, I've always been successful in being able to kind of walk them through. And so I always say, when you've got a client that's really fearful, they genuinely feel that way, You know, let them hear them out. Let's have a conversation and then start point by point getting it through. 9 times out of 10, they're probably going to listen. You're going to have very few that are just like, okay, well, now we're going to decide how much do we want to, you know. So if a client is just to the point where they're like, I've got to do something, I'm usually saying, okay, do you want to do 10% or 20% of it? And I do that automatically so that they are off of thinking, I want to sell everything. 'Cause my whole objective is I'm trying to help you not blow up your portfolio on there. And so by giving them some control, they'll start. And what I find is that they usually start talking down like, no, I don't need to do that much. I don't need to. And then I said, well, let's put this to the side. This is our pillow. And then what we'll do, I say markets are still, we may be able to get back in at a lower valuation. So actually this last month has been really good because I think what, I think the quarter before was, you know, really a low time. And so it was a great time to kind of get back in. So yeah, clients are feeling a little bit better. Yeah, exactly.

So, so in terms of the concerns, obviously the most direct and obvious one is when the market goes down a lot, that often correlates with fear. Right. Not a surprise. And putting aside that, you know, the shoulder or whatever might be bugging a client, are there any other things or patterns that you're hearing that are emerging in recent years that don't fall under the rubric of falling markets or random ailment?

You know, I'm all about taking advantages of crisis. And so we've had really, really good years in the last several years. The biggest, you know, the biggest complaints I've had in great markets is, oh my gosh, did you see my tax liability? So this year markets are down. You know what, we may have some tax harvesting opportunities on there. And so a lot of, particularly, you know, high-income earners, I'm getting on the phone, we're having the conversations like, you know, we've got some opportunity here. Maybe we can do some tax harvesting and doing some adjustments. That actually has been a good thing because that kind of gets them off of markets being down, but actually saying, listen, we need to, you know, let's harvest this, but then we're going to look at this opportunity to get back in in some areas. So I think the biggest advantage is being able to kind of tax harvest some losses and get them positioned, you know, for the following year. But yeah, most of my clients, like I said, it's all about the plan. So I always tell other advisors, I don't know how you do this without the plan in place because if, you know, I don't really track the market day to day. I'm really looking at what's, you know, what's important over a period of time. And if I've done my job, we probably already have cash for our day-to-day needs anyway. I call it the 3 buckets of money. And so the first bucket's that river, that's your checking. And the second bucket's that emergency. And I always, towards the end of the year, want to fill that bucket up based on things that we're expecting for the following year. And the third bucket, that's our, you know, that's the scary part that I handle, the long-term. And if I've done my job, We've got time to get through the storm. Excellent. Excellent. That makes sense. Yeah, absolutely.

So now I want to just pivot a little and talk about some of your personal accomplishments, not in this field, but rather as a standout athlete. So you're a 6-time NCAA All-American in track and field. You've won a bronze medal in the 1995 World Indoor Championships. That's very impressive. So tell me, a little about that and how your success there has transferred over or inspired you or, you know, applies to what you're doing now.

So I ran track, and I actually started in high school purely for social reasons, just because I like to talk. But I think the biggest thing is that I probably early in my life, I won something and I like that feeling. I learned very early that that was a really cool thing. But it also required you to, you know, you have to work hard for that, you know? So things are not necessarily just given to you. And so for me, I'm one of 8 kids. My parents were amazing, but they, they, it was all about education first. So you had to keep up your grades. So I always had to negotiate if, you know, if there was extracurricular activity and things of that nature. But running, my dad would say to me, you know, because there was 8 of us. So if he was coming to an event, he's like, look, "Are you gonna win? 'Cause I don't wanna come out here and watch you." And I was like, "Dad, you know, really?" So it was kind of that thing where if you're gonna do it, like you got my face, do it right. So I learned early on that that was important. But when you translate off of track and field, out of sports into real life, it's kind of the same type of mentality. I, you know, I'm not afraid of working hard on there. I also, I'm very goal set oriented. I'm all about the goals. For me, I have to have something I'm working towards. It's just how I'm wired. So as soon as I've achieved something, I've got to put something else in that place. And so when I was starting out in this industry 20-plus years ago, I just focused on what I knew I could do. And as my dad would say, you know, that which made you successful in everything else is going to be the same thing that'll make you successful in whatever ventures you have. I focused on, you know what, I could do this. I'm smart, I'm capable. It's just going to take me some time. And I, you know, I ran my numbers when I first started on what I needed for my family, for me to justify walking out that door. And over time, you know, I call it what I need to do today. So I may have a yearly goal of this is how much I want to produce or how much assets I want to bring in. And I break that down over the month and I break that down over 20 days in the in the day, in the month of the day. And so I know exactly what I need to do today, how much assets I need to bring in. And that actually helped because, you know, just it's kind of, you're in the grind and when you look up, all of a sudden it's like, oh, I didn't realize I achieved, because I wasn't focusing on the whole 12 months. I was just focusing on what I need to do today.

Right.

That makes sense.

It absolutely does. And that, I mean, that advice applies to other areas of life. For example, someone who's an aspiring author, they might talk themselves out of writing the book because they, think about biting it off in one big bite. It's like, oh, I can't, book takes forever, but it's like—

About 3 pages. Exactly.

Even 2 pages a day, right? Even 1 page a day, anything to incrementally move the ball forward, and then hopefully it'll gain traction and you'll be more productive.

You've got to be that. And I think also you've got to give yourself kudos because I think the world is always— there's a lot of negativity out there. I am a big believer of trying to remove as much toxicity as possible. And so I don't necessarily tell everyone what I wanna achieve because a lot of people just don't have that vision. But I focus on what I need to do and then I keep doing it. So that's kind of how I'm wired too, which I don't know if that's healthy or not, but sometimes I don't tell, you know, I keep my circle small on what I wanna do 'cause I want people to, I want certain people to hold me accountable. I don't necessarily tell everyone because sometimes people just aren't— they don't see it. So, you know, when I started out and said, well, I'm going to do this, or, you know, I'm going to be a million-dollar producer, you know, God, you don't look like, you know, you don't have the same look as other people are million-dollar producers. What does that even mean? So now I know I got to do it.

Meet that challenge. And what was the pivot? What inspired you to enter, you know, the profession?

Well, it was actually in college. I was— I went to Georgia Tech. I was an engineer major, electrical engineering major, because my dad said I was good at math and science. So I became an electrical engineering major for 3 years. I should not be an electrical engineering major. So I took— I took some classes over at the business school, actually, just to I thought it would be just a reprieve during the summer. And a professor literally saw me and he said, why are you over at the engineering school? You should be at the business school. So I got introduced to investing in a class where we had to put together, it was a risk analysis. You put a stock portfolio together and that was my first introduction to it in college. And I thought, man, this is cool.

You liked it immediately? Yeah, I liked it immediately. And what did you like about it?

I just, the numbers that, you know, it made sense to me. Numbers have always made sense to me. And I just, you know, stocks and, you know, these companies and valuations. And it was just, I was just really just the nerdy part of it that I just thought that was so cool. And the fact that wealth is built by just everyday, you know, companies that are being spent. And so I actually, so that was my first kind of experience with it. And then, you know, to be in an industry that's kind of all commission and everyone's like, oh, that's scary. You want something on salary. But my dad was the one that says, you know, when you— if you find something you love to do and you can get paid for it, one, you'll never work a day in your life, but it'll be something that you will invest in. So when you have your own business, you, you know, it's going to be your baby. You're going to put everything into it. So if you're going to work hard, you might as well work hard for yourself. Yeah. So that aspect was really cool. But interesting, my father was concerned about me going into this quote unquote industry. He thought for, you know, he was thinking that as women back in the, I guess the '80s and '70s, he didn't think it was— I was like, Dad, you know, it'll be fine. It'll be fine. You know, he's like, I don't know. You know, I was like, Dad, you're a lawyer. Nobody likes attorneys. Come on. It'll be fine. So, but he was very happy. He says, you know, I don't know what it was. He was more worried about some movie he saw about how things are. I'm like, ah, that's nice. It'll be fine. But yeah, that was the first exposure to it. And it was something in the back of my head as I was working. I wanted to get back into it. So when that opportunity happened, I went head into it. And luckily, you know, it worked out. Yeah.

And you've mentioned that he instilled in you a mentality that failure was not an option.

That is true. And my first manager actually said that when he hired me. He's like, failure's not an option. And I was like, okay, that's great. And at the time, I mean, you know, one of the things I've talked about when I came into this industry, I mean, it's been 20-plus years. And I think, I think my class that trainees, maybe like 100 of us, I don't know. And there was maybe 5 women and I think I was the only person of color in there, but it was really kind of cool. We had a great time, but I think of all of us, I think there's maybe still 5 of us in the industry. And they talked about how hard it was. You know, it's only about 1 or 2% of people are gonna succeed. But for me, I think just coming from a big family, I have 5 brothers. Anytime my brother would say, "You can't do it," I'm like, "Now I've gotta do it." So I've had people who've said, oh, you know, this is not, you know, this is gonna be hard. I'm like, ah, it's not that hard. I got this, I'm gonna do this. So, and I like people, so I think that's important, so.

Yeah, tell me more broadly about diversity in the industry, what your take is on where we are, just open-ended. Yeah, I'm just curious what you think are the good, bad, et cetera.

Yeah, I mean, there's a lot of opportunity. There's a lot of opportunity for growth and, you know, We've gotta do better. I'm at the place in my life, I've been in this industry for 20+ years. I don't think the, I think women have grown a little bit more. I think we're at, I think I just heard we're at 18%. I think we were at 12, 12 or 10 when I, I think we were at 12 when I started 20+ years ago. People of color, I think we've been at 1%. I don't think, I think that may be negative now. I don't think we've grown at all since I've been in the industry. So I'm at the place in my life, I've got a great practice, I've got a great team. I realize that I'm no longer gonna wait for someone to do it. I'm gonna help and try to, I wanna bring people on the team that are diverse, but also have that right, the right characteristics to be successful. So that's the first thing. But I wanna be purposeful in making sure that I give opportunities to others that didn't necessarily have that opportunity things that I wish I had when I started out. So I just think it's, it's my job to make it a little bit easier. So, and this comes back from just how I was raised. My parents were very big about giving back and they would, my mother would always say, it's not if, but when you get to the top, you gotta go back down. 'Cause if you don't, what's it all for? So for me, that's just a personal thing. It has nothing to do with, corporate industry is just something I'm driven by. But I would like to see more women, more people of color, more diversity in our industry. And I just decided I'm going to, you know, I'm going to do what I need to do for helping my team and be very purposeful of bringing on other, other advisors. I've got a junior now that I brought on last year. She's phenomenal. I mean, absolutely phenomenal on there. And so I'm just happy to see her flourish. She's gonna rock it. And so that just gives me joy. So I'm kind of corny like that. It's the mom in me.

Well, that's great that you can share your distilled wisdom. I mean, with everything you've learned and you can help pass it on and hopefully bring in people. Yeah. Is there an actionable idea you'd like to share for listeners about a key takeaway from today that they can maybe implement to help them?

I know I'm probably preaching to the choir. Planning. I think that's a big deal. You know, for those that are younger in the industry, I would say definitely invest in yourself for accreditations. I think CFP and things of that nature are definitely going to add credibility to your practice. And then also for those that are, you know, very successful in your practice as you're bringing people on the team, you know, I think it's good to make sure your team does look like America. So that would be the things I would give to him.

Excellent. Well, it was an absolute pleasure chatting with you today.

Thank you for having me on the podcast.

Oh, it was terrific. It was excellent. Thank you so much. Thank you.

Thank you.

My guest was Nelre Bacca-Ali. For more advisor-specific podcasts, please check out barons.com/podcast. For The Way Forward, I'm Greg Bartalis.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.