Adam Grossman: Asset Allocation Is an Investor’s Best Defense

Episode Summary

Executive Summary: Adam Grossman explains why his fixed-fee firm Mayport uses a flat-fee, index-fund-based model, and how that approach aligns with his broader philosophy: keep investing simple, focus on retirement planning, and resist needless complexity. He also discusses Humble Dollar’s evolution after Jonathan Clements, emphasizing behavior, cash reserves, Social Security timing, AI’s role, and why stocks are his preferred long-term inflation hedge.

Main Topics: Humble Dollar and Jonathan Clements’ influence (Priority: 5/5): Grossman recounts how he began writing for Humble Dollar in 2016, how Clements mentored him through extensive editing, and how the site now operates under Elaine Clements with a small group of curators and contributors. Flat-fee wealth management at Mayport (Priority: 5/5): He explains why he founded a fixed-fee firm: he viewed asset-based fees as illogical because service effort often doesn’t rise with portfolio size, and he preferred a simple, transparent pricing model. Retirement-focused client base and planning process (Priority: 5/5): Mayport’s flat-fee structure naturally attracts larger portfolios, which means clients are mostly near or in retirement; the firm focuses on retirement planning, cash flow, and portfolio resilience. Behavior, market volatility, and the role of cash (Priority: 4/5): Grossman argues against overemphasizing 'behavioral management' and instead uses history, asset allocation, and cash/bond reserves to help clients understand how long they can fund spending through downturns. Social Security, spending, and retirement flexibility (Priority: 4/5): He supports delaying Social Security when possible, but stresses that personal circumstances matter. He also favors broad budgeting categories and cautions against over-optimizing every expense line. Inflation, asset allocation, and skepticism toward alternatives (Priority: 5/5): Grossman says TIPS help but are imperfect, stocks are often the best inflation hedge, and he is skeptical of gold, Bitcoin, commodities, and most alternative assets as necessary portfolio tools. AI, reading, and investment writing influences (Priority: 3/5): He sees AI as a useful productivity and educational tool for both advisors and clients, and cites a range of finance writers and books that shape his thinking, including Cullen Roche, Jason Zweig, Bill Bengen, and others.

Key Arguments: A flat fee is more logical than charging based on assets because portfolio management effort often does not scale meaningfully with portfolio size. A simple strategy built from index funds, cash, and high-quality bonds can serve most retirement clients well. Clients’ needs vary over time, but workload tends to average out across the client base. Cash should be treated separately from bonds because bonds can and do lose money, as seen in 2022. Stocks are, in Grossman’s view, the best long-term hedge against inflation because companies can pass through price increases. Social Security claiming should balance math and personal preference; mathematically, delaying to 70 is usually best, but life circumstances can justify earlier claiming. Rules of thumb, such as allocating by age, are useful only when they fit the specific client’s circumstances. Underspending in retirement is less problematic than overspending, and advisors should avoid forcing naturally frugal people to spend in ways that make them unhappy. Giving money to children during life can be more useful than leaving everything as a bequest, especially given housing, childcare, and tuition costs. AI is more likely to augment advisors and clients than replace them, serving as a research and starting-point tool rather than a final decision-maker.

Data Points: Submissions edited by Jonathan Clements: About 400 - Grossman says Clements edited roughly 400 of his Humble Dollar submissions over the years. Year collaboration began: 2016 - He first contacted Jonathan Clements in 2016 and began contributing to Humble Dollar. Traditional advisory fee model: About 1% of assets - Grossman criticizes the standard asset-based fee structure used by many investment advisors. Bond market loss in 2022: More than 10% - He cites the aggregate bond index’s decline to illustrate why cash and bonds are not the same thing. New York MTA revenue decline in 2020: 96% - Used as an example of how municipal bonds were not as safe as many investors assumed during the pandemic. Typical withdrawal reserve target: 5 to 7 years - He suggests retirees keep five to seven years of withdrawals in bonds and cash to protect against bad market timing. Age referenced for Social Security: 70 - He says the math generally favors waiting until age 70 to claim benefits. Frequency of portfolio reviews: Every month - Mayport reviews every client portfolio monthly. Client meetings: Twice a year - He says meetings typically occur in the fall and spring.

Pivotal Quotes: "It wasn't for stockpickers, it was not for gunslingers, it was for people who wanted to take the kind of simple path to wealth." — Adam Grossman: Grossman describing Jonathan Clements’ original vision for Humble Dollar. "There are two answers to every financial question. There's what the math says, and then there's how you feel about it." — Adam Grossman: His framework for Social Security claiming, spending decisions, and other personal finance tradeoffs. "If you can recite your financial plan standing on one foot, then that's the ideal plan." — Adam Grossman: His emphasis on simplicity and clarity in retirement planning.

Implications: Listeners should expect fewer financial “rules” and more individualized planning: keep costs transparent, build cash reserves, delay Social Security when feasible, and focus on resilient portfolios rather than chasing complexity or fashionable alternatives.