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Speaker 2: We start strong this morning with Monica the Sense of
Speaker 2: joins us. Thrilled to have her and hear from JP Morgan.
Speaker 2: I gotta go over a year to date down, I'm
Speaker 2: six s and B five hundred ten, NaSTA Composite up
Speaker 2: twelve percent, and as you say, surprise, it's a great
Speaker 2: year for equities.
Speaker 3: It is a message out there.
Speaker 4: I mean, people are still skeptical and nervous, are just funny.
Speaker 4: It's been an amazing year by any measure from an
Speaker 4: equity standpoint. That's a yet feel great. So you could
Speaker 4: argue you just go home and enjoy the rest of
Speaker 4: the year and call it a day. But I think
Speaker 4: the challenge for many people I work with they're still
Speaker 4: sitting in a lot of cash. So it argue not
Speaker 4: everyone has participated in that equity rally.
Speaker 2: Well, not only is everyone participated, but there's a rent
Speaker 2: here between the retail investors I guess participating and institutions
Speaker 2: about smarter themselves.
Speaker 3: Is that how you see it?
Speaker 4: Yeah, I think to a degree, the retail investors tend
Speaker 4: to overanalyze, right, because there's a fair amount of recency
Speaker 4: bias that creeps in there and you can't underestimate. Again
Speaker 4: twenty twenty two, it was a few years ago, but
Speaker 4: it's still very recent people's minds. That the fact that
Speaker 4: when volatility happened, nothing worked equities or down. Bonds were down.
Speaker 4: And that's the big challenge I've been having to get
Speaker 4: people to move out of cash and look at fixed
Speaker 4: income as a real significant allocation their portfolio.
Speaker 2: Again, Paul, the Madrid stock exchange in US dollars, I
Speaker 2: think it's up thirty two percent a year to day.
Speaker 5: I guess we miss that again.
Speaker 6: My word, Monica, when you talk to some of your largest,
Speaker 6: you know, clients, your high networth your high networth clients, are.
Speaker 5: They fully invested?
Speaker 6: Do you feel or do you feel like they're still.
Speaker 4: Just kind of still cash balances? They are a bit
Speaker 4: too high. If you go back over the last ten years,
Speaker 4: I still see cash balances like thirty forty percent higher
Speaker 4: and would have seen in the past from their old balances, right,
Speaker 4: so some you know, I see like fifteen twenty twenty
Speaker 4: five percent cash balances, which is too high for people
Speaker 4: with generational wealth, which you would argue they should have.
Speaker 1: Almost no cash.
Speaker 4: They don't need it, right, they don't need the cash.
Speaker 6: So in fixed income you can actually get real returns
Speaker 6: here today, even like municipal bonds.
Speaker 5: I mean, I don't know where you're you're.
Speaker 4: A US taxpayer, means are a no brainer. If you write,
Speaker 4: like me, the privilege of living in New York City,
Speaker 4: it's especially no brainer. You're talking high single digit tacticle
Speaker 4: than yields with I would argue you much less risk
Speaker 4: than you're gonna get in equities, So probably do better
Speaker 4: than I think you will in US equities over the
Speaker 4: next twelve months with less risk.
Speaker 6: That seems about alternatives, I mean, you know, private equity,
Speaker 6: hedge funds, private credit, real estate.
Speaker 5: I mean, how do you guys talk to your clients
Speaker 5: about alternatives.
Speaker 4: It's a big allocation for large families because again they
Speaker 4: don't need the liquidity, so you tend to see allocations
Speaker 4: and alternatives they could be as high as fifty percent
Speaker 4: of them. Markelia, Yeah, it's not, it's not where we start,
Speaker 4: but that is what I see for some of the
Speaker 4: larger families.
Speaker 2: Expert have the blue button Detroit Lions blue button. You
Speaker 2: have a wonderful resume for this question. Forget about family
Speaker 2: networth JP Morgan Mega hitters. You know eight zero's off
Speaker 2: to the left of the decimal point. Should people have
Speaker 2: alternative investments in their four oh one?
Speaker 6: Kay?
Speaker 4: If for long term money? Yes, because you know data
Speaker 4: tells me you're going to compound at a rate higher
Speaker 4: than you would in public markets. Now that's that there
Speaker 4: is a different risk protofile there, and you always want
Speaker 4: people to be comfortable with that risk. And so it
Speaker 4: depends what age you are, right, if you're in your
Speaker 4: thirties or forties, yeah, that wouldn't scare me. If you're
Speaker 4: in your fifty sixties seventies, are tapping to that money sooner?
Speaker 4: That's a different question.
Speaker 3: Okay, So let's you mentioned cash earlier.
Speaker 2: What's the to do list for Monica Descenzo going into
Speaker 2: labor day?
Speaker 3: People are like, I need to do action. What's the
Speaker 3: action mandate?
Speaker 4: If you believe what the market is telling you, which
Speaker 4: is the feed is in a cut in September. You
Speaker 4: need to own more fixed income because your cash is
Speaker 4: going to earn you less. And it seems so obvious,
Speaker 4: but people don't believe it because I think they've been
Speaker 4: hearing people like me say cuts are coming, cuts are coming,
Speaker 4: and they haven't been coming as fast as people thought.
Speaker 3: Do you want to weigh in on NATO?
Speaker 4: You know, it's it's a thing I talk about with
Speaker 4: a lot of clients, but then have to remind them,
Speaker 4: do not let your geopolitical concerns on the tail wag
Speaker 4: the dog because generally speaking, over any intermediate term, it
Speaker 4: doesn't matter for me.
Speaker 2: It's just it's a nuts summer. Where were two hundred
Speaker 2: and forty days in the in the term? Monica, thank you,
Speaker 2: soone's too short a visit.
Speaker 3: Let's do this sooner. Monica Descenzo is with JP Moore.
Speaker 3: Stay with us.
Speaker 2: More from Bloomberg's Surveillance coming up after this.
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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on Apple,
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Speaker 2: Jim Karen Torstenslack publishes moments ago in Apollo Global Management
Speaker 2: on what I walked in the building and looked at today, which.
Speaker 3: Is a yield curve.
Speaker 2: The vanilla curve is comparing the two year yield with
Speaker 2: a ten year I went out and looked at the
Speaker 2: two year as compared to the thirty year yield, and
Speaker 2: they answer, I think a lot of people Jim Karen
Speaker 2: don't know this. Going back thirty years, the steepness, the
Speaker 2: difference in yield of the two's thirty yield curve is
Speaker 2: not even back to normal. We were so negative. We're
Speaker 2: still trying to get back to normal.
Speaker 3: Is that right?
Speaker 7: That is absolutely correct. If I look at there are
Speaker 7: various curves that people look at. Some people look at
Speaker 7: the three month T bill rate versus the ten year yield,
Speaker 7: and some people look at FED funds versus tenure. If
Speaker 7: you look at the yield curves, right now, we are
Speaker 7: still below historical averages, so the curve has a lot
Speaker 7: more it could potentially steepen, and that has a lot
Speaker 7: of implications, right because in one sense, we're talking about
Speaker 7: FED rate cuts, and yes, that means that front end
Speaker 7: rates can come down, but it doesn't necessarily mean that
Speaker 7: back end rates actually have to come down, and that
Speaker 7: might actually be not exactly an intended consequence if you're
Speaker 7: trying to lower mortgages or longer term borrowing rates.
Speaker 2: I mean, within all, this is the basic idea, Paul
Speaker 2: am I right, A steeper yield curve is evil.
Speaker 3: I mean FORBOSEI one oh one, I don't know, Jimkaren.
Speaker 2: Is a steeper yield curve bad for our listeners and viewers?
Speaker 8: No, not necessarily right.
Speaker 7: So it depends on why the curve is steepening and
Speaker 7: what the conditions are that are surrounding it. So in
Speaker 7: some cases a steep yield curve is actually really positive
Speaker 7: for the financial sector and for banks. Why because bends
Speaker 7: Banks borrow at the short term at a low interest rate,
Speaker 7: and they lend longer terms. So therefore the spreads get wider,
Speaker 7: banks can earn more money, and what that means is
Speaker 7: that banks are more willing to lend into the economy.
Speaker 7: So that could actually be a positive thing. So usually
Speaker 7: a steeper yale curve could be a positive. The other
Speaker 7: thing that also it creates is some form of easier leverage,
Speaker 7: meaning if you can borrow at those shorter term rates
Speaker 7: at those lower rates, and you can invest longer term,
Speaker 7: then you could actually you can actually generate more potential revenues.
Speaker 7: But usually the yeal curve steepens when the FED starts
Speaker 7: to cut interest rates aggressively, and that's usually in response
Speaker 7: to something bad happening in the economy. So that's the
Speaker 7: coincident component of the indicator that you may be referring to.
Speaker 8: Tom.
Speaker 6: Hey, Jim, Tomorrow, Tom's gonna get on the Gulf stream
Speaker 6: and head out to Jackson Hole.
Speaker 5: What are you.
Speaker 6: Looking for from Jackson Hole? Fed Cherirman J pallin Friday.
Speaker 8: So I really think that.
Speaker 7: He's not going to alert us to a potential rate cut,
Speaker 7: but I think he's going to open the door. I
Speaker 7: think what he's going to do his mission is ultimately
Speaker 7: just to basically say that the risks are more balanced
Speaker 7: and potentially tilted to the downside, especially as it pertains
Speaker 7: to the employment situation that gives him the opportunity to
Speaker 7: cut interest rates. Now, we have a payroll number before
Speaker 7: the next FED meeting in mid September, and we also
Speaker 7: have inflation data coming out. The payroll numbers coming out
Speaker 7: over the next several months, are not going to be good.
Speaker 7: I think it's on September ninth, we have a quarterly
Speaker 7: sensus of employment and wages. This is that downward revision
Speaker 7: that we're supposed to get in jobs data, So we
Speaker 7: may actually start to realize that our monthly job's rate
Speaker 7: of growth over the past six months or so has
Speaker 7: actually been a lot worse than what's actually been reported
Speaker 7: by the BLS. So I think the labor data is
Speaker 7: sending a very strong signal that the jobs market is
Speaker 7: not overly strong right now. And I think we know that,
Speaker 7: and I think that opens the door for the FED
Speaker 7: to interest rates, and I think that POW will probably
Speaker 7: allude to something along those lines with respect to the
Speaker 7: labor market.
Speaker 6: Jim, you're the CIO of Cross Asset Solutions. I have
Speaker 6: no idea what that means, but I guess I'm guessing
Speaker 6: it means you and your team can look at a
Speaker 6: lot of different places for value.
Speaker 5: Where do you see value these days?
Speaker 7: Yeah, So effectively, what we're seeing right now is actually
Speaker 7: equities look a bit more attractive than fixed income does
Speaker 7: now let me let me explain that. So clearly, fixed
Speaker 7: income has a higher yield and has a higher coupon,
Speaker 7: and it's good.
Speaker 3: It's very good, stable place to put.
Speaker 7: Your money, and it's a good component a portfolio for diversification. However,
Speaker 7: we think that within the equity markets, if you look
Speaker 7: at the broader parts of the market, so not the
Speaker 7: top flying mag seven, but the other four ninety three,
Speaker 7: what we're starting to see right now is a broadening
Speaker 7: out of earnings revisions to the upside. In fact, second
Speaker 7: quarter earnings which just came out, we're actually very very
Speaker 7: strong from a historical standpoint. We're very strong that many
Speaker 7: of these companies in the second quarter actually beat expectations
Speaker 7: quite significantly, and that is actually pretending to something relatively
Speaker 7: strong going into the future. So when we think about
Speaker 7: the markets and we think about the next six to
Speaker 7: eight nine months ahead, I don't like to think very
Speaker 7: short term, but if we think over that period of time,
Speaker 7: what we have to recognize is that we have some
Speaker 7: tower fallout that we're going through right now. Inflation's likely
Speaker 7: to be higher over the next couple of months. But
Speaker 7: once we get beyond that, what we're left with is
Speaker 7: a lot of business investment, a lot of cap x,
Speaker 7: a lot of companies starting to invest in their own future,
Speaker 7: and I think what that's going to do is increase
Speaker 7: private sector jobs growth, and I think that's a positive.
Speaker 2: Are you managing for the coupon right now or can
Speaker 2: you actually make total return forward?
Speaker 8: That's a great question. Tom.
Speaker 7: What I've been saying in fixed income is I'm managing
Speaker 7: for the coupon right now.
Speaker 3: The reason I say that, do you realize that only.
Speaker 2: Twelve percent of our audience Jim Karen has ever done
Speaker 2: that because there.
Speaker 3: Wasn't a coupon.
Speaker 7: Yes, well that is true, but well effectively, I think
Speaker 7: that the duration movement. So what Tom is referring to
Speaker 7: is if you get this drop in interest rates, you
Speaker 7: get this increase in price, this total return just in
Speaker 7: terms of price. I think that interest rates are have
Speaker 7: already fallen reasonably enough at this point. They may fall
Speaker 7: a little bit more, but I don't think that's going
Speaker 7: to be the majority of the game. I think the
Speaker 7: majority of the game that you can look for in
Speaker 7: fixed income is the yield or it's the actual COUPI
Speaker 7: So for fixed income, it's really a question of that stability,
Speaker 7: and you can add that to your portfolio for diversification,
Speaker 7: which is which is what we're doing well.
Speaker 2: Sweeney's been lecturing me on a daily basis. Jim Karen,
Speaker 2: thank you so much. Margan Stanley, stay with us. More
Speaker 2: from Bloomberg Surveillance coming up after this.
Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on
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Speaker 1: or watch US Live on YouTube.
Speaker 2: We speak with Douglas Cast a Pinata on Wall Street.
Speaker 2: People love to go after him, but the fact is
Speaker 2: it's an esteemed career starting out a kidder peavity, A.
Speaker 5: Zillion people started, a lot of people done.
Speaker 2: It was great for him. Doug Cast joins US now
Speaker 2: with Seaberg's partners. He is been cautious on the market
Speaker 2: and run, Doug. I just looked at a toothpaste company.
Speaker 2: We'll keep the name out that. Since the Poldic has
Speaker 2: made four point five percent return, there's basically two markets.
Speaker 2: Have you been wrong because you missed Meg seven or
Speaker 2: have you been wrong for another specific reason.
Speaker 8: That's a good question.
Speaker 9: I just want to warn you that I prep for
Speaker 9: this interview with one hour of Peppa Pig and Baby.
Speaker 8: Shark with my granddaughter Carlin.
Speaker 3: Good look.
Speaker 8: I'm painfully honest.
Speaker 9: I don't go on Bloomberg or any of the other
Speaker 9: shows to improve my brand or sell a service. I
Speaker 9: try typically to explain my view in the market's individual
Speaker 9: stocks without an agenda to promote that view. My view
Speaker 9: is currently is often a contraryan one it is today.
Speaker 9: So I'm going to briefly explain how dumb I've been
Speaker 9: in the market, but how I addressed and managed through
Speaker 9: a wrong sided market view, effectively managing risk and even profiting.
Speaker 9: I think that it's instructive for your viewers. It'll benefit
Speaker 9: from my transparency and technique because I honestly to be blunt.
Speaker 9: Few come on market surveillance and say how wrong they've been.
Speaker 9: The opposite is the case. People usually talk about their successes,
Speaker 9: the winners in the forum. They want to appear smart
Speaker 9: and conveniently forget their views and performance during drawdowns like
Speaker 9: in twenty twenty two. It reminds me of the old
Speaker 9: Harold arl And and Johnny Mrcy's song. Accentuate the positives,
Speaker 9: the emphasize the negatives. So since we first we last met,
Speaker 9: and with the exception of the fall in February and March,
Speaker 9: and really since the S and P was fifty eight hundred,
Speaker 9: I've basically.
Speaker 8: Been burish and wrong.
Speaker 9: But astonishingly, Lee, my hedge Front Sea Breeze has been
Speaker 9: net short in almost every month except for the March
Speaker 9: April sell off since early twenty twenty four. Despite that,
Speaker 9: our monthly returns have been positive and eighteen of.
Speaker 3: The last done that. But Doug, how is you?
Speaker 8: I've done it? That's a great question.
Speaker 9: We employee good risk management by taking a number of
Speaker 9: small losses rather than get involved in shurre evaluation AI
Speaker 9: AI mag seven short of the mundane companies business models
Speaker 9: we're roading.
Speaker 3: Paul wants to get in here.
Speaker 2: I want to ask you one question, Paul Sweeney's got
Speaker 2: to be you can ask me any question in a
Speaker 2: short time. I on the Bloomberg have Walmart. It's a
Speaker 2: pe of forty point one six. Can you explain to
Speaker 2: me by somebody dropping pennies down to the bottom line
Speaker 2: deserves a forty multiple. You're the only one living who
Speaker 2: remembers the nifty to fifty?
Speaker 3: How do we get here with Walmart?
Speaker 8: It is astonishing to me.
Speaker 9: We are been short our largest short exposure in the
Speaker 9: last year and a half have been in consumer stocks.
Speaker 9: We actually recently showed at Walmart. And I think it's
Speaker 9: condition of the market. It's what's It's what Warren Buffett
Speaker 9: wrote in a in a report to his Berkshire Hathaway
Speaker 9: shareholders in nineteen ninety nine. God's plan basically, people wait up,
Speaker 9: wake up in the morning, expect stock prices to go
Speaker 9: ever higher. So you've seen that this substantial expansion reevaluation
Speaker 9: in price earnings ratios, and we think that equity is
Speaker 9: a terribly overpriced against interest rates. The equity risk premium
Speaker 9: is a two decade low that's typically consistent with the
Speaker 9: slide in stocks. The S and P dividend yield is
Speaker 9: at a near record low one point twenty five percent,
Speaker 9: and spread between that and the ten year treasury has
Speaker 9: rarely been so wide. As you know, I'm very close
Speaker 9: to Coops. Iway was Lee's director of research for a
Speaker 9: while to make advisors Lee fields bonds or over prices.
Speaker 9: Stocks may be overpriced against overpriced sixt income And.
Speaker 3: That's just real.
Speaker 6: Quickly, given that stance, given that conservative outlook on maybe evaluation,
Speaker 6: how are you positioned here today?
Speaker 9: I've been net short between ten and twenty percent, as
Speaker 9: I said, for most of the last nineteen months, and
Speaker 9: we are currently considering expanding our next short exposure. Outside
Speaker 9: of that range, I think current valuations are twenty four times.
Speaker 9: That's in the ninety eighth percentile. It's a poor launching
Speaker 9: pad for future investment returns. Bob Barrel, in one of
Speaker 9: his ten Lessons of Investing, said there are no new
Speaker 9: eras excesses are never permanent. The SMP index trailing multiple
Speaker 9: is twenty six. You take out the twenty three p
Speaker 9: in twenty twenty one, and it's similar to the valuation
Speaker 9: of August twenty two thousand, right before two year by
Speaker 9: bear Mark.
Speaker 3: I'm going to pick up on this with Paul jumping here.
Speaker 6: So, Doug, how about in the fixed income space? Here
Speaker 6: are you can you go there and just clip coupons?
Speaker 6: Here is our opportunity there.
Speaker 8: I think that.
Speaker 9: If you're a high net worth individual I listened to
Speaker 9: your prior segment about just earning the coupon, you can
Speaker 9: get a seven and a half percent pre tax equivalent
Speaker 9: if you're a high net worth individual in municipals. So
Speaker 9: I think that four point three percent is thereabouts where
Speaker 9: the ten year yield is it's a good place to
Speaker 9: hang out. And if you go a little riskier in credit,
Speaker 9: you get equity like returns for limited risk and no volatility.
Speaker 3: Doug, I got time for one more question. I got
Speaker 3: eight ways to go here.
Speaker 9: Don't ask me about the Yankees. I'm not going to
Speaker 9: about the Yankees. I hang up.
Speaker 2: Well you should, and you know it's a glorious and
Speaker 2: beautiful thing, Doud Cass, I want you to speak to
Speaker 2: the people listening and viewing who aren't sophisticates. They didn't
Speaker 2: have an office next to Julian Robertson. They haven't done
Speaker 2: what you've done. They haven't been as visible an Opinionata
Speaker 2: like you. What do you say to our audience about
Speaker 2: this addiction, this belief in MEG seven.
Speaker 8: Well, I'm I'm you know.
Speaker 9: No one I know is concerned that there'll be a
Speaker 9: large drawer down inequities. And I think there's any number
Speaker 9: of conditions that could bring down the market meaningfully. And
Speaker 9: the most important one as it relates to MAG seven,
Speaker 9: is a hiccup and AI. For example, a slow down
Speaker 9: in AI cap spending could occur. We could see growing
Speaker 9: evidence of double and triple chip ordering. We could see
Speaker 9: the failure of AI to improve from its current state.
Speaker 9: We can see the failure of use sets to develop
Speaker 9: for AI. We could see an accounting scandal in AI
Speaker 9: because companies Hyperscalers are depreciating their massive capital expenditures over
Speaker 9: ten years well in excess of useful life. I've written
Speaker 9: over one hundred and five columns on the street about that,
Speaker 9: called wartales from Navidia. I think Navidia and the Hyperscalers,
Speaker 9: and on long two of them, Meta and Amazon are
Speaker 9: over earning.
Speaker 3: Right, Derek, quickly, You're an Apple? You long your short? Apple?
Speaker 8: No position?
Speaker 9: I was short into the move under two hundred and
Speaker 9: I have no position. I think it's overvalued, but I
Speaker 9: think they are far better shorts available.
Speaker 3: Can the Red Sox make the Wild Card?
Speaker 9: Red Sox, I believe are tied with the Yankees five
Speaker 9: games out. The Red Sox are four and six in
Speaker 9: the last ten. The Yankees is seven to three. The
Speaker 9: leading team, Toronto is five and five. The momentum is
Speaker 9: with the Yankees. There go the Yankees.
Speaker 2: Thank you so much. Get back to Peppa Pig with
Speaker 2: your granddaughter. Mister kass Is with Seabreez Partners. He's been
Speaker 2: very open about missing a great bullmark.
Speaker 3: Greatly appreciate it. Stay with us.
Speaker 2: More from Bloomberg Surveillance coming up after this.
Speaker 1: This is the Bloomberg serve Balen's podcast. Listen live each
Speaker 1: weekday starting at seven am Eastern on Apple, Cocklay and
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Speaker 1: the Bloomberg terminal.
Speaker 2: Joining us out for clarity, Kristin Biddle, It's been wait long,
Speaker 2: had a welts at work at City Global Markets, and
Speaker 2: I guess just this has come up this week. Kristin,
Speaker 2: do you believe in rebalancing?
Speaker 1: Like?
Speaker 2: Is this like a formula?
Speaker 10: I absolutely believe in rebalancing.
Speaker 11: I think look like at a very high level, what's
Speaker 11: the number one question we're getting from our clients is
Speaker 11: really questioning around like the sixty forty portfolio, and I
Speaker 11: think it's gotten a little bit of a bad rap
Speaker 11: because when you look at it over time. Just look
Speaker 11: at it over the past decade, it's been returning around
Speaker 11: nine percent perannum. Even year to date, you have nine
Speaker 11: percent paranum or nine percent total year to date.
Speaker 10: Through the sixty forty portfolio.
Speaker 11: So I think where the question comes into place though,
Speaker 11: is really looking at what does cash provide in this market?
Speaker 11: It should you have an allocation to cash to be
Speaker 11: a little bit more nimble. And then also the question
Speaker 11: that everyone's been discussing around the fact that your equity
Speaker 11: exposure is actually highly concentrated. Is that a good thing
Speaker 11: or something that you should diversify away for?
Speaker 2: We want diversification. I mean my basic thing as I
Speaker 2: see a lot of portfolio is over diversified, so that
Speaker 2: if you have a winner, it doesn't matter because you're overdiversified.
Speaker 11: So the diversification across let's just say like fixed income,
Speaker 11: alternatives and equities certainly a case for it. I think
Speaker 11: there's a case for having some cash. Now within our portfolios,
Speaker 11: we have about a one percent cash allocation killed in
Speaker 11: our investors. Well, you know, you have a little bit
Speaker 11: just to do some rebalancing on the edges. But if
Speaker 11: you look at the average client's portfolio, some of those
Speaker 11: are upwards of twenty to thirty percent in cash, which
Speaker 11: then you have to ask the question is that really
Speaker 11: an investment or are you kind of stuck in in inertia.
Speaker 6: I love some of this data from the cap Gemini report,
Speaker 6: which I've seen in so many places. High net worth
Speaker 6: individual wealth showed strong growth in twenty twenty four, reaching
Speaker 6: ninety and a half trillion dollars globally.
Speaker 5: And this is the number I keep telling.
Speaker 6: My number three offspring that works at a big investment
Speaker 6: from sixty three percent of global wealth is expected to
Speaker 6: change hands by twenty thirty five.
Speaker 10: That is unbelievable, unbelievable.
Speaker 5: How is that going to happen?
Speaker 6: By the way, is that just I mean, you've got
Speaker 6: to plan for it now, don't you know?
Speaker 11: You have to plan for it now. And this is
Speaker 11: something so the cap Gemini team, they've been producing this
Speaker 11: report for the past twenty nine years, and this is
Speaker 11: really kind of one of the leading publications when it
Speaker 11: comes to wealth management and the broader kind of spectrum
Speaker 11: of ultra high networth and high net worth investors. So
Speaker 11: I was part of the exact steerco this year, and
Speaker 11: the focus of this is really this great wealth transfer
Speaker 11: and so that sixty three percent is expected to change
Speaker 11: hands by twenty thirty five. I think the more important
Speaker 11: stat there is not just the movement of wealth, but
Speaker 11: the fact that whenever you have whether it's like interspousal transfer,
Speaker 11: whether it's in a state situation, intergenerational transfer.
Speaker 10: There's two key insights.
Speaker 11: One, within one to two years, close to ninety percent
Speaker 11: of people change their advisor. So simply because you were
Speaker 11: advising a family does not mean if you have one
Speaker 11: of these big life events that you're going to continue
Speaker 11: being the advisor. I think the other thing is when
Speaker 11: people talk about next gen, it really is people aged
Speaker 11: forty to sixty. You hear something like next gen and
Speaker 11: you think it's someone in their early twenties or in
Speaker 11: their teens. That transfer is going to happen first and
Speaker 11: foremost to Gen X.
Speaker 2: Here's what I want to know for the listeners and
Speaker 2: viewers that are doing all this estate planning, etc. And
Speaker 2: the kids have no visceral interest in the markets. They
Speaker 2: wouldn't know yield to maturity if it hit them over
Speaker 2: the head. What do you do if you have all
Speaker 2: your kids or some of your kids who they just
Speaker 2: don't care about the material.
Speaker 11: So this is this is a really interesting questioned Tom,
Speaker 11: because I think it's fascinating and almost kind of ludicrous
Speaker 11: that you can graduate from the best universities in this
Speaker 11: country without a foundational knowledge of financial planning, estate planning,
Speaker 11: and just understanding investments one oh one. So since we're
Speaker 11: dealing with that as a base case and some people
Speaker 11: are not interested, the educational component and having a trusted
Speaker 11: advisor becomes a mission critical and so everyone should have
Speaker 11: a foundational knowledge of financial planning.
Speaker 10: They don't, but they need to.
Speaker 2: Okay, they need to. But come on, this is like
Speaker 2: a huge deal. We have a generation behind us, whether
Speaker 2: we have you know, the megabucks John Tucker has or
Speaker 2: you're like me, I can never retire it.
Speaker 3: I mean, I mean, Kristen, the kids don't care.
Speaker 10: Well, we see them caring, but just in different ways.
Speaker 2: Right.
Speaker 11: So a lot of the barriers to entry from a
Speaker 11: technology perspective, hear me out on this time. The barriers
Speaker 11: to entry from a technology perspective, even accessing financial markets.
Speaker 11: You've never seen so many people in their twenties and
Speaker 11: thirties actively trading, and so the democratization in terms of
Speaker 11: trading is free access to markets. That was a very
Speaker 11: different story a decade ago or two decades ago. So
Speaker 11: a lot of those barriers have been brought down, and
Speaker 11: I think it's a question of meeting people where they're at.
Speaker 11: And also with their interests. So where do we see
Speaker 11: the primary interests of this next generation. It's definitely in
Speaker 11: terms of digital engagement and the platform in terms of
Speaker 11: accessing advice twenty four to seven, But it's also interest
Speaker 11: in other asset classes. And you see a higher tendency
Speaker 11: towards alternatives as opposed to public markets. And I'm not
Speaker 11: just talking about crypto and what you would think. It's
Speaker 11: actually alternatives because ninety nine percent of the companies in
Speaker 11: the US market are private companies. And actually, if you say, like, okay,
Speaker 11: fair enough, but a lot of them are small. Even
Speaker 11: if you use the threshold of over one hundred million
Speaker 11: in revenue, you're still talking ninety percent.
Speaker 10: So a lot of those themes.
Speaker 11: You can meet someone where they're at in terms of
Speaker 11: what does interest them without it being financial planning one
Speaker 11: oh one or kind of are the benefits of asset
Speaker 11: allocation and diversification.
Speaker 6: Well, I've told my kids the last check I write,
Speaker 6: I want it to bounce, So don't plan on anything else.
Speaker 6: So what are some of the questions you get from
Speaker 6: your clients? How do I set up the states, how
Speaker 6: do I set up trust? What do I do with
Speaker 6: my investments today? What kind of questions do you get
Speaker 6: from your clients these days?
Speaker 11: So I would say the first question oftentimes when we
Speaker 11: meet with a new client, right, So if it's an
Speaker 11: existing client, you generally are going to already have a
Speaker 11: financial plan in place, You're going to have an estate
Speaker 11: plan in place, and you're going to have an asset
Speaker 11: allocation and understanding your risk profile. So oftentimes when we
Speaker 11: have that initial interaction. And by the way, we cover
Speaker 11: people in the legal industry, we cover professional services, we
Speaker 11: cover asset managers, pre ipo post ipo companies, so you're
Speaker 11: talking about a very diverse set of individuals, but they're
Speaker 11: very ambitious in terms of their careers and their goals
Speaker 11: for themselves personally as well as professionally. One of those
Speaker 11: common things that we find is people have all their
Speaker 11: money in a savings account, right, so that they have
Speaker 11: not actually done a financial plan or that they just
Speaker 11: simply they've been saving and they start with kind of
Speaker 11: a traditional path of I'm going to buy my first house,
Speaker 11: I have my mortgage, then I come into liquidity and
Speaker 11: I don't even realize and many people think it's too late.
Speaker 11: So the question around, like, these are people who are
Speaker 11: fine from a retirement standpoint, but then really getting an
Speaker 11: estate plan in place, understanding wealth transfer and then understanding
Speaker 11: acid allocation.
Speaker 2: Yeah, all I can say, Folks, is just on probate alone,
Speaker 2: get an estate plan in order. Kristin Biddley, thank us
Speaker 2: so much for Citygroup this morning. There.
Speaker 3: We don't do enough for that.
Speaker 10: Can you come back anytime. I'll be here.
Speaker 3: Kristin, thank you so much early, really well, I appreciate that.
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