WEBVTT - What the Next Generation Wants From Wealth Managers: Part 2

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. Welcome to Merrin Talk

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<v Speaker 1>to Your Money, the personal finance edition of Merin Talks Money.

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<v Speaker 1>In these bonus podcasts, we talk about the best strategies

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<v Speaker 1>for making the most of your money. I'm Marenzumzep, Web

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<v Speaker 1>Editor at Large for Bloomberg UK Money. We've got the

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<v Speaker 1>second half of the special broadcast we recorded at the

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<v Speaker 1>Bloomberg offices in London on the fourteenth of July. If

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<v Speaker 1>you missed the first portion, go back and listen to

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<v Speaker 1>last week's episode. It was an hour long panel focused

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<v Speaker 1>on how the world of wealth management is changing, about

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<v Speaker 1>the rise of next generation wealth clients and the growing

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<v Speaker 1>role of alternatives in modern portfolio construction. The banelers were

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<v Speaker 1>John Steppeck, senior reporter and author of the Money Dissold newsletter,

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<v Speaker 1>Charlie Morris, chief investment officer and founder of byte Tree,

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<v Speaker 1>a leading provider of investment research in traditional finance and

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<v Speaker 1>digital assets. We also as your Dammy and Marie, Global

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<v Speaker 1>head of Investments for Barkley's Private Bank and Wealth Management.

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<v Speaker 1>Here is the second half of our conversation. I think

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<v Speaker 1>we advertise where we're going to talk about how AI

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<v Speaker 1>except with affect the wealth management business. So here we

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<v Speaker 1>go and we do have to have questions. So de

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<v Speaker 1>send more and I've got quite a lot, but more

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<v Speaker 1>is good. This is kind of the key, the absolute

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<v Speaker 1>key to the to the wealth management business over the

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<v Speaker 1>next next couple of decades, technology and AI transforming the

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<v Speaker 1>investment process. Where do you see AI creating the greatest

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<v Speaker 1>value for advisors over the next three to five years.

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<v Speaker 1>Is it improving productivity, enhancing investment insights, or delivering a

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<v Speaker 1>better client's experience. I mean, I would hope that it

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<v Speaker 1>will be all three.

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<v Speaker 2>I think it's probably all three.

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<v Speaker 3>Yeah, I think I think what's going to happen back

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<v Speaker 3>to democrats journeys. What we're working on is ready to

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<v Speaker 3>help clients enjoy the high touch. So is that you

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<v Speaker 3>could only have thought at a certain level at the

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<v Speaker 3>much lower level.

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<v Speaker 2>And that's really the revolution, I feel, because you.

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<v Speaker 1>Can use AI agency do basic work augmented done by somebody,

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<v Speaker 1>and you can concentrate on the actual client server, place

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<v Speaker 1>to face stuff.

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<v Speaker 3>Absolutely, But what we've seen in our experience here is

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<v Speaker 3>you do need human judgment.

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<v Speaker 2>As I'm sure you know. We had a an attempt

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<v Speaker 2>with robo advice. It didn't work out very well.

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<v Speaker 3>We've launched a month ago planning let service with an

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<v Speaker 3>advisor in the middle. That is the opportunity. I think

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<v Speaker 3>clearly you're going to see a higher quality advice deliver

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<v Speaker 3>that scale, I think thanks to AI.

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<v Speaker 4>So it will definitely improve productivity.

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<v Speaker 1>I mean, I think we know that, although it won't

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<v Speaker 1>necessarily improve productivity in such a way that you'll end

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<v Speaker 1>up getting rid of human staff.

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<v Speaker 4>Right, people aren't going to lose their jobs over this.

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<v Speaker 1>They're just going to become more productive and hence better

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<v Speaker 1>at the client creazing it.

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<v Speaker 2>Yeah, that's all experience. Really, We've actually really put.

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<v Speaker 3>Back the human in the meal in that part of

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<v Speaker 3>the advice process because this is what's working on.

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<v Speaker 1>So the client experience and the actual relationship with the

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<v Speaker 1>advances should improve. And what about actual better investment outcomes?

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<v Speaker 1>Are you're going to be able to use it to

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<v Speaker 1>improve your investment process, to improve the insights.

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<v Speaker 3>So I'm more que guy by training, but I'm fascinated

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<v Speaker 3>by the ability to go for research now through tools

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<v Speaker 3>which are quite spectacular. All right, So so again the

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<v Speaker 3>insights is still require like we value the opinion, we

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<v Speaker 3>value the analysis but how much you can process quick

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<v Speaker 3>is quite spectacular, that's for sure.

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<v Speaker 2>And that's really moving fast. Now.

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<v Speaker 3>Yeah, to the point of again, is alpha going to

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<v Speaker 3>disappear thanks to that?

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<v Speaker 2>I think that's all wide our discussion.

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<v Speaker 1>The same tool of what happens to the answer, Yeah,

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<v Speaker 1>I'm optimistic on now telling you construct portfolios.

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<v Speaker 4>You must be finding that AI is changing the way

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<v Speaker 4>you work.

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<v Speaker 5>Well, it's like have you an assistance, So that's good,

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<v Speaker 5>but there are better things you can do with it.

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<v Speaker 5>By discussing this morning, would I trust trust it to

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<v Speaker 5>H to reevaluate our portfolios? The answer is no. Would

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<v Speaker 5>I trust it to even book trades? No, I wouldn't

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<v Speaker 5>not at this point, although we have experimented. But as

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<v Speaker 5>we grow to many more portfolios that I think we'll

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<v Speaker 5>have to So I think that's the interesting part. But

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<v Speaker 5>to answer that question, there's a lot of admin in

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<v Speaker 5>having a client in the wealth management industry that's solved

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<v Speaker 5>by AIR or improved by AI, and I think the

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<v Speaker 5>client experience will be much better. But the most useful

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<v Speaker 5>thing that the industry can do is deliver returns. But

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<v Speaker 5>there's no more returns coming from AI. There's no alpha

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<v Speaker 5>coming from AI. That the you know, alpha's axiosum game

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<v Speaker 5>as we know it comes from some and it goes

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<v Speaker 5>to others, and the beta is the direction of the

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<v Speaker 5>returns of the market, and they're not going to be

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<v Speaker 5>a return. They're not going to be changed materially by

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<v Speaker 5>AI the long term either, So I don't think that

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<v Speaker 5>anyone's going to make more money out of it in

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<v Speaker 5>the next ten to twenty years. This current wave of excitement,

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<v Speaker 5>you know, it's not going to last for ever, and

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<v Speaker 5>once that's over look through that it's going to be

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<v Speaker 5>back to normal. But I think that there's going to

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<v Speaker 5>be a new bunch of actors who do better and

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<v Speaker 5>others that lose out. But of course the buffetology would

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<v Speaker 5>always win through long term decisions. I think that AI

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<v Speaker 5>will have no chance against long term decision making, good

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<v Speaker 5>decision making, which is what value investors thrive off, So

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<v Speaker 5>that stays. I don't think that changes at all. But

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<v Speaker 5>the short term shenanigans and the narratives and stuff, they'll

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<v Speaker 5>just go even more crazy than they've already been.

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<v Speaker 1>I suppose, because as you were saying earlier when we

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<v Speaker 1>were talking about creating AI portfolios, if you're using an

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<v Speaker 1>LLM of any kind. They're not creating new information or

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<v Speaker 1>new ideas that are simply correlating old or more likely

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<v Speaker 1>recent information, So maybe the insights are not there's.

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<v Speaker 5>That, and so if they're just sort of, you know,

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<v Speaker 5>really sophisticated Google in that sense, then then I think

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<v Speaker 5>there's probably not much edge there. If everyone's got it.

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<v Speaker 4>Okay, we do have more questions. Got to move on, John.

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<v Speaker 1>I know you're not a wealth manager, but I still

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<v Speaker 1>think that that you might be able to help with

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<v Speaker 1>this one. And then I'd love to air your views

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<v Speaker 1>on as well. Looking ahead, what do you believe will

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<v Speaker 1>differentiate the leading wealth managers over the next decade? Will

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<v Speaker 1>success be driven primarily by investment performance, access to private markets, technology,

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<v Speaker 1>or the quality of client relationships?

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<v Speaker 4>And I know we always come down on this.

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<v Speaker 6>Don't we. Obviously investment if you can do it, but

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<v Speaker 6>I far more is that I think that by far

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<v Speaker 6>the more important thing is navigating regulation and government changes

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<v Speaker 6>over the next If you told me in the next

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<v Speaker 6>decade and tax is going to be where the biggest

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<v Speaker 6>value I think for almost any wealth advisor will be.

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<v Speaker 6>And when I say think outside the box, what I

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<v Speaker 6>mean is somebody will turning around and say to you, well,

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<v Speaker 6>that's the best investment you need right now is the

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<v Speaker 6>second passport. And I know somebody who I can pass

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<v Speaker 6>you on to. We've already seen a whole load of

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<v Speaker 6>changes here in the UK in the last couple of years,

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<v Speaker 6>and Britain is not the only country with a deficit

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<v Speaker 6>and a debt problem. So I think we're going to

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<v Speaker 6>see an awful lotic kind of government budget changes and

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<v Speaker 6>that will put a premium more in decent tax advice

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<v Speaker 6>completely above board. But I think that's where they'll be again.

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<v Speaker 4>That comes back to hyper personalization, doesn't it.

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<v Speaker 1>The idea the whole portfolio, not just the not just

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<v Speaker 1>the investment portfolio, but the entirestic portfolio of someone's life

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<v Speaker 1>is understood by the wealth manager, and the tax can

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<v Speaker 1>be fiddled with the I'm.

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<v Speaker 4>After optimized optimized.

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<v Speaker 2>I think that's true.

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<v Speaker 6>And the thing that's what it can come in as well.

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<v Speaker 6>It's almost like if you go to your GP and

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<v Speaker 6>the actually AI that works and it says, actually you

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<v Speaker 6>need to send this guy too, you know, okay, this

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<v Speaker 6>specialist of that specialist I.

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<v Speaker 1>Think that you want.

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<v Speaker 2>Well, no, I mean that's in my dreams.

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<v Speaker 4>Dream medical world.

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<v Speaker 1>Back to you on this idea of what will mean

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<v Speaker 1>success in future investment formats, access to private markets and

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<v Speaker 1>anything that's it by the way, but who knows client experience.

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<v Speaker 3>Yeah, we concur with you, and actually I'm responsible for

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<v Speaker 3>the investment business and Parkers, but I'm also responsible for weals,

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<v Speaker 3>planning and advisories.

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<v Speaker 2>Yes, under one team, and I completely agree with you.

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<v Speaker 2>I think the planning.

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<v Speaker 3>Side, that's like the GP work you do at the outset,

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<v Speaker 3>is so important and probably more than ever to your point,

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<v Speaker 3>the ability to to build proper plan, quality plan that

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<v Speaker 3>you can actually deliver through various segments of clients is

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<v Speaker 3>where you're going to make a difference. I think the

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<v Speaker 3>return side will be very important. That the return side

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<v Speaker 3>has to be fit for purpose, for the situation and if.

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<v Speaker 1>You've made if you've made a mistake and you don't

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<v Speaker 1>have a tax division portfolio, whether you make six percent

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<v Speaker 1>or eight percent in real clouds every year, is mech

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<v Speaker 1>differends correct?

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<v Speaker 2>Yeah?

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<v Speaker 3>Absolutely, I think the it's not by accident that we've

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<v Speaker 3>launched this affluent service in the UK, which is planning

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<v Speaker 3>led first and foremost. This is really really what we

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<v Speaker 3>think is important clearly return will be important education as well,

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<v Speaker 3>like time should be on your side, like this is

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<v Speaker 3>real competitive advantage if you have time. It's great enjoyed

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<v Speaker 3>time and compounds.

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<v Speaker 4>And that planning has turned out really anticipate as well,

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<v Speaker 4>doesn't it.

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<v Speaker 6>We do.

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<v Speaker 1>There's nothing in the UK now except for talk about

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<v Speaker 1>what tax might go up next and how it might

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<v Speaker 1>go up and whether it might be indexed or not

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<v Speaker 1>index and you know where the mansion tax is going

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<v Speaker 1>to be on one and a half million pounds or

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<v Speaker 1>two million pounds, et cetera, et cetera, and basically our

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<v Speaker 1>whole conversation. So as a planning you've got a lot

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<v Speaker 1>of anticipation of what might come away.

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<v Speaker 3>Absolutely and this is where you actually get into real

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<v Speaker 3>deep conversation with clients Like I sit in a few

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<v Speaker 3>conversations like this on Well's Planning when wes Advisor, and

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<v Speaker 3>it's really you know, people open up. You actually understand

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<v Speaker 3>the old family all the time, ynamics, all the beliefs

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<v Speaker 3>as well, like the values for next gen et cetera.

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<v Speaker 3>And I think it's really really important and then we

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<v Speaker 3>can debate about bitcon TF et cetera. But like that

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<v Speaker 3>plan at the very building is so important. I think

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<v Speaker 3>this is where you're going to make a difference. And

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<v Speaker 3>again AI will allow us to deliver that kind of

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<v Speaker 3>a high touch diagnostic at much higher.

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<v Speaker 1>Scale as well. Management evolves to serve the next gend

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<v Speaker 1>of clients. How do you see banks expectations of third

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<v Speaker 1>party data providers and technology partners changing. What will find

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<v Speaker 1>a successful partnership going forward.

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<v Speaker 2>It's a very good.

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<v Speaker 3>Question, and I think the tech infrastructure is really at

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<v Speaker 3>the hurt of our our our thinking both from a

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<v Speaker 3>client experience side and a resilient site, right, I mean

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<v Speaker 3>button to peplese daste. We really want to create the

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<v Speaker 3>best architecture we can to do great CX. We will

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<v Speaker 3>not built everything ourselves, for sure. We're really happy to

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<v Speaker 3>to just partner with people so they can understand us.

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<v Speaker 3>We're gonna own or really the one of the most

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<v Speaker 3>critical parts of the equation, which is the data point,

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<v Speaker 3>the data set.

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<v Speaker 2>Right, we will it's going to be in the bank.

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<v Speaker 3>We'll be more than happy if you want to benefit

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<v Speaker 3>from this ecosystem where people are doing the watchhow reg development,

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<v Speaker 3>you know to do things you need to do before

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<v Speaker 3>you actually give an advice, and.

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<v Speaker 2>Sometimes there's a lot of data involvement.

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<v Speaker 3>There's it's moving, it's changing, it's changing now right as

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<v Speaker 3>we speak. We're very open minded actually to partner with people.

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<v Speaker 3>I guess question will be how many Uh, it's probably

0:10:44.520 --> 0:10:47.360
<v Speaker 3>a question like in this world where you really want

0:10:47.400 --> 0:10:51.880
<v Speaker 3>to be on top of your architecture security, how many

0:10:51.960 --> 0:10:54.480
<v Speaker 3>partners can we have in terms of really understanding each

0:10:54.520 --> 0:10:55.040
<v Speaker 3>other very well?

0:10:55.280 --> 0:10:57.200
<v Speaker 1>And also if you have to fully understand how they

0:10:57.280 --> 0:11:00.959
<v Speaker 1>are using new technology, they are using AI harm and

0:11:01.080 --> 0:11:01.560
<v Speaker 1>suddenly you.

0:11:01.600 --> 0:11:04.040
<v Speaker 4>Need to have a lot more oversight of the inside

0:11:04.080 --> 0:11:04.680
<v Speaker 4>of every program.

0:11:05.080 --> 0:11:06.200
<v Speaker 2>We've been involved for a very.

0:11:06.160 --> 0:11:09.000
<v Speaker 3>Long time in supporting a fintech for instance, so we

0:11:09.120 --> 0:11:11.400
<v Speaker 3>want to strike the right balance between innovation.

0:11:11.600 --> 0:11:14.280
<v Speaker 2>They're also like scaling resilience.

0:11:16.240 --> 0:11:18.400
<v Speaker 1>Okay, a couple more quick ones are well funds using

0:11:18.480 --> 0:11:21.920
<v Speaker 1>data well enough to understand client behavior, preferences and portfolio needs.

0:11:22.280 --> 0:11:23.719
<v Speaker 4>Maybe not yet but soon will be.

0:11:24.200 --> 0:11:27.840
<v Speaker 2>In the UK, we're working they're hard on the launching

0:11:28.040 --> 0:11:32.120
<v Speaker 2>targeted support. So it's right GBR. It's a large part

0:11:32.160 --> 0:11:32.280
<v Speaker 2>of that.

0:11:32.720 --> 0:11:36.000
<v Speaker 3>The understanding of the client behavior across all dimensions of

0:11:36.080 --> 0:11:39.640
<v Speaker 3>the touch points they have with the back across actually

0:11:39.960 --> 0:11:43.760
<v Speaker 3>everything is a very big part. So it's actually happening fast,

0:11:43.840 --> 0:11:47.280
<v Speaker 3>I think, and it's actually a very interesting discussion in

0:11:47.360 --> 0:11:49.800
<v Speaker 3>terms of how far you go and what do you

0:11:50.000 --> 0:11:52.960
<v Speaker 3>need to plan far knowing what you know on the.

0:11:52.960 --> 0:11:55.840
<v Speaker 1>Client Charlie, we've talked about You've done the whole discussion

0:11:55.880 --> 0:11:58.240
<v Speaker 1>is crypto and actic class? Isn't it that asset classes

0:11:58.280 --> 0:12:01.040
<v Speaker 1>bitcoin in that classic? But really to stuff with bitcoin?

0:12:01.559 --> 0:12:04.560
<v Speaker 1>If you're constructing a portfolio and we talk about digital assets,

0:12:04.600 --> 0:12:05.400
<v Speaker 1>what else is in there?

0:12:06.000 --> 0:12:08.520
<v Speaker 4>We're putting other cryptocurrencies in there?

0:12:08.559 --> 0:12:10.160
<v Speaker 2>What's going into.

0:12:09.960 --> 0:12:11.920
<v Speaker 5>This one of the sort of credible things sort of

0:12:11.960 --> 0:12:14.520
<v Speaker 5>survived the last decade of innovation and all the rest

0:12:14.559 --> 0:12:18.360
<v Speaker 5>of it. You've basically got Bitcoin as the only sort

0:12:18.400 --> 0:12:20.280
<v Speaker 5>of store of value, the sort of a digital gold

0:12:20.360 --> 0:12:23.160
<v Speaker 5>proxy as it were. Then you've got what they call

0:12:23.200 --> 0:12:25.800
<v Speaker 5>the layer ones, basically the things that you can transfer

0:12:25.920 --> 0:12:29.920
<v Speaker 5>assets with, theorems at Solana and near and things like that,

0:12:30.320 --> 0:12:33.400
<v Speaker 5>and they're the home for stable coins, and in many

0:12:33.440 --> 0:12:36.439
<v Speaker 5>people's eyes, that the future of markets generally, because I

0:12:36.480 --> 0:12:37.920
<v Speaker 5>think a lot of the people in the financial service

0:12:37.960 --> 0:12:41.640
<v Speaker 5>industry who are pro crypto believe that stock exchanges and

0:12:42.000 --> 0:12:45.160
<v Speaker 5>bond exchanges will end up using that kind of infrastructure,

0:12:45.920 --> 0:12:48.679
<v Speaker 5>and so they're very real tech businesses as it were.

0:12:49.360 --> 0:12:52.840
<v Speaker 5>And I think the third category really the exchanges themselves,

0:12:52.880 --> 0:12:55.400
<v Speaker 5>things like finance, and there are some other weird and

0:12:55.440 --> 0:12:57.959
<v Speaker 5>wacky ones, and there's lots of other stuff, but it

0:12:58.240 --> 0:13:01.199
<v Speaker 5>hasn't really got to scale or even itself. So those

0:13:01.240 --> 0:13:03.439
<v Speaker 5>are the things that are coming through. But the fascinating

0:13:03.480 --> 0:13:05.920
<v Speaker 5>bits I said earlier, just as the above ground supply

0:13:06.000 --> 0:13:09.160
<v Speaker 5>of gold is the vast majority of the tradeable value

0:13:09.200 --> 0:13:11.120
<v Speaker 5>of all the commodity markets, you know, the above ground

0:13:11.160 --> 0:13:13.400
<v Speaker 5>supply of all is actually quite small. Yeah, I mean

0:13:13.679 --> 0:13:15.280
<v Speaker 5>us a lot of oil, but it's not really there

0:13:15.320 --> 0:13:19.280
<v Speaker 5>as an asset. Commodity is overwhelmed by gold in investable terms,

0:13:19.400 --> 0:13:23.719
<v Speaker 5>just as bitcoin overwhelms digital as an investable asset. And

0:13:24.280 --> 0:13:27.199
<v Speaker 5>they're connected, you know, they're all connected. So I think

0:13:27.240 --> 0:13:28.200
<v Speaker 5>that's the interesting point.

0:13:28.840 --> 0:13:30.800
<v Speaker 4>Convinced yet working on it.

0:13:32.720 --> 0:13:37.880
<v Speaker 2>For us, the tokenization part of it is really important.

0:13:37.920 --> 0:13:40.120
<v Speaker 3>I think we'll see so many more clients coming and

0:13:40.240 --> 0:13:42.760
<v Speaker 3>asking for us to you know, on board and assets

0:13:42.800 --> 0:13:44.440
<v Speaker 3>somewhere that's been tokenized somewhere else.

0:13:45.440 --> 0:13:47.520
<v Speaker 2>We need to be able to do that marskiing.

0:13:47.600 --> 0:13:49.120
<v Speaker 5>But what we should do is do what everyone else

0:13:49.200 --> 0:13:52.280
<v Speaker 5>does in the financial service industry and say say I

0:13:52.400 --> 0:13:57.320
<v Speaker 5>love blockchain, but I don't like cropte, and that is.

0:13:57.320 --> 0:14:00.199
<v Speaker 1>The perfect place to end. Thank you, Thank you so

0:14:00.320 --> 0:14:02.880
<v Speaker 1>much for joining me today. Thanks John, Thank you Charlie,

0:14:02.960 --> 0:14:04.959
<v Speaker 1>Thank you JD. That was that was very interesting and

0:14:05.040 --> 0:14:08.920
<v Speaker 1>I look forward to every private bank portfolio having what

0:14:09.080 --> 0:14:10.880
<v Speaker 1>was it eight and a half percent of crypto isn't it.

0:14:12.480 --> 0:14:16.320
<v Speaker 5>Bigcoin? It was Sikes for sharing Bay, Yes, but Bold

0:14:16.400 --> 0:14:17.520
<v Speaker 5>is the alternative of course.

0:14:18.200 --> 0:14:18.559
<v Speaker 2>Thank you.

0:14:24.720 --> 0:14:26.800
<v Speaker 1>Thanks for listening to this week's Maren Talk to Your Money.

0:14:26.840 --> 0:14:29.200
<v Speaker 1>If you like our show, rate review and subscribe wherever

0:14:29.200 --> 0:14:31.360
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<v Speaker 1>and John on ex or Twitter at marins w and

0:14:33.680 --> 0:14:37.040
<v Speaker 1>John Underscore stepic. This episode was produced by Semisadi and

0:14:37.120 --> 0:14:40.080
<v Speaker 1>Moses and sound designed by Blake Mabel's and Aaron Casper.

0:14:40.360 --> 0:14:42.360
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