1 00:00:00,080 --> 00:00:05,880 Speaker 1: M hm. This is Mesters in Business with very Results 2 00:00:05,920 --> 00:00:10,040 Speaker 1: on Bluebird Radio this weekend. On the podcast, I have 3 00:00:10,080 --> 00:00:13,520 Speaker 1: a special guest. His name is Steve Fradkin, and he 4 00:00:13,640 --> 00:00:16,880 Speaker 1: runs one of the larger pools of assets that you 5 00:00:17,120 --> 00:00:21,520 Speaker 1: probably had no idea about. He is the president of 6 00:00:21,640 --> 00:00:25,439 Speaker 1: Northern Trust Wealth Management. They run over three hundred fifty 7 00:00:25,440 --> 00:00:28,600 Speaker 1: billion dollars in client assets. They serve some of the 8 00:00:28,640 --> 00:00:33,400 Speaker 1: wealthiest families in America. One in five wealthy families actually 9 00:00:33,440 --> 00:00:37,440 Speaker 1: has assets with Northern Trust. They have something like of 10 00:00:37,520 --> 00:00:42,800 Speaker 1: the Forbes four hundred. Just a very interesting perspective on 11 00:00:43,000 --> 00:00:47,680 Speaker 1: how to manage through periods of uncertainty, changing tax laws, 12 00:00:48,280 --> 00:00:52,520 Speaker 1: rising inflation, all sorts of really interesting perspectives. It's less 13 00:00:52,560 --> 00:00:56,080 Speaker 1: about predicting the future, Steve tells us, than thinking in 14 00:00:56,200 --> 00:01:00,480 Speaker 1: terms of planning and probabilities. And I think that was 15 00:01:00,520 --> 00:01:04,600 Speaker 1: really interesting advice. He he is about as knowledgeable as 16 00:01:04,640 --> 00:01:08,040 Speaker 1: anybody is going to get in the um, both wealth 17 00:01:08,080 --> 00:01:12,280 Speaker 1: management business and ultra high now worth management business. I 18 00:01:12,360 --> 00:01:15,360 Speaker 1: found the conversation really intriguing and I think you will 19 00:01:15,400 --> 00:01:18,959 Speaker 1: also so, with no further ado, my interview of Steve 20 00:01:19,000 --> 00:01:25,520 Speaker 1: Fratkin of Northern Trust, This is Mesters in business with 21 00:01:25,680 --> 00:01:30,920 Speaker 1: very results. On Bloomberg Radio. My special guest this week 22 00:01:31,040 --> 00:01:34,720 Speaker 1: is Steve Fradkin. He is the president of Northern Trust 23 00:01:34,720 --> 00:01:38,920 Speaker 1: Wealth Management, running about three hundred and fifty five billion 24 00:01:38,959 --> 00:01:42,480 Speaker 1: dollars in assets. They serve about one in five of 25 00:01:42,520 --> 00:01:46,319 Speaker 1: the wealthiest families in America. Previously, Steve ran the corporate 26 00:01:46,319 --> 00:01:49,600 Speaker 1: and institutional services. He was head of International business for 27 00:01:49,720 --> 00:01:53,960 Speaker 1: Northern Trust as well as the firm's chief financial officer. 28 00:01:54,480 --> 00:01:58,920 Speaker 1: Steve Fratkin, Welcome to Bloomberg. Thank you very great to 29 00:01:58,920 --> 00:02:02,440 Speaker 1: be here. So you spent your entire career at Northern Trust, 30 00:02:02,520 --> 00:02:07,560 Speaker 1: having joined in in how do you make the leap 31 00:02:07,680 --> 00:02:11,200 Speaker 1: from really CFO to a president, which to me, I 32 00:02:11,240 --> 00:02:14,880 Speaker 1: think of president, I think of someone who's running um 33 00:02:14,919 --> 00:02:18,960 Speaker 1: like a CEO running a division. What were the challenges 34 00:02:19,000 --> 00:02:23,040 Speaker 1: of that transition. Well, it's a great question, and you know, 35 00:02:23,200 --> 00:02:29,120 Speaker 1: careers are mysterious experiences. The bigger mystery, really, Barry, was 36 00:02:29,800 --> 00:02:33,120 Speaker 1: the move to CFO. So I joined Northern Trust as 37 00:02:33,160 --> 00:02:35,960 Speaker 1: a youngster. I didn't know what I wanted to do, 38 00:02:36,880 --> 00:02:39,800 Speaker 1: worked my way through a variety of entry level jobs, 39 00:02:40,280 --> 00:02:46,359 Speaker 1: ultimately uh culminating at that point in running are growing 40 00:02:46,440 --> 00:02:52,880 Speaker 1: international business and UM loving it, traveling the world, clients 41 00:02:52,880 --> 00:02:56,320 Speaker 1: in Asia, Europe, the Middle East, Africa, South America. You know, 42 00:02:56,840 --> 00:03:01,480 Speaker 1: UM really fun and interesting stuff. And was asked at 43 00:03:01,520 --> 00:03:06,840 Speaker 1: that point to service CFO, which was the unnatural job. 44 00:03:07,880 --> 00:03:13,080 Speaker 1: UM was not a controller, was not a treasurer UM, 45 00:03:13,440 --> 00:03:16,640 Speaker 1: and so serving as CFO of a large public company 46 00:03:16,800 --> 00:03:21,880 Speaker 1: was shall we say traumatic when they asked. But UM 47 00:03:22,240 --> 00:03:25,800 Speaker 1: did that for six years, including through the global financial crisis, 48 00:03:25,800 --> 00:03:27,880 Speaker 1: and it was at that point I went back to 49 00:03:27,960 --> 00:03:31,120 Speaker 1: doing what I normally do, which is running businesses. I 50 00:03:31,200 --> 00:03:35,000 Speaker 1: ran our corporate institutional services business and then after that 51 00:03:35,120 --> 00:03:38,520 Speaker 1: wealth management. So so it wasn't so much going from 52 00:03:38,640 --> 00:03:43,560 Speaker 1: CFO to wealth management as it was ending up as CFO, 53 00:03:43,800 --> 00:03:45,880 Speaker 1: if you will, by accidents from my point of view, 54 00:03:46,800 --> 00:03:50,360 Speaker 1: really interesting. So so you guys had a pretty good 55 00:03:50,440 --> 00:03:54,800 Speaker 1: year in How did that carry over to this year? 56 00:03:54,960 --> 00:03:58,240 Speaker 1: Is it just more of the same. What were the 57 00:03:58,320 --> 00:04:02,280 Speaker 1: big success stories relative to all those challenges we saw 58 00:04:02,960 --> 00:04:07,680 Speaker 1: last year? Well, you know, it's it's really an interesting 59 00:04:07,920 --> 00:04:10,880 Speaker 1: phenomenon and it shows you the in some ways the 60 00:04:10,960 --> 00:04:14,280 Speaker 1: unpredictability of what can happen. You know, if you think 61 00:04:14,320 --> 00:04:19,800 Speaker 1: about COVID nineteen and its impact in and if I 62 00:04:19,839 --> 00:04:22,599 Speaker 1: said to you, you know, look, here's what's going to happen. 63 00:04:22,720 --> 00:04:25,320 Speaker 1: We're going to go as a society, not just Northern 64 00:04:25,360 --> 00:04:27,720 Speaker 1: Trust from you know, we all come in and we 65 00:04:27,760 --> 00:04:31,160 Speaker 1: work and so forth and so on, and one day 66 00:04:31,240 --> 00:04:35,599 Speaker 1: on about the same day, worldwide, everyone's going to start 67 00:04:35,600 --> 00:04:39,360 Speaker 1: working from home. Facetiously, what what do you think is 68 00:04:39,360 --> 00:04:43,240 Speaker 1: going to happen to the markets? I think most people 69 00:04:43,279 --> 00:04:44,800 Speaker 1: would have said, well, first of all, it could never 70 00:04:44,880 --> 00:04:47,839 Speaker 1: happen that way. It's not going to be true that 71 00:04:47,880 --> 00:04:51,400 Speaker 1: people in Sydney and London and New York and um 72 00:04:51,839 --> 00:04:54,359 Speaker 1: Sal Paulo are all going to be, you know, as 73 00:04:54,440 --> 00:04:57,320 Speaker 1: much as one can working from home. That's just impossible. 74 00:04:58,080 --> 00:05:00,240 Speaker 1: And second of all, if that were to have up 75 00:05:00,240 --> 00:05:04,279 Speaker 1: in on a sustained basis, well, gee, you know, the 76 00:05:04,320 --> 00:05:08,400 Speaker 1: economy is going to creator because no baseball games, no concerts, 77 00:05:08,480 --> 00:05:12,839 Speaker 1: no you know, less use of restaurants, etcetera, etcetera. I 78 00:05:12,920 --> 00:05:15,320 Speaker 1: don't think people would have said, you know, the markets 79 00:05:15,320 --> 00:05:20,120 Speaker 1: would do as well as they've done. So, um uh, look, 80 00:05:20,160 --> 00:05:25,839 Speaker 1: it's been an incredible journey. Um Northern Trust has navigated 81 00:05:25,880 --> 00:05:29,600 Speaker 1: exceptionally well through it last year and continues to perform 82 00:05:29,640 --> 00:05:32,520 Speaker 1: well today. And there are a variety of factors in that, 83 00:05:32,680 --> 00:05:36,400 Speaker 1: but each and every day has been a navigation because 84 00:05:36,440 --> 00:05:38,559 Speaker 1: we're still not out of the pandemic, and we're still 85 00:05:38,600 --> 00:05:43,240 Speaker 1: operating in a hybrid mode. And UM, you know, balancing 86 00:05:43,440 --> 00:05:47,760 Speaker 1: safety of our partners, are our employees, and the needs 87 00:05:47,800 --> 00:05:51,800 Speaker 1: of our clients is a a daily uh A juggling 88 00:05:51,839 --> 00:05:54,040 Speaker 1: act that we're still working through, and I suspect we'll 89 00:05:54,040 --> 00:05:56,160 Speaker 1: be working through for a while longer. Here we're gonna 90 00:05:56,160 --> 00:05:59,159 Speaker 1: talk a little more about how you guys managed doing 91 00:05:59,200 --> 00:06:01,760 Speaker 1: the pandemic UH in a bit, but I want to 92 00:06:01,920 --> 00:06:06,000 Speaker 1: stay with um the success of Northern Trust. You're one 93 00:06:06,040 --> 00:06:09,440 Speaker 1: of the biggest ultra high net worth investment managers, but 94 00:06:10,160 --> 00:06:13,120 Speaker 1: relative to your size, you guys kind of fly under 95 00:06:13,160 --> 00:06:17,720 Speaker 1: the radar. Why is that, well, you know, it's it's 96 00:06:17,760 --> 00:06:23,760 Speaker 1: an interesting question. Very the uh so in terms of size, 97 00:06:23,800 --> 00:06:26,480 Speaker 1: we're in the top twenty banks in the country as 98 00:06:26,520 --> 00:06:30,000 Speaker 1: measured by our balance sheet, but really the the better 99 00:06:31,279 --> 00:06:34,200 Speaker 1: marker of our size is the assets that we manage 100 00:06:34,240 --> 00:06:37,960 Speaker 1: and the assets that we administer for clients. And we're 101 00:06:37,960 --> 00:06:41,919 Speaker 1: a very uh quiet company. We don't do lots of 102 00:06:41,920 --> 00:06:44,919 Speaker 1: big acquisitions. We do the same thing today that we've 103 00:06:44,920 --> 00:06:48,159 Speaker 1: been doing since eighteen eighty nine, serving the same clientele, 104 00:06:48,839 --> 00:06:54,120 Speaker 1: and so we're a very focused institution. A little over 105 00:06:54,200 --> 00:06:59,000 Speaker 1: half our profits come from the UH provision of services 106 00:06:59,080 --> 00:07:03,200 Speaker 1: to wealthy families in America and around the world, and 107 00:07:03,240 --> 00:07:07,279 Speaker 1: the other half come from essentially providing the same services 108 00:07:07,279 --> 00:07:11,760 Speaker 1: but to large global institutional investors seven wealth funds, pension 109 00:07:11,800 --> 00:07:16,120 Speaker 1: funds and the like, and so um we're a quiet 110 00:07:16,200 --> 00:07:22,320 Speaker 1: company that has been UM extraordinarily successful and consistently so 111 00:07:22,520 --> 00:07:25,520 Speaker 1: for UH many many years. So we're proud of what 112 00:07:25,520 --> 00:07:29,000 Speaker 1: we've got. But we UM we we we fly under 113 00:07:29,040 --> 00:07:33,120 Speaker 1: the radar scream screen intentionally to just keep a low 114 00:07:33,160 --> 00:07:36,200 Speaker 1: profile and stay focused on our clients. And that would 115 00:07:36,200 --> 00:07:39,679 Speaker 1: make sense given the nature of your clients, who are 116 00:07:41,280 --> 00:07:45,760 Speaker 1: less Instagram stars and more quiet wealth. Is that a 117 00:07:45,880 --> 00:07:48,200 Speaker 1: Is that a fair way to describe it? Yeah, Today 118 00:07:48,280 --> 00:07:52,040 Speaker 1: we serve a little overt of the Forbes four hundred 119 00:07:52,360 --> 00:07:57,600 Speaker 1: wealthiest Americans and obviously many other affluent families and interestingly 120 00:07:57,760 --> 00:08:02,320 Speaker 1: very you know, sometimes people think of Northern Trust and 121 00:08:02,400 --> 00:08:09,400 Speaker 1: its wealth management business as UH focusing on or serving multigenerational, 122 00:08:09,520 --> 00:08:13,080 Speaker 1: well healed, you know, families, and that's true. We certainly 123 00:08:13,080 --> 00:08:20,600 Speaker 1: serve many of those, but there are many h entrepreneurs 124 00:08:20,800 --> 00:08:25,960 Speaker 1: uh in Silicon Valley, in New York, in Miami, in Dallas, 125 00:08:25,960 --> 00:08:29,760 Speaker 1: in um all over the country and all over the world. 126 00:08:30,600 --> 00:08:32,920 Speaker 1: And if there's one thing I've learned in being here, 127 00:08:32,920 --> 00:08:36,320 Speaker 1: it's that wealth is created in a lot of mysterious ways. 128 00:08:36,679 --> 00:08:40,600 Speaker 1: And so your your reference to Instagram and so forth. 129 00:08:40,760 --> 00:08:44,040 Speaker 1: I would say our clients are definitely low profile, but 130 00:08:44,280 --> 00:08:49,520 Speaker 1: where they create their wealth emanates from every segment of 131 00:08:49,520 --> 00:08:54,120 Speaker 1: the economy. It's really a fascinating part of the privilege 132 00:08:54,120 --> 00:08:56,440 Speaker 1: of being in this this kind of role. Let's stay 133 00:08:56,480 --> 00:08:59,520 Speaker 1: with that, because I was just involved in a conversation 134 00:08:59,640 --> 00:09:04,640 Speaker 1: recently about the amount of wealth that has been created 135 00:09:04,640 --> 00:09:10,040 Speaker 1: over the past couple of decades. Wherever you look, especially 136 00:09:10,080 --> 00:09:13,800 Speaker 1: in the United States, it seems that people are coming 137 00:09:13,840 --> 00:09:18,480 Speaker 1: up with new ideas, new technologies, new just even business 138 00:09:18,520 --> 00:09:22,080 Speaker 1: processes that if you go back to the nineties, I 139 00:09:22,080 --> 00:09:25,240 Speaker 1: don't think people could have imagined the sort of things 140 00:09:25,280 --> 00:09:29,880 Speaker 1: that are generating the massive amounts of wealth that we've seen. 141 00:09:29,920 --> 00:09:31,839 Speaker 1: And I'm not even talking about n f T s 142 00:09:31,960 --> 00:09:35,560 Speaker 1: or things like that. I mean businesses with clients that 143 00:09:35,720 --> 00:09:39,320 Speaker 1: are just doing tens of millions of dollars of revenue 144 00:09:39,320 --> 00:09:44,520 Speaker 1: a year. M hmm, well, I think the the fascinating 145 00:09:44,600 --> 00:09:51,240 Speaker 1: thing that I think we see is that UM wealth 146 00:09:51,320 --> 00:09:53,800 Speaker 1: can be created in a lot of different ways. And 147 00:09:53,840 --> 00:09:57,319 Speaker 1: I think you're right that as the world has sped up, 148 00:09:58,320 --> 00:10:01,480 Speaker 1: the wealth creation has be up to you know, to 149 00:10:01,960 --> 00:10:05,360 Speaker 1: caricature it. It used to be you would start a 150 00:10:05,360 --> 00:10:09,880 Speaker 1: business in your garage in Louisiana, and over time you would, 151 00:10:10,679 --> 00:10:12,840 Speaker 1: you know, build a vacuum cleaner or whatever it happened 152 00:10:12,840 --> 00:10:16,280 Speaker 1: to be, and you would start selling it from a store, 153 00:10:16,360 --> 00:10:19,640 Speaker 1: and you know it would um. You know, you'd have 154 00:10:19,640 --> 00:10:21,560 Speaker 1: a second store, and and the next thing, you know, 155 00:10:21,679 --> 00:10:26,240 Speaker 1: you have a big business that you never envisioned having, 156 00:10:26,720 --> 00:10:30,520 Speaker 1: and you could sell that company and create a tremendous 157 00:10:30,559 --> 00:10:37,200 Speaker 1: amount of wealth. Today that phenomenon still absolutely happens, but 158 00:10:37,320 --> 00:10:40,760 Speaker 1: it also happens with the power of the Internet that 159 00:10:40,960 --> 00:10:46,680 Speaker 1: the pace at which UM companies in some industries can 160 00:10:46,720 --> 00:10:52,239 Speaker 1: grow and accelerate has has really multiplied. So wealth creation 161 00:10:52,880 --> 00:10:57,000 Speaker 1: in some instances is still a slow, laborious, step by 162 00:10:57,000 --> 00:11:00,679 Speaker 1: step process, but in others, I don't want to say 163 00:11:00,720 --> 00:11:04,760 Speaker 1: it's overnight, but it happens a lot faster. UM with 164 00:11:04,880 --> 00:11:08,000 Speaker 1: digitalization and the pace at which the world moves today. 165 00:11:08,040 --> 00:11:12,640 Speaker 1: So we see both phenomena and that's part of the 166 00:11:12,679 --> 00:11:16,000 Speaker 1: fun and excitement of UM the American economy. And this 167 00:11:16,040 --> 00:11:19,280 Speaker 1: certainly happens elsewhere in the world as well. Quite interesting. 168 00:11:19,880 --> 00:11:23,240 Speaker 1: So let's talk about how you guys had to operate 169 00:11:23,840 --> 00:11:27,200 Speaker 1: during the lockdown. You mentioned this earlier. What were you 170 00:11:27,360 --> 00:11:31,040 Speaker 1: doing when you know it became clear the country was 171 00:11:31,040 --> 00:11:36,280 Speaker 1: shutting down in March. It's a great question. Very well, 172 00:11:36,320 --> 00:11:41,480 Speaker 1: we started, like many other institutions, with the safety of 173 00:11:41,480 --> 00:11:46,400 Speaker 1: our clients and the safety of our employees, and it 174 00:11:46,480 --> 00:11:52,080 Speaker 1: all happened relatively quickly in terms of UH shutting down 175 00:11:52,120 --> 00:11:56,160 Speaker 1: offices to the bare minimum, getting people home and making 176 00:11:56,160 --> 00:11:58,719 Speaker 1: sure that they could function effectively from home. And if 177 00:11:58,720 --> 00:12:01,400 Speaker 1: you go back to and and by the way, we 178 00:12:01,480 --> 00:12:05,200 Speaker 1: have twenty employees worldwide, So we were doing the same 179 00:12:05,240 --> 00:12:09,000 Speaker 1: thing in Manila and the Philippines, as we were doing 180 00:12:09,000 --> 00:12:12,760 Speaker 1: in London, as we were doing in Dublin, as we 181 00:12:12,760 --> 00:12:16,880 Speaker 1: were doing in Houston, as we were doing in Las Vegas. UM. 182 00:12:17,120 --> 00:12:21,200 Speaker 1: And so I want you to think about the operational 183 00:12:21,280 --> 00:12:26,560 Speaker 1: and logistical and infrastructural needs of pretty much all at 184 00:12:26,559 --> 00:12:29,640 Speaker 1: the same time, trying to get people out of the office, 185 00:12:30,440 --> 00:12:34,960 Speaker 1: enable them to function effectively from home, still be able 186 00:12:35,000 --> 00:12:38,320 Speaker 1: to serve our clients, uh and all the family and 187 00:12:38,360 --> 00:12:41,600 Speaker 1: other issues that people were wrestling with. So I would 188 00:12:41,600 --> 00:12:47,079 Speaker 1: say the beginning of the pandemic was um uh stressful. 189 00:12:47,440 --> 00:12:50,360 Speaker 1: You know, we were working seven trying to make sure 190 00:12:50,440 --> 00:12:54,440 Speaker 1: that technology worked and uh people could still get cash 191 00:12:54,480 --> 00:12:57,400 Speaker 1: and all those things. It has gotten to a much 192 00:12:57,520 --> 00:13:01,079 Speaker 1: better you know, I'll call it normalcy in a strange 193 00:13:01,080 --> 00:13:03,720 Speaker 1: sort of way. But the early days of the pandemic 194 00:13:03,800 --> 00:13:08,760 Speaker 1: we're challenging. We navigated through well, but um it's certainly 195 00:13:08,760 --> 00:13:12,920 Speaker 1: not something that anyone had anticipated. Really quite interesting. So 196 00:13:12,960 --> 00:13:17,200 Speaker 1: I'm assuming you guys have your offices more or less reopens. 197 00:13:18,000 --> 00:13:19,720 Speaker 1: What are you gonna do going forward? Is it going 198 00:13:19,760 --> 00:13:23,200 Speaker 1: to be a hybrid model or is everyone back in 199 00:13:23,240 --> 00:13:26,840 Speaker 1: the office or are people working from home? Um Our 200 00:13:26,880 --> 00:13:31,280 Speaker 1: offices are open, uh and and really two different extents 201 00:13:31,320 --> 00:13:35,880 Speaker 1: in different geographies, you know, which makes sense. The the 202 00:13:36,040 --> 00:13:40,400 Speaker 1: UH infection rates, hospitalization rates, all the metrics that we 203 00:13:40,520 --> 00:13:44,120 Speaker 1: track are very different in different cities and countries around 204 00:13:44,160 --> 00:13:48,880 Speaker 1: the globe. Um uh. You know, in terms of where 205 00:13:48,920 --> 00:13:53,640 Speaker 1: it goes in the future, I think Uh, the future 206 00:13:53,640 --> 00:13:57,240 Speaker 1: of work and how people work is forever change. You know, 207 00:13:57,320 --> 00:14:00,520 Speaker 1: we always had a pretty flexible work force and the 208 00:14:00,559 --> 00:14:03,600 Speaker 1: ability to work from home, and you know, people people's 209 00:14:03,679 --> 00:14:07,640 Speaker 1: lives and personal lives and business lives had crossed over 210 00:14:07,720 --> 00:14:11,720 Speaker 1: long ago that as an employer, we had to be flexible. Uh. 211 00:14:11,840 --> 00:14:14,360 Speaker 1: I think that's going to be even more so. Uh 212 00:14:14,559 --> 00:14:17,720 Speaker 1: coming out of the pandemic. People have gotten used to it, 213 00:14:18,200 --> 00:14:22,440 Speaker 1: the technology has gotten better, client expectations are different, and 214 00:14:22,520 --> 00:14:25,880 Speaker 1: so UM, I think we will be in a hybrid 215 00:14:26,000 --> 00:14:27,760 Speaker 1: you know, what we what we think of today as 216 00:14:27,760 --> 00:14:31,200 Speaker 1: a hybrid model will be a normal model tomorrow. And 217 00:14:31,240 --> 00:14:34,120 Speaker 1: that doesn't mean everyone will work from home, but it 218 00:14:34,200 --> 00:14:39,400 Speaker 1: certainly means a lot more flexibility. UM. For employees too 219 00:14:39,960 --> 00:14:45,840 Speaker 1: inevitably juggle the conflicting needs of family and work life, 220 00:14:45,840 --> 00:14:49,320 Speaker 1: and we're well prepared for that. So as investors, COVID 221 00:14:49,480 --> 00:14:52,880 Speaker 1: was pretty much an exogenous shock. It came out of 222 00:14:52,960 --> 00:14:57,320 Speaker 1: left fields. How did the whole COVID crash and recovery 223 00:14:57,360 --> 00:15:01,440 Speaker 1: comparative past crises, whether it's nine eleven or the dot 224 00:15:01,440 --> 00:15:06,000 Speaker 1: com implosion or the Great Financial Crisis? How? How do 225 00:15:06,040 --> 00:15:08,440 Speaker 1: you how do you wrap your head around this one? 226 00:15:08,920 --> 00:15:12,560 Speaker 1: Compared to ones from from recent past. You know, it's 227 00:15:12,640 --> 00:15:16,000 Speaker 1: it's a great question, and I think, Barry my perspective 228 00:15:16,040 --> 00:15:20,040 Speaker 1: would be that we often call events like the COVID 229 00:15:20,080 --> 00:15:23,760 Speaker 1: nineteen pandemic tail events or once in a lifetime events, 230 00:15:24,600 --> 00:15:26,720 Speaker 1: and in some ways they are and in some ways 231 00:15:26,760 --> 00:15:29,280 Speaker 1: they aren't. If if I think about it through the 232 00:15:29,320 --> 00:15:34,520 Speaker 1: prism of my career experience, we had the crash of 233 00:15:34,600 --> 00:15:39,440 Speaker 1: October seven. We've seen the collapses of things like m 234 00:15:39,560 --> 00:15:43,400 Speaker 1: Enron and World come. We've seen September eleventh, We've seen 235 00:15:43,440 --> 00:15:46,760 Speaker 1: Bear Stearns go down, we had the global financial crisis 236 00:15:46,840 --> 00:15:50,479 Speaker 1: of two thousand and eight UM, and of course the pandemic, 237 00:15:50,560 --> 00:15:53,720 Speaker 1: and each time we call it a tale event. But 238 00:15:53,800 --> 00:15:55,360 Speaker 1: at some point we have to admit that there are 239 00:15:55,400 --> 00:15:58,000 Speaker 1: a lot of tales. So I want to take you 240 00:15:58,040 --> 00:16:02,040 Speaker 1: back just to compare and contract um COVID nineteen with 241 00:16:02,120 --> 00:16:05,960 Speaker 1: two thousand and eight. I'll give you this example. I 242 00:16:06,000 --> 00:16:08,200 Speaker 1: want you to imagine it's the end of two thousand 243 00:16:08,200 --> 00:16:13,960 Speaker 1: and seven and you're presenting the two thousand and eight 244 00:16:14,280 --> 00:16:18,520 Speaker 1: plan for Northern Trust to our board, and you go 245 00:16:18,600 --> 00:16:20,640 Speaker 1: to the board and you say, look, we expect our 246 00:16:20,680 --> 00:16:23,280 Speaker 1: revenues to do this, and our expenses to do that, 247 00:16:23,360 --> 00:16:25,880 Speaker 1: and so forth and so on, And one of the 248 00:16:25,880 --> 00:16:28,680 Speaker 1: board members raises his or her hand and he says 249 00:16:28,800 --> 00:16:33,160 Speaker 1: he or she says, um, Berry, that's that's terrific. Sounds 250 00:16:33,200 --> 00:16:35,200 Speaker 1: like a great plan for two thousand and eight. But 251 00:16:35,240 --> 00:16:39,560 Speaker 1: I I just want to get your perspective. What happens 252 00:16:40,360 --> 00:16:46,320 Speaker 1: if bear Stearns collapses Freddie Fanny Washington, Mutual Walk, Covia, 253 00:16:46,440 --> 00:16:51,880 Speaker 1: Meryl Lynch, you know, etcetera, etcetera. Lehman, you know, the 254 00:16:51,880 --> 00:16:54,120 Speaker 1: whole thing collapses in two thousand and eight, how will 255 00:16:54,160 --> 00:16:56,880 Speaker 1: we perform? I think you you know, I think if 256 00:16:56,920 --> 00:16:59,480 Speaker 1: you had been CFO at that time, you would have said, well, 257 00:16:59,640 --> 00:17:02,200 Speaker 1: you know that it's just that's never going to happen. 258 00:17:02,800 --> 00:17:07,280 Speaker 1: But it did. Um and Northern Trust navigated through that 259 00:17:07,440 --> 00:17:13,560 Speaker 1: exceptionally well, not on scarred, but exceptionally well. If you 260 00:17:13,600 --> 00:17:19,320 Speaker 1: take if you fast forward from that paradigm to COVID nineteen, 261 00:17:20,640 --> 00:17:23,800 Speaker 1: it's very similar. You know, if if we had been 262 00:17:24,160 --> 00:17:31,240 Speaker 1: talking to our board uh the year before and put 263 00:17:31,320 --> 00:17:35,159 Speaker 1: forward our plan, I think our board would have said, well, okay, 264 00:17:35,280 --> 00:17:37,719 Speaker 1: you know, that sounds like a great plan. What happens 265 00:17:37,760 --> 00:17:41,160 Speaker 1: if there's a global pandemic, and every office from which 266 00:17:41,200 --> 00:17:45,240 Speaker 1: we operate is going to be shut down or substantially 267 00:17:45,240 --> 00:17:47,439 Speaker 1: shut down. Everyone's got to work from home on the 268 00:17:47,520 --> 00:17:50,680 Speaker 1: same day globally, and by the way, it's going to 269 00:17:50,760 --> 00:17:53,360 Speaker 1: be for a year and a half or more. I'm 270 00:17:53,440 --> 00:17:55,560 Speaker 1: quite confident you or we would have said, well that, 271 00:17:55,760 --> 00:17:58,040 Speaker 1: you know, that's just not you know, I don't know 272 00:17:58,080 --> 00:18:00,760 Speaker 1: what we'll do. That's not going to happen. But it did. 273 00:18:01,320 --> 00:18:04,439 Speaker 1: And so I think the lesson from these crises is 274 00:18:04,440 --> 00:18:11,159 Speaker 1: that while they're different, every time, they happen a lot. 275 00:18:11,680 --> 00:18:15,200 Speaker 1: And so we have to think about our approach to business, 276 00:18:15,200 --> 00:18:20,320 Speaker 1: our approach to resource research, our approach to preparing for 277 00:18:20,400 --> 00:18:26,199 Speaker 1: the unanticipateable and um as I say, each each of 278 00:18:26,280 --> 00:18:31,240 Speaker 1: your examples September eleventh and COVID and two thousand eight 279 00:18:31,280 --> 00:18:38,200 Speaker 1: are different, but they were all. They all featured substantial disruption, 280 00:18:39,359 --> 00:18:46,840 Speaker 1: substantial unanticipatable disruption. And at Northern Trust and every other 281 00:18:46,880 --> 00:18:49,800 Speaker 1: company around the world, you have to be prepared to 282 00:18:49,920 --> 00:18:53,040 Speaker 1: be agile and adapt quickly. And that's what we've been 283 00:18:53,080 --> 00:18:56,200 Speaker 1: able to do pretty consistently over our d and thirty 284 00:18:56,200 --> 00:19:01,719 Speaker 1: plus years of experience. So given that history and the 285 00:19:01,760 --> 00:19:05,760 Speaker 1: fact that a big chunk of your clients are ultra 286 00:19:05,840 --> 00:19:10,560 Speaker 1: high net worth, how do you think about managing assets 287 00:19:11,240 --> 00:19:13,600 Speaker 1: compared to what I don't know, let's use the phrase 288 00:19:13,680 --> 00:19:17,840 Speaker 1: mass affluent. Uh that typical approach? Is this more about 289 00:19:18,560 --> 00:19:22,200 Speaker 1: preserving wealth than it is striking it rich? These folks are, 290 00:19:22,240 --> 00:19:27,919 Speaker 1: after all, already fairly wealthy. How does this specific demographic 291 00:19:28,760 --> 00:19:32,920 Speaker 1: change and challenge the way you manage assets for them? Well? 292 00:19:32,960 --> 00:19:37,280 Speaker 1: I think, um, look where wherever one sits on the 293 00:19:37,400 --> 00:19:44,840 Speaker 1: spectrum of wealth, they generally want to optimize their returns 294 00:19:44,920 --> 00:19:48,040 Speaker 1: over time. And people have different risk preferences as you 295 00:19:48,040 --> 00:19:53,760 Speaker 1: would expect. Uh. So to caricature it, if you come 296 00:19:53,880 --> 00:20:00,119 Speaker 1: from nothing and you've done exceptionally wealth financially, you a 297 00:20:00,480 --> 00:20:06,080 Speaker 1: not always, but you may have a predisposition to have 298 00:20:06,280 --> 00:20:10,240 Speaker 1: a stronger defensive component to your portfolio because you don't 299 00:20:10,240 --> 00:20:12,000 Speaker 1: want to end up back where you were. You know 300 00:20:12,080 --> 00:20:15,200 Speaker 1: what it's like not to have money. You have it, uh, 301 00:20:15,240 --> 00:20:19,920 Speaker 1: and you want to be defensive. Um. On the other hand, 302 00:20:20,440 --> 00:20:23,560 Speaker 1: there are people who, whether they came from nothing or not, 303 00:20:24,119 --> 00:20:27,640 Speaker 1: they've had tremendous success. They've seen the power of capitalism, 304 00:20:27,640 --> 00:20:30,120 Speaker 1: and they want to not only do as well as 305 00:20:30,119 --> 00:20:34,400 Speaker 1: they can, but keep going. So we see things, um 306 00:20:34,680 --> 00:20:38,320 Speaker 1: through the eyes of our clients across a continuum. What 307 00:20:38,400 --> 00:20:42,240 Speaker 1: I would say is people in the ultra neet ultra 308 00:20:42,320 --> 00:20:46,440 Speaker 1: high net worth space, at least from my point of view, 309 00:20:46,440 --> 00:20:50,320 Speaker 1: it's not so much about they're more defensive or more offensive. 310 00:20:51,160 --> 00:20:55,760 Speaker 1: They have more flexibility for choice. Um. They can be 311 00:20:55,880 --> 00:21:00,000 Speaker 1: defensive because they've you know, so to speak, got more 312 00:21:00,000 --> 00:21:03,760 Speaker 1: more than enough, or they can lean in and be 313 00:21:03,880 --> 00:21:07,119 Speaker 1: more aggressive because they have a bigger cushion than the 314 00:21:07,119 --> 00:21:10,960 Speaker 1: rest of us. And our clientele is all ends of 315 00:21:11,040 --> 00:21:16,760 Speaker 1: that spectrum. There's no um the notion that some people 316 00:21:16,800 --> 00:21:20,200 Speaker 1: have that well, once someone's made a certain amount of money, 317 00:21:20,280 --> 00:21:24,239 Speaker 1: they're they're just trying to preserve it. Um. There are 318 00:21:24,240 --> 00:21:27,840 Speaker 1: certainly clients that that exhibit that behavior, but there are 319 00:21:28,200 --> 00:21:34,159 Speaker 1: an equal number who want to optimize it and aren't 320 00:21:34,200 --> 00:21:37,159 Speaker 1: in a completely defensive mindset. So it depends on the personality. 321 00:21:38,040 --> 00:21:42,000 Speaker 1: Very interesting. One of the cliches of the industry is 322 00:21:42,160 --> 00:21:45,600 Speaker 1: three generations from you know, short tales to short tails, 323 00:21:46,280 --> 00:21:52,040 Speaker 1: referring that generational wealth very often gets I don't want 324 00:21:52,040 --> 00:21:57,080 Speaker 1: to say wasted, but frittered away irresponsibly or recklessly. Uh. 325 00:21:57,160 --> 00:22:01,200 Speaker 1: Some people take too much risk. How do you manage 326 00:22:01,200 --> 00:22:04,000 Speaker 1: around that? Do you do? You ever have families coming 327 00:22:04,040 --> 00:22:06,600 Speaker 1: to you and say, hey, we want to leave money 328 00:22:06,640 --> 00:22:08,760 Speaker 1: to the next generation, but we want to make sure 329 00:22:09,520 --> 00:22:13,000 Speaker 1: they get it and that it's not just you know, 330 00:22:13,119 --> 00:22:19,760 Speaker 1: ferraris and weekends in Vegas. Yes, all the time. Again, 331 00:22:19,920 --> 00:22:23,919 Speaker 1: every family is different, every client is different. But you know, 332 00:22:23,960 --> 00:22:26,479 Speaker 1: one thing to one thing that I think is a 333 00:22:26,520 --> 00:22:30,840 Speaker 1: little bit unfair and in not by you, but in 334 00:22:30,960 --> 00:22:36,440 Speaker 1: the characterization that you refer to. Is this notion, well, 335 00:22:36,560 --> 00:22:38,919 Speaker 1: you know by the third generation it is, you know, 336 00:22:39,040 --> 00:22:42,080 Speaker 1: frittered away. I think you you have to remember a 337 00:22:42,119 --> 00:22:47,199 Speaker 1: couple of things first. When when we say it's frittered away, 338 00:22:48,840 --> 00:22:53,399 Speaker 1: the comparison point is often to someone who did the extraordinary. 339 00:22:53,440 --> 00:22:56,399 Speaker 1: So if I started from nothing and created a billion 340 00:22:56,440 --> 00:23:01,760 Speaker 1: dollars billion dollars of wealth, it's a little unfair to say, 341 00:23:01,800 --> 00:23:04,239 Speaker 1: my kids are my grandkids you know they're not as 342 00:23:04,280 --> 00:23:06,719 Speaker 1: smart as I am, because you know they didn't do 343 00:23:06,760 --> 00:23:11,879 Speaker 1: it too. You know, people who have created extraordinary wealth 344 00:23:12,119 --> 00:23:17,440 Speaker 1: have done so. By definition, it's it's extraordinary and it's 345 00:23:17,480 --> 00:23:23,200 Speaker 1: not reasonable. Even if you have bright, talented, you know, um, 346 00:23:23,320 --> 00:23:26,240 Speaker 1: high functioning kids, it's not reasonable to assume that each 347 00:23:26,320 --> 00:23:31,760 Speaker 1: generation is just gonna you know, uh, mom made a billion. Uh, 348 00:23:31,880 --> 00:23:35,120 Speaker 1: mom's kid made two billion, and and mom's grandkids made 349 00:23:35,320 --> 00:23:38,399 Speaker 1: made four billion. You know, it's mathematically that's not a 350 00:23:38,480 --> 00:23:47,400 Speaker 1: reasonable probability. That said, UM, there is definitely an art 351 00:23:47,920 --> 00:23:53,399 Speaker 1: to optimizing wealth through the generations. And of course it 352 00:23:53,480 --> 00:23:55,480 Speaker 1: starts in the home and how you raise kids and 353 00:23:55,760 --> 00:23:58,760 Speaker 1: values and um you know what you demand of them 354 00:23:58,880 --> 00:24:01,960 Speaker 1: or not. Um, But a lot of our clients do 355 00:24:02,040 --> 00:24:05,480 Speaker 1: a great job of trying to steward their wealth, trying 356 00:24:05,480 --> 00:24:08,760 Speaker 1: to educate their kids, trying to make use of family 357 00:24:08,840 --> 00:24:12,560 Speaker 1: governance to to help everyone understand how things work for 358 00:24:12,600 --> 00:24:19,840 Speaker 1: the family. And so each client is different. But UM, 359 00:24:19,880 --> 00:24:22,119 Speaker 1: as with most things, the more you put into it, 360 00:24:22,200 --> 00:24:24,360 Speaker 1: the more you're likely to get out of it. And 361 00:24:24,400 --> 00:24:29,440 Speaker 1: for those who believe it's an important responsibility to steward 362 00:24:29,480 --> 00:24:33,560 Speaker 1: that wealth, pass it to future generations, educate those generations, 363 00:24:33,640 --> 00:24:38,399 Speaker 1: make them um uh, try and help them be important 364 00:24:38,440 --> 00:24:42,320 Speaker 1: members of society. Um. They tend to get better outcomes 365 00:24:42,320 --> 00:24:45,920 Speaker 1: than the rest of us. It's a it's a very um. 366 00:24:45,920 --> 00:24:51,679 Speaker 1: It's you know, raising kids and money are too challenging vectors. 367 00:24:51,680 --> 00:24:56,320 Speaker 1: But um um. We see some great examples of people 368 00:24:56,400 --> 00:25:00,959 Speaker 1: stewarding wealth through multiple generations, not just the founder, so 369 00:25:01,000 --> 00:25:04,439 Speaker 1: to speak. Quite interesting. Let's talk a little bit about 370 00:25:04,480 --> 00:25:08,040 Speaker 1: what you call goals driven wealth management. Start out with 371 00:25:08,600 --> 00:25:12,960 Speaker 1: what what exactly is that sure? Goals driven wealth management 372 00:25:12,960 --> 00:25:18,160 Speaker 1: at Northern Trust is the framework that that we've devised 373 00:25:18,280 --> 00:25:22,800 Speaker 1: to build personalized wealth plans for clients, and it focuses 374 00:25:22,880 --> 00:25:28,119 Speaker 1: on helping them achieve their individual goals with confidence. It 375 00:25:28,240 --> 00:25:32,840 Speaker 1: provides a big picture of their wealth and transparent steps 376 00:25:32,880 --> 00:25:36,800 Speaker 1: on how to manage and optimize wealth over time. So 377 00:25:37,280 --> 00:25:40,120 Speaker 1: very one way to think about it is and I'm 378 00:25:40,160 --> 00:25:42,960 Speaker 1: being a little bit facetian decetious, but just to make 379 00:25:43,000 --> 00:25:47,480 Speaker 1: the point, it used to be in this industry that 380 00:25:47,600 --> 00:25:52,119 Speaker 1: the starting point for how money might be managed was 381 00:25:52,160 --> 00:25:54,440 Speaker 1: a function of your outlook on the markets. You think 382 00:25:54,480 --> 00:25:57,960 Speaker 1: equities are going to go up, etcetera, so you allocate 383 00:25:58,000 --> 00:26:03,560 Speaker 1: more to equities. Um Goals driven wealth management comes at 384 00:26:03,640 --> 00:26:07,960 Speaker 1: investing through a different lens. The starting point is not 385 00:26:08,080 --> 00:26:11,000 Speaker 1: so much our call on the markets, though that will 386 00:26:11,040 --> 00:26:14,600 Speaker 1: be important at some point. Our starting point in goals 387 00:26:14,680 --> 00:26:18,520 Speaker 1: driven is what are you and your family trying to accomplish? 388 00:26:18,760 --> 00:26:21,639 Speaker 1: Once we understand what you're trying to accomplish and the 389 00:26:21,720 --> 00:26:25,359 Speaker 1: assets you need to accomplish it. We can in effect 390 00:26:25,680 --> 00:26:30,800 Speaker 1: back into how to deploy those assets in stocks, bonds, 391 00:26:30,840 --> 00:26:35,040 Speaker 1: other asset classes to give you the best probability of 392 00:26:35,080 --> 00:26:39,399 Speaker 1: achieving your life goals over time. So it's really just 393 00:26:39,480 --> 00:26:45,200 Speaker 1: a different starting point for how to think about creating 394 00:26:45,560 --> 00:26:48,879 Speaker 1: an asset allocation that is most effective for you and 395 00:26:48,920 --> 00:26:52,920 Speaker 1: your family. So let's talk about that framework. And again 396 00:26:53,240 --> 00:26:56,080 Speaker 1: the question comes back, how different is it for the 397 00:26:56,160 --> 00:26:59,680 Speaker 1: ultra high net worth than for the merely wealthy or 398 00:27:00,119 --> 00:27:02,840 Speaker 1: is there a lot of overlapping between the two different 399 00:27:02,840 --> 00:27:06,720 Speaker 1: types of planning. The process is really the same no 400 00:27:06,760 --> 00:27:10,760 Speaker 1: matter where you are on the wealth spectrum. You and 401 00:27:10,840 --> 00:27:14,640 Speaker 1: your family have goals, and whether you have a million dollars, 402 00:27:14,840 --> 00:27:18,040 Speaker 1: a hundred million, a billion, ten billion, or whatever the 403 00:27:18,119 --> 00:27:21,639 Speaker 1: number is, you have something you want to achieve over time. 404 00:27:22,200 --> 00:27:25,840 Speaker 1: You plan to live to age nine hundred, this is 405 00:27:25,880 --> 00:27:27,880 Speaker 1: what you need to live in the style to which 406 00:27:27,920 --> 00:27:31,720 Speaker 1: you want to be accustomed. And we do a variety 407 00:27:31,720 --> 00:27:35,840 Speaker 1: of work to figure out first of all, are you 408 00:27:35,920 --> 00:27:43,120 Speaker 1: asset sufficient? Meaning under reasonable scenarios, do I have enough? 409 00:27:43,520 --> 00:27:46,600 Speaker 1: If I steward it effectively to live my life the 410 00:27:46,600 --> 00:27:48,879 Speaker 1: way I want to live it over time, and that 411 00:27:48,960 --> 00:27:51,600 Speaker 1: happens whether you have you know again, whatever the number 412 00:27:51,640 --> 00:27:57,240 Speaker 1: is five dollars or ten million. The difference Barry comes 413 00:27:57,280 --> 00:28:02,600 Speaker 1: in with the flexibility end options that you have as 414 00:28:02,640 --> 00:28:05,200 Speaker 1: you create more wealth. So the starting point is the same, 415 00:28:06,200 --> 00:28:10,040 Speaker 1: understand your goals, understand your needs, and let's figure out 416 00:28:10,040 --> 00:28:12,480 Speaker 1: an asset allocation to give you the best chance to 417 00:28:12,520 --> 00:28:17,240 Speaker 1: get there. What becomes different for people in the ultra 418 00:28:17,359 --> 00:28:20,240 Speaker 1: high net worth space relative to the rest of us 419 00:28:20,960 --> 00:28:25,199 Speaker 1: is that they can take advantage of more planning techniques. 420 00:28:25,760 --> 00:28:30,920 Speaker 1: They can take advantage of uh more techniques to optimize philanthropy, 421 00:28:31,040 --> 00:28:35,800 Speaker 1: They can take advantage of gifting to future generations and 422 00:28:35,840 --> 00:28:39,560 Speaker 1: so forth, and so the process is the same. But 423 00:28:39,640 --> 00:28:44,320 Speaker 1: as you accumulate more money UM in general, you have 424 00:28:44,440 --> 00:28:49,160 Speaker 1: more flexibility on some other things you can do. The 425 00:28:49,240 --> 00:28:54,240 Speaker 1: ultrah net worth also have more investment optionality. They have 426 00:28:54,400 --> 00:28:58,040 Speaker 1: the ability to invest in asset classes like private equity, 427 00:28:58,040 --> 00:29:01,880 Speaker 1: hedge funds, and so forth, where um they may have 428 00:29:01,960 --> 00:29:04,760 Speaker 1: to trade off some liquidity for a period of time. 429 00:29:05,280 --> 00:29:07,720 Speaker 1: Those of us who are lower on the spectrum may 430 00:29:07,760 --> 00:29:10,480 Speaker 1: not be able to endure that in a down market, 431 00:29:11,080 --> 00:29:16,160 Speaker 1: those who have more wealth can can uh oftentimes whether 432 00:29:16,240 --> 00:29:20,160 Speaker 1: that storm more so, the process is the same, but 433 00:29:20,560 --> 00:29:23,840 Speaker 1: you get more flexibility as your wealth grows. We're going 434 00:29:23,880 --> 00:29:27,560 Speaker 1: to talk more of about alternative investments in a little bit. 435 00:29:28,240 --> 00:29:30,720 Speaker 1: I want to stick with a couple of interesting things 436 00:29:30,800 --> 00:29:35,160 Speaker 1: I read, UH in some Northern Trust research. One of 437 00:29:35,200 --> 00:29:38,080 Speaker 1: the things that I kind of knew but I didn't 438 00:29:38,120 --> 00:29:42,080 Speaker 1: realize it was this intense was the number of clients 439 00:29:42,120 --> 00:29:47,320 Speaker 1: you see relocating to new states. It's been a record volume. 440 00:29:47,680 --> 00:29:51,800 Speaker 1: Some of that's pandemic related, some of it predates the pandemic. 441 00:29:52,800 --> 00:29:57,480 Speaker 1: How does that challenge the planning process? How different is 442 00:29:57,520 --> 00:29:59,560 Speaker 1: it from state to state when it comes to things 443 00:29:59,640 --> 00:30:04,360 Speaker 1: like tax planning. You mentioned trust, you mentioned philanthropic issues. 444 00:30:04,640 --> 00:30:07,920 Speaker 1: What happens when somebody picks up from one state and 445 00:30:07,960 --> 00:30:11,200 Speaker 1: relocates to another state. Yeah, it's an interesting question. Look, 446 00:30:11,760 --> 00:30:16,560 Speaker 1: clients relocating has always been with us. If you look 447 00:30:16,600 --> 00:30:22,280 Speaker 1: at Northern Trust's history. We are headquartered in Chicago, in 448 00:30:22,320 --> 00:30:25,400 Speaker 1: the middle of the United States. It's cold here in 449 00:30:25,440 --> 00:30:29,640 Speaker 1: the winter. Lovely city, but it does get rather cold 450 00:30:30,080 --> 00:30:34,840 Speaker 1: at wintertime, and oftentimes as people age and you know, 451 00:30:34,880 --> 00:30:38,320 Speaker 1: their kids finished school, and so forth. They opt for 452 00:30:40,120 --> 00:30:44,520 Speaker 1: better UH environments in the wintertime, so they may want 453 00:30:44,520 --> 00:30:48,200 Speaker 1: to be in Florida or Arizona, or Texas or California. 454 00:30:48,480 --> 00:30:53,600 Speaker 1: Um So, one phenomenon we've always seen is migration from 455 00:30:53,720 --> 00:31:01,080 Speaker 1: state to state. That phenomenon is also impacted by state 456 00:31:01,160 --> 00:31:06,360 Speaker 1: tax rates, by a state tax UH considerations, and so 457 00:31:07,520 --> 00:31:11,400 Speaker 1: both because of the pandemic and for tax reasons and 458 00:31:11,680 --> 00:31:20,560 Speaker 1: lifestyle reasons, we're continuing to see movement across state lines 459 00:31:20,640 --> 00:31:24,120 Speaker 1: and so, UM. You know, I think that the message 460 00:31:24,200 --> 00:31:30,480 Speaker 1: to UM urban planners is taxes do matter to people. 461 00:31:30,480 --> 00:31:35,880 Speaker 1: It's not necessarily the only factor, but um even affluent 462 00:31:35,960 --> 00:31:39,920 Speaker 1: people will think through where do they want to be, 463 00:31:40,160 --> 00:31:42,680 Speaker 1: where do they want to live, what environment do they 464 00:31:42,680 --> 00:31:45,400 Speaker 1: want to be in, and what's the tax impact for 465 00:31:45,440 --> 00:31:49,080 Speaker 1: their clients. And that phenomenon is alive and well it's 466 00:31:49,120 --> 00:31:52,840 Speaker 1: always been there, UM, but it does seem to be 467 00:31:52,960 --> 00:32:00,320 Speaker 1: important as different states consider different UH policies. If will 468 00:32:01,480 --> 00:32:07,520 Speaker 1: UH people residents make their choices and UM. So it's 469 00:32:07,600 --> 00:32:10,960 Speaker 1: it's it's a phenomenon. It's very much at the front 470 00:32:10,960 --> 00:32:14,800 Speaker 1: of mine for many of our clients. Interesting you mentioned taxes. 471 00:32:14,920 --> 00:32:18,400 Speaker 1: There was a new administration came to town this year, 472 00:32:18,600 --> 00:32:21,800 Speaker 1: and the expectations are there will be some sort of 473 00:32:21,880 --> 00:32:29,480 Speaker 1: change in tax policy, potentially including increases in capital gains 474 00:32:29,520 --> 00:32:34,160 Speaker 1: and increases in estate taxes, and in some cases fairly 475 00:32:34,160 --> 00:32:38,720 Speaker 1: substantial increases. How do you plan around that? And since 476 00:32:38,800 --> 00:32:42,480 Speaker 1: nothing is known for certain in advance what an administration 477 00:32:42,600 --> 00:32:46,440 Speaker 1: is is going to do, how do you make decisions 478 00:32:46,480 --> 00:32:51,160 Speaker 1: in the face of that uncertainty. Yeah, I think our 479 00:32:52,160 --> 00:32:55,440 Speaker 1: starting point on behalf of our clients is to prepare 480 00:32:55,600 --> 00:32:58,880 Speaker 1: rather than predict. So let me give you an example 481 00:32:59,760 --> 00:33:03,960 Speaker 1: that that you referred to. The newly proposed tax law 482 00:33:04,080 --> 00:33:09,600 Speaker 1: change would change the lifetime gift in a state tax 483 00:33:09,640 --> 00:33:13,560 Speaker 1: exemption amount from eleven point seven million dollars down to 484 00:33:13,680 --> 00:33:18,040 Speaker 1: five million dollars. And what this means for people who 485 00:33:18,040 --> 00:33:22,320 Speaker 1: have built up substantial wealth is that, uh, if the 486 00:33:22,360 --> 00:33:27,520 Speaker 1: proposal goes forward as as offered, uh, you have until 487 00:33:27,560 --> 00:33:29,280 Speaker 1: the end of this year if you want to make 488 00:33:29,320 --> 00:33:33,360 Speaker 1: a gift to your heirs of eleven if you can 489 00:33:33,360 --> 00:33:36,400 Speaker 1: afford to, and if you want to make a gift 490 00:33:36,400 --> 00:33:39,240 Speaker 1: of eleven point seven million dollars. And again, I can't 491 00:33:39,240 --> 00:33:43,160 Speaker 1: tell you whether this will happen, but if we just 492 00:33:43,520 --> 00:33:49,200 Speaker 1: think about the financial impact here. If you have enough 493 00:33:50,200 --> 00:33:52,680 Speaker 1: capacity to do that, and you choose to do it, 494 00:33:53,360 --> 00:33:56,360 Speaker 1: you can take eleven point seven million dollars out of 495 00:33:56,400 --> 00:34:00,680 Speaker 1: your estate today, get it to your kids, grant kids whoever. 496 00:34:00,680 --> 00:34:04,400 Speaker 1: It happens to be tax free as opposed to on 497 00:34:04,520 --> 00:34:09,759 Speaker 1: January one, if the law goes forward only as as offered, uh, 498 00:34:10,000 --> 00:34:13,359 Speaker 1: you can only do five million dollars. And what that 499 00:34:13,440 --> 00:34:16,440 Speaker 1: means is the difference between sorry to get you know, 500 00:34:16,840 --> 00:34:19,920 Speaker 1: numbers all over, but the difference between eleven seven and five, 501 00:34:20,560 --> 00:34:24,600 Speaker 1: which is six point seven million dollars will be taxed 502 00:34:25,160 --> 00:34:28,960 Speaker 1: you know when you die um uh at a at 503 00:34:28,960 --> 00:34:33,319 Speaker 1: a high rate. And so we have literally thousands of 504 00:34:33,400 --> 00:34:37,680 Speaker 1: clients all across the country, and each one we're working 505 00:34:37,719 --> 00:34:43,960 Speaker 1: with individually to evaluate, um, what's their financial circumstance, what 506 00:34:44,080 --> 00:34:46,799 Speaker 1: do they want to do? Do they want to make 507 00:34:46,840 --> 00:34:49,520 Speaker 1: the gift? And by the way, this this this tax 508 00:34:49,600 --> 00:34:54,320 Speaker 1: law change may or may not happen um, So people 509 00:34:54,360 --> 00:34:57,479 Speaker 1: have to make a choice without knowing for sure whether 510 00:34:57,520 --> 00:35:00,439 Speaker 1: it's going to happen. I think the bottom law mine though, 511 00:35:00,760 --> 00:35:06,359 Speaker 1: is people are looking at this carefully, they're studying it, 512 00:35:06,880 --> 00:35:10,560 Speaker 1: and they're trying to prepare and make judgments about what 513 00:35:10,680 --> 00:35:13,560 Speaker 1: might happen and what's best for their individual circumstances. But 514 00:35:14,000 --> 00:35:17,120 Speaker 1: tax law changes matter, and we are in the business 515 00:35:17,160 --> 00:35:20,400 Speaker 1: of helping our clients figure out what's the best choice 516 00:35:20,400 --> 00:35:24,640 Speaker 1: for them with the information that we have. Quite quite interesting. 517 00:35:25,280 --> 00:35:29,719 Speaker 1: So we talked a little bit about alternatives earlier. Let's 518 00:35:29,719 --> 00:35:32,800 Speaker 1: address that a bit. There seems to be a growing 519 00:35:32,920 --> 00:35:38,320 Speaker 1: appetite for all manner of alternative investments, given that stocks 520 00:35:38,320 --> 00:35:43,319 Speaker 1: and bonds are all a little bit pricey. Um, let's 521 00:35:43,320 --> 00:35:46,200 Speaker 1: start with private equity. What what sort of demand is 522 00:35:46,280 --> 00:35:51,480 Speaker 1: there from your clients for private equity and how do 523 00:35:51,600 --> 00:35:56,800 Speaker 1: you guys respond to the question of potentially better returns 524 00:35:56,800 --> 00:36:02,279 Speaker 1: and exchange for far less liquidity. Sure, look, investment has 525 00:36:02,400 --> 00:36:07,239 Speaker 1: become much more granular over the decades. And again, just 526 00:36:07,280 --> 00:36:11,319 Speaker 1: to be facetious, you know, large cap stocks versus high 527 00:36:11,400 --> 00:36:17,719 Speaker 1: quality bonds. You know forty years ago. Today clients think 528 00:36:17,760 --> 00:36:23,360 Speaker 1: in terms of small cap, mid cap, large cap, value, international, 529 00:36:23,920 --> 00:36:29,880 Speaker 1: emerging markets, private equity, and thousands of flavors of private equity, 530 00:36:29,960 --> 00:36:36,080 Speaker 1: hedge funds. Same thing. So in the quest for optimizing returns, 531 00:36:37,400 --> 00:36:40,800 Speaker 1: clients and their professional money managers and Northern Trust included 532 00:36:41,440 --> 00:36:46,880 Speaker 1: have um searched for different asset classes to combine together 533 00:36:47,520 --> 00:36:51,120 Speaker 1: to give people the best chance to achieve their objectives. 534 00:36:51,440 --> 00:36:55,759 Speaker 1: Private equity clearly has been in the aggregate. There are 535 00:36:55,760 --> 00:36:58,960 Speaker 1: winners and losers in private equity, but has been a 536 00:36:58,960 --> 00:37:02,399 Speaker 1: asset class that has done well for many There are 537 00:37:02,440 --> 00:37:08,120 Speaker 1: tradeoffs with private equity, particularly in terms of liquidity UM, 538 00:37:08,239 --> 00:37:12,880 Speaker 1: but I would say amongst our clientele, the appetite for 539 00:37:13,040 --> 00:37:18,360 Speaker 1: private equity and private equity is a more normalized asset 540 00:37:18,440 --> 00:37:22,440 Speaker 1: class continues to grow. It's not the right asset class 541 00:37:22,480 --> 00:37:25,920 Speaker 1: for every client, but for clients who have the capacity, 542 00:37:26,040 --> 00:37:30,160 Speaker 1: the risk tolerance, and so forth. Uh, it definitely can 543 00:37:30,200 --> 00:37:34,200 Speaker 1: play an important role in a client's portfolio. And increasingly 544 00:37:34,239 --> 00:37:37,279 Speaker 1: we're seeing more use of private equity today than we did, 545 00:37:37,600 --> 00:37:41,160 Speaker 1: say ten years ago. What about venture capital or hedge 546 00:37:41,160 --> 00:37:45,120 Speaker 1: funds too, totally different entities from both each other and 547 00:37:45,200 --> 00:37:48,880 Speaker 1: private equity. What's the demand like for those products? Demand 548 00:37:49,400 --> 00:37:54,240 Speaker 1: exists for venture capital and four hedge funds as well. Again, 549 00:37:54,520 --> 00:37:57,400 Speaker 1: the devil is in the detail. Not all hedge funds 550 00:37:57,400 --> 00:38:01,120 Speaker 1: are created equally. The theme is that they charge. The 551 00:38:01,200 --> 00:38:06,279 Speaker 1: performance that they've delivered can differ substantially, But there is 552 00:38:06,680 --> 00:38:11,359 Speaker 1: um again, this same notion of I want to diversify 553 00:38:11,440 --> 00:38:16,680 Speaker 1: my portfolio. I want a range of options and so 554 00:38:16,760 --> 00:38:20,560 Speaker 1: called alternative investments, whether you call it private equity, venture capital, 555 00:38:21,320 --> 00:38:26,000 Speaker 1: hedge funds, UH seem to continue to be growing in 556 00:38:26,080 --> 00:38:30,719 Speaker 1: appeal to our clientele. What about crypto and things like 557 00:38:31,080 --> 00:38:34,879 Speaker 1: blockchain and ethereum? There seems to be a lot of 558 00:38:34,960 --> 00:38:40,239 Speaker 1: real interest in the space. Are are you finding your 559 00:38:40,280 --> 00:38:45,160 Speaker 1: client base is crypto curious? Um? I would say the 560 00:38:45,280 --> 00:38:51,839 Speaker 1: demand for crypto is more muted amongst our clientele than 561 00:38:52,520 --> 00:38:55,879 Speaker 1: um some of what you read in the public press. 562 00:38:55,960 --> 00:39:00,680 Speaker 1: And um, that doesn't mean we have example of clients 563 00:39:00,680 --> 00:39:04,480 Speaker 1: who have invested in crypto and done exceptionally well you know, 564 00:39:04,600 --> 00:39:08,640 Speaker 1: right time. But I would say in general, if I 565 00:39:08,680 --> 00:39:15,120 Speaker 1: had to caricature it, I would say that crypto is 566 00:39:15,560 --> 00:39:19,840 Speaker 1: still an evolving asset class that is misunderstood by many, 567 00:39:19,880 --> 00:39:25,239 Speaker 1: and I think most are treating it uh carefully. And 568 00:39:25,280 --> 00:39:29,040 Speaker 1: the ones that are making crypto investments are viewing it 569 00:39:29,120 --> 00:39:34,920 Speaker 1: more as a uh um, more as a roll of 570 00:39:34,960 --> 00:39:41,919 Speaker 1: the dice than a rational uh uh analytical view of 571 00:39:42,400 --> 00:39:45,040 Speaker 1: what crypto is trading it today and what it's going 572 00:39:45,080 --> 00:39:47,399 Speaker 1: to trade it tomorrow. They view it as a bit 573 00:39:47,400 --> 00:39:48,920 Speaker 1: of a roll of the dice. They may jump in 574 00:39:48,960 --> 00:39:52,000 Speaker 1: a little bit, but UM, they understand that what goes 575 00:39:52,120 --> 00:39:55,000 Speaker 1: up can also go down. So I would say amongst 576 00:39:55,040 --> 00:40:00,719 Speaker 1: our clientele overall crypto is still UM not idely in use. 577 00:40:02,040 --> 00:40:06,000 Speaker 1: So we mentioned briefly the market is a certainly priced 578 00:40:06,080 --> 00:40:08,640 Speaker 1: yer than it was five or ten years ago. How 579 00:40:08,680 --> 00:40:12,759 Speaker 1: do you manage around stocks and bonds, neither of which 580 00:40:12,800 --> 00:40:17,200 Speaker 1: are inexpensive. Yeah. Look, I think for many of our 581 00:40:17,239 --> 00:40:21,719 Speaker 1: clients UM, the market does go up, the market does 582 00:40:21,760 --> 00:40:24,160 Speaker 1: go down. And one of the great features of our 583 00:40:24,680 --> 00:40:27,759 Speaker 1: the goals driven methodology that we use for clients is 584 00:40:27,800 --> 00:40:36,320 Speaker 1: that we build a UM portfolio such that, after a 585 00:40:36,360 --> 00:40:40,080 Speaker 1: lot of analytical work to evaluate their goals and so forth, 586 00:40:40,760 --> 00:40:46,960 Speaker 1: UM that enables them to uh endure and not have 587 00:40:47,120 --> 00:40:50,160 Speaker 1: to sell in a down market. We we create something 588 00:40:50,200 --> 00:40:53,640 Speaker 1: that's called a portfolio reserve. I would liken it to 589 00:40:53,880 --> 00:40:57,320 Speaker 1: the moat around your castle. Some people like a wide, 590 00:40:57,440 --> 00:41:03,200 Speaker 1: deep moat, some people eat the narrower UM and less 591 00:41:03,200 --> 00:41:06,920 Speaker 1: deep mode. But think of that as high quality fixed income. 592 00:41:07,320 --> 00:41:10,480 Speaker 1: If the stock market goes down, your your bonds are 593 00:41:10,520 --> 00:41:13,560 Speaker 1: still fine, you can still pay your mortgage. Life is good. 594 00:41:13,880 --> 00:41:18,320 Speaker 1: You can wait until the market goes up or returns 595 00:41:18,360 --> 00:41:23,360 Speaker 1: to normal. So the one thing we know on behalf 596 00:41:23,360 --> 00:41:26,239 Speaker 1: of our clients is markets go up and down, and 597 00:41:26,320 --> 00:41:29,080 Speaker 1: so you have to plan and prepare for that. And 598 00:41:29,160 --> 00:41:34,360 Speaker 1: so it's very difficult to know, um you know. Again, 599 00:41:34,480 --> 00:41:36,719 Speaker 1: using the COVID nineteen example, I think there are a 600 00:41:36,760 --> 00:41:38,680 Speaker 1: lot of people who might have argued the markets are 601 00:41:38,719 --> 00:41:41,000 Speaker 1: going to crash. You know, everyone's working from home and 602 00:41:41,040 --> 00:41:44,239 Speaker 1: we can't get essentials and people don't want to go 603 00:41:44,239 --> 00:41:47,239 Speaker 1: to the grocery store. And yet the market went up dramatically. 604 00:41:47,400 --> 00:41:50,680 Speaker 1: So we try and take a long, stewarded view and 605 00:41:50,719 --> 00:41:55,160 Speaker 1: help our clients plan and prepare themselves so that when 606 00:41:55,160 --> 00:41:58,759 Speaker 1: the market does go down, um, that they can get 607 00:41:58,800 --> 00:42:03,280 Speaker 1: through and um uh not have to take adverse steps 608 00:42:03,280 --> 00:42:06,879 Speaker 1: and sell uh in dire circumstance. And that's been very 609 00:42:06,920 --> 00:42:12,480 Speaker 1: helpful for our clients. So, in terms of forward return expectations, 610 00:42:12,600 --> 00:42:18,720 Speaker 1: does that and historically loban yields high equity prices tend 611 00:42:18,800 --> 00:42:23,200 Speaker 1: to suggest lower returns going forward. Does that work its 612 00:42:23,239 --> 00:42:26,799 Speaker 1: way into the planning process or is that really more 613 00:42:26,840 --> 00:42:30,959 Speaker 1: of an academic theory. No, it absolutely works its way 614 00:42:30,960 --> 00:42:36,600 Speaker 1: into the planning process. Because our starting point is what 615 00:42:36,840 --> 00:42:41,680 Speaker 1: needs does a client have over the near term for 616 00:42:41,840 --> 00:42:44,200 Speaker 1: financial resources. We we've got to make sure they can 617 00:42:44,840 --> 00:42:48,120 Speaker 1: buy their groceries and pay their mortgage, and we have 618 00:42:48,239 --> 00:42:53,640 Speaker 1: to deploy assets against those goals. But once in working 619 00:42:53,680 --> 00:42:57,600 Speaker 1: with a client we figured out the right mix of 620 00:42:57,680 --> 00:43:03,359 Speaker 1: assets to uh to enable them to to afford those 621 00:43:03,400 --> 00:43:07,520 Speaker 1: goals over a reasonable period of time, we then have 622 00:43:07,640 --> 00:43:10,560 Speaker 1: to deploy the rest of the portfolio towards so called 623 00:43:10,640 --> 00:43:14,800 Speaker 1: risk assets equities, private equity, hedge funds, venture cat, whatever 624 00:43:14,840 --> 00:43:19,200 Speaker 1: the asset class, And in so doing we have to 625 00:43:19,239 --> 00:43:24,160 Speaker 1: bring our judgment about risk and return expectations for each 626 00:43:24,160 --> 00:43:27,960 Speaker 1: of those asset classes. So our view of asset classes 627 00:43:28,520 --> 00:43:32,080 Speaker 1: and what they're likely to bring over the relatively short 628 00:43:32,200 --> 00:43:36,399 Speaker 1: term is still an important part of the process. So 629 00:43:36,440 --> 00:43:39,080 Speaker 1: what do you tell investors who say, you know, I'm 630 00:43:39,080 --> 00:43:43,040 Speaker 1: really not happy with my muni bond portfolio. It's barely 631 00:43:43,080 --> 00:43:46,280 Speaker 1: thrown off two or two and a half percent. Investors 632 00:43:46,280 --> 00:43:50,040 Speaker 1: are always seemed to be looking for more yields. How 633 00:43:50,080 --> 00:43:53,839 Speaker 1: do you respond to that group of clients. Yeah, I 634 00:43:53,880 --> 00:43:58,080 Speaker 1: think it's my Our response is, really, you have to 635 00:43:58,160 --> 00:44:03,279 Speaker 1: remember what you're going to do with that muni bond portfolio. 636 00:44:03,680 --> 00:44:08,960 Speaker 1: No one is saying it's a great, high returning asset class, 637 00:44:08,960 --> 00:44:13,640 Speaker 1: but that's not its role. Its role is to making 638 00:44:13,640 --> 00:44:17,840 Speaker 1: this up bury. But generally the role of that muni 639 00:44:17,880 --> 00:44:25,399 Speaker 1: bond portfolio is to provide you with certainty, security, confidence, uh, 640 00:44:25,400 --> 00:44:28,480 Speaker 1: and not have to worry about the other part of 641 00:44:28,480 --> 00:44:33,480 Speaker 1: your portfolio. Let's just call that equities gyrating up and down. So, 642 00:44:33,640 --> 00:44:36,560 Speaker 1: of course people want their muni bonds or their high 643 00:44:36,640 --> 00:44:39,680 Speaker 1: quality fixed income to return as much as it can, 644 00:44:40,280 --> 00:44:43,279 Speaker 1: and it's our job to try and help people achieve that. 645 00:44:44,239 --> 00:44:46,160 Speaker 1: But I think you always have to come back to 646 00:44:46,800 --> 00:44:51,480 Speaker 1: what role is this trying to play? And for most clients, 647 00:44:51,520 --> 00:44:55,400 Speaker 1: it's trying to play a role of stability and reliability 648 00:44:55,680 --> 00:45:01,520 Speaker 1: and consistency, and that's the paramount feature. And in providing 649 00:45:01,520 --> 00:45:06,440 Speaker 1: that consistency and stability and predictability, they give up a 650 00:45:06,480 --> 00:45:10,520 Speaker 1: little bit of return on that asset class, but they're 651 00:45:10,520 --> 00:45:13,520 Speaker 1: trying to get that elsewhere with their equities, private equity 652 00:45:13,520 --> 00:45:19,120 Speaker 1: and so forth. So you had you had discussed previously, Um, hey, 653 00:45:19,480 --> 00:45:21,560 Speaker 1: you know it's up to us to make the most 654 00:45:22,160 --> 00:45:25,640 Speaker 1: of a low rate environment. What does that mean? How 655 00:45:25,719 --> 00:45:28,600 Speaker 1: does one make the most of a low rate environment, Well, 656 00:45:28,640 --> 00:45:32,719 Speaker 1: I think, um, you know, low low rates create low 657 00:45:32,840 --> 00:45:38,680 Speaker 1: interest rates create uh challenges and opportunities, and maybe two 658 00:45:39,080 --> 00:45:44,080 Speaker 1: simple ways to think about it are. One on the 659 00:45:44,200 --> 00:45:48,959 Speaker 1: challenge side, if you're living on a fixed income, as 660 00:45:49,000 --> 00:45:53,560 Speaker 1: assets repriced and you're reliant on bonds, your bonds to 661 00:45:53,680 --> 00:46:00,120 Speaker 1: provide UH income, the lower rates make the yield on 662 00:46:00,200 --> 00:46:06,960 Speaker 1: those bonds lower, and so that's bad from a you know, 663 00:46:07,120 --> 00:46:09,640 Speaker 1: how much cash will I have to fulfill my needs? 664 00:46:11,040 --> 00:46:15,319 Speaker 1: The flip side to that is that when rates are 665 00:46:15,480 --> 00:46:20,000 Speaker 1: very low, UH, if you want to, if it's appropriate, 666 00:46:20,120 --> 00:46:25,439 Speaker 1: if it's thoughtfully done, you can use credit rather than 667 00:46:25,800 --> 00:46:29,279 Speaker 1: liquidating stocks too. You know, if you want to buy 668 00:46:29,320 --> 00:46:32,520 Speaker 1: a new toy, um so to speak, a boat, whatever 669 00:46:32,560 --> 00:46:34,960 Speaker 1: it happens to be. One way to do that is 670 00:46:35,000 --> 00:46:37,799 Speaker 1: to sell stocks in your portfolio and buy the you know, 671 00:46:37,840 --> 00:46:40,799 Speaker 1: whatever it is you want to buy. Another way is 672 00:46:40,840 --> 00:46:43,839 Speaker 1: to let those stocks keep working on your behalf. And 673 00:46:43,920 --> 00:46:48,640 Speaker 1: because rates are so low, UH, take advantage of credit, 674 00:46:49,000 --> 00:46:52,080 Speaker 1: take a loan by that boat and or whatever it 675 00:46:52,120 --> 00:46:55,400 Speaker 1: happens to being paid back over time. So low interest rates, 676 00:46:56,080 --> 00:47:01,600 Speaker 1: you know, can have different UM conflict phenomenon opportunities on 677 00:47:01,640 --> 00:47:05,760 Speaker 1: the credit side and headwinds on the bond investment side. 678 00:47:06,400 --> 00:47:10,680 Speaker 1: So so how do you incorporate all this inflation chatter 679 00:47:10,960 --> 00:47:16,720 Speaker 1: to to your planning. Um, we've started to see rates 680 00:47:16,760 --> 00:47:19,800 Speaker 1: tick up the tenures as we're recording this, just about 681 00:47:19,840 --> 00:47:24,040 Speaker 1: one point five. And I know there's an irony in 682 00:47:24,160 --> 00:47:26,839 Speaker 1: saying that rates are all the way up to one 683 00:47:26,840 --> 00:47:31,799 Speaker 1: point five, which historically is incredibly low. How do you 684 00:47:31,880 --> 00:47:37,960 Speaker 1: figure um inflation into your modeling and thinking about the future. 685 00:47:39,600 --> 00:47:43,920 Speaker 1: Will we use multi scenario modeling? The reality is no 686 00:47:43,960 --> 00:47:47,160 Speaker 1: one knows, and so you have to you know, the 687 00:47:47,640 --> 00:47:51,719 Speaker 1: prognosticators will will have a view. Some some believe inflation 688 00:47:51,840 --> 00:47:55,040 Speaker 1: is here and is going to continue. Others argue it's 689 00:47:55,600 --> 00:48:01,160 Speaker 1: so called transitory. Um, and uh, the truth is, we 690 00:48:01,200 --> 00:48:03,719 Speaker 1: don't know. We'll we'll we'll find that out tomorrow, so 691 00:48:03,760 --> 00:48:08,600 Speaker 1: to speak. And so as we work through planning with 692 00:48:08,640 --> 00:48:16,239 Speaker 1: our clients, we generally are running multiple scenarios low inflation, 693 00:48:16,680 --> 00:48:20,960 Speaker 1: medium inflation, high inflation, and we're trying as well as 694 00:48:21,000 --> 00:48:23,839 Speaker 1: we help clients make decisions, we're trying to make the 695 00:48:23,880 --> 00:48:27,640 Speaker 1: best judgment we can at a given point in time. 696 00:48:28,200 --> 00:48:32,280 Speaker 1: But UM, that's why you you really have to be 697 00:48:32,760 --> 00:48:37,040 Speaker 1: you have to plan for multiple scenarios and bring agility 698 00:48:37,120 --> 00:48:39,320 Speaker 1: to your process because we don't know whether the stock 699 00:48:39,360 --> 00:48:41,720 Speaker 1: markets going up or down. We don't know whether inflation 700 00:48:41,760 --> 00:48:45,080 Speaker 1: will be higher or lower. We have a view, we 701 00:48:45,120 --> 00:48:49,759 Speaker 1: can have probabilities, but as we've seen, whether it was 702 00:48:50,960 --> 00:48:57,279 Speaker 1: with two thousand and eight or uh covid um, we 703 00:48:57,520 --> 00:49:00,359 Speaker 1: everyone can be wrong, and so you have to plan 704 00:49:00,880 --> 00:49:04,120 Speaker 1: and adapt and leave yourself a buffer for when you 705 00:49:04,160 --> 00:49:08,760 Speaker 1: are wrong, and hopefully it's not um uh not catastrophic. Huh. 706 00:49:09,120 --> 00:49:11,120 Speaker 1: So I know I only have you for a little 707 00:49:11,160 --> 00:49:14,520 Speaker 1: bit of time. Let me jump to my favorite questions 708 00:49:14,520 --> 00:49:18,640 Speaker 1: that I ask all of my guests, starting with tell 709 00:49:18,719 --> 00:49:21,480 Speaker 1: us what you're streaming these days? What's keeping you entertained 710 00:49:22,440 --> 00:49:26,839 Speaker 1: at home, either on Netflix or Amazon Prime or wherever. Well, 711 00:49:26,880 --> 00:49:29,480 Speaker 1: I've I've been working hard, so I can't say I've 712 00:49:29,920 --> 00:49:33,799 Speaker 1: made great use of Netflix. But um, what I have 713 00:49:33,960 --> 00:49:36,760 Speaker 1: just started. This will show you, Perry, how far behind 714 00:49:36,800 --> 00:49:41,319 Speaker 1: am is. I've just started ted Lasso, so um, I'm 715 00:49:41,360 --> 00:49:43,279 Speaker 1: behind the rest of the world. But that's what I'm 716 00:49:43,280 --> 00:49:45,600 Speaker 1: on right now. All right, Well, well you'll I can 717 00:49:45,640 --> 00:49:48,320 Speaker 1: tell you this much. You will enjoy it and and 718 00:49:48,400 --> 00:49:52,040 Speaker 1: enjoy catching up with us. What about mentors who helped 719 00:49:52,200 --> 00:49:56,520 Speaker 1: to shape your career. You know, I've had a lot 720 00:49:56,560 --> 00:50:00,560 Speaker 1: of mentors at Northern Trust over the years. Uh, people 721 00:50:00,560 --> 00:50:03,920 Speaker 1: who were senior to me and people who weren't. But 722 00:50:04,000 --> 00:50:08,680 Speaker 1: I learned from everyone. I think when I think about mentors, 723 00:50:08,680 --> 00:50:12,040 Speaker 1: for me, it's less about people with whom I work, 724 00:50:12,160 --> 00:50:17,319 Speaker 1: and maybe it's my interest in history, but um, I 725 00:50:17,440 --> 00:50:21,480 Speaker 1: try and learn from people who have overcome insurmountable ods. 726 00:50:22,200 --> 00:50:26,000 Speaker 1: The Mahatma Gandhi's, the Martin Luther King's, the Winston Churchill's, 727 00:50:26,080 --> 00:50:29,920 Speaker 1: the Thoughts of Hovels, the Abraham Lincoln. And there's so 728 00:50:30,040 --> 00:50:35,680 Speaker 1: much wisdom that I see in people like that, because um, 729 00:50:35,719 --> 00:50:44,239 Speaker 1: they really faced incredible circumstances and worked through them generally 730 00:50:44,280 --> 00:50:49,440 Speaker 1: too good outcomes, and so um they're those great thinkers 731 00:50:49,440 --> 00:50:52,320 Speaker 1: are probably the people I've learned the most from. As 732 00:50:52,360 --> 00:50:55,120 Speaker 1: I wouldn't call them mentors to me, but I've certainly 733 00:50:55,160 --> 00:50:57,359 Speaker 1: read about all of them and learned a lot from 734 00:50:57,360 --> 00:51:01,040 Speaker 1: each of them. Let's talk about books. What are you 735 00:51:01,080 --> 00:51:03,560 Speaker 1: reading right now and what what are some of your favorites? 736 00:51:05,000 --> 00:51:07,719 Speaker 1: You know, I think, in keeping with that theme of 737 00:51:07,840 --> 00:51:14,080 Speaker 1: mentors or poor um periods of time, that interest me. Uh. 738 00:51:15,320 --> 00:51:18,360 Speaker 1: I've really enjoyed The Splendid and the Vial by Eric Larson, 739 00:51:18,480 --> 00:51:23,520 Speaker 1: which is um about Churchill and the blitz of World 740 00:51:23,560 --> 00:51:29,319 Speaker 1: War Two, and again it it helps you here, it 741 00:51:29,360 --> 00:51:35,640 Speaker 1: helps me to see just how dire the circumstances were 742 00:51:36,440 --> 00:51:40,239 Speaker 1: and what he and others had to navigate through. The 743 00:51:40,280 --> 00:51:42,920 Speaker 1: other book that I've dusted off recently I had read 744 00:51:42,960 --> 00:51:44,960 Speaker 1: some time ago, but I think in a few of 745 00:51:44,960 --> 00:51:48,919 Speaker 1: the pandemic it seemed interesting to me was The Hot 746 00:51:49,000 --> 00:51:54,040 Speaker 1: Zone by Richard Preston, which has nothing to do with 747 00:51:54,080 --> 00:51:59,239 Speaker 1: the pandemic, but um uh, there are parallels to what 748 00:51:59,280 --> 00:52:01,440 Speaker 1: we're dealing with than It was sort of a gripping, 749 00:52:01,920 --> 00:52:03,719 Speaker 1: gripping book if you have time for a good read, 750 00:52:04,880 --> 00:52:08,480 Speaker 1: it sounds interesting. What sort of advice would you give 751 00:52:08,560 --> 00:52:11,400 Speaker 1: to a recent college grad who was interested in a 752 00:52:11,520 --> 00:52:18,879 Speaker 1: career in either investment management or finance? Yeah, I think, 753 00:52:19,320 --> 00:52:24,080 Speaker 1: um berry, I'd offer a couple of themes on this, 754 00:52:24,200 --> 00:52:28,360 Speaker 1: and I don't know that I um narrow these themes 755 00:52:28,360 --> 00:52:34,080 Speaker 1: too uh an interest in investments or finance, although I 756 00:52:34,080 --> 00:52:36,960 Speaker 1: think they do overlap. I'd start by saying it probably 757 00:52:37,000 --> 00:52:39,000 Speaker 1: the easiest place to get my view there would be 758 00:52:39,040 --> 00:52:41,640 Speaker 1: to go to YouTube, and I gave a commencement addressed 759 00:52:41,680 --> 00:52:45,680 Speaker 1: at the University of Illinois, Chicago and tried to formulate 760 00:52:45,760 --> 00:52:48,319 Speaker 1: those themes for for young people. But but a few 761 00:52:48,400 --> 00:52:54,160 Speaker 1: that come to mind, at least through my lens are UM. 762 00:52:54,480 --> 00:52:58,759 Speaker 1: Comfort is the enemy of accomplishment. If you want to 763 00:52:59,480 --> 00:53:02,919 Speaker 1: be the best you can be. Uh, you can never 764 00:53:02,960 --> 00:53:07,560 Speaker 1: be satisfied with where you are. You've got to push, push, push, 765 00:53:07,640 --> 00:53:11,600 Speaker 1: and UM make yourself better each and every day and 766 00:53:11,680 --> 00:53:16,200 Speaker 1: everything you touch. UM. I think of a couple of 767 00:53:16,200 --> 00:53:18,959 Speaker 1: the other themes that would come to me would be 768 00:53:19,680 --> 00:53:22,880 Speaker 1: in the same vein UM. We see this at Northern 769 00:53:22,920 --> 00:53:25,479 Speaker 1: Trust all the time. Excellence is not a part time job. 770 00:53:26,239 --> 00:53:28,440 Speaker 1: For people who want to be excellent, who want to 771 00:53:28,440 --> 00:53:31,240 Speaker 1: do the best job for our clients and our shareholders. 772 00:53:32,120 --> 00:53:35,799 Speaker 1: You can't be excellent only when it's convenient, only when 773 00:53:35,800 --> 00:53:37,840 Speaker 1: you want to do it, or only when you feel 774 00:53:37,880 --> 00:53:43,520 Speaker 1: like it. You've you've got to UM. Excellence is an 775 00:53:43,520 --> 00:53:48,879 Speaker 1: all in phenomenon. And then probably the the last theme 776 00:53:48,960 --> 00:53:53,120 Speaker 1: that comes to my mind is persevere beyond your accomplishments. 777 00:53:53,160 --> 00:53:57,080 Speaker 1: It's not what you did yesterday, UH, it's you can 778 00:53:57,120 --> 00:54:01,239 Speaker 1: be proud of what you've accomplished, but again, you want 779 00:54:01,239 --> 00:54:04,520 Speaker 1: to be better going forward, and so be proud of 780 00:54:04,560 --> 00:54:07,120 Speaker 1: who you are. Be proud of your grades and your 781 00:54:07,239 --> 00:54:10,560 Speaker 1: your school and your degrees and all that sort of stuff. 782 00:54:11,160 --> 00:54:14,200 Speaker 1: But those are what you did, you know two years ago, 783 00:54:14,239 --> 00:54:16,560 Speaker 1: five years ago, ten years ago, whatever it happens to be. 784 00:54:17,560 --> 00:54:20,200 Speaker 1: Keep pushing forward to be the best you can be, 785 00:54:20,239 --> 00:54:24,920 Speaker 1: so persevered beyond your accomplishments. And our final question, what 786 00:54:25,000 --> 00:54:28,000 Speaker 1: do you know about the world of investing today? You 787 00:54:28,160 --> 00:54:30,880 Speaker 1: wish you knew thirty five years ago when you were 788 00:54:30,960 --> 00:54:36,320 Speaker 1: first starting with Northern Trust. That is a long list, Arry, 789 00:54:36,360 --> 00:54:39,920 Speaker 1: But um, I think what I would say is you 790 00:54:40,000 --> 00:54:43,520 Speaker 1: don't have to be right on everything, and sometimes being 791 00:54:43,640 --> 00:54:46,600 Speaker 1: right is more about luck and timing than it is 792 00:54:46,640 --> 00:54:54,040 Speaker 1: about specific analytical acumen. Uninspiring choices in a bowl market 793 00:54:54,120 --> 00:54:57,440 Speaker 1: can turn out just fine, and well reasoned ideas in 794 00:54:57,480 --> 00:54:59,799 Speaker 1: a down market can turn out to be not so good. 795 00:55:00,560 --> 00:55:03,479 Speaker 1: Get the direction right more often than not and you'll 796 00:55:03,480 --> 00:55:07,000 Speaker 1: be just fine. Really good advice. Thank you, Steve for 797 00:55:07,080 --> 00:55:09,480 Speaker 1: being so generous with your time. We've been speaking with 798 00:55:09,520 --> 00:55:13,120 Speaker 1: Steve Fradkin. He's the president of Northern Trust Wealth Management. 799 00:55:13,719 --> 00:55:17,080 Speaker 1: If you enjoy this conversation, well, be sure and check 800 00:55:17,120 --> 00:55:21,520 Speaker 1: out any of the other three prior discussions we've had 801 00:55:21,560 --> 00:55:25,040 Speaker 1: over the past seven years. You can find those wherever 802 00:55:25,160 --> 00:55:30,120 Speaker 1: you normally find your favorite podcast iTunes, Spotify, wherever. We 803 00:55:30,200 --> 00:55:33,480 Speaker 1: love your comments, feedback and suggestions right to us at 804 00:55:34,200 --> 00:55:37,840 Speaker 1: m IB podcast at Bloomberg dot net. You can sign 805 00:55:37,920 --> 00:55:41,400 Speaker 1: up from my daily suggested reading list at rid Halts 806 00:55:41,480 --> 00:55:44,919 Speaker 1: dot com. Check out my regular column at Bloomberg dot 807 00:55:44,920 --> 00:55:49,520 Speaker 1: com slash Opinion. Follow me on Twitter at rit Halts. 808 00:55:49,840 --> 00:55:51,840 Speaker 1: I would be remiss if I did not thank the 809 00:55:51,880 --> 00:55:55,000 Speaker 1: crack team that helps put these conversations together each week. 810 00:55:55,600 --> 00:55:59,239 Speaker 1: Paris Wald is my producer. Michael Batnick is my head 811 00:55:59,239 --> 00:56:04,920 Speaker 1: of research. Attika Valbron is our project manager. I'm Barrier. Adults, 812 00:56:05,200 --> 00:56:08,720 Speaker 1: you've been listening to The Master's in Business on Bloomberg Radio.