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Speaker 3: Hi, everyone, welcome to the Bloomberg Business Week Weekend podcast.
Speaker 3: Our backdrop this week highlights from the annual future Proof
Speaker 3: Festival in Huntington Beach, California, a gathering of the wealth
Speaker 3: management ecosystem, some three thousand financial advisors, wealth management execs,
Speaker 3: and limited partners more than five thousand attendees in all,
Speaker 3: representing an anticipated twenty trillion dollars in assets under management,
Speaker 3: a lot of money.
Speaker 4: All of this happening against a background of records on
Speaker 4: Wall Street, tighter, Tariff's geopolitical tensions, global governments undergoing leadership changes,
Speaker 4: and more. Of course, investors also getting ready for this
Speaker 4: week's meeting of the Federal Reserve and expected rate cut.
Speaker 3: All right, so the next two hours are going to
Speaker 3: include our conversations from future Proof, including one with Sarah Levy,
Speaker 3: CEO of Betterment Advisor Solutions, on serving the advisor community
Speaker 3: and kind of tim shedding to some extent just the
Speaker 3: roboadvisor image.
Speaker 4: Yeah, I was surprised to hear her say how much
Speaker 4: she's trying to move away from that, because I still
Speaker 4: think of Betterment as like a competitor to Wealth Run
Speaker 4: or Schwab Intelligent Portfolio. Those robo advisors that are like
Speaker 4: set it and forget it. They're trying to move away
Speaker 4: from that.
Speaker 3: They definitely are. We also heard from JP Morgan's Pria
Speaker 3: Misra on could it be one and done for the FED?
Speaker 4: What was the term she used for that cut? The
Speaker 4: cautionary cut.
Speaker 3: Something like that, right, an insurance cut.
Speaker 4: In assurance cut, That's what it is.
Speaker 3: Just do it just in case things are coming undone.
Speaker 4: We'll also hear from Masters in Business host Barry Ridholtz
Speaker 4: about FED independence and black rocks, Jamie Majerra on bringing
Speaker 4: private credit to the retirement class, also a psychologist take
Speaker 4: on investing some numbers too to back it all up.
Speaker 3: Get to put emotions to the side. First up, we
Speaker 3: start with the event itself and what future Proof is
Speaker 3: all about. Matt Middleton is the creator and CEO.
Speaker 5: We all grow up my personal experience into the into
Speaker 5: the industry of its conformity. Right, it's you know, talk
Speaker 5: this way, walk this way, dressed like this, act that way.
Speaker 5: If you want to get in that room, this is
Speaker 5: what you have to be. And really, what we're representing
Speaker 5: here is a shift, right, It's a it's a mindset shift,
Speaker 5: it's a generational shift. And what we're seeing is that
Speaker 5: people with real buying power, real influence and assets want
Speaker 5: to actually break up of the status quo. And this
Speaker 5: is a represent a representation of that new industry which
Speaker 5: is not just casual attire.
Speaker 6: Obviously, we're here on and we feel a.
Speaker 4: Little dressed up here, I said earlier. The only one
Speaker 4: you're wearing a suit.
Speaker 6: I know this first timer. That's why.
Speaker 4: That's if you can tell who the first tree.
Speaker 5: But but it is, it's it's mostly about the experience
Speaker 5: here and people connecting. And the industry is better when
Speaker 5: we all connect versus siloing out. And so our hope
Speaker 5: is here is not just to define it as wealth management,
Speaker 5: not to define it as ask management or fintech. It's
Speaker 5: to bring everyone together from all job levels across all
Speaker 5: functions and give them the tools that they have to
Speaker 5: meet a network to see how to build a better business.
Speaker 4: One thing that I noticed about this conference that I've
Speaker 4: never seen before is for a small fee, you can
Speaker 4: bring your partner, meaning your husband, your wife, your boyfriend,
Speaker 4: your girlfriend, your significant other. I've never seen that before.
Speaker 4: What's the thinking behind us?
Speaker 5: Well, personally, obviously I'm an entrepreneur, and you know, I
Speaker 5: always laugh when I have these conversations.
Speaker 6: Everyone's like, what's the vision? What do you do this?
Speaker 6: You know, how do you manage it? You're acquired this business,
Speaker 6: and it's like.
Speaker 5: My co founder is my wife, right at the end
Speaker 5: of the day, it's it's who you have at home,
Speaker 5: to people that are on that journey with you that
Speaker 5: kind of wear all of that. And so part of
Speaker 5: that view is one we're in this beautiful setting, right,
Speaker 5: it should feel like a destination and a vacation to
Speaker 5: some sorts, but also it's a lot until you get
Speaker 5: your spouses to experience what the industry is like, meet
Speaker 5: your clients, meet your partners, and again, I think if
Speaker 5: they are more exposed to it, they'll understand it more.
Speaker 5: And that's a representation of what we're trying to do here,
Speaker 5: which is, if we could get this event to a
Speaker 5: large enough scale and get national attention with the help
Speaker 5: of you all, well maybe some people on the you know,
Speaker 5: the general public will start to look at it and say, oh,
Speaker 5: what is this? Right, They'll scroll through Instagram and it's like, oh,
Speaker 5: I see Coachila and my friends and this is very
Speaker 5: it's a cultural movement. And then the next scroll they're
Speaker 5: scrolling and they're seeing future.
Speaker 7: People like, oh, this is great.
Speaker 5: What is a wealth management conference? This is interesting? What
Speaker 5: is wealth management? And we could expose them to more
Speaker 5: of it? And so it's a little bit of one.
Speaker 5: We want to make a family oriented and the other
Speaker 5: side of it is we want to change the narrative
Speaker 5: and the optics of our industry.
Speaker 3: But do you also think about I thought I read
Speaker 3: somewhere too that you want to kind of cap how
Speaker 3: many people are here, because we've certainly been to lots
Speaker 3: of conferences where it just goes like thousands and thousands
Speaker 3: and thousands of people and tons and tons of booths
Speaker 3: and it's almost overwhelming, and I'm not quite sure what
Speaker 3: the takeaway is.
Speaker 6: Yeah, So it's two parts, right, One is, yes, that
Speaker 6: is true.
Speaker 5: When you get a large crowd, the word that always
Speaker 5: comes out as boondoggle, right, and you have no people
Speaker 5: get lost, you're drinking from a viro hose. We use
Speaker 5: proprietary event technology so break through what you see this
Speaker 5: big ten here to allow people to connect in meaningful ways.
Speaker 5: And the goal there is you go into the event,
Speaker 5: So three weeks before the event, you basically are making
Speaker 5: connections and guaranteeing certain meetings. So you have one to
Speaker 5: one meetings, you have roundtable discussions, you have all these
Speaker 5: different booth activities. These are all pre scheduled, so it's
Speaker 5: not serendipity happen. So you could create a large scale experience,
Speaker 5: multi thousand person experience, and create a unique agenda and
Speaker 5: a unique networking plan for one specific role or person.
Speaker 5: And that's the benefit of what we do. The second
Speaker 5: side to that is we do want to cap this
Speaker 5: because there's a magic size here, and we believe that's
Speaker 5: around five thousand people. One. We're in four hotels in
Speaker 5: Huntington Beach, we have ten hotels in Newport Beach. People
Speaker 5: staying in Irvine, there's people staying forty minutes away. So
Speaker 5: at some point even if we can't control it. Their
Speaker 5: experience is going to be different than everyone here, and
Speaker 5: so we decided that there's a limit to what we
Speaker 5: want to do here.
Speaker 4: I did see this idea of you know, growth and
Speaker 4: bringing people. I did notice that pretty much everything is branded,
Speaker 4: they're sponsors everywhere. From the perspective ABYSS as a business
Speaker 4: in terms of revenue, is your biggest revenue source still
Speaker 4: tickets or is it sponsorships?
Speaker 6: Now it's it's always sponsorships.
Speaker 4: So how much bigger is that than tickets?
Speaker 6: It's probably seventy thirty ratio.
Speaker 5: We also monetize all these different connection points, so again
Speaker 5: using the technology, right, a lot of these meetings that
Speaker 5: you see, there's somewhere peer to peer.
Speaker 6: Others are you know.
Speaker 5: Buyer seller, and so there's different ways to monetize events
Speaker 5: that we've kind of broken one. It's a different format
Speaker 5: right too. It's the technology allows us to do things
Speaker 5: differently than most other events. But yeah, the idea here
Speaker 5: is like events should be about the community and shouldn't
Speaker 5: just treat the attendees as a product, which is unfortunately
Speaker 5: how it typically happens when you have these booths and
Speaker 5: everyone's trying to pitch and Wheel and so you see
Speaker 5: people that you see a lot of the big brands
Speaker 5: that you see at other events, but they're showing up
Speaker 5: differently here and it's meaningful. They get better ROI and
Speaker 5: the attendees have.
Speaker 4: Better experience our thanks to Matt Middleton, founder and CEO
Speaker 4: of future Proof.
Speaker 3: Also joining us at Futureproof in Huntington Beach this past
Speaker 3: week Sarah kirshbaum Levy. She's the CEO of Betterment, formerly
Speaker 3: chief operating officer at Nickelodeon.
Speaker 4: We didn't talk SpongeBob, maybe we will next time, but
Speaker 4: we did talk a lot about Betterment's robo advisor tool
Speaker 4: and how they're trying to move away from that as
Speaker 4: an image.
Speaker 8: So we're now fifteen years old, we have a million
Speaker 8: customers and we have sixty three billion in assets center management,
Speaker 8: and the Advisor Solutions product is we are an all
Speaker 8: in one custodian for the modern Ria.
Speaker 9: So what does that mean.
Speaker 8: It means we're custody, we're portfolio management, and we have
Speaker 8: an integrated billing solution.
Speaker 4: Do those things work in conflict with one another in
Speaker 4: the sense of like, Okay, well you're offering this this
Speaker 4: robo advisor service. People who use that wouldn't necessarily have advisors.
Speaker 8: So I've tried to shed that those robo roots. I
Speaker 8: think they actually are incredibly aligned. And when we first start,
Speaker 8: well when the business first started, it predates me because
Speaker 8: I've been here about five years, but fifteen years ago
Speaker 8: I think there was a fear.
Speaker 3: Of that from the advisor community.
Speaker 8: But the reality is what we did as a business
Speaker 8: is we use technology to lower the barrier to entry
Speaker 8: for young investors. Right, so, clients that advisors wouldn't want
Speaker 8: to spend time with because they didn't have enough assets
Speaker 8: under management to really you know, be worth their time. Honestly,
Speaker 8: the technology could do it.
Speaker 9: And what we've done.
Speaker 8: Is we've basically started folks on their investing journey in
Speaker 8: you know, started folks with good habits, right diversification, low cost,
Speaker 8: low taxes, like that's really what you want to do
Speaker 8: early on, not day trading. And those folks grow into
Speaker 8: really really great advised clients, and we have an ability to, basically,
Speaker 8: as they grow with us, bring them on to the advisors.
Speaker 3: How is technology and changing demographics really impacting you guys.
Speaker 8: Well, technologies at the heart of what we do. I
Speaker 8: think fundamentally, we are a technology solution. We're a fintech
Speaker 8: company that is.
Speaker 3: But changing technology and AI and all that, like, yeah,
Speaker 3: that's makes soot.
Speaker 8: It's it's interesting because AI has come on the scene
Speaker 8: faster than anything we've ever seen. We just released a
Speaker 8: survey asking advisors how they're using a IAI Are they
Speaker 8: worried about AI? And they're sort of a paradox in there,
Speaker 8: which is yes and yes, which is they're all using it,
Speaker 8: and they're also all terrified that their clients are going
Speaker 8: to use it and that they're going to be replaced.
Speaker 10: Are right?
Speaker 9: I think they're right to some extent.
Speaker 8: We saw actually an incredible shift in just one year.
Speaker 8: The source of advice that that young clients are seeking
Speaker 8: was via social media and is now AI within the
Speaker 8: course of just a year, which amazing, And so I think, yes,
Speaker 8: they're right to be, you know, to be worried. But
Speaker 8: at the end of the day, an advisor relationship is
Speaker 8: a human relationship and it's a relationship and that's the
Speaker 8: important word. And I think technology can really supercharge that.
Speaker 8: So the smart advisors are saying, how do I embrace
Speaker 8: it and how do I have it make me better, stronger, faster,
Speaker 8: one other.
Speaker 4: Uh, there's the survey is huge in One of the
Speaker 4: results that struck me was the optimism that the arias
Speaker 4: right now are feeling about the economy. We've spoken about
Speaker 4: this over the last two hours. Here. There seems to
Speaker 4: be an opt optimism here. I don't know if it's
Speaker 4: the sun shining and the waves crashing right there that's
Speaker 4: leading to that enable the people playing pickleball and surfing
Speaker 4: over there, but there's a lot that we talk about
Speaker 4: each and every day that seems to be stressing people out.
Speaker 4: Rias are pretty optimistic.
Speaker 8: Well, I think a lot of it is time horizon.
Speaker 8: I mean when we think about even when we look
Speaker 8: at the different groups of rias, when you think about
Speaker 8: the different generations, right, the younger generations have a really
Speaker 8: long time horizon, and so they're thinking about retirement.
Speaker 11: Right.
Speaker 8: There's a lot of times to plan for your future.
Speaker 8: So some of the volatility that we're experiencing now and
Speaker 8: some of the you know what's going to happen in
Speaker 8: the economy in the next twenty four months, these are
Speaker 8: investing journeys and rias are thinking about a much longer
Speaker 8: time horizon, and so I think they're clients who are
Speaker 8: most worried are the ones who are in retirement, entering retirement.
Speaker 8: You know what's going to happen to my nest egg.
Speaker 8: But a lot of the clients we serve, we're more
Speaker 8: a segmentation play for the big arias who put their
Speaker 8: next generation clients with us, Ones who want a more
Speaker 8: delightful user experience, ones who maybe don't want to talk
Speaker 8: to the advisor quite as much, they'd like to do
Speaker 8: a little more self service. That's really the customer we serve. Ultimately,
Speaker 8: What in terms of types.
Speaker 3: Of investment, Sarah, do you find that those on the
Speaker 3: platform are increasingly want to know about. I feel like
Speaker 3: for years all we talked about was crypto. I'm just
Speaker 3: curious what it is that people are like, wait, I
Speaker 3: want to be able to do this on your platform.
Speaker 8: Well, so our platform started as really a great ETF
Speaker 8: solution on the theory that you know, ETFs is where
Speaker 8: the average investor should be, and we actually attracted rias
Speaker 8: who were primarily building ETF portfolios and as an RIA,
Speaker 8: you can build custom portfolios on our platform. There's also
Speaker 8: model portfolios available. We read more recently introduced mutual funds
Speaker 8: and then last up single stocks. We are actually complementing
Speaker 8: that with some self directed and advisor directed investing, which
Speaker 8: is coming imminently because I think the biggest change we've
Speaker 8: seen is there used to be clients either who want
Speaker 8: a self direct or who want a set it and
Speaker 8: forget it managed portfolio, and now what we're seeing is
Speaker 8: that there's much more of a blending, which is people
Speaker 8: want a little bit of agency with some part of
Speaker 8: their wealth, and then they want some of it in diversified,
Speaker 8: long term, globally diversified position.
Speaker 3: So wait, where does the crypto fit in?
Speaker 8: Well, we you know, interestingly, in twenty twenty one, we
Speaker 8: actually bought a small crypto company and we did diversified
Speaker 8: crypto portfolios and what we found is that the advisors
Speaker 8: shied away from it on the on the advisor solution
Speaker 8: side and on the retail side. Our audience wanted bitcoin
Speaker 8: and ethereum, but didn't want much else. A lot of
Speaker 8: it was and maybe that speaks to who our customer
Speaker 8: segment is.
Speaker 3: More than anything.
Speaker 8: We're not a gamified crowd right where we really do
Speaker 8: attract the long term mindset investor.
Speaker 4: That was Sarah kirschbaumd Levy, CEO of Betterman joining us
Speaker 4: on site at future Proof.
Speaker 3: Coming up, He's an Apple bull and now he's sharing
Speaker 3: a company hoarding a sam Altman linked cryptocurrency.
Speaker 4: We're talking about Dan Ives. He's Next is our coverage
Speaker 4: from future Proof twenty twenty five in Huntington Beach, California. Continues,
Speaker 4: This is Bloomberg.
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Speaker 3: We continue with highlights from our coverage this past week
Speaker 3: in the future Proof Festival from Huntington Beach, California. And
Speaker 3: I gotta say, I know we said it a lot
Speaker 3: on air, but man, it was so nice doing a
Speaker 3: financial conference on the beach. We could see the ocean,
Speaker 3: the wind blowing. It definitely had a different feel.
Speaker 4: Yeah, you and I go to a lot of conferences.
Speaker 4: Most of those, if not all, are actually indoors. I mean,
Speaker 4: even something like the Milkin Institute Global Conference, which is
Speaker 4: in Beverly Hills, another part of the country right there,
Speaker 4: just north of Huntington Beach that actually has perfect weather
Speaker 4: year round, so they could do it outside. But there's
Speaker 4: something unique about having a festival that is literally on
Speaker 4: a parking lot next to the beach. You're in the
Speaker 4: sand for some of it.
Speaker 3: Yeah, no, you absolutely are. It would be really funny
Speaker 3: because I was walking and I was like emptying my shoes.
Speaker 3: Once I got home, I'm like, oh, a little sand
Speaker 3: in there. It's a casual feel, and there's people running
Speaker 3: into each other. They're dressed casually. I mean you even
Speaker 3: wore shorts and flip flops.
Speaker 4: The second day.
Speaker 3: The second day, the second day on air, I mean,
Speaker 3: but it's just there is and it's about setting up
Speaker 3: meetings and conversations. I mean, there were rias right that said, listen,
Speaker 3: this is the only investment financial conference I go to.
Speaker 3: This is the one that really makes sense for me.
Speaker 3: And I thought that was really kind of telling, considering
Speaker 3: there are many many out there.
Speaker 4: The tone also very bullish from really pretty much everyone
Speaker 4: we spoke to, and I'm wondering to what extent that's
Speaker 4: because financial advisors are inherently optimistic. They kind of need
Speaker 4: to be that way for clients who call when they're
Speaker 4: nervous and sort of calm them, or because the festival
Speaker 4: vibe was like that, or if they're actually feeling like, Okay,
Speaker 4: we're not so concerned about the impact of tariffs. We
Speaker 4: think the FED is moving in the right direction, and
Speaker 4: even though we're starting to see some cracks in the
Speaker 4: labor market and the economy, things are pretty good still.
Speaker 3: I think it's interesting that you said that, because I
Speaker 3: did still hear the word uncertainty used an awful lot,
Speaker 3: and I was kind of maybe surprised by that because
Speaker 3: there are some things that we know. We've had a
Speaker 3: massive spending and tax package passed by the President, We've
Speaker 3: had some other moves. We've seen tariffs already set for
Speaker 3: a lot of countries, so we know we're in a
Speaker 3: higher tariff environment. So I think it's kind of interesting
Speaker 3: that there are some things that have been set and
Speaker 3: yet many still said there's uncertainty out there about kind
Speaker 3: of what comes next, and not.
Speaker 4: The uncertainty around what SPF to use thirty or or twenty.
Speaker 3: When you're out there on that, I can't believe.
Speaker 6: You went there.
Speaker 3: No, it's a really interesting environment. You're right, it's not
Speaker 3: like a lot of people were using the R word.
Speaker 3: They weren't talking about recession. But we are going in
Speaker 3: this interesting period with a FED meeting this coming week
Speaker 3: and a FED decision, and then we're in kind of
Speaker 3: a period where we won't hear from companies in terms
Speaker 3: of earnings, and that won't start till January.
Speaker 4: Well, one company that we did hear from this past
Speaker 4: week is Apple, the company holding its biggest product launch
Speaker 4: event of the year this past week, ushering in four
Speaker 4: new iPhone models, including its thinnest ever iPhone, an end
Speaker 4: to end refresh of its smart watch lineup, and updated
Speaker 4: air pods. Someone who watches the company very closely, as
Speaker 4: web Bush's global head of Technology Research, Dan ives Dan
Speaker 4: joined us from future Proof to talk Apple AI plus
Speaker 4: becoming chair of a crypto treasury company that had a
Speaker 4: really big day this past week. You and the team
Speaker 4: at webush has to make their three hundred and fifteen
Speaker 4: million folks out there who are ready to upgrade their iPhones.
Speaker 4: Is the seventeam gonna get them to upgrade? Look, I
Speaker 4: think it's going to move the needle. I mean, I
Speaker 4: think especially in China, there's definitely what I to pin
Speaker 4: up demand. I think street numbers continue to be pretty
Speaker 4: conservative to maybe low and that's a great setup. Look,
Speaker 4: the reality is that this is not going to be
Speaker 4: a super cycle. There's nothing here there makes you think
Speaker 4: that this is gonna be the game change that everyone's
Speaker 4: been waiting for. But I do believe given the install base,
Speaker 4: given some of the tweaks here, and ultimately on the
Speaker 4: on sort of the second half of this upgrade cycle,
Speaker 4: you will have an AI driven ecosystem.
Speaker 12: I believe it will be Google Gemini. This could be
Speaker 12: a sneaky upgrade cycle that I think surprises investors on
Speaker 12: the upside. What do you mean because right now, expectations
Speaker 12: New York City cab drivers barrish on Apple, and I
Speaker 12: think that what I like about the setup is it's
Speaker 12: all about it's kind of left behind.
Speaker 4: Now.
Speaker 12: A lot of that's been self inflicted because every Apple
Speaker 12: event feels like it's a I feel like Michael J.
Speaker 7: Fox and back to the future, you know. So there they.
Speaker 12: Continue to be left behind AI, but now with the
Speaker 12: Google DOJ issue in the rear view, they will double
Speaker 12: down ultimately that Gemini partnership. And when you look at
Speaker 12: the install base, I think that I think Street is
Speaker 12: underestimating what numbers look like for iPhone When you look
Speaker 12: out over the next six, nine, twelve months, and I
Speaker 12: think in big tech, I view Apple from a sentiment
Speaker 12: perspective relative to where I viewed Alphabet.
Speaker 7: Maybe about six months ago.
Speaker 4: You in your note ahead of the launch called Apple's
Speaker 4: AI strategy quote invisible. You said the elephant in the room,
Speaker 4: and is the black over the stock AI's invisible or
Speaker 4: Apple's invisible AI strategy? Did you get any more information
Speaker 4: today at the launch about its strategy?
Speaker 12: I mean, I think fundamentally it they're keeping it close
Speaker 12: to the vest right like you in the words, it
Speaker 12: continues to be.
Speaker 7: That black cloud.
Speaker 12: I think they're waiting for ultimately what's going to be Gemini,
Speaker 12: because I think they had a choice either go down
Speaker 12: the route with Perplexity and ultimately look to acquire that,
Speaker 12: or if it was a favorable ruling, then the candlelight
Speaker 12: dinner with Google and sun Dar could ultimately start again
Speaker 12: and then you could actually double down that partnership. And
Speaker 12: that is I believe the direction. But look, tim they
Speaker 12: got it. It was a black eye moment a year
Speaker 12: ago when they weighed out the AI strategy.
Speaker 7: I mean it's ninety five percent of that had a
Speaker 7: backtrack on it.
Speaker 4: Well, now and now they've lost a lot of the
Speaker 4: senior executives that were working on that to matter.
Speaker 12: And we've talked about there's a better chance to me
Speaker 12: playing Ryder Cup bef page than any internal AI strategy
Speaker 12: happening at Apple.
Speaker 3: But is that such a bad thing? And this is
Speaker 3: one of the things that Dan we talk a lot
Speaker 3: about that maybe Apple's just kind of watching. There's a
Speaker 3: lot of money slashing around trying to figure out what
Speaker 3: ultimately are the standards, the methods the companies that really
Speaker 3: dominate right in terms of AI kind of protocols, and
Speaker 3: maybe Apple's like, I'll just watch and then we'll figure
Speaker 3: it out.
Speaker 9: Are that bad?
Speaker 7: I think it's bad.
Speaker 12: I compare it to like Saturday night in New York City,
Speaker 12: there's a restaurant where there's one person in there at
Speaker 12: eight thirty, like, oh, they must know something everyone else does.
Speaker 12: I'd rather go to the place where people are lining
Speaker 12: up outside. When it comes to old AI, time's not
Speaker 12: on their side. Lookquid open AI, look at Meta wartime CEO,
Speaker 12: look at Microsoft. Look what are Google's done? That's why
Speaker 12: you as in an all time high. So I do
Speaker 12: believe cooks recognize this. But The problem is is that
Speaker 12: now it's a go time moment when it comes to
Speaker 12: AI and that look we've talked about, that's how you
Speaker 12: get through three twenty five three point fifty four hundred
Speaker 12: dollars stock is AI, you know relative to right now Apple,
Speaker 12: they're kind of on the outside looking in of that
Speaker 12: AI party where it's still ten pm going to four am.
Speaker 4: Everyone wants to know about what the heck is going
Speaker 4: on over at eight Co Holdings, your chairman of this company. Now,
Speaker 4: I think it took a lot of people by surprise.
Speaker 4: It's a crypto treasury firm. And for those who aren't
Speaker 4: familiar with the way this works, it's a Michael Sayler strategy,
Speaker 4: but with a different cryptocurrency. This is world Coin backed
Speaker 4: by Sam Altman eyeball scanning stuff what is going on here?
Speaker 12: So I wouldn't have done this as chairman if just
Speaker 12: a regular token back strategy. The reason I did this
Speaker 12: it has to do with Sam, It has to do
Speaker 12: with my view world is going to be a de
Speaker 12: facto standard for identification authentication in terms of human proof
Speaker 12: in AI world. This is much more of a tech
Speaker 12: infrastructure play than when I'd say the traditional crypto play.
Speaker 12: So obviously the reason I'm so excited about it is
Speaker 12: really this is going to become I think a huge
Speaker 12: part of the story and the narrative.
Speaker 7: It's really an intersection of AI and crypto.
Speaker 3: Explain that damn.
Speaker 12: So what that means is, you know, as timpto, it's
Speaker 12: IRIS scanning the orbs. Right going forward in the future,
Speaker 12: especially in the robotic world bots everywhere, you're not going
Speaker 12: to be able just identify through a boot check.
Speaker 7: It's really going to be IRIS scanning.
Speaker 12: What they've done already fifteen million humans on the platform
Speaker 12: I believe, going about one hundred million over the next year.
Speaker 12: That's going to be a form of identification. That's probably
Speaker 12: the most privacy lock box out there, and it's secured
Speaker 12: by token, a world token. So my view and our
Speaker 12: view as a team, this is our early days in
Speaker 12: terms of where this is all heading, and that's why
Speaker 12: we want to do the strategy.
Speaker 3: Now, what's to prevent somebody else from doing the same.
Speaker 7: Thing they are.
Speaker 12: They're playing a different game than they they're Nvidian twenty
Speaker 12: twenty two, And in other words, like relative to what
Speaker 12: Sam Alex and the team have built out, I mean
Speaker 12: from an infrastructure and authentication perspective. They are I think
Speaker 12: miles ahead. I don't see anyone that could catch them.
Speaker 12: That's why we bet on World as part of the
Speaker 12: acres strategy. And obviously having someone like Tom Lee and
Speaker 12: bitmnor Huge, you know, big investor, that's another support that
Speaker 12: we're so excited to have.
Speaker 4: You've also got an ETF the launch back in June.
Speaker 4: It's the dan Ives Webbush Ai Revolution ETF. It's up
Speaker 4: sixteen percent since launch. It's up performing the S and
Speaker 4: P five hundred and the Nasdaq one hundred, Broadcom, Google
Speaker 4: and Video, TSMC, Apple, They're the top holdings. Somebody watching
Speaker 4: right now might be like, Okay, he's got a clothing company,
Speaker 4: he's chairman of this crypto treasury company, he has this
Speaker 4: day job at webbush. How am I sure that he's
Speaker 4: going to manage this ETF and have the time and
Speaker 4: resources to manage the CTF in my interest?
Speaker 12: And that's a great question. I'd say, when you think
Speaker 12: about my chairman role, it's all related to to AI
Speaker 12: in the infrastructure, and there was this is interrelated to
Speaker 12: my view of where the AI revolution gets built out,
Speaker 12: and the reality is that ninety five percent of my
Speaker 12: time has spent you know, three and a half million
Speaker 12: aire Miles.
Speaker 7: Well, I was twenty five years.
Speaker 12: I think what's what's enabled to distinguish us is feet
Speaker 12: on the ground talking whether it's private public partners and really,
Speaker 12: you know, I think that's how investments have grown to.
Speaker 4: Do you add do you add eight co holdings to
Speaker 4: the IV ETF?
Speaker 12: No, No, that would be totally it's a total separate operation.
Speaker 3: How do you keep firewalls between it? Though, Like there's
Speaker 3: going to be people who are saying, yeah, of course
Speaker 3: Dan's going to talk up that he loves alphabet and
Speaker 3: that he looked loves nvidio. I mean he's got an
Speaker 3: ETF like I've just how.
Speaker 12: Do we sure on the on the UTF and for
Speaker 12: like and and remember and part of how investors know
Speaker 12: us the ETF is all based on our ives AI thirty.
Speaker 7: It's all based on our research.
Speaker 12: So the reality is I think part of how we've
Speaker 12: gotten so, you know, the the customer, I'd say, from
Speaker 12: an investor perspective, we've had massive you know, I think
Speaker 12: reception for the ETF is because it's our thirty names
Speaker 12: that altermate. We've used the winners and we and we
Speaker 12: change out every quarter. And that's I think you do
Speaker 12: about ETF what it's based on. It's all based on
Speaker 12: the research. And got everyone here that knows dan ives,
Speaker 12: they know like feet on the street, not sitting there
Speaker 12: in some Peter Malar fifteen to four of New York
Speaker 12: City office building. And the only time we travel is
Speaker 12: two times in San Francisco.
Speaker 4: Now you just got back from Australia.
Speaker 7: Yeah, so I literally landed here from Australia.
Speaker 4: What were you doing there? Yeah?
Speaker 7: So part part work, part pleasure.
Speaker 12: So it's fun because look, I mean we when we
Speaker 12: talk at AI Revolution, like in Sydney, in Melbourne, weren't
Speaker 12: packed meetings because the reality is that this is not
Speaker 12: just us. And that's why I spend so much my
Speaker 12: time traveling around the globe.
Speaker 3: What might be the irrational exuberance part of kind of
Speaker 3: the trade today or the tech trade or the AI trade.
Speaker 3: And just got about thirty seconds. There's got to be
Speaker 3: some fluff out.
Speaker 12: Just because you say AI forty times in a conference
Speaker 12: call doesn't make yourself an AI need Look just because
Speaker 12: like Tim he was wearing an AI shirt because he
Speaker 12: says it fifteen times and says Tim on the back AI,
Speaker 12: it doesn't mean. My view is you have to distinguish
Speaker 12: the winners and the real ones from the fakes, and
Speaker 12: that's the reality. And then look, that's what we spend
Speaker 12: all of our time doing.
Speaker 4: The one company you're most bullish on right now, public company.
Speaker 12: mESC Ofai Pounteer, that's going to a trillion next two
Speaker 12: to three years. And I always say the haters hate it,
Speaker 12: hated fifteen, despise it, eighties, say it's super expensive one
Speaker 12: point fifty.
Speaker 7: They'll be saying the same thing at a trillion.
Speaker 4: Thanks to Dan I's Global head of Technology Research at
Speaker 4: Webbush Securities.
Speaker 3: Still ahead on Bloomberg Business Week, JP Morgan's Pria Mizra
Speaker 3: on the bond market, the ming Fed meeting, that is
Speaker 3: our coverage from future Proof twenty twenty five in Huntington Beach,
Speaker 3: California continues.
Speaker 4: This is Bloomberg.
Speaker 1: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 1: Just say Alexa Play Bloomberg eleven thirty.
Speaker 4: We continue with this special edition of Bloomberg Business Week,
Speaker 4: highlighting interviews from this week's future Proof Festival in sunny
Speaker 4: Huntington Beach, California.
Speaker 3: Yeah, it's a great opportunity to talk to people all
Speaker 3: different types of rias, registered investment advisors and some with
Speaker 3: specialties whether it comes to private credit, alt assets. But
Speaker 3: we also got a lot of the I don't know,
Speaker 3: traditional investment financial community, a lot of folks that are
Speaker 3: often on Bloomberg, and you know, got to talk about
Speaker 3: the upcoming FED meeting this week, the jobs data revisions
Speaker 3: that we got last week, you know, all of the
Speaker 3: data that was coming at us, and try to make
Speaker 3: some consensus about what this means for investors in terms
Speaker 3: of strategy. And you know, whether it was equities we
Speaker 3: talked or often fixed income.
Speaker 4: On that surging debt and deficits, a relentless attack on
Speaker 4: the US Central Bank, and the most aggressive tariff policies
Speaker 4: in almost a century. The question a recipe for bond
Speaker 4: market chaos, one person says, guess again.
Speaker 3: For all the shocks US treasuries have absorbed during the
Speaker 3: first months of President Donald Trump's tempestuous second term, the
Speaker 3: market has held up remarkably well, even as government bonds
Speaker 3: from the UK to Japan have been pummeled amid heightened
Speaker 3: fiscal concerns.
Speaker 4: We also got news this week that the Core consumer
Speaker 4: price index rose as expected in August, keeping the Fed
Speaker 4: on track to cut rates next week.
Speaker 3: Now, before we got any data, we caught up with
Speaker 3: Pria Misra Core Plus Bond ETF portfolio manager JP Morgan,
Speaker 3: who joined us at future Proof.
Speaker 13: There's a lot going on if you think about we've
Speaker 13: had to deal with this year. You know, tariffs, fed, independence,
Speaker 13: the deficit, it's just and then you look at equities
Speaker 13: at their highs and now bond's doing well, So what's
Speaker 13: going on? So our view is everything's actually consistent with
Speaker 13: the soft landing. What I actually think equity people called
Speaker 13: soft landing and bond.
Speaker 9: People called.
Speaker 13: Yeah, the growth in the one to two percent range inflations.
Speaker 13: The problem is not at two percent, but it's not
Speaker 13: as high as people feared when we first heard tariffs.
Speaker 13: So it's allowing the Fed to start to cut rates,
Speaker 13: and then you have this slowdown in the labor market.
Speaker 14: I think the hope stops right here.
Speaker 13: There's low fire, low, higher we don't quite make it
Speaker 13: to the high fire world that the FED can cut
Speaker 13: just enough in terms of time as well as how
Speaker 13: much they cut to get the economy to stain the
Speaker 13: soft landing mode.
Speaker 14: I think that's the hope.
Speaker 4: Why are you so confident that the tariff induced inflation
Speaker 4: that we've seen has not been as prominent as people
Speaker 4: initially thought it would be. We just had very ridoults on.
Speaker 4: He said, Hey, a lot of people did pull a
Speaker 4: lot of people pulled pulled forward, a lot of companies
Speaker 4: pulled forward. So the tariffs hadn't hit them yet.
Speaker 13: Right, And so I think that is the risk scenario.
Speaker 13: But I'll get to your question why I have so
Speaker 13: it hasn't happened yet. Now again we're looking at the future,
Speaker 13: and maybe it can happen because I was using inventory
Speaker 13: and now when I'm paying more as a company, I can.
Speaker 3: Pass it on.
Speaker 14: Here's the issue.
Speaker 13: Companies are realizing that consumers are cost conscious, and passing
Speaker 13: on price increases entirely runs the risk of consumers stopping
Speaker 13: buying or reducing the amount that they're buying. So I
Speaker 13: think that's why companies might be taking some of the
Speaker 13: tariffs in their margins margins are high, so they can
Speaker 13: afford to take some of the costs and the margins.
Speaker 13: Some of it the currency's work, some of it may
Speaker 13: be the foreign producer is taking some of that hit.
Speaker 13: So I think that through the value chain is being
Speaker 13: absorbed at different spots. But the other part is look
Speaker 13: at the rest of inflation. So maybe goods inflation does
Speaker 13: pick up because companies have to pass on at least
Speaker 13: some of it, and a governor Waller thinks about half
Speaker 13: of it will be passed.
Speaker 14: Some people argue one third. Some part is going to
Speaker 14: be passed.
Speaker 13: Look at I mean, the US consumer basket is really
Speaker 13: seventy five percent services, So we're looking at service inflation, wages,
Speaker 13: rent inflation, X rent course services that it's not coming down,
Speaker 13: but it's not going back up. In fact, wages were
Speaker 13: seeing signs that wages are starting to slow down. So
Speaker 13: our thought is, even if you get the goods related
Speaker 13: price increases, services will likely offset it. And that's why
Speaker 13: Chair Power something he said in Jackson Hall, which I
Speaker 13: thought was the first time I've heard it in a while,
Speaker 13: that it could be short lived, meaning that they can look.
Speaker 14: Through any tariff related increases.
Speaker 13: Now it has to be TARIF related. So let's see
Speaker 13: we get a CPI report later this week. Our view
Speaker 13: is services is going to not be as troublesome. Goods
Speaker 13: might look troublesome, but they can put it down as
Speaker 13: one off.
Speaker 3: It sounds like if things aren't so bad in terms
Speaker 3: of inflationary pressures, and if you, as you kind of
Speaker 3: laid out in terms of the jobs report, me, maybe
Speaker 3: it was just that one month you know that we're
Speaker 3: not going to continue to see losses. Why do we
Speaker 3: need to cut rates? Is it justin I keep hearing naw,
Speaker 3: I should say keep But the idea of an insurance
Speaker 3: cut just in case? Is that what this is all about?
Speaker 13: So I think the starting point is where I focus
Speaker 13: on the starting point. We're in restrictive territory. If we
Speaker 13: were at neutral levels.
Speaker 3: Even though financial conditions are really loose, like you said.
Speaker 13: Yeah, but intrasensitive sectors look at housing, look at consumer durables.
Speaker 13: So sectors of the economy that are sort of levered
Speaker 13: two interest rates are in.
Speaker 9: A weak spot.
Speaker 13: So that's why that restrictive level of interest rates matter.
Speaker 14: And if the FED scenes.
Speaker 3: It's not the FED mandate right, Like I think about
Speaker 3: when I think about interest rates to help the housing market.
Speaker 3: All I can think about is the financial crisis, and
Speaker 3: I realize there are a lot of things going on
Speaker 3: at that point prier, but I do wonder is that
Speaker 3: what the FED needs to be concerned about.
Speaker 13: So I think they've got other tools for it, whether
Speaker 13: it's regulation or making sure that you know, banks are
Speaker 13: not lending to remember the Ninja loans back.
Speaker 14: And or assets. That was what the A was for
Speaker 14: and people were getting loan. So I think there's other
Speaker 14: ways to ensure that there's not excesses.
Speaker 13: But when you look at the one tool that they have,
Speaker 13: interest rates, we're in restrictive territory. Inflation slowly heading down,
Speaker 13: which is impressive given the extent of tariffs. So average
Speaker 13: effective TARIFFAF is fifteen percent, and yet inflation's not accelerating
Speaker 13: and the job market is slowing. I think why Chair
Speaker 13: Power was a little maybe hesitant in July was wasn't
Speaker 13: sure it's a demand or supply and it's both factors
Speaker 13: are impacting the labor market. But there's clear evidence I
Speaker 13: think that the demand side is there. Demand is slowing.
Speaker 13: You're seeing it in college age. You know, the unemployment
Speaker 13: rate for young people you're seeing it in hiring thousands.
Speaker 4: That was pretty start. On Friday we talked about that.
Speaker 4: The numbers that we got for young people. I mean,
Speaker 4: anybody can speak anecdotally about this who has young graduates
Speaker 4: from college or young people in their household. It's not
Speaker 4: pretty out there.
Speaker 13: And then that's why it's hard to put that on immigration.
Speaker 13: There's absolutely an immigration impact on the labor market, but
Speaker 13: not when you look at the young people who are
Speaker 13: not getting jobs straight out of college. So I think
Speaker 13: there's a demand aspect. Now, is it AI, is it tariffs?
Speaker 13: Is it uncertainty? Hard to disentangle what's driving it, but
Speaker 13: there is a demand aspect, and so I think the
Speaker 13: FED is looking at that and saying, well, let's reduce
Speaker 13: some of that restrictiveness. I think talk of fifty basis
Speaker 13: points cut next week that might be a little aggressive,
Speaker 13: because I think that is in case you see signs
Speaker 13: that layoffs have really picked up. We do have an
Speaker 13: initial claims report, one report that really spikes. I think
Speaker 13: we can talk back about fifty. They don't have to
Speaker 13: get aggressive, but just start that process and remain data
Speaker 13: depends what.
Speaker 10: Do you think.
Speaker 3: There are visions on the labor data tomorrow. I mean,
Speaker 3: we've been so focused on that. What do you think
Speaker 3: that's going to show.
Speaker 13: It's going to be between eight hundred thousand and a million,
Speaker 13: So it's going to be a big number down. I
Speaker 13: don't think it should be a big surprise. The labor
Speaker 13: market was the outperformer when we looked at everything else.
Speaker 13: So I think the fact that these revisions will actually
Speaker 13: bring the labor get in line with GDP, in line
Speaker 13: with consumer spending and so you know, and is it
Speaker 13: I don't think it's political. I think it's just data
Speaker 13: collection has been an issue really since the pandemic, and
Speaker 13: globally you look at response rates globally, it's something we
Speaker 13: should all think about. How do we get more accurate data?
Speaker 13: And I think this is maybe revisions is the way.
Speaker 7: To do it.
Speaker 3: Or Mark Bickie was talking about this and he says,
Speaker 3: you know, people are responding, they're just it's the responses
Speaker 3: are slower and so that the revisions finally take all
Speaker 3: that into accounts. So how do we get people to
Speaker 3: respond more quickly right, so that the data is more
Speaker 3: relevant in a timely matter?
Speaker 13: Yeah, maybe you're supposed to spend more money. You figured
Speaker 13: out some modern way of asking.
Speaker 15: People technology maybe speaking of that, I'm curious about the
Speaker 15: immigration side of things and the way you're looking at
Speaker 15: immigration from your perspective as somebody who invests in fixed income,
Speaker 15: recommends fixed income and thinks.
Speaker 4: About strategy, because we're seeing a real crackdown obviously here
Speaker 4: in the US, and that has implications for labor to
Speaker 4: market up as implications for demand. Augusta Sarava, who writes
Speaker 4: for our Economy team, had this really interesting piece out
Speaker 4: over the weekend about Hispanic consumers hitting the brakes as
Speaker 4: US firms worn a bit pullback. So now we're starting
Speaker 4: to hear US firms talk about this segment of the
Speaker 4: population spending least as a result of an immigration crackdown.
Speaker 4: How are you looking at that?
Speaker 14: Yeah, there's a great article.
Speaker 13: I read it and it sort of hit a nerve
Speaker 13: because a lot has been talked about immigration and the
Speaker 13: impact on the labor market. What about immigration and growth,
Speaker 13: it's a source of demand housing consumption in general, and
Speaker 13: this idea that our star. So I'm going to take
Speaker 13: it down to a bond PM, so I live in.
Speaker 10: The art star.
Speaker 13: I love this, But what is neutral interest rate? And
Speaker 13: there's been this argument that actually neutral rate is maybe
Speaker 13: it's three and a half, maybe it's four. You know,
Speaker 13: you didn't ask me, but people who tell me we're
Speaker 13: at neutral stock markets high, we're at neutral. FED doesn't
Speaker 13: need to cut rates. And then I'd say, look at
Speaker 13: the intrasensitive sectors. They are all kinds of frozen slowing.
Speaker 13: It is restrictive, But what is that neutral rate? I
Speaker 13: think immigration was a big part of why that neutral
Speaker 13: rate has gone up, Like in you know, two thousand
Speaker 13: and ten or two thousand and eight to twenty twenty,
Speaker 13: we argue the neutral rate was two two and a half.
Speaker 13: Now people are saying, maybe it's three to three and
Speaker 13: a half. How much of that is immigration? And so
Speaker 13: if immigration is heading low and this is a structural trend,
Speaker 13: then I would argue, maybe that neutralate is low, and
Speaker 13: so where should the tenure be in equilibrium? Three and
Speaker 13: a half to four seems fine in a recession. It's
Speaker 13: going well below.
Speaker 14: Three and a half.
Speaker 13: But we're not pricing in a recession. So I don't
Speaker 13: see a disconnect between bonds and stocks. They're both all spreads.
Speaker 13: For that matter, They're all telling you an okay economy.
Speaker 13: FED cutting just enough and hopefully we just stay here.
Speaker 13: But if things slow down more wele then the Fed's
Speaker 13: going to cut.
Speaker 14: A lot more. Then that ten year is getting much lower.
Speaker 13: So I bring it to whether it's consumption or the
Speaker 13: labor market that immigration impacts that neutral rate lower.
Speaker 3: Pre It just got about thirty forty seconds here. So
Speaker 3: you add all this up, there's your macro. What does
Speaker 3: it mean for investors in the fixed income world? Where
Speaker 3: should they be allocating assets?
Speaker 14: So fixed income should give you income and diversification.
Speaker 13: It's giving you both right now in income in real terms,
Speaker 13: the tenure is giving you two percent real rates thirty
Speaker 13: years giving you even more. So I would say own
Speaker 13: fixed income for yield, and then you have to go
Speaker 13: out the curve. Diversification is where that curve comes, and
Speaker 13: you need a little bit of duration. I don't know
Speaker 13: anybody who's long the tenure. Well I know myself. We're
Speaker 13: long a little bit of the tenure. A lot of
Speaker 13: people are nervous about the deficit, right the deficit is
Speaker 13: better today because of tariff revenues, So I think it's
Speaker 13: priced in. You're getting paid to extend. Take a little
Speaker 13: bit of credit risk, own some duration. The economy is okay.
Speaker 13: So you can look at fixed income for that income
Speaker 13: and if you've got what role does fixed and complain
Speaker 13: a portfolio, if you've got risk assets, you want to
Speaker 13: hedge those risk assets own a little bit of five
Speaker 13: ten year duration, don't have to go further out, but
Speaker 13: that's where you'll get that diversification benefit.
Speaker 4: Our thanks to Priam isra Core plus bond ETF portfolio
Speaker 4: manager at JP Morgan.
Speaker 3: And that wraps up our first hour or of the
Speaker 3: weekend edition of Bloomberg Business Week from Bloomberg Radio coming
Speaker 3: up in the next sixty minutes. Much more from future
Speaker 3: Proof twenty twenty five.
Speaker 4: We hear from Masters and Business host Barry Ridholts to
Speaker 4: get his opinion of fed independence plus black Rocks, Jamie
Speaker 4: Majera on bringing private credit to the retirement class.
Speaker 3: Also a psychologist's take on investing, and well, I gotta
Speaker 3: say he also added some numbers two to back it
Speaker 3: all up in terms of his thinking. This is Bloomberg
Speaker 3: Business Week.
Speaker 4: I'm Carol Masser and I'm Tim Steineveeck. Stay with us.
Speaker 4: More from Bloomberg Business Week Daily coming up after this.
Speaker 2: You're listening to the Bloomberg Business Week daily podcast. Catch
Speaker 2: us live weekday afternoons from two to five pm Eastern
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg
Speaker 2: Business app, or watch us live on YouTube Plenty.
Speaker 3: Ahead in our second hour of the weekend edition of
Speaker 3: Bloomberg Business Week, highlighting our conversation from this past week's
Speaker 3: future Proof Festival held in Huntington Beach, California, I should
Speaker 3: say lovely Huntington Beach, California was pretty sweet.
Speaker 4: You sound like you still want to be there.
Speaker 3: Well, you know, I'm a happy girl on I'm Mirror Beach.
Speaker 4: You really are. I will say, I didn't know you
Speaker 4: could be so productive, Carol, Master lying in the sand
Speaker 4: just at your iPhone working on the show, Because that's
Speaker 4: pretty cool.
Speaker 3: I did do it.
Speaker 4: He did, Hey, Blenny Moore. Including a conversation with the
Speaker 4: host of the Masters in Business podcasts. Yeah, Barry Redholts
Speaker 4: you all know him, plus a chief behavioral officer on
Speaker 4: how psychology and behavioral finance are coming to the forefront
Speaker 4: of wealth management. Carol, I didn't even know this job
Speaker 4: existed exactly.
Speaker 3: That's a fascinating conversation.
Speaker 7: You know.
Speaker 3: The other interesting conversations and a major theme of future
Speaker 3: proof was AI. No surprise, right, but everybody trying to
Speaker 3: figure out how to use AI when it comes to
Speaker 3: investment management. What does it mean going forward?
Speaker 4: I don't know. I don't think anybody knows.
Speaker 3: I don't think so either.
Speaker 4: And I think the question a lot of people have is, Okay,
Speaker 4: am I still going to take on the same role
Speaker 4: in the world of AI moving forward? Will I still
Speaker 4: need the same number of employees? What's it going to
Speaker 4: do for my business? But also equally important, what's it
Speaker 4: going to do for the non AI companies that we
Speaker 4: invest in? When are we going to see that result
Speaker 4: of increased productivity?
Speaker 8: Yeah?
Speaker 3: Exactly. I think that's the stage we're moving into when
Speaker 3: it comes to AI in a big way, all right,
Speaker 3: First up this hour, though, there is a trend picking
Speaker 3: up momentum as the big US banks partner up with
Speaker 3: asset managers. Just about a week ago, Bloomberg reported that
Speaker 3: City Group is entrusting Blackrock with tens of billions of
Speaker 3: dollars of clients investments, in a move that will close
Speaker 3: the bank's only remaining in house asset manager and outsource
Speaker 3: more of its wealth units offerings.
Speaker 4: In a new partnership, Blackrock will manage the assets of
Speaker 4: thousands of the bank's wealthiest clients who currently have accounts
Speaker 4: with City Investment Management. Our next guest involved in all
Speaker 4: of this, Jamie Majeira, was named head of US Wealth
Speaker 4: Advisory in July. Her job also includes heading up retirement
Speaker 4: at Blackrock, it's the world's largest asset manager, which natched
Speaker 4: a record twelve point five trillion dollars in assets as
Speaker 4: of the company's most recent quarterly update. She joined us
Speaker 4: from future Proof.
Speaker 3: How are you.
Speaker 16: I'm great. I mean, we're at the future Proof Festival. Like,
Speaker 16: it doesn't get better than this. This is beautiful.
Speaker 3: It's pretty amazing, right to talk about like kind of
Speaker 3: what's going on in the markets against this backdrop. I
Speaker 3: want to ask you though about the news last week.
Speaker 3: You were definitely quoted in one of the Bloomberg stories.
Speaker 3: It was exclusive. You said, this is a sector defining moment.
Speaker 3: How come?
Speaker 17: Well?
Speaker 16: You know, the thing that I find so interesting about
Speaker 16: the wealth market is that as firms are getting larger,
Speaker 16: right as wealth management firms, as banks, they're getting larger,
Speaker 16: and they're looking to really lean in on what they
Speaker 16: do best, which is serving their clients, expanding their relationships
Speaker 16: with their clients, and as they do that, they need
Speaker 16: to work with partners, partners who can be their outsource provider,
Speaker 16: who can take on the investment management, who can build
Speaker 16: custom solutions for them. And so this is just one
Speaker 16: example of a very large global bank asking Blackrock, selecting
Speaker 16: Blackrock to be their outsource provider. But we're still this
Speaker 16: every single day from financial advisors all around the country.
Speaker 16: They're looking to work with firms like Blackrock so that
Speaker 16: we can customize solutions for them and take on the
Speaker 16: investment management so they can do what they do best,
Speaker 16: serve their clients, expand their sol This is just the
Speaker 16: beginning of the beginning.
Speaker 4: I was just going to ask, should we should investors
Speaker 4: expect more of these partnerships to be announced.
Speaker 9: Absolutely absolutely.
Speaker 16: And by the way, today Blackrock has over thirty thousand
Speaker 16: financial advisors just in the US who are already relying
Speaker 16: on us to be their outsourced provider. Then you enter
Speaker 16: a firm Lake City, a massive global bank, there will
Speaker 16: be more firms coming who are going to come to
Speaker 16: Blackrock and ask for this type of partnership.
Speaker 3: So you guys see a lot. How would you describe
Speaker 3: the investment environment we were reminded. We were just talking
Speaker 3: to Matt Middleton, who puts on this event, and said,
Speaker 3: last year it was all about the upcoming US elections.
Speaker 3: They've happened, right, we have a president who's very active
Speaker 3: on things that really impact the investment environment. How would
Speaker 3: you describe the environment today?
Speaker 16: Look, I think a lot of people with reason, of course,
Speaker 16: have uncertainty around economics, uncertainty around tariffs, uncertainty around everything
Speaker 16: and what that.
Speaker 9: Means for their portfolio. What I find most.
Speaker 16: Positive and exciting is the fact of all of these
Speaker 16: people who are thinking about what does this mean to
Speaker 16: my savings, What does this mean to my ability to retire,
Speaker 16: What does this mean to my ability to send my
Speaker 16: children to school. Well, they're working with professionals like financial advisors,
Speaker 16: like so many of the advisors that are here, and
Speaker 16: the job of the advisor is to help them navigate
Speaker 16: that uncertainty and help them focus on the long term. Right,
Speaker 16: It's about time in the market, not timing the market.
Speaker 16: And that's something that we believe very strongly.
Speaker 4: What are the questions that they're asking right now, especially
Speaker 4: the wealthier clients, What do they want to know? What
Speaker 4: do they want to invest in? What opportunities do they
Speaker 4: want you to provide.
Speaker 16: Yeah, there's two massive things. One is taxes. Help me
Speaker 16: better manage my taxes. I can control for that, I
Speaker 16: can't control.
Speaker 9: Markets. Help me b better managing.
Speaker 3: It's so funny that you say that. I feel like,
Speaker 3: all of a sudden, we've noticed too. I think in
Speaker 3: conversations that it's yes, about returned but it is about
Speaker 3: text self advantages. Yes, exact exactly. Tax ope, so go go,
Speaker 3: go ahead.
Speaker 16: But you're right, that is the that is top of
Speaker 16: mind for high net worth ultra high networth investors because
Speaker 16: one they can control it too. There's actually a pretty
Speaker 16: significant implication on their portfolios when you think about taxes.
Speaker 9: And so it's exactly why a.
Speaker 16: Few years ago Blackrock acquired a company called a Perio.
Speaker 16: A Perio was a direct indexing company, a platform that
Speaker 16: had best in class capabilities to help end investors customize portfolios,
Speaker 16: writ single security portfolios, maybe for their values, their beliefs,
Speaker 16: most importantly their taxes. And today that's one of our
Speaker 16: largest growing platforms. A Perio direct indexing also spider Rock,
Speaker 16: where you can do custom overlay, custom options overlay. Think
Speaker 16: about that Apple executive that worked at Apple for years
Speaker 16: and years and years and has all of this Apple
Speaker 16: stock that's emotional for them. They want to hold onto that.
Speaker 16: There's a lot of tax implications in that, but at
Speaker 16: the same time they can hedge against that, they can
Speaker 16: run options on top of that, and that is top
Speaker 16: of mind.
Speaker 4: Okay, taxes is one thing. What's the other one?
Speaker 9: Private markets?
Speaker 4: Yeah? I knew you were going to say, of course.
Speaker 9: You did private markets every headline.
Speaker 4: Well, what part of that specifically when you when you
Speaker 4: think of alternatives, when you think of private markets where.
Speaker 16: Yeah, So let me take a step back and say
Speaker 16: one of the things we believe very very very strongly
Speaker 16: at Blackrock is our job is to help make it
Speaker 16: easier for investors to access the full power of the
Speaker 16: capital markets. Now previously capital markets meant public markets. We
Speaker 16: know the opportunities that exist beyond the public markets in
Speaker 16: the realm of private companies. And so it's why last
Speaker 16: year we acquired pre Quinn. From a data perspective, we
Speaker 16: inquired g I p HPS because we feel so strongly frequent.
Speaker 3: Being I know, for those of us in the journalism world,
Speaker 3: I mean, that's where we go in terms of for
Speaker 3: data on the private markets.
Speaker 16: Every slide, every chart you see source Prequin and it
Speaker 16: is really the only source of truth on private markets.
Speaker 16: And so if we if we have that in addition
Speaker 16: to all of these capabilities that help us build products
Speaker 16: that allow people to more efficiently access the private markets,
Speaker 16: then we can better serve our clients in the wealth market,
Speaker 16: not just institutions any longer. And also in retirement.
Speaker 3: We're talking with Jamie Madeira, managing director ahead of US
Speaker 3: Wealth Advisory and head of Retirement at black Rock here
Speaker 3: at future Proof in Huntington Beach. We reported too that
Speaker 3: I think Lari Fink, your CEO, has talked about in
Speaker 3: your CFO about offering target date retirement funds that include
Speaker 3: private assets next year. I mean it meshes kind of
Speaker 3: with the survey that you guys put out today that
Speaker 3: talks about twenty four percent of retirement plans are considering
Speaker 3: adding all the assets over the next year, private equity,
Speaker 3: credit and other investments. Is that still on track? Give
Speaker 3: us Can you give us an update?
Speaker 18: Yeah?
Speaker 16: Absolutely so, yes, it is still on track. Look, I
Speaker 16: think there's been a lot of headlines from a lot
Speaker 16: of different firms about people coming to market with ideas
Speaker 16: of how to incorporate private markets.
Speaker 3: Safely, right, because we have to remind everybody they're not
Speaker 3: as liquid as a lot of investments that normally your
Speaker 3: retirement funds go into.
Speaker 16: Yeah, there are many considerations that planned sponsors and investors
Speaker 16: need to think about to make sure it's right for them.
Speaker 16: Our view is that if we can do this thoughtfully
Speaker 16: strategically integrating private markets private assets into a target date
Speaker 16: fund alongside of public markets, and manage that glide path
Speaker 16: so it's appropriate for people at different stages of their life,
Speaker 16: then we can actually deliver them fifteen percent more returns
Speaker 16: over a forty year or fifteen percent more retirement asset's
Speaker 16: a just say over a forty year time horizon, that's
Speaker 16: a long time, and that's a lot more a lot
Speaker 16: more retirement savings.
Speaker 9: And so we believe strongly in that we are on track.
Speaker 16: We actually are already in market as well in the
Speaker 16: smaller and mid size retirement space. So we partnered with
Speaker 16: a company called Great Gray, and we're powering their glidepath
Speaker 16: so that they can incorporate public and private markets into
Speaker 16: one target date solution.
Speaker 4: Do you you know when we think about target date solutions, now,
Speaker 4: what we know and what we've experienced is like the
Speaker 4: asset allocation between equities and fixed income. Do we get
Speaker 4: to a point where that's not even a choice anymore,
Speaker 4: It's like equities, fixed income, and.
Speaker 9: Private It's interesting.
Speaker 16: I think for so long people have thought about the
Speaker 16: sixty forty portfolio equity is fixed income. Some people may
Speaker 16: be as old we are to say fifty thirty twenty
Speaker 16: that twenty percent might be ten percent private equity, ten
Speaker 16: percent private credit, different diversified assets in there. But absolutely
Speaker 16: I think the new portfolio, the portfolio of the future,
Speaker 16: to fund these longer lives, has to incorporate private assets.
Speaker 10: You know.
Speaker 3: One of the things out of your survey that thought
Speaker 3: was really interesting was guaranteed income is now a top priority.
Speaker 3: Eighty six percent of workplace savers want it, and for
Speaker 3: the first time, one hundred percent of employers say they
Speaker 3: feel responsible for helping participants generate income and retirement. I
Speaker 3: keep thinking about my father who had a pension and
Speaker 3: VA benefits and investments, and not a lot of people
Speaker 3: are doing pensions right or anything anymore, and so I
Speaker 3: am curious about how employers are thinking about this. That
Speaker 3: struck me.
Speaker 16: Yeah, So it's so interesting because you raise such a
Speaker 16: good point. So employers used to have pension plans, right,
Speaker 16: and then the conversion to defined contribution. Well, we're now
Speaker 16: seeing pensionization of defined contribution. Think about private assets have
Speaker 16: been available in pensions for decades, Well, now they'll be
Speaker 16: available in four oh one K plans, retirement plans. Same
Speaker 16: thing with guaranteed income. That's what the benefit of a
Speaker 16: pension was. But there's no flexibility around that. So black
Speaker 16: Rock has.
Speaker 9: Created a solution.
Speaker 16: It's a target date fund solution, and it's called Life
Speaker 16: Path Paycheck. And what it does is it actually delivers
Speaker 16: you the option the choice to have guaranteed income. You
Speaker 16: can choose to take that or not. But it's giving
Speaker 16: savers and employers the option to have their employees have
Speaker 16: more security, have more simplicity, have more confidence in their
Speaker 16: retirement income. One of the things I'll just add is
Speaker 16: that I found so interesting in our survey when you
Speaker 16: look at retirees, twenty seven percent of retirees, only twenty
Speaker 16: seven percent are confident in their ability to live through
Speaker 16: retirement on their savings.
Speaker 3: Well, that's discouraged.
Speaker 9: Its discouraging.
Speaker 4: Well, so what's the implication of that. Just in last
Speaker 4: minute that we have with you, because that has implications
Speaker 4: beyond our own portance. That is real societal implications.
Speaker 16: It has societal implications, and that there is going to
Speaker 16: be this whole group of Americans who are trying to
Speaker 16: live through retirement. Maybe they do another job, maybe they
Speaker 16: spend differently. That shouldn't be the case. Longer live should
Speaker 16: be a blessing. They shouldn't be a challenge. And that's
Speaker 16: where guaranteed income comes in. That's where the modernization of
Speaker 16: four to one K plans to include private assets comes in.
Speaker 16: And that's where more advice comes in, which is why
Speaker 16: we're here at future Proof Festival. Advisors play a massive
Speaker 16: role in this.
Speaker 4: Our thanks to Jamie Majia, head of US Wealth Advisory
Speaker 4: and Retirement at black Rock.
Speaker 3: You're listening to a special edition of Bloomberg Business Week
Speaker 3: featuring our favorite conversations from the future Proof Festival.
Speaker 4: Next up, a familiar voice to the Bloomberg audience, Barry Redholts,
Speaker 4: the host of Masters in Business and at the Money.
Speaker 3: We talk interest rates and fed independence and a whole
Speaker 3: lot more with him.
Speaker 4: That's next. This is Bloomberg.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Apple car
Speaker 2: Play and the Android Auto with the Bloomberg Business app.
Speaker 2: You can also listen live on Amazon Alexa from our
Speaker 2: flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: As you know, we are highlighting our coverage of the
Speaker 3: future Proof Festival that was held early in the week
Speaker 3: in Huntington Beach, California. Now the event brings together financial advisors,
Speaker 3: wealth managers, and company execs, all involved in the wealth
Speaker 3: ecosystem to talk about the future of the business and
Speaker 3: the factors impacting investor money.
Speaker 4: With us at future Proof. A man quite familiar to
Speaker 4: our audience, Barry Ridolts. He's host of the Bloomberg podcasts
Speaker 4: and broadcast Masters in Business and at the Money. He's
Speaker 4: also chairman and CIO of Ridholt's Wealth Management, which is
Speaker 4: a close partner with the event.
Speaker 17: We also know that sometimes you got to scratch a
Speaker 17: clients itch to prevent them from engaging in worse behavior.
Speaker 17: I like to say, you can't get alpha if you
Speaker 17: don't at least lock in beta. So think of your portfolio.
Speaker 17: It's I know, it's Sonny and eighty hard to talk
Speaker 17: about Christmas trees. But if you're the CORER portfolio is
Speaker 17: a broad passive, that's the tree. Hey, what's the garland?
Speaker 17: What's the ornaments you want to put on that? If
Speaker 17: you want to say, hey, I want to broad value
Speaker 17: index to accentuate all the games I've already seen in technology.
Speaker 17: And by the way, the same thing is taking place overseas.
Speaker 17: You have fifteen years of US outperformance. Maybe it's time
Speaker 17: to think about broader exposure overseas, international and international value.
Speaker 10: That's how you'll if.
Speaker 17: You can't pick who's the big winner from AI, pick
Speaker 17: all the secondary winners that are going to be able
Speaker 17: to be more productive, more more profitable.
Speaker 3: So it's I love talking with you. I'm amazed that
Speaker 3: we haven't talked politics at all, and especially like AI.
Speaker 3: If you think about last was it last week the
Speaker 3: big dinner of the big tech CEOs all in DC
Speaker 3: surrounding the President AI was a big part of you know,
Speaker 3: they were kind of thanking him for what he's doing
Speaker 3: in terms of the world of AI. Where is politics?
Speaker 3: What did y'all have to say about politics? Did it
Speaker 3: even enter into the conversation?
Speaker 17: So I tried to push that question a little bit.
Speaker 17: And the consensus I've gotten, and I don't want to
Speaker 17: put words into his mouth, but the consensus I've gotten
Speaker 17: from economists on both the left and the right have been, Hey,
Speaker 17: this was a very robust economy heading into twenty twenty five.
Speaker 17: It's starting to slow. That doesn't mean we're going into
Speaker 17: a recession, but it's starting to look more and more
Speaker 17: like growth is going to not be three percent. Yeah,
Speaker 17: probably isn't going to be two percent.
Speaker 10: And the consensus seems.
Speaker 17: To be that this is an unforced error, that this
Speaker 17: is between the craziness of the Doge layoffs and just
Speaker 17: generally the mayhem, not just the tariffs themselves. Hey, if
Speaker 17: I said we're going to pass a consumer VAT tax,
Speaker 17: you would think that's bearish for consumer spending and bearish
Speaker 17: for the economy. Someone like Joe says, it's we look
Speaker 17: at tariffs as a tax on the consumer. So far,
Speaker 17: the pass through hasn't showed up yet because, first of all,
Speaker 17: a lot of companies ordered and this is me speaking,
Speaker 17: not him, there was a lot of inventory build in
Speaker 17: advance of the tariffs, and then taraffs were on tariffs.
Speaker 17: We're off right, So it's taken a while to work
Speaker 17: its way through the system. It seems that it's just
Speaker 17: starting to show up, both in hiring and in inflation.
Speaker 4: We got a minute left, Berryer, I promised we talk
Speaker 4: about the FED with you, because it doesn't seem like
Speaker 4: the bond market is taking seriously the threat to FED independence.
Speaker 4: Why do you think that is?
Speaker 17: I honestly don't know. To me, I'm a stock guy
Speaker 17: as much as I own fixed income on munis and
Speaker 17: tips and things like that. It seems like James Carvell
Speaker 17: was right in the nineteen nineties, but in the twenty
Speaker 17: twenties the stock market is the most feared index and
Speaker 17: most feared asset class.
Speaker 10: Because it was the stock market.
Speaker 4: It's not sending a message that it's is threatened that well.
Speaker 17: I think the mark it is pragmatic and cares less
Speaker 17: about academic discussions of independence.
Speaker 10: And loves lower rates.
Speaker 17: Now maybe it's inflationary down the road, but the difference
Speaker 17: between stocks and bonds is bonds are about a return
Speaker 17: of capital, which means you're waiting five or ten years.
Speaker 17: Stocks are about the next quarter at least when you look
Speaker 17: at you know in the short run, it's a voting
Speaker 17: machine and a long run, it's a weighing machine. I
Speaker 17: think in the short run it's a probability machine. And
Speaker 17: the stock market is saying that independence is a concern.
Speaker 17: But give us some of those delicious low rates. We
Speaker 17: will we will let us show you what we can do.
Speaker 17: If you take seventy five one hundred basis points off,
Speaker 17: everybody's going to party, and that's what the market is
Speaker 17: looking at one to two quarters out.
Speaker 3: As long as you're not worried that those low rates
Speaker 3: mean that everything's coming undone and the economy's falling apart.
Speaker 10: I mean the the odds.
Speaker 17: If you Torsten Slock said there was a zero percent
Speaker 17: chance of a recession in January, he moderated that what
Speaker 17: I said ten percent in January. Now we're forty five
Speaker 17: fifty five percent.
Speaker 4: Does it change your view, as chief investment officer at
Speaker 4: Ridolts Wealth Management on what your clients should be doing,
Speaker 4: because you have a whole part of your book dedicated
Speaker 4: to buying the entire haystack. Don't look for the needle
Speaker 4: just by the haystacks.
Speaker 17: So yeah, we very much do that, but we also
Speaker 17: know that sometimes you got to scratch a client's itch
Speaker 17: to prevent them from engaging in worse behavior. I like
Speaker 17: to say, you can't get alpha if you don't at
Speaker 17: least lock in beta. So think of your portfolio. It's
Speaker 17: I know it's sonny and eighty hard to talk about
Speaker 17: Christmas trees. But if you're the core of your portfolio
Speaker 17: is a broad passive index, that's the tree.
Speaker 10: Hey, what's the garland. What's the ornament you want to
Speaker 10: put on that?
Speaker 17: If you want to say, hey, I want to broad
Speaker 17: value index to accentuate all the games I've already seen
Speaker 17: in technology and by the way, the same thing is
Speaker 17: taking place overseas. You have fifteen years of US outperforming.
Speaker 17: Maybe it's time to think about broader exposure overseas, international
Speaker 17: and international value.
Speaker 10: That's how you'll if.
Speaker 17: You can't pick who's the big winner from AI, pick
Speaker 17: all the secondary winners that are going to be able
Speaker 17: to be more productive, more more profitable.
Speaker 4: We're speaking with Barry rid Hoolts. He's the host of
Speaker 4: the Masters in Business podcast on Bloomberg Radio and radio show.
Speaker 4: He's stunder chairman and chief investment officer of rid Holt's
Speaker 4: Wealth Management. He's also the author of How Not to Invest,
Speaker 4: The Ideas numbers and behaviors that destroy wealth and how
Speaker 4: to avoid them. So, Barry, if you were to add
Speaker 4: a new chapter to your book that came out earlier
Speaker 4: this year was published, It came out a few months
Speaker 4: ago in March eighteenth, So a lot has happened between
Speaker 4: now and then. What would it be on.
Speaker 17: So there's a chapter in the book called love Trump,
Speaker 17: Hat Trump.
Speaker 10: That's no way to invest.
Speaker 17: And after the election in November, I heard from a
Speaker 17: number of people, clients, friends, family members, Oh, this guy
Speaker 17: got elected again. I'm selling my house, all my stocks.
Speaker 17: And I said to them, hey, when he was elected
Speaker 17: in twenty sixteen, had you done that, look at all
Speaker 17: the money you would have left on the table on
Speaker 17: By the way, the same is true for Joe Biden
Speaker 17: in twenty twenty and for Barack Obama in eight and twelve.
Speaker 17: Your job as an investor, as a mom and pop
Speaker 17: long term investor, is to not interfere with the market's
Speaker 17: ability to compound your portfolio gains on top of gains
Speaker 17: on top of gains, dividends reinvested. If you look at
Speaker 17: the history of one at Democrats in the White House,
Speaker 17: when Republicans in the White House, it's a fraction of
Speaker 17: just keeping an invested the entire time. Especially you know,
Speaker 17: we see the gen Z and the millennials significantly underinvested
Speaker 17: compared to the gen X and the boomers, And it's like,
Speaker 17: you guys have a thirty forty year investment horizon. What
Speaker 17: happens in any random Tuesday or any random year shouldn't matter.
Speaker 17: You have forty years to let it compound. Hey, if
Speaker 17: you're a boomer and you're retiring in two years, you
Speaker 17: want to throttle back your risk. That has nothing to
Speaker 17: do with the President Tariff's markets. It just has to
Speaker 17: do with, Hey, we understand the sequence of returns problem.
Speaker 17: You don't want to retire into a big down year.
Speaker 17: So maybe one hundred percent equities isn't right. Maybe you
Speaker 17: should be closer to sixty forty and slide that down
Speaker 17: as you go. But the chapter I would write is about,
Speaker 17: here's what everybody said about tariffs in April, and here's
Speaker 17: how this is going to be the end of Packs Americana,
Speaker 17: the end of the US dollar. The US equity market's
Speaker 17: going to hell. By the way, we're up eleven to
Speaker 17: twelve percent for the year.
Speaker 10: If you ignored that from the lows.
Speaker 17: Had you listened to, have you ignored that noise, then
Speaker 17: you're doing great. Had you gotten nervous and tapped out,
Speaker 17: you're pulling your hair out. You don't know when to
Speaker 17: get back in, and it's a problem. So the noise,
Speaker 17: the fear mongering, just the easy temptation to give into
Speaker 17: your olympic system.
Speaker 10: In the book I wrote.
Speaker 17: We are not Wired for This, and the Bill Bernstein,
Speaker 17: the neurologists Last Investors said investors have to learn to
Speaker 17: control their olympic system. People who fail to do that
Speaker 17: are going to die poor, and it's really true.
Speaker 3: We're going to talk like the importance of psychology a
Speaker 3: little bit later on with Dan Crosby. He's a chief
Speaker 3: behavioral officer of a Ryan Advisor Solution, so we're looking
Speaker 3: forward to that. Two things I really want to ask you, though,
Speaker 3: so many people talking about the importance of private markets.
Speaker 3: It makes me think my whole career in business news,
Speaker 3: which is a few decades, has all been about the
Speaker 3: public markets, and increasingly everybody's saying it's all about private markets.
Speaker 3: And I wonder, is there going to be a world
Speaker 3: at some point where private markets are more dominant in
Speaker 3: somebody's portfolio, and rightfully so than public markets. Do we
Speaker 3: really see that kind of a shift.
Speaker 10: I'm not so sure.
Speaker 17: I mean, here's the thing about every financial product that's
Speaker 17: ever come along since the beginning of time, stocks, mutual funds,
Speaker 17: spack trust, whatever it is, ninety percent of them are
Speaker 17: junk and the top ten percent are spectacular. So if
Speaker 17: you can get into the best fill in the blank
Speaker 17: mutual fund, etf venture capital fund, private credit, private equity,
Speaker 17: private real estate, private debt, fantastic, But just be aware
Speaker 17: there's a land rush. The best companies are going to
Speaker 17: deliver the best risk adjusted returns relative to the fees.
Speaker 10: The bottom I don't know, fifty sixty seventy.
Speaker 17: Percent they're in there, They're not contributing to your portfolio
Speaker 17: the way the top tier is.
Speaker 10: It's Sturgeon's lore.
Speaker 17: Ninety percent of everything is grasp Well.
Speaker 4: That just seems to be so concerned about why people
Speaker 4: are concerned about privates going into four oh one k's
Speaker 4: and retirement accounts, because you're not going to get the
Speaker 4: best of the best, is the argument.
Speaker 17: It depends on who's doing it. If you take and
Speaker 17: I won't name names or embarrass anybody now, but there
Speaker 17: are number of shops that are multi trillion dollar companies
Speaker 17: that have been doing this for decades. They have a
Speaker 17: deep research process, and they are fiduciaries and very customer focused.
Speaker 10: I'm comfortable that.
Speaker 17: Five, ten percent, fifteen percent. I'm not quite at the
Speaker 17: fifty thirty twenty level yet. But if you can be
Speaker 17: with a shop that can get you access to the
Speaker 17: best of the best, having a few percentage of it
Speaker 17: is not going to hurt. Just remember, the fees are higher,
Speaker 17: the lock up periods the longer. If you need liquidity,
Speaker 17: maybe not for you. It's amazing how often I have
Speaker 17: conversations with people who are so enthusiastic about privates and
Speaker 17: then you show this is what's going to cost, here's
Speaker 17: the lockup.
Speaker 10: Oh, not to match it kind of scares them.
Speaker 17: So Hey, if you're twenty five, thirty years old and
Speaker 17: you got a thirty forty year investment horizon and you
Speaker 17: want you don't care about the lockup, you want to
Speaker 17: have ten to fifteen percent of your portfolio on that,
Speaker 17: knock yourself out. Just be really selective. It doesn't matter SPACs,
Speaker 17: mutual funds, ETF.
Speaker 3: The public markets are not going away.
Speaker 10: I don't think so.
Speaker 3: And in fact because it Sorps feels really interesting the show.
Speaker 17: So you know, there was a really fascinating study done
Speaker 17: that looked at the concentration in the Mag seven and
Speaker 17: it's really misleading because the Max seven have made eight
Speaker 17: hundred and fifty nine acquisitions over the past twenty years,
Speaker 17: so the Max seven is really almost the Max seven fifty.
Speaker 4: That was Barry Ridholts hoposed to be Bloomberg Masters in
Speaker 4: Business podcast and at the Money. Arry also chairman and
Speaker 4: CIO of Ridholt's Wealth Management.
Speaker 3: Still ahead on Bloomberg BusinessWeek, how psychology and behavioral finance
Speaker 3: are coming to the forefront of wealth management.
Speaker 4: That's next. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five eas during
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Speaker 1: or watch us live on YouTube.
Speaker 4: We continue now with a special edition of Bloomberg BusinessWeek,
Speaker 4: where we bring you highlights from our coverage of the
Speaker 4: future Proof Festival in Huntington Beach, California.
Speaker 3: Now, before we wrap up our coverage, we wanted to
Speaker 3: share a chat from the event on the Cross between
Speaker 3: behavioral economics and psychology, taking an outsized role in recent
Speaker 3: years on Wall Street and in investing.
Speaker 4: On that we were joined by doctor Daniel Crosby, chief
Speaker 4: behavioral officer at Orion Advisor Solutions. The firm, in its
Speaker 4: own words, supports five point two trillion dollars in assets
Speaker 4: under administration across twenty five thousand advisory firms in the US.
Speaker 4: It also manages more than one hundred billion dollars in
Speaker 4: wealth assets for advisors.
Speaker 3: We should note doctor Crosby's first book, Personal Benchmark, Integrating
Speaker 3: Behavioral Finance and Investment Management, was a New York Times bestseller.
Speaker 4: What is a chief behavioral officer?
Speaker 11: Yes, it's a great question. My mom would like to
Speaker 11: know as well a chief behavioral office. So the role
Speaker 11: of the advisors that we serve is more and more
Speaker 11: about helping people avoid the very worst of human behavior.
Speaker 11: And if you look at the research on how advisors
Speaker 11: ad dollars and cents value to their clients' lives, a
Speaker 11: meta analysis of this shows that they add about seven
Speaker 11: times as much by keeping people out of their own
Speaker 11: way as they do even something like asset management. So
Speaker 11: it's an incredible value and I think in the age
Speaker 11: of AI, it's just going to be an even bigger value.
Speaker 3: So how do they read through the behavioral cues? Because
Speaker 3: I'm just thinking, Daniel, that there are people who are
Speaker 3: overly confident, like I know exactly what I'm doing, and
Speaker 3: then there are people who are really really nervous, and
Speaker 3: I'm just trying to figure out, how do you we
Speaker 3: kind of read through all of those cues if you're
Speaker 3: sitting down with a client.
Speaker 11: Well, what's cool is now we can use technology to
Speaker 11: do that and in a very short order two different ways.
Speaker 11: We have a variety of assessments that we'll get at
Speaker 11: someone's sort of financial personality, but also through what psychologists
Speaker 11: call revealed preferences by looking at what they do. People
Speaker 11: tend to be pretty poor descriptors of their own behavior.
Speaker 11: We don't have to ask them what they're like. We
Speaker 11: can look at how they act and we can infer
Speaker 11: from their behavior.
Speaker 4: That's one of the great things about working.
Speaker 3: Give us an example, Oh, just how in my mind?
Speaker 11: You know, instead of asking someone how how overconfident are you?
Speaker 11: You look at things that that are descriptive of overconfidence,
Speaker 11: over trading, you know, failure to use an advisor, jumping
Speaker 11: in and out of positions, being skittish. Things like this
Speaker 11: would be representative of a fear or overconfidence. So there
Speaker 11: are trading behaviors that are emblematic of the different sorts
Speaker 11: of things that doctor Thaylor studied.
Speaker 4: Is it the right answer to everything? Just you nothing
Speaker 4: like don't follow your well, you know, in the I'll
Speaker 4: give you an example of a friend. He's was freaking
Speaker 4: out during the tariff, you know, so called liberation Day,
Speaker 4: and he he sold a bunch of equities and he's like,
Speaker 4: this is everything is different. We're in a different world.
Speaker 4: He's not an investment manager. He's in medicine. He is,
Speaker 4: you know, he has an advisor, but he told his
Speaker 4: advisor to sell. His advisor told him not to, but
Speaker 4: he did it anyway. And he's convinced that this is
Speaker 4: a different world that we're living in, pre and post tariffs.
Speaker 11: Well, one of the tricky things is that you definitely
Speaker 11: should do less than you think you should. And being
Speaker 11: good at investing requires a different set of understanding and
Speaker 11: a different set of skills than just about anything else
Speaker 11: in life. If you want to get stronger, you lift
Speaker 11: more weights. If you want to get a wiser you
Speaker 11: read more books. If you want to make more money,
Speaker 11: you tend to do less. And in fact, this has
Speaker 11: been studied in nineteen different countries in every country where
Speaker 11: it's ever been studied. The more people trade, the worse
Speaker 11: they tend to do. That is a very consistent finding.
Speaker 11: It's monotonic, it's step wise, right, The more you trade,
Speaker 11: the worse you tend to do. So maybe not do nothing,
Speaker 11: but definitely do less than you think you should.
Speaker 3: So set it and forget it.
Speaker 4: More or less.
Speaker 11: I mean, you could do a lot worse than set
Speaker 11: it and forget it.
Speaker 3: Yeah, So how do you do something like in you
Speaker 3: come to an event like this, You go to a
Speaker 3: lot of other financial conferences. You go to milk in
Speaker 3: on the West Coast in the spring, and everybody's talking
Speaker 3: about private markets, and so you're like, oh my gosh,
Speaker 3: maybe I need to be in this more aggressively. Like
Speaker 3: how do you like kind of weave that into maybe
Speaker 3: your strategy or how do you or should you ignore it?
Speaker 3: How do you I don't know you deal with new
Speaker 3: trends AI the exuberants that we're seeing over that.
Speaker 7: Yeah, yeah, yeah.
Speaker 11: One of the things is that that we understand is
Speaker 11: that the best portfolio for you is gonna look a
Speaker 11: little different than it is for me. So something like
Speaker 11: AI sucks, Something like something like private markets may have
Speaker 11: a place depending on who you are and what you value.
Speaker 11: I'm also a big proponent of, you know, sinning a little, right,
Speaker 11: there's something like I'll encourage people sinning a little, like,
Speaker 11: you know, going like having a three to five percent
Speaker 11: of your wealth and sort of a fun account where
Speaker 11: you get to take big risks because you like being
Speaker 11: involved in markets.
Speaker 4: Eric Falcunas, our colleague of Bloomberg Intelligence, calls this the
Speaker 4: hot sauce. Yeah, where you know people throw something into
Speaker 4: arc or crypto or something.
Speaker 11: Sure, right, it's a it's a cheap and it sort
Speaker 11: of scratches that itch.
Speaker 4: It's like, okay, you can, you can mess around with
Speaker 4: that money, just don't touch everything else.
Speaker 7: That's exactly right.
Speaker 11: So it's an imperfect decision that keeps you from a
Speaker 11: much larger, larger, sort of life altering decision, and I'm
Speaker 11: happy with that trade off.
Speaker 3: I don't know a piece of advice to investors then,
Speaker 3: in thinking about psychology and behavioral economics or behavioral investment thinking.
Speaker 11: Yeah, if you want to change your behavior. There's really
Speaker 11: three things you need. Three e's right. The first is
Speaker 11: the right education. You need to know a little bit
Speaker 11: about markets. They need to listen to you, all right.
Speaker 11: The next is an environment. The environment is very predictive
Speaker 11: of how you do. Are you getting the right inputs right?
Speaker 11: Are you listening to the right sources? Are you listening
Speaker 11: to the right voices? And the last one's encouragement. People
Speaker 11: who work with a professional do a lot better than
Speaker 11: people who don't, and it's largely because they have that
Speaker 11: person in their corner.
Speaker 3: And this applies whether it's a global pandemic and a
Speaker 3: shutdown of the economy, whether it's the global financial crisis,
Speaker 3: or a president that some say is errootic and policies
Speaker 3: can change a lot.
Speaker 10: Yeah, I think that's right.
Speaker 11: The flavor of the disruption will vary from moment to moment,
Speaker 11: but the fundamentals of what we should do beneath that
Speaker 11: very rarely do.
Speaker 3: Well come back. We would love to continue this conversation.
Speaker 3: This is fun lot of Fune Rosby. He's chief behavioral
Speaker 3: Officer to Ryan Advisor Solutions.
Speaker 4: Joining us here at future Proof future Proof Bloomberg BusinessWeek
Speaker 4: Live at Futureproof in Huntington Beach. Today's show is sponsored
Speaker 4: by van Ak Marking at seventieth anniversary this year, with
Speaker 4: a legacy defined by forward thinking strategies, resilience through market cycles,
Speaker 4: and an enduring commitment to clients.
Speaker 3: Jennifer Grancia was back with US Global head of ETFs
Speaker 3: over at TCW. They've got more than two hundred billion
Speaker 3: across investment solutions as as of the mid of this
Speaker 3: year midpoint ETF platforms have more than four billion a
Speaker 3: lot under management. They see a lot of flows. We
Speaker 3: want to remind everybody to Jennifer, the former CEO of
Speaker 3: the impact investment from Engine Number one, which took on exceon,
Speaker 3: You're going to be iconic forever. This is going to
Speaker 3: go with you wherever you go, because it was really significant.
Speaker 4: I think also, I think also you joined us at
Speaker 4: Milkin during that time. Yeah, you guys were in the
Speaker 4: midst of that, and that's where sort of like I
Speaker 4: still know you from, but I think people still know
Speaker 4: you from that.
Speaker 18: As Carol mentioned, Yeah, I mean Engine number one as
Speaker 18: a moment in time where I think we had just
Speaker 18: started to think about energy transition and at a very
Speaker 18: big level. It's not just green, it's brown, and then
Speaker 18: it's going to require so much to move the world
Speaker 18: towards better sources of energy, electrification, all the power we
Speaker 18: need for restoring in the US. So yeah, that was
Speaker 18: it was a great moment in time, and then we
Speaker 18: folded in a lot of the work we had done
Speaker 18: there into TCW.
Speaker 3: We'll talk about what you are doing because energy is
Speaker 3: a big theme in terms of investing here for you
Speaker 3: guys for sure.
Speaker 18: So if you think about the world today as much
Speaker 18: as it's molatile and we're never sure exactly what's going
Speaker 18: to happen or how things are going to play out,
Speaker 18: if you think about TCW, we started as an equity
Speaker 18: firm and then we've got a great public private credit business,
Speaker 18: and so on the equity side, a lot of what
Speaker 18: we do is fundamental concentrated portfolios that help you diversify
Speaker 18: from the index fund and the direct indexing you have
Speaker 18: at the core. Because the market is broadening and we
Speaker 18: have a huge opportunity as investors to actually take advantage
Speaker 18: of how do you profit from the fact that we're
Speaker 18: seeing different sources of energy and we have a huge
Speaker 18: demand for energy for AI and data centers, but also
Speaker 18: for the restoring of manufacturing.
Speaker 4: How do you do that in an environment where the administration,
Speaker 4: depending on who's in the White House, changes their view
Speaker 4: on the future of energy, like does a one ad.
Speaker 4: I mean you have the president wanting to actually doing it,
Speaker 4: trying to cancel offshore wind projects and really anything that
Speaker 4: isn't oil. It seems like he's not interested in safer nuclear.
Speaker 4: But that's a bigger time arise in time.
Speaker 18: Yeah, but that's how we think about it. So from
Speaker 18: a TCW perspective, we've been investing in the energy and
Speaker 18: power transition. We do that through the ETF Powered pr PWRD.
Speaker 18: Pardon me, but when we think about that, that's a
Speaker 18: very long trend. So that's over decades and decades, and
Speaker 18: so the way we think about it as we as
Speaker 18: managers want to invest for you, so that we're paying
Speaker 18: attention to one administration to the other and what happens,
Speaker 18: and there will be some changes. But if you think
Speaker 18: about the changes in the traditional brown so that they
Speaker 18: can electrify and more productive in a market like the
Speaker 18: Permian on oil, that's really important. Nuclear is incredibly important.
Speaker 18: And then what Trump said on actually supporting more nuclear, Yeah,
Speaker 18: it's a long run game. But that's great intermittent power.
Speaker 18: So we like to think about it very broadly, and
Speaker 18: it transcends administrations.
Speaker 4: But does it mean you ignore wind and solar that could.
Speaker 18: Be part of our portfolio as well. We're looking at
Speaker 18: things that from a very long term perspective will make sense.
Speaker 4: And you think, even though Wind is under so much
Speaker 4: pressure right now, in a different administration, it could come back.
Speaker 9: It will be part of the solution.
Speaker 18: It's not the lead place to make money in the
Speaker 18: next couple of years. And we're active managers, so we
Speaker 18: can take that into account in terms of the way
Speaker 18: we manage the portfolio.
Speaker 3: Where is money going across your platforms, where are the
Speaker 3: flows going in, where the flow's coming out?
Speaker 18: We would see if I answer it maybe on an
Speaker 18: industry question, and then I can talk about to PLACW.
Speaker 18: We see active equity is tough, so in active equity
Speaker 18: investments are very selective. So what we're doing in active
Speaker 18: equity products like powered or AIFD for AI, if they're selective,
Speaker 18: they're meant to be complementing to big index holdings. And
Speaker 18: on fixed income, like a lot of money continues to
Speaker 18: come into fixed income and continues to come into active
Speaker 18: fixed income or also big in private credit, not in
Speaker 18: the ETF space and products that are appropriate there, but
Speaker 18: both if fixed income and private credit are probably the
Speaker 18: places we see the most money coming in.
Speaker 3: Really not surprising. It feels like everything is private credit.
Speaker 3: I mean, I don't like.
Speaker 18: Ketty does it does when on the other hand, it's early.
Speaker 18: So if you think about if you think about the portfolio,
Speaker 18: and if you think about it, biggest institutions in the world,
Speaker 18: they're invested in some kinds of private credit, but they're
Speaker 18: looking to get into private ABF because it's diversifying. But
Speaker 18: in wealth portfolios, if you think about the average investor
Speaker 18: or registered investment advisors, they're looking at how to take
Speaker 18: advantage of returns that can be like our core plus
Speaker 18: income ETF flexer. You know that's returning almost seven percent
Speaker 18: with over five percent annual yield. That's very attractive. When
Speaker 18: you move into safe, controlled, careful private credit, you're still
Speaker 18: picking up multiple percentage points a year. So people should
Speaker 18: do it carefully. Yeah, it's a big opportunity.
Speaker 4: Do you see that opportunity continuing to grow in a
Speaker 4: weakening environment?
Speaker 7: We do.
Speaker 18: It's if again, if you go out and you survey.
Speaker 18: There's a McKinsey report that just came out surveying institutions
Speaker 18: and wealth and private credit by far is the place
Speaker 18: that people are most interested in most increasing allocations in.
Speaker 3: What confidence do you have that we have the right
Speaker 3: regulatory oversight on this in a world where private credit
Speaker 3: still there is a lack of transparency and people don't
Speaker 3: maybe not all investors understand that it's not liquid like
Speaker 3: a lot of other investments.
Speaker 18: It's the right question, which is from a responsibility perspective
Speaker 18: as asset managers or for wealth managers, we should always
Speaker 18: be in a dialogue with clients on do they understand
Speaker 18: the liquids when you do a semi liquid product. For example,
Speaker 18: for us, we have things that have many many your
Speaker 18: five plus year draw downs. That's not a liquid product.
Speaker 18: We wouldn't tell clients that that's on the quid product.
Speaker 18: In the asset back finance space, we have an interval fund,
Speaker 18: but the loans there are getting kind of turning over
Speaker 18: within two to four years, so there's a little bit
Speaker 18: more liquidity there. So I think we'll watch the regulatory space,
Speaker 18: but investor education and responsibility by the managers it's critical.
Speaker 3: So when it comes to private credit, you're looking for
Speaker 3: things where it is two to four years that they're
Speaker 3: turning over a little bit more liquid. That's a little
Speaker 3: bit more liquid.
Speaker 18: And so if you think about private credit in the
Speaker 18: private securitized or asset back finance space, the loans you're
Speaker 18: self advertising in two to four years, and that's a
Speaker 18: space we think in interval fund makes sense we manage
Speaker 18: an interval fund. There there are other places where it's
Speaker 18: just not that liquid, and that should be a private
Speaker 18: market product.
Speaker 4: Still a lot of interest in AI and the fund that.
Speaker 18: Tracks that a huge amount of interest in AI, and
Speaker 18: I think everybody's interested in one what's happening with AI,
Speaker 18: who wins, what happens, but people are also looking at
Speaker 18: how to invest in it. So at TCW, we manage
Speaker 18: an ETFAIFD which is investing very broadly in AI, and
Speaker 18: that's an opportunity to.
Speaker 9: Take advantage of.
Speaker 18: Yes, it holds Navidia, but it also holds a broadcom
Speaker 18: and other companies that are benefiting and early winners in
Speaker 18: the trade.
Speaker 3: When you come to an event like this, I mean,
Speaker 3: is there a narrative you're picking up on that might
Speaker 3: be surprising? I'm just curious. Just got about thirty seconds here.
Speaker 18: I think from this conference, which is full of wealth advisors,
Speaker 18: they are trying to figure out how does artificial intelligence
Speaker 18: affect their business, how do they get smarter about it,
Speaker 18: and how can they adopt new outsourcing and new technology
Speaker 18: so that they can spend more time actually serving their clients.
Speaker 4: Our thanks to Jennifer Grancio, Global head of BTFS at TCW.
Speaker 3: And that wraps up the weekend edition of Bloomberg Business
Speaker 3: Week from Bloomberg Radio at the future Proof Festival in
Speaker 3: Huntington Beach, California this past week. You can catch all
Speaker 3: the conversations from the event on the Bloomberg and at
Speaker 3: Bloomberg dot com. Thank you so much for joining us.
Speaker 3: I'm Tim Stenebet and I'm Carol Masser. Have a good
Speaker 3: and safe weekend everyone.
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