Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Speaker 1: Wait inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus global business, finance and
Speaker 1: tech news. The Bloomberg Business Week Podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: I'm Carol Masser, and I'm live here in Huntington Beach
Speaker 2: at future Proof. Barry Ridtholtz, by the way, is going
Speaker 2: to join us in such in just a few minutes.
Speaker 2: He's my co host over the next couple of days,
Speaker 2: very involved in future Proof, so he's going to join
Speaker 2: our discussion in just a moment. Right now, though, I
Speaker 2: want to get to the individual who's responsible for creating
Speaker 2: this just a couple of years ago and responsible for
Speaker 2: putting it on.
Speaker 3: We're talking about Matt Middleton.
Speaker 2: He's a former growth strategy director at the media publisher
Speaker 2: informa co creator of the financial advisor conference wealth Stack.
Speaker 2: He's the founder and CEO of future Proof and joins
Speaker 2: us here. And I should say welcome, but thank you for.
Speaker 4: Environment Oh, thank you for being here.
Speaker 2: It's amazing tell us about this event, in particular because
Speaker 2: I've been to a lot of investment conferences. Everyone has
Speaker 2: its certain feel, but this is something different. And I
Speaker 2: don't know, is it just that it's outside and at
Speaker 2: the beach or something else.
Speaker 4: It's a little bit of everything.
Speaker 5: So if we created this in twenty twenty two, with
Speaker 5: the original thought being in twenty twenty, if we recall COVID,
Speaker 5: the events in industry came to a screeching halt, right,
Speaker 5: And so at that time most in the event space
Speaker 5: looked at it and said, well, we're going to go
Speaker 5: digital because content digital makes sense. People aren't going to travel,
Speaker 5: risk their health, leave their family, and as an industry,
Speaker 5: we're a relationship business, right, and so FaceTime is really important.
Speaker 5: So we had this idea very early on that content
Speaker 5: is important, but more importantly is the networking and the experience.
Speaker 5: And so how do you create that in a live
Speaker 5: event setting? And unfortunately, most events that are positioned inside
Speaker 5: a ballroom or a captive space, right don't afford you
Speaker 5: the freedom, the casual nature and tone. Right. This is
Speaker 5: the first event that I've ever worked T shirt at
Speaker 5: in our industry, and it's fitting right, I fit right in,
Speaker 5: And so the elements are you know, it's outdoor, it's casual.
Speaker 5: You have really interesting senior level people here. They're open
Speaker 5: to sharing, right. And then we use network, we use
Speaker 5: technology to better connect the industry. So, while this event
Speaker 5: has gotten bigger, if you come as an individual with
Speaker 5: a key objective, it's likely that that objective will be
Speaker 5: meant either by the people you meet or the content
Speaker 5: you could attend through the five stages.
Speaker 2: Yeah, I have to say there is something about things
Speaker 2: being more casual. I definitely overdressed, and tomorrow it'll be different.
Speaker 2: I did where flip flops over. But having said that,
Speaker 2: there is something about putting in a casual setting. And
Speaker 2: while I always do see meetings that investment conferences, it's
Speaker 2: just everywhere I look, it's people stopping, there's tables, everybody's
Speaker 2: sitting down talking. I mean there's a lot of activity
Speaker 2: and interest when you thought about the subjects that you
Speaker 2: wanted to cover. Also, I was asked by my co
Speaker 2: ancher who's back in New York, he said, what about
Speaker 2: the FED?
Speaker 3: Is that something? I mean, you're covering the important topics
Speaker 3: that are out there as well.
Speaker 4: Yeah.
Speaker 5: So the majority of this audience is RIA, right, and
Speaker 5: the RAA is the fastest growing channel within the investment
Speaker 5: management ecosystem. And so these folks are here to look,
Speaker 5: how do they develop their business, how do they recruit
Speaker 5: retain right? They want to grow access to investment content. Yes,
Speaker 5: it's plentiful here, but it's far ranging here because there's
Speaker 5: more than just the investment content that they come for.
Speaker 5: They want to come for practice management, they want to
Speaker 5: come for what's happening with technology and so bas on
Speaker 5: a very wide swath of content and therefore bring across generational,
Speaker 5: cross functional ecosystem versus just the standard investment conference or
Speaker 5: just the standard you know, technology conference. Yeah.
Speaker 2: I mean, these guys are running businesses, right, I mean
Speaker 2: one of the guests that we're going to talk about
Speaker 2: is you know, legacy, like the involvement. You have got
Speaker 2: this entrenched firm, and then they've got to think about
Speaker 2: what happens after either a founder, right or co founder
Speaker 2: you know, either leaves the firm, seals the firm.
Speaker 3: You have to think about some of those issues.
Speaker 5: I mean, they're predominantly small businesses, right, So when you
Speaker 5: think about this, you know, many years ago when this
Speaker 5: channels arted, these folks were building firms locally and then
Speaker 5: it grew and then they maybe acquired someone and became national,
Speaker 5: and now they're looking at it. Well, you know, I'm
Speaker 5: in my mid fifties and early sixties. What's my secession planned?
Speaker 1: Right?
Speaker 5: I want to leave a legacy, I have a team, right,
Speaker 5: But I also want to retire and relax and enjoy
Speaker 5: my life as well. And you know it's a culmination
Speaker 5: of all of this. So you'll see at the content here.
Speaker 5: We'll have plentiful investment focused content, but we also have
Speaker 5: a state planning. We also have you know, technology focused right,
Speaker 5: how to build your tech stack as an entrepreneur. You know,
Speaker 5: there's over two hundred and seventy five you know vendors here.
Speaker 5: And they're not just here, you know, handing out fact
Speaker 5: sheets like the old days, right, they're there, they're demoing,
Speaker 5: they're talking to folks. They're basically getting feedback to how
Speaker 5: to better serve this ecosystem.
Speaker 3: How did you know that there was room for another
Speaker 3: investment conference?
Speaker 4: I didn't.
Speaker 3: No, No, that's fair.
Speaker 5: Honestly, it's a very crowded marketplace, you know. The you know,
Speaker 5: I've been doing this for fifteen years. My view was
Speaker 5: as of someone who attended all these events during COVID,
Speaker 5: I kind of said, do I really want to, you know,
Speaker 5: go do this again? Right where you go to these
Speaker 5: events and you're trapped, right and you're consuming content twelve
Speaker 5: hours a day. The only time you break away from
Speaker 5: this beautiful resort is to go get a steak dinner.
Speaker 5: And to me, that felt not organic. And so the
Speaker 5: thesis really here and most.
Speaker 4: People look at it. We call it a festival.
Speaker 5: It's bright colors, it's everything that is not traditional to
Speaker 5: our industry.
Speaker 3: But the real it almost has a Barbie feel.
Speaker 5: Hence yeah, pay yes and my skin tone right now
Speaker 5: at the sunburns. But really, when you think about it
Speaker 5: at an essence, right, the outdoor element is just a
Speaker 5: way to bring this out, which is we're all humans
Speaker 5: at the end of the day, and we want to
Speaker 5: connect people financial professionals in our industry at the human level,
Speaker 5: which means what right we want to connect people based
Speaker 5: on their hobbies, their interests, their lifestyle. We believe that
Speaker 5: as an industry, if we could find those connection points
Speaker 5: where you could make new connections or further your existing
Speaker 5: relationships in a very organic way, well then maybe we
Speaker 5: could actually do better at getting business done naturally. In
Speaker 5: our industry and further the growth of all different sectors here.
Speaker 5: And so that's why you'll see we have a music
Speaker 5: conference tomorrow, we have culinary demonstrations.
Speaker 1: Right.
Speaker 3: You use a lot of food around.
Speaker 4: Of course, there's no shortage of food here.
Speaker 3: It's a good thing.
Speaker 2: Having said that, you know what's interesting too, is I
Speaker 2: think we're going to talk with the CEO of Betterment
Speaker 2: and thinking about the next generation of investing and I
Speaker 2: just even think about the next generation of how we
Speaker 2: as financial professionals are we as media cover it that
Speaker 2: things are changing, right, And like I said, this has
Speaker 2: got a very different feel and the approach to what
Speaker 2: you guys is doing is very different from I feel
Speaker 2: like what's out there. Yeah, not to not to pooh
Speaker 2: pooh or criticize anything that's out there, but you do
Speaker 2: see an evolution.
Speaker 5: Well, I mean what's important here is that we have
Speaker 5: a multi generational audience.
Speaker 4: Right.
Speaker 5: You have folks that are here that we were talking
Speaker 5: about secession planning. They're thinking about, all, right, what's where's
Speaker 5: my firm going? Right, how do I keep my employees
Speaker 5: engaged and involved? Or maybe hey, I'm looking to sell
Speaker 5: my business? Right, And then you have the opposite spectrum. Right,
Speaker 5: you have folks that are sitting here and saying I'm
Speaker 5: just getting started, right, I want to meet folks like Barry, Right,
Speaker 5: I need to understand Ary Bhill Crah.
Speaker 3: So let me ask Matt introducing people up.
Speaker 6: That's right, I just introduced the strategists talking about what
Speaker 6: they see coming in the coming years. But Matt, your innovation,
Speaker 6: your creativity, your genius really is what led to us
Speaker 6: doing this big outdoor event. How far can we press
Speaker 6: this concept?
Speaker 7: Where you going to go with this?
Speaker 1: Yeah?
Speaker 5: So I think this event could scale to ten thousand.
Speaker 4: Right.
Speaker 5: The RIA space is rapidly growing, and there's no shortage
Speaker 5: of people coming each and every year, and there's certainly
Speaker 5: no shortage of people supporting these types of events.
Speaker 1: Right.
Speaker 5: So you know our thesis is to have an outdoor
Speaker 5: festival type, very modern approach to conferences and therefore serve
Speaker 5: the next generation.
Speaker 8: Right.
Speaker 5: We want these events to last for the next ten
Speaker 5: to twenty years, and therefore you need to think about
Speaker 5: who you're attracting to it. Right. So the generations that
Speaker 5: we attract are at every stage, right, It's not just
Speaker 5: we want.
Speaker 4: The CEOs at this stage that you know.
Speaker 5: In twenty years, they're not going to be in the bus,
Speaker 5: and so we think about it like that. So, going
Speaker 5: from this event, we announced future Proof citywide in March
Speaker 5: of next year, and that's gonna be in Miami Beach.
Speaker 5: We have several different retreats. We're really taking this future
Speaker 5: Proof concept into an enterprise business serving the entire wealth
Speaker 5: and asset management ecosystem.
Speaker 3: How about the French Riviera? Where else would we like
Speaker 3: to go? In Greek islands and real Greek islands?
Speaker 7: How about Bahamas?
Speaker 4: Back We're going to be in the Bahamas next October.
Speaker 7: I'm just saying, right October, Bahamas.
Speaker 3: Warren Cup, I'm just like planning it now. Good luck.
Speaker 4: Thank you so much, so much. I appreciate it.
Speaker 3: Yeah, thank you so much for inviting us.
Speaker 2: The founder and CEO of future Proof, Matt Middleton, all right,
Speaker 2: you are listening and watching Blueberg Business Week. We're gonna
Speaker 2: get David Kelly up there in just a moment, but
Speaker 2: I want to turn to you.
Speaker 3: Tell me a little bit about how things are going.
Speaker 7: So far, so far, so great.
Speaker 3: I mean, this is this is your event.
Speaker 7: Yeah.
Speaker 6: So the funny story with Matt was we were talking
Speaker 6: we had done events previously in before the pandemic. Yeah,
Speaker 6: and twenty one things were starting to open up again
Speaker 6: and at least take year to plan an event. Hey,
Speaker 6: we'd love to do an event again. How do we
Speaker 6: not make it a super spreader event? He's like, I know,
Speaker 6: We'll do the whole thing outdoors in California, which is
Speaker 6: brilliant and it's worked out fantastically. It's so much more
Speaker 6: enjoyable and so much so refreshing compared.
Speaker 3: To Are you surprised at how well it has done?
Speaker 6: I always there was a lot of skepticism when we
Speaker 6: first announced this, but we'd work with Matt and his
Speaker 6: team for years. I have a great deal confidence in him,
Speaker 6: and I figured, worse comes to worse, we'll land on
Speaker 6: our face and we'll spend a week in California.
Speaker 8: That's not the if.
Speaker 6: That's your downside, right, But it worked out great. That
Speaker 6: was four years ago. This is our third one, right,
Speaker 6: and we're thrilled with it.
Speaker 3: All right, Well, we want to We're also thrilled to
Speaker 3: have next US right now.
Speaker 2: David Kelly, who's joining us, he's the chief Global market
Speaker 2: strategis over at JP Morgan Asset Management with us on
Speaker 2: site at future Proof.
Speaker 3: Nice to have you here. You're very involved in this event.
Speaker 8: Yeah, really excited to be here.
Speaker 2: Well, tell me about the mood and the mood you
Speaker 2: are having right now. Thinking, you know, we've got a
Speaker 2: FED meeting. You know, we expect the FED to do something,
Speaker 2: But what's the mood. It feels like everybody's feeling pretty
Speaker 2: good right now.
Speaker 8: Well, I think that's right. I mean, it's been a
Speaker 8: very good year for markets, you know, the S and
Speaker 8: p FO. I've found that it's up eighteen percent a
Speaker 8: year to date. Bond eels are down. The economy is
Speaker 8: doing fine. I mean it's slowing down, but it was
Speaker 8: supposed to slow down, you know, but unemployment slow, inflations
Speaker 8: come down, so the backdrop is good. I think the
Speaker 8: financial industry is doing very well right now. And I
Speaker 8: just think that there's a little nervousness that that that
Speaker 8: the FED might somehow, you know, panic on Wednesday and
Speaker 8: scare people.
Speaker 2: Bill Dudley, former head of the New York Fed, you know,
Speaker 2: thinks the Fed should be more aggressive.
Speaker 3: I think that he should have done that. They should
Speaker 3: have done it probably already.
Speaker 8: Well, I agree that they should have started cutting earlier, Yes,
Speaker 8: but bringing interest rates down. It's like lowering a piano
Speaker 8: down from the fourth floor of a building. You need
Speaker 8: to do it slowly and carefully. And what I think
Speaker 8: the FED is the fact that initially you cut rates,
Speaker 8: you hurt the economy. Why is that? Because you know
Speaker 8: you talk about long and variable ags. What happened. There
Speaker 8: are three very bad things that happened with the FED cuts,
Speaker 8: and this is particularly going to be the case that
Speaker 8: they're cut by fifty. First of all, you squeeze the
Speaker 8: interest income of all those American consumers have got money
Speaker 8: in money market funds, particularly older Americans. Second of all,
Speaker 8: if a FED cuts fifty, then the thing that's going
Speaker 8: to immediately happen is on programs like this and all
Speaker 8: over all over American people can say, what are they
Speaker 8: so scared about it? They must see a Recessiony're gonna
Speaker 8: at all these numbers. So if I'm going to hire somebody,
Speaker 8: maybe I wait a while. I was going to buy
Speaker 8: a car, maybe I should put that off. That's what
Speaker 8: people want to wait and see. The third thing that happens,
Speaker 8: which is terrible, is that you know you're thinking about
Speaker 8: taking out a mortgage, You're gonna take it a more
Speaker 8: each day, you want to wait a while. I think
Speaker 8: I'll wait a while, right, I mean, if they're cut
Speaker 8: in fifty, are going to cut some more. The problem
Speaker 8: is they don't get this. I wish I could get
Speaker 8: people to understand this. There is a J curve effect.
Speaker 8: You actually hurt the economy before you help. But now
Speaker 8: when rates get very low're actually stimidating the economy. But
Speaker 8: it waits. You have to wait to get to that point.
Speaker 8: And that's what frankly, Bill Dudley doesn't get. That's what
Speaker 8: all the people are calling for aggressive cutting. Don't get
Speaker 8: this economy is fine, don't mess with it. So gradually
Speaker 8: take rates down, slowly the nothing going on over here.
Speaker 3: Don't take great adjustment.
Speaker 8: Just take it down. It's a fine economy.
Speaker 2: When you're working on somebody's back, right, you don't just
Speaker 2: it's you.
Speaker 8: Know, they're like, you know, it's like medieval medicine. I mean,
Speaker 8: you know, the most dangerous thing is when you're told
Speaker 8: the doctor's going to come to cry you because they'll
Speaker 8: probably kill you. I mean, just just amputation.
Speaker 6: So let's let's take this down a couple of months,
Speaker 6: quarter point, a half, a point, It really doesn't matter.
Speaker 7: It feels like they're way behind the curve.
Speaker 6: Where did they end up If not fifty, it's certainly
Speaker 6: not going to be fifty to fifty to fifty. Where
Speaker 6: do you see this going by the first quarter of
Speaker 6: next year?
Speaker 8: Well, there is I mean, I don't think they're way
Speaker 8: behind the curve. I don't think they should have pushed
Speaker 8: rights up high as high as they did. I think
Speaker 8: they should have started earlier. But let's not over estimate
Speaker 8: the importance of all this for the economy. The rates
Speaker 8: are too high because the economy is basically a good place,
Speaker 8: and you need to gradually bring rates down to a
Speaker 8: normal level. I think normal is probably three and a
Speaker 8: half to four percent of the federal funds, So you
Speaker 8: need to gradually do that. My preference would be if
Speaker 8: they and I think they use a Dolt plot, and
Speaker 8: I think this is the way that they can express this.
Speaker 8: What I would love to see on Wednesday is two
Speaker 8: dots in twenty twenty four and four dots next year.
Speaker 8: So you're going to take fifty basis points this year
Speaker 8: and then another one hundred basis points next year. I
Speaker 8: don't know if we'll see that or not, but I
Speaker 8: hope that that's what we see. But they don't need
Speaker 8: to do this aggressively. The damage they did by pushing
Speaker 8: rates up too high is already been done, but bringing
Speaker 8: it down too fast will actually make the problem worse.
Speaker 3: Recession off the table at this point, David.
Speaker 8: Recession is never off the table. What I say is
Speaker 8: we're not going to get an indulgenous recession. In other words,
Speaker 8: it's not something that's built in the system right now.
Speaker 7: External shock.
Speaker 8: It's got to be an external shock. I mean, I'm
Speaker 8: looking at.
Speaker 3: So do you roll at external shocks?
Speaker 8: No, of course we're going to know. The history of
Speaker 8: the twenty first century is nothing but external shocks. I mean,
Speaker 8: that's what happens, and eventually that'll get us. But it
Speaker 8: is important to realize that the traditional business cycle, that
Speaker 8: stress is already behind us. The point of twich high
Speaker 8: interest rates calls a collapse in investments, There has been
Speaker 8: no collapse in investments spending. There's been no colaps in
Speaker 8: GDP growth either. By the way, you know, GDP is
Speaker 8: up three point one percent a year of the year.
Speaker 8: We've in the second quarter. We think we got about
Speaker 8: two percent of the third quarter, So there's really no
Speaker 8: no particular problem there.
Speaker 6: So last question, why has so many economists got this wrong?
Speaker 6: Why are so many people expecting a recession that never
Speaker 6: seems to come?
Speaker 3: And just got about ten fifteen seconds?
Speaker 8: Well, I think because they I think they listen to
Speaker 8: the mood rather than read all the numbers. You've got
Speaker 8: all the numbers, imperfect, but you've got to look at
Speaker 8: all of them in order to get the right mosaic.
Speaker 8: And the mosaic looks pretty good.
Speaker 3: All right, Gonna leave it there. Great stuff, David Kelly,
Speaker 3: Thank you so much, David Kelly. Of course if JP
Speaker 3: Morgan Asset Management. Folks, this is BusinessWeek.
Speaker 2: We're at future Proof in California. Carol Masser, Barry Ridhilts.
Speaker 4: This is Bluebird.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: Tarl Master along with Barry Ridholts reading in. You're a
Speaker 2: busy man at these events.
Speaker 7: I run around, I do a lot of things to wear,
Speaker 7: a lot of hats.
Speaker 3: He wears a lot of hats.
Speaker 2: You know he also does of course Masters in Business
Speaker 2: at the money you run Rid Holt's.
Speaker 6: Management, Ridhults Wealts Management, I forget what you titled Farverstow
Speaker 6: billion dollars right, and then real money.
Speaker 2: Real money, which is why he's a great co host
Speaker 2: to have during this event because we are talking about
Speaker 2: the management of real money a lot of it. Want
Speaker 2: to get to our next guest because we're delighted to
Speaker 2: have with the Scott Danner. He's head of the Legacy
Speaker 2: division at the employee owned independent wealth advisory firm Stewart Partners,
Speaker 2: responsible for over thirty seven billion in client as it
Speaker 2: has that says of I think August twenty twenty four.
Speaker 7: Some real money thirty seve real money.
Speaker 2: Yeah, firm founded about ten years ago by former Morgan
Speaker 2: Stanley Barney managers.
Speaker 3: So you have to explain it, but like like who
Speaker 3: are these firms?
Speaker 7: Yeah, real firms.
Speaker 6: Smith Barney was a giant, So so legacy division. First question,
Speaker 6: what does that mean?
Speaker 9: So legacy is that next generation? You know, if you
Speaker 9: think about it, the succession epidemic in our industry is
Speaker 9: that the average age of advisors successful advisors is fifty
Speaker 9: eight to sixty two and there's a challenge. What do
Speaker 9: they do when they're ready to step down and there's
Speaker 9: a major gap. There are more you know, eighty year
Speaker 9: olds than thirty year olds in our industry and that's changing.
Speaker 9: You could see it here. But Legacy division is we
Speaker 9: had Freedom Street Partners our company. We were acquired by
Speaker 9: Stewart Partners last year, so I went to market brought
Speaker 9: our company. We had three and a half billion approximately,
Speaker 9: you know, a good sized real money firm as well,
Speaker 9: but we needed that next level and Stewart had not
Speaker 9: done acquisitions, so we now come in as the acquisition
Speaker 9: Mergers and Acquisitions division. Legacy just means that next generation,
Speaker 9: that legacy division, where we can help people that are
Speaker 9: looking for that next step in their practice or the
Speaker 9: final stary.
Speaker 2: Were you thinking about it when you sold your firm
Speaker 2: to Stewart, Like, were you thinking about legacy as well?
Speaker 9: Yes, so this is what we specialized in. So it's
Speaker 9: something that we had been doing. We built an entire
Speaker 9: model in and around that next chapter legacy. We used
Speaker 9: to say, you know, our job is to make you
Speaker 9: look like a hero on the way out, and we
Speaker 9: need to look like the hero on the way in
Speaker 9: to help you and your clients have continuity. So doing
Speaker 9: that at a thirty seven billion dollar firm is a
Speaker 9: lot more fun because we have a partnership, a great gym,
Speaker 9: gold high support of the team. They're phenomenal, and we're
Speaker 9: working together to build something special.
Speaker 6: So you have all these solo practitioners out there working,
Speaker 6: many of whom are running five hundred million dollars a
Speaker 6: billion dollars, how do they deal with the issue of
Speaker 6: successful succession planning? Clients have to know, Hey, if my.
Speaker 7: Guy's hit by a bus, I have to be able
Speaker 7: to access my money.
Speaker 8: It's funny.
Speaker 9: I don't think clients asked that question enough because if
Speaker 9: they did, our industry would probably look at it in
Speaker 9: a different way. Advisors don't have a very clean cut
Speaker 9: succession plan, and if they do, they're not super happy
Speaker 9: with it. So if we look at it, a lot
Speaker 9: of advisors are looking to go into the next chapter
Speaker 9: of their career with next gen advisors, and that means
Speaker 9: you have to do both. Like this event's a perfect
Speaker 9: example future proof. If you look around, there's so many
Speaker 9: young advisors that want to be a part of the
Speaker 9: next chapter of this industry, and you can't have succession
Speaker 9: without the next chapter of the industry. So if we
Speaker 9: look at these advisors that are looking for succession, it's
Speaker 9: really about identifying what's important to them, letting making sure
Speaker 9: that they know exactly what they're getting into when they
Speaker 9: when they do the transition, because that's a fear. They
Speaker 9: want to make sure their clients are well served and
Speaker 9: continuity continues. So there's so many things to think about.
Speaker 2: Scott, you know, I think about you know and Barritt.
Speaker 2: How many times we're talking about whether it's you know,
Speaker 2: Jamie Domit, JP Morgan Chase or Pick. You know, whether
Speaker 2: as you know, Bob Eiagrit Disney, you think about it.
Speaker 2: We talk about that so so much because who is
Speaker 2: in that top spot really determines the future trajectory of
Speaker 2: a company. Same thing though with a financial firm, right
Speaker 2: in terms of who's running it.
Speaker 3: I thought it was interesting.
Speaker 2: I think about the Bloomberg audience, like, if you are
Speaker 2: investing with a firm, you want to know what they're
Speaker 2: thinking because the change at the top can impact how
Speaker 2: well your investments or how they do as a firm.
Speaker 9: Yeah, I love I love the wisdom in our industry.
Speaker 9: I love the fact that there is no age that
Speaker 9: defines how good someone can be. But at the end
Speaker 9: of the day, a team approach is a great approach
Speaker 9: because if I have a demographic that identifies think about
Speaker 9: how you receive your paperwork. You know, if you're not
Speaker 9: getting it today with an app or a quick conversation
Speaker 9: or a fill in the blank versus the old ways
Speaker 9: where you were getting a pile of paper. You know,
Speaker 9: the generational shift is important, and it's our job to push.
Speaker 9: We push our parents in those ways. We push you know,
Speaker 9: the next generation always needs and then my children push me.
Speaker 9: So we have to continue to do that in the industry.
Speaker 9: And I think it's really a great thing for our
Speaker 9: listeners to think about as far as continuity, how does
Speaker 9: my plan continue when I move on? And that's what
Speaker 9: the Legacy Division is. Steward's all about, is helping the
Speaker 9: advisors create continuity plans that matter for their clients.
Speaker 7: So let's talk dollars and cents.
Speaker 6: Back in the before days when FED rates were zero
Speaker 6: and rias were thought of as this great, reliable, almost
Speaker 6: like a preferred stock issue once you had a great
Speaker 6: yield of seven eight nine percent and equity upside if
Speaker 6: there was acquisitions, people playing paying some pretty aggressive multiples
Speaker 6: now that rates are much higher. What do you see
Speaker 6: in the landscape for acquisition? Is it still ten and
Speaker 6: fifteen X?
Speaker 8: What does it look like?
Speaker 9: Yeah, you know, you go through this process and you
Speaker 9: learn very quickly there's a lot of inflated numbers that
Speaker 9: get thrown around, and they can throw that around and
Speaker 9: then decrease your EBITA and it still looks really really good,
Speaker 9: but it's not the same number. So I think the
Speaker 9: numbers are real. I think you just have to know
Speaker 9: where you fit in. Are you more of a single
Speaker 9: practitioner do it? You know, with a billion dollars under
Speaker 9: management and having that consistent cash flow, that fairly low
Speaker 9: number of staff members, you're you're gonna do pretty well,
Speaker 9: but not as well as the enterprises. You know, the
Speaker 9: five billion dollar firms are very attractive to us. We
Speaker 9: should talk, but these are the things, these are the
Speaker 9: things that that are the most we get.
Speaker 6: We literally get calls every other really going back for
Speaker 6: way back when, and I remember having a conversation before
Speaker 6: we launched this and I'm like, listen, we have this
Speaker 6: little project I can't tell you about. It's going to
Speaker 6: affect our evaluation. I can't even talk to you about it.
Speaker 6: We have a different growth rate, we have a different
Speaker 6: business model. Every conversation we've ever had has always been like, well,
Speaker 6: thanks to nice, nice chatting, we'll get back to you.
Speaker 6: It's like, besides, I am having too much fun.
Speaker 7: Yeah, why I have the I.
Speaker 6: Will freely admit I have the best gig in all
Speaker 6: the finance. I get to work with Carol, I do
Speaker 6: stuff like this, I sit down in the office. I
Speaker 6: just had David Rubinstein in my studio for an hour
Speaker 6: and a half.
Speaker 7: Who does that? Yeah, why would I ever want to
Speaker 7: give that up?
Speaker 9: I don't think you have to. I think the key
Speaker 9: is and what you have to pay attention to is
Speaker 9: the life option. What you're talking about is your life
Speaker 9: is great. How do we maintain that lifestyle? And I
Speaker 9: think what's different is you'll never get a call from us.
Speaker 9: I'm not recruiting. We're attracting people because we're focusing on
Speaker 9: what's important to you in your life. And that's what
Speaker 9: we're going to focus on in the next chapter. That's
Speaker 9: what the legacy division is all about. And I think
Speaker 9: in our industry, you're doing all the right things, all
Speaker 9: the things you love. What we have to pay attention
Speaker 9: to is when does that? When does that end? And
Speaker 9: how can we make sure that it doesn't end in
Speaker 9: a way that we're not happy with. We want to
Speaker 9: make sure that that continues even for our clients, and
Speaker 9: the fun continues.
Speaker 6: So let me push this back to you. Your thirty
Speaker 6: seven billion dollars. I look at shops like Sherylpenny's Dynasty,
Speaker 6: they're over one hundred billion dollars.
Speaker 7: Where do you want to go? What are your goals?
Speaker 9: Yes, So our company's goals are to continue to grow.
Speaker 9: I was the first acquisition. So the beautiful thing is
Speaker 9: we are now acquiring a significantly number, significantly high number
Speaker 9: of practices and we've entered that space. We're still traditionally
Speaker 9: growing by recruiting the way that the Smith Barney guys
Speaker 9: always did, by just attracting great advisors and breakaway advisors.
Speaker 9: And I see us going from thirty billion to one
Speaker 9: hundred billion very quickly, and I think as a partnership
Speaker 9: that's very exciting for every single person that owns shares
Speaker 9: in this company, and everyone in our company owned shares,
Speaker 9: from our admin to our marketing teams, to the.
Speaker 3: Advisors, that's that impact culture.
Speaker 9: I think it impacts culture in a great way because
Speaker 9: being new to this entity in the last nine months,
Speaker 9: what I could tell you is the sharing is significant.
Speaker 9: If you're doing something great, there's no hesitation for you
Speaker 9: to share it to somebody else because if your practice
Speaker 9: is doing great and I share it with you, we're
Speaker 9: now elevating the entire firm's value. And that to me
Speaker 9: is something special. And I come from the old Edward
Speaker 9: Jones days where I started, and it was something that
Speaker 9: having partnership at Edward Jones was something really special. It
Speaker 9: was being a part of something bigger. Anytime you're a
Speaker 9: part of something bigger a community, if you will, yeah,
Speaker 9: you're going to have a really great opportunity with culture.
Speaker 7: Plus plus, that ownership mindset permeates everything everybody does.
Speaker 9: Yeah, it's an ownership mindset, which means you're not overspending
Speaker 9: in the wrong spaces, you're paying attention to you know,
Speaker 9: if I want to fly first class, I can upgrade,
Speaker 9: but it doesn't have to be at the firm's expense.
Speaker 9: There are things that you think about because you're trying
Speaker 9: to elevate the value of the firm and not just you.
Speaker 2: Because what you do impacts the value of the firm,
Speaker 2: the success, but you also get a piece of.
Speaker 3: That so special how much that you have of that,
Speaker 3: it's very special. I think about a Bloomberg audience who's
Speaker 3: listening to this conversation.
Speaker 2: I have to say, I don't know that I had
Speaker 2: ever thought about legacy at all of these firms, and
Speaker 2: it was interesting kind of prepping for this event. So
Speaker 2: what do you think about the Bloomberg audience investors who
Speaker 2: are listening to it, what they need to take away
Speaker 2: and think about.
Speaker 9: Well, you know, I'm a build better kind of person,
Speaker 9: meaning that if I think there's a better way, I
Speaker 9: want to know it. If I'm a client sitting across
Speaker 9: from my financial advisor right now, I want to know
Speaker 9: what they're doing that's innovative if we're only doing the
Speaker 9: same old thing that we've always done. Now, look, I'm
Speaker 9: not saying blow up plans. I'm just saying, pay attention
Speaker 9: to the team, pay attention to demographic, pay attention to
Speaker 9: the things that they're bringing back. And these are the
Speaker 9: things that if I'm listening and I'm thinking about this
Speaker 9: sitting across from my advisor, I'm just paying attention to
Speaker 9: something as simple as a succession plan. Is it written,
Speaker 9: is it confirmed, or is it just floating in the
Speaker 9: air like most groups. And that's something that I think
Speaker 9: is really important because my financial plan that you continuously
Speaker 9: tell me to maintain, markets up, markets down, I maintain
Speaker 9: my plan. I need to know that you're maintaining my
Speaker 9: plan if you're here or you're not here. And it's
Speaker 9: very impactful.
Speaker 3: It's so logical, right, it's really.
Speaker 6: Most overlooked aspects of running a business. I can't tell
Speaker 6: you how many firms this is a giant, gaping hole
Speaker 6: that they have to respond to. So if someone comes
Speaker 6: to you and says, look, we're not looking to sell,
Speaker 6: but we want to learn a little bit more about
Speaker 6: succession planning and we want to have a conversation.
Speaker 8: Maybe down the road, we're ready to do this.
Speaker 7: How do you work with firms like that?
Speaker 3: I think about thirty seconds.
Speaker 9: Yeah, I think at the end of the day, it's
Speaker 9: all about building relationships. So what we're doing is we're
Speaker 9: building a relationship to learn about your business, learn about
Speaker 9: what you're trying to accomplish, and how we can help
Speaker 9: you actually attain that. Most importantly, we understand your story
Speaker 9: and we help you reach that goal that you're aiming towards,
Speaker 9: whatever it may.
Speaker 2: Be, Scott, is the trend ten seconds for much more
Speaker 2: bigger firms or smaller firms, or a little.
Speaker 3: Bit of both.
Speaker 9: I think the trend is moving in an upward progression
Speaker 9: on both.
Speaker 8: On both.
Speaker 2: All right, good stuff, Thank you so much, Thank you
Speaker 2: so much for having me really appreciate it. All right,
Speaker 2: Scott dan Our, head of the Legacy Division at Steward Partners.
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Speaker 5: Can't you let me drive?
Speaker 6: No, no, no, no, honey, please, how do the driving gravels?
Speaker 1: Let's mate, I want to try it.
Speaker 5: It's a good question.
Speaker 4: This is the Drive to the Clothes dot com for me?
Speaker 1: Well, young Don on Bloomberg Radio.
Speaker 2: All right, everybody, about eighteen minutes left in the trading day.
Speaker 2: It is time for the Drive to the Clothes. I'm
Speaker 2: Carol Master along with Barry Ridtholts. We are live at
Speaker 2: future Proof at Huntington Beach, California, and we've got what
Speaker 2: two days for that FED decision.
Speaker 6: That's right Wednesday, the last day of this event, and
Speaker 6: I'll be halfway home when they come out and announced, So.
Speaker 3: You're gonna get a moment. Have to wait to read
Speaker 3: about it on the Bloomba.
Speaker 6: No, I'm waiting for Delta Wi Fi. As long as
Speaker 6: I have Wi Fi on the plane, I'll track it
Speaker 6: in real time.
Speaker 3: That's a really good point, all right. So let's get
Speaker 3: to our guest, Becau. We're gonna talk a little bit
Speaker 3: about the trade.
Speaker 2: Menda Rebella's with us managing director ahead of Extracer sales
Speaker 2: at the d DWS Group, the Global Asset Manager. You
Speaker 2: might remember, they were formally do to Asset Management. A
Speaker 2: little bit of a history lesson part of DEUTSA Group
Speaker 2: until twenty eighteen when ADWS became a separate entity.
Speaker 3: Welcome, Welcome, Thank you very much for having me. How
Speaker 3: are you. I'm doing really well.
Speaker 10: It's hard not to be doing well when the sunshine
Speaker 10: and you're at the beach in California.
Speaker 6: So not the worst setup. To talk about investing in
Speaker 6: markets exactly.
Speaker 10: Well, it's hard to remain focused, but I think so
Speaker 10: many stimulating conversations here that are giving us a lot
Speaker 10: of ideas.
Speaker 2: So what specifically, I am curious you could there's a
Speaker 2: good mood and I know it's California and I know
Speaker 2: it's the beach, but you know, it's interesting. It does
Speaker 2: feel like people are pretty optimistic. How do you see
Speaker 2: the outlook right now?
Speaker 1: Yeah?
Speaker 10: I think you know, we were just talking about everyone
Speaker 10: waiting in anticipation of Wednesday, and I think that's been
Speaker 10: a major talking point in all of the breakout sessions
Speaker 10: that we've had this morning. Everyone's definitely in wait and
Speaker 10: see mode as we see in the markets, and I
Speaker 10: think that we've had a lot of, you know, great
Speaker 10: momentum in the markets over the past couple of years.
Speaker 10: But the number one thing that my team and I
Speaker 10: were speaking about to invest the prospects clients is what's
Speaker 10: your view or your take on your current allocation to
Speaker 10: the Magnificent seven. It's top of mind for everyone. Everyone
Speaker 10: is perhaps too long, everyone is very aware of that,
Speaker 10: but at the same time, there's still this kind of
Speaker 10: fomo aspect as well. You know, especially after the dips
Speaker 10: last week, people wondering should they still remain in, should
Speaker 10: they top up, should they actually rotate a way to
Speaker 10: non market cap weighted exposures within US equities, should they
Speaker 10: even diversify to international equities? And especially given our German heritage,
Speaker 10: we've kind of been a go to for a lot
Speaker 10: of investors on that site.
Speaker 6: So what do you make of how the market has
Speaker 6: behaved since the Magnificent seven has kind of stumbled? You know,
Speaker 6: a lot of bears said wants the General's trip, THAT'SID,
Speaker 6: it's all over, And instead it seems like the market
Speaker 6: is broadening out and there's more participation. That tends to
Speaker 6: be healthy, doesn't it.
Speaker 3: Seventy five hundred equal weight hitting a record all time
Speaker 3: high tech.
Speaker 10: Absolutely, we actually have this fund in Europe and we
Speaker 10: love it. It's been one of the top sellers in
Speaker 10: our use its range from our side, within the US range,
Speaker 10: we kind of are thinking more about how can we
Speaker 10: provide some more sector diversification.
Speaker 3: I think everyone is very long.
Speaker 10: Tech, but like you said, but it's really good to
Speaker 10: see that at least you're not just in just a
Speaker 10: few names. Now it's extending kind of along the tail,
Speaker 10: which is very healthy. You know, it's really funny to
Speaker 10: see that the ETFs were first launched globally in nineteen
Speaker 10: ninety and you know, one of the key elements of
Speaker 10: them was the diversification traits, to have diversification and just
Speaker 10: one Q support icin and that's very much like coming back.
Speaker 10: You know, it's ever relevant, which is fantastic. What we're
Speaker 10: really liking at the moment from that diversification perspective is
Speaker 10: to still not have you know, too much propensity to
Speaker 10: just one sector. But obviously there are some sectors which
Speaker 10: are more important than others. We like the equal weight,
Speaker 10: but at the end of the day, it's just thinking
Speaker 10: about the number of names in each sector. So maybe
Speaker 10: you know, there's a version two point zero that we're
Speaker 10: trying to work on on our side.
Speaker 3: But what we really liked is about.
Speaker 10: Picking the winners within each sector. So we've got our
Speaker 10: SMPE fund. It's just across its five year mark, its anniversary,
Speaker 10: and what's really good is that it's sector neutral versus
Speaker 10: the broad based benchmark. But you're actually picking the winners
Speaker 10: within each sector based on ESG scores from SMP, the
Speaker 10: index provider.
Speaker 3: People still want esgo.
Speaker 10: Well, the thing is, you know what, it's still a
Speaker 10: lot of cynics, and I think that a lot of
Speaker 10: people have thought, oh, it just equates to environmental but
Speaker 10: in reality the social component, but more importantly the governance component.
Speaker 10: This is what stock analysts are looking at anyway.
Speaker 3: So it seems to be more easily to measure exactly.
Speaker 10: Yeah, there's so much data and everything that we have,
Speaker 10: so you know, just to encapsulate it in an index
Speaker 10: is very easy, I think. Frankly, you know, all of
Speaker 10: us are looking for. The unicorn is always to outperform
Speaker 10: the S and P five hundred, and actually this fund
Speaker 10: is doing that. So it's outperformed by about one point
Speaker 10: five five percent per anum since inception, which is incredible,
Speaker 10: and it's not been by playing any sectors or anything
Speaker 10: like that, so that's really positive.
Speaker 6: The governance side seems to act as a risk screen
Speaker 6: to pull out some really bad actors before they start
Speaker 6: acting badly.
Speaker 10: Exactly, absolutely, so it's usually typically a buffer on the downside.
Speaker 10: But what's been really great to see with this outperformance
Speaker 10: is that even in the market that has rallied over
Speaker 10: the last five years, you also captured more upside as well,
Speaker 10: which is fantastic. So what you end up with is
Speaker 10: a lower downside capture and then a higher upside capture,
Speaker 10: which is you know, what we're all striving to do
Speaker 10: in our industry.
Speaker 7: That's how you perform exactly.
Speaker 3: Absolutely.
Speaker 2: How does AI play into your world in terms of
Speaker 2: what investors want, but also how you guys actually you know,
Speaker 2: create funds, create investment vehicles.
Speaker 3: Yeah, we love AI.
Speaker 10: I mean, one of the greatest things that we're most
Speaker 10: proud about at DWS is that we actually have the
Speaker 10: largest AI fund in the world. It's our use it's
Speaker 10: xaix and being a global player, we're able to kind
Speaker 10: of take ideas from both sides of the Atlantic. Maybe
Speaker 10: one of the reasons why I came over from the
Speaker 10: UK to the US and then one day I go
Speaker 10: back maybe. But this fund is that we've just launched
Speaker 10: it in the past couple of months here in the
Speaker 10: US for US investors and great to have this fund.
Speaker 10: There are a number of different funds already in the market.
Speaker 10: But what's very different about this fund is that it's
Speaker 10: forward looking, so we actually it's a bit better. In fact,
Speaker 10: we use AI to capture AI, so we use natural
Speaker 10: language processing to identify the patent universe, and so we're
Speaker 10: thinking then about which stocks are going to benefit more,
Speaker 10: are going to have better forward looking revenues, which obviously
Speaker 10: then helps with evaluation of the stocks rather than just
Speaker 10: which are already existing players in the market.
Speaker 6: What's the what's the vehicle for this or using ETFs,
Speaker 6: mutual funds, how does it.
Speaker 3: Wrong we're using ETF.
Speaker 10: I'm very typically speaking at DWS, we are launching more
Speaker 10: ETFs than mutual funds these days. Last year we launched
Speaker 10: around seven new funds, and this year we're kind of
Speaker 10: aiming for a similar number as well, then probably next
Speaker 10: year going to ten or so. The reason why is
Speaker 10: we're just listening to what the investors want, and the
Speaker 10: investors are saying that the ETFs time and time again
Speaker 10: are helping them with their businesses, with their investment needs
Speaker 10: and so forth. So we've actually launched our first active ETF,
Speaker 10: which I think is the real confirmation of that stance,
Speaker 10: which is our Natural Resources ETF, which we just launched
Speaker 10: to see at and RES And that's been a collaboration
Speaker 10: with one of our strongest platforms at TWS, which is
Speaker 10: our liquid Real Assets REEF platform. So leveraging their expertise
Speaker 10: in terms of identifying equities which are pure, which are
Speaker 10: very highly correlated to the commodities markets, but without taking
Speaker 10: the volatility of commodities markets.
Speaker 6: You mentioned that you wanted to move a little bit
Speaker 6: away from the concentrated mag seven any particular sector standing out,
Speaker 6: and we only have about thirty seconds left.
Speaker 10: We are really liking international equities and especially if they're
Speaker 10: FX hedged or if there's a value component like dividends
Speaker 10: in them.
Speaker 2: I feel like I like people have been talking about
Speaker 2: the international aspect for about a year.
Speaker 6: Eventually that perversion is going to kick in, but it's
Speaker 6: been a lot of time coming.
Speaker 3: Nice to catch up with you. Thank you very much
Speaker 3: for having me appreciate it. Goody.
Speaker 2: I'm Meta robellohead of X Tracker Sales at the DWS Group.
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