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Speaker 2: Earlier, you know, we did get some deal news. Charles
Speaker 2: Schwab agreed to buy Forge Global Holdings. It's a marketplace
Speaker 2: for buying and selling shares of private companies.
Speaker 3: The deal about six hundred and sixty million or forty
Speaker 3: five dollars to share.
Speaker 2: That is a seventy two percent premium to the Wednesday close.
Speaker 2: Rick Worster, as you know, is president and CEO of
Speaker 2: Charles Schwab, and he stopped by earlier today for a
Speaker 2: second interview with us here at Impact twenty twenty five.
Speaker 2: My first question to Rick, why this deal, why now,
Speaker 2: and why this company?
Speaker 4: Well, we're thrilled to be able to democratize access to
Speaker 4: private investing. This is a market that forever has been
Speaker 4: for the high net worth and the ultra high net
Speaker 4: worth and with the acquisition of Forge, we'll be able
Speaker 4: to bring access to private companies to every investor, and
Speaker 4: so we're thrilled about that. Second, it continues our history
Speaker 4: of innovation, and our innovation has always centered around what
Speaker 4: can we do to provide more access, more opportunity to
Speaker 4: our clients so that they can grow and improve their
Speaker 4: net worth. So we're just thrilled about this, and Forge
Speaker 4: was the firm we really wanted to work with.
Speaker 2: It's been a lot of speculation about this company, as
Speaker 2: you know, yes.
Speaker 4: Well you know there's stock who's down ninety percent off
Speaker 4: its highs and at the same time they're the leader
Speaker 4: in the private company of marketplace, and so for us
Speaker 4: to be able to acquire the leading company that has
Speaker 4: the deepest relationships with the private companies and who have
Speaker 4: the stock opportunity, it's just phenomenal for us.
Speaker 2: Rick was it a bit competitive and I'm just thinking
Speaker 2: about the premium that you guys paid, what was it
Speaker 2: seventy two percent above the closing price yesterday? I'm thinking
Speaker 2: of was that Morgan Stanley just did a deal to
Speaker 2: buy equity Zen, which is another similar platform. So it
Speaker 2: does feel like big firms are jockeying to provide this
Speaker 2: access to their investors. So was there pressure to do
Speaker 2: this deal and get it done now?
Speaker 4: Well, as a public company, Forge has to run a process,
Speaker 4: and so absolutely this was a competitive process.
Speaker 3: They've been pretty I think transparent about this.
Speaker 5: Yes.
Speaker 4: From our standpoint though, we think we're paying a very
Speaker 4: reasonable price where it's five times revenue less than what
Speaker 4: we trade on a revenue basis, and the opportunity for
Speaker 4: us in private markets is so much bigger than what
Speaker 4: we're paying for the company. We're paying six hundred and
Speaker 4: sixty million dollars for the company. This market could be huge,
Speaker 4: and when we bring our forty six million clients to
Speaker 4: this marketplace, I think the opportunity to grow our economics
Speaker 4: is significant. But most importantly and why we did this
Speaker 4: deal was not about making money.
Speaker 5: Relative to the purchase price.
Speaker 4: It was about democratizing access to private investing and to
Speaker 4: helping our clients grow their wealth.
Speaker 2: Will this only be for accredited investors or what's the
Speaker 2: plan in terms of new product placement or product offerings
Speaker 2: to offer it up to the retail investor.
Speaker 4: What I'm so excited about is we're going to have
Speaker 4: an opportunity for every type of investor to invest in
Speaker 4: alternatives with this acquisition. Well, three ways that clients can
Speaker 4: invest today. We already have for both our rias and
Speaker 4: retail clients a menu of alternative managers, the leaders that
Speaker 4: you're aware of, some of the big names in private
Speaker 4: equity and venture capital. That's one way our clients can invest.
Speaker 4: The second way is through this acquisition of Forge, which
Speaker 4: owns an asset management company, we will in the first
Speaker 4: quarter of next year launch an indexed fund that is
Speaker 4: an index.
Speaker 5: Of the sixty biggest private.
Speaker 4: Companies, and any investor with any wealth, if they have
Speaker 4: interests in that, we'll be able to invest. And then third,
Speaker 4: for accredited investors, we will have a marketplace opportunity for
Speaker 4: those investors to buy individual private companies and invest in
Speaker 4: those companies directly. That does require you being an accredited investor.
Speaker 2: A couple of questions I want to ask you, so,
Speaker 2: how does it kind of improve your ability to win
Speaker 2: more wallet share when it comes specifically to clients. We
Speaker 2: know that retail investors have been clamoring for more access.
Speaker 3: To private markets.
Speaker 6: I think we've gone I.
Speaker 2: Know it's not about money, yeah, or I know it's
Speaker 2: not about in terms of the price you paid, but
Speaker 2: it is about right, Like you want to make sure
Speaker 2: your clients are happy and they're getting all the offerings.
Speaker 3: So I'm just curious, how does it help you win
Speaker 3: more share?
Speaker 4: Over the last ten years, we've become a premier destination
Speaker 4: for high net worth and alternate high networth clients. And
Speaker 4: the reason for that is we have a product offer
Speaker 4: that can't be matched, whether it's access to privates, lending
Speaker 4: capabilities that are straightforward, fast efficient with great rates, wealth
Speaker 4: support on their tax, trust and estate needs, and access
Speaker 4: to live individuals to speak to. They can walk into
Speaker 4: one of our four hundred branches all across the country,
Speaker 4: have a conversation with a real life person about their
Speaker 4: financial needs, have a discussion about financial planning and what's
Speaker 4: going on in their life. And so we really have
Speaker 4: become over the last decade a premier destination for high
Speaker 4: network clients.
Speaker 5: And this acquisition just adds to our capabilities.
Speaker 3: What about from your rias?
Speaker 2: And I think about all the independent advisors who are
Speaker 2: here right this is what this event is all about.
Speaker 3: So how much does this kind of help them in
Speaker 3: their pitch to clients?
Speaker 2: And I'm just curious, is this to some extent in
Speaker 2: response to what you've been hearing from independent advisors.
Speaker 4: It absolutely is and this is a game changer for
Speaker 4: us in the RIA space. Today, we have five trillion
Speaker 4: dollars of RIA assets that we custody, one point two
Speaker 4: percent of them sitting in alternatives. We know there's more
Speaker 4: demand that number probably should be closer to five, six
Speaker 4: or seven percent. And with this acquisition, we've now given
Speaker 4: them three different ways to get invested, and I expect
Speaker 4: over the coming years we'll see that one percent grow
Speaker 4: more towards the five percent. So the rias are thrilled.
Speaker 4: They've wanted us to do more in alternatives, and I
Speaker 4: think with this acquisition.
Speaker 5: We've nailed it.
Speaker 3: And you said the new client offering, it's next year.
Speaker 3: We'll see early part of next year.
Speaker 4: Well, Forge is up and going today, so hopefully some
Speaker 4: of our clients will go find it starting tomorrow and
Speaker 4: start getting invested if that's what they want to do.
Speaker 3: But what I have non accredited I think about like that.
Speaker 4: We're going to launch the fund in the first quarter
Speaker 4: of next year. That's the current plan, and then we'll
Speaker 4: continue to roll out their services in the coming months.
Speaker 2: You know, the other side of this rick is, you know,
Speaker 2: concerns about hurdles in terms of transparency and investors really
Speaker 2: understanding what they're buying when they tap into anything in
Speaker 2: the private markets. So are there any kind of hurdles
Speaker 2: that you anticipate, regulatory or otherwise.
Speaker 4: That's why we really wanted to work with Forge, Okay,
Speaker 4: because Forge is the market leader in providing robust research
Speaker 4: to clients, and so clients will be able to access
Speaker 4: that level of research through Forge. In addition to that,
Speaker 4: we've also stood up a team of alternative investment experts
Speaker 4: at our firm that any client can call and talk
Speaker 4: to about, you know, a question they have about a
Speaker 4: type of alternative or a particular investment that they want
Speaker 4: to make, And so we really are trying to do
Speaker 4: everything we can to support clients. This is a great
Speaker 4: opportunity for clients to be diversified to grow their wealth
Speaker 4: in a new aset class. But at the same time,
Speaker 4: we want to make sure we do everything we can
Speaker 4: that they for them to be able to do this
Speaker 4: in a thoughtful, well researched way.
Speaker 2: Is there a company you're most excited about that's on
Speaker 2: the Forge platform or that might be on the Forge platform?
Speaker 3: At some point.
Speaker 2: I mean, there's opening, there's anthropic. Is there any company
Speaker 2: that you're really excited about?
Speaker 5: Is not a.
Speaker 4: Particular one I'm interested in, but I am thrilled that
Speaker 4: there are a lot of people on our platform and
Speaker 4: a lot of people that listen to your show that
Speaker 4: are active in markets and they want to get into
Speaker 4: cracking because they love crypto or you know, they love
Speaker 4: Elon Musk and want to get into SpaceX.
Speaker 3: So that say, sex is another one.
Speaker 5: Yeah, I think that's.
Speaker 4: What's so interesting is that we find a lot of
Speaker 4: our investors do have these passions and now they're going
Speaker 4: to be able to invest in them through private companies.
Speaker 2: So we know you took over in January, this is
Speaker 2: your first deal. Is there more m and A to
Speaker 2: coom Like, how are you thinking about what else you
Speaker 2: need to bring under the Schwab umbrella.
Speaker 4: Well, with forty six million clients on our platform, we
Speaker 4: have an incredible opportunity to continue to add capabilities to
Speaker 4: serve and meet more of their financial life. The average
Speaker 4: fifty year older than fifty year old client has seven
Speaker 4: financial services relationships in their life, so we want to
Speaker 4: add more and more capabilities so they can handle more
Speaker 4: of their financial life at Schwab. And as we add
Speaker 4: those capabilities, we'll either build them, we can partner, or
Speaker 4: we can buy, and so we'll look at all three
Speaker 4: of those. But we want to round out our capabilities
Speaker 4: and do everything we can to stand behind our clients
Speaker 4: and make a difference in their financial life.
Speaker 3: And just one last question, mostly small, probably tack ons.
Speaker 2: I mean, you guys already have digested a large company,
Speaker 2: so I'm just curious or could it be a pretty
Speaker 2: significant and any deal.
Speaker 4: You know, it's going to depend when. Again, we'll look
Speaker 4: at build by partner based on what capabilities we want
Speaker 4: to add, But I think we're open to just about anything.
Speaker 4: We want to grow our company. We want to do
Speaker 4: the best job we can serve in clients. We want
Speaker 4: to make a difference in their lives. And if there's
Speaker 4: a company or capability out there that we can add
Speaker 4: to our platform that's going to make a difference, we're going.
Speaker 5: To do it.
Speaker 3: That is That is Rick Wurster, He's President's that you
Speaker 3: have to Schwab.
Speaker 7: Stay with us.
Speaker 8: More from Bloomberg Business Week Daily coming up after this.
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Speaker 2: All right, today we're going to go from Schwab corporate
Speaker 2: strategy to really macro strategy today's environment, and he is
Speaker 2: back with us. Delighted that he is Kevin Gordon, head
Speaker 2: of macro Research and Strategy at Schwab Center for Financial Research.
Speaker 3: Good to have you here, guys, Welcome to Impact. Where's up?
Speaker 3: We get such a great feel, so much fun of
Speaker 3: how things are going.
Speaker 2: But I do feel like there's kind of this internal
Speaker 2: turmoil right now in terms of the environment.
Speaker 3: Is it inflation we have to worry about?
Speaker 2: We saw that companies announced the most job cuts for
Speaker 2: any October and more than two decades. This from Challenger,
Speaker 2: Gray and Chris Christmas and the did talk about an
Speaker 2: AI component to it.
Speaker 3: I can't figure out where we are. What do you think?
Speaker 9: You know?
Speaker 10: It's like the flavor changes almost literally every day, because
Speaker 10: this morning, I mean, it was much more labor driven.
Speaker 10: You had the Challenger data you mentioned, but you also
Speaker 10: had data from Revellio Labs, which has become much more
Speaker 10: important to look at in terms of private sector providers
Speaker 10: and what they're looking at for job growth, and what
Speaker 10: they showed for October was a decline of nine thousand
Speaker 10: for payrolls. But you know, for me, the labor market
Speaker 10: stuff is almost this hall of mirrors because all of
Speaker 10: the different indicators tell you completely different things as to
Speaker 10: what's going on in the labor market. If you look
Speaker 10: at claims data, which we're not getting at the national level, right,
Speaker 10: but if you aggregate everything at the state level, it
Speaker 10: still looks relatively healthy.
Speaker 11: It's state relatively low and stable.
Speaker 10: If you look at ADP for October, surprise to the
Speaker 10: upside as we learned, you know, a couple of days ago.
Speaker 10: If you look at something like Revellio though week if
Speaker 10: you look at something.
Speaker 11: Like Challenger also weak.
Speaker 10: The interesting thing with Challenger is, and we always try
Speaker 10: to make this, you know, important distinction and emphasis for
Speaker 10: investors layoff announcements. They're not exactly cuts themselves. So there
Speaker 10: is a little bit of a lag there in terms
Speaker 10: of what you can expect.
Speaker 7: Yeah, oftentimes ninety days, right.
Speaker 10: Plus I think the one thing that is i will
Speaker 10: say maybe a little bit more worrisome with the one
Speaker 10: for October relative to what we saw earlier this year,
Speaker 10: because there was a huge pickup and challenge your job
Speaker 10: cut announcements earlier this year, but most of that was
Speaker 10: at the federal level that was focused on what everything
Speaker 10: was going on regarding to this one was a little
Speaker 10: bit more broad based. As you mentioned with the AI overlay,
Speaker 10: the concentration for the sectors was mostly in tech and warehousing.
Speaker 2: So clearly this cost cutting going on by companies, yeah,
Speaker 2: which is never a good feeling.
Speaker 10: No, And I think what's what's been interesting so far
Speaker 10: it's been relatively methodical where it's gone sector by sector.
Speaker 10: It hasn't been broad based across the economy, which I know.
Speaker 10: I've talked about this with you guys a lot and
Speaker 10: Lazanne you know who I work with closely on this
Speaker 10: are the sort of this concept and thesis of rolling
Speaker 10: recessions in the economy. You're still experiencing that to some
Speaker 10: extent where it's not filtering up to the surface and
Speaker 10: it's not aggregating together to give you a full blown
Speaker 10: traditional recession, but it's still happening at pockets.
Speaker 8: Or is Lizan We all call her liz Ane Saunders too.
Speaker 8: That's the Lizanne you're referring to.
Speaker 2: Well, yeah, and she's their chief global strategyment strategis so yeah,
Speaker 2: the big part.
Speaker 10: And you guys are my first boss, my mentor, and
Speaker 10: she loves you on our program yesterday.
Speaker 7: She's the best Kevin corporate Going from.
Speaker 8: The corporate world and thinking about, Okay, what are companies
Speaker 8: doing with employees? How are they hiring, how are they firing?
Speaker 8: How are they announcing this to consumer spending? Because the
Speaker 8: consumer powers this economy. Yeah, we're getting some troubling anecdotes.
Speaker 7: What do you see?
Speaker 10: You know, what's interesting is that when you look at
Speaker 10: I mean, this is where the labor market's so crucial
Speaker 10: to understand the differences between the stock and the flow.
Speaker 10: So the stock of labor is still relatively healthy. I mean,
Speaker 10: you look at a mostly fully employed America and that's
Speaker 10: where we're at.
Speaker 5: Any of the.
Speaker 10: Layoff activity we've seen, it's just at the margin, relatively minimal.
Speaker 10: So if you see relatively low layoffs despite a very
Speaker 10: low hiring rate, which we're basically at psycho lows, the
Speaker 10: fact that the stock of labor is strong means that
Speaker 10: the aggregate income growth month to month, assuming you stay
Speaker 10: employed is relatively strong. So that's why real spending is
Speaker 10: still positive. But to your point about some of these
Speaker 10: anecdotes and some of these cracks under the surface, they
Speaker 10: are starting to widen a little bit more, especially if
Speaker 10: you look at that bottom half of the what everybody
Speaker 10: calls now the K shaped sort of economy.
Speaker 3: There are economists look at that bottom wrong.
Speaker 10: You could break it down by wealth level, I like
Speaker 10: the FED data and looking at sort of percentile levels
Speaker 10: of well.
Speaker 2: In terms of it like overall economic growth and what
Speaker 2: the FED like, how do you think.
Speaker 11: About this is the tough part because you know.
Speaker 3: There's a social answer and then they're sych.
Speaker 10: Well, the multiplier effect up the wealth and the income
Speaker 10: spectrum is just much stronger.
Speaker 11: It's just the math.
Speaker 10: And when you look at how well asset markets have
Speaker 10: done over the past couple of years, even this year,
Speaker 10: the bounce from the April lows. I mean, if you're
Speaker 10: benefiting from that as an asset owner, we have household
Speaker 10: exposure to equities at an all time high, beyond where
Speaker 10: we were just slightly but still beyond where we were
Speaker 10: at the at the peak in two thousand.
Speaker 11: So the wealth effect and the power of the market.
Speaker 10: In terms of an economic driver, has become quite strong
Speaker 10: and quite potent. So I think when you add that
Speaker 10: together with what is true ditionally an economy that has
Speaker 10: become more or I shouldn't say traditionally, but over time
Speaker 10: has become more powered by that wealthy cohort, then you've
Speaker 10: got a pretty strong effect.
Speaker 8: When you say full employment, do you how do you
Speaker 8: define that? And then how does the FED define that?
Speaker 10: Because relatively low and employment rate to history compared to history,
Speaker 10: there has been a little bit of an uptick. But
Speaker 10: you look at that, and you look at overall payrolls
Speaker 10: and we're still right around, you know, all time time.
Speaker 8: But does it mean the person who's who's has the
Speaker 8: computer science undergraduate degree is working in computer science or
Speaker 8: working at Chipotle?
Speaker 11: Oh yeah, exactly.
Speaker 10: Fully, the question just sort of in nominal terms, looking
Speaker 10: at at face value, a job being a job, whether
Speaker 10: that job is perfectly matched with what the person is doing.
Speaker 5: That's a little bit of how do.
Speaker 8: We measure that well? Because it doesn't that seems like
Speaker 8: a concern right now.
Speaker 10: Well, then I think is going to show up, probably
Speaker 10: start to show up a lot more within the next year.
Speaker 10: In a lot of the labor flows that we're going
Speaker 10: to get because one of the you know, one of
Speaker 10: the longer term concerns I have for the labor market
Speaker 10: is what's happening right now in some of the churn
Speaker 10: with the pretty significant decline in immigration, but also not
Speaker 10: sort of the lack of replacement.
Speaker 11: A lot of a lot of those jobs. We're just
Speaker 11: not seeing that happen.
Speaker 10: And you see that happening in you know, youth unemployment,
Speaker 10: black unemployment. It's really starting to spread in some of
Speaker 10: those pockets. So the areas that were supposed to benefit,
Speaker 10: you know, throughout this year as you had more of
Speaker 10: a domestic strengthening the in the fate of born labor force,
Speaker 10: it's not yet happening. So it's a little bit lagged.
Speaker 10: I hope it's delayed and not completely derailed. But I
Speaker 10: think in the next year, figuring out replacements for a
Speaker 10: lot of those lost jobs that's going to be key.
Speaker 8: And the reason I brought up the Chipotle computer science
Speaker 8: exactly well, always ungry, but that was what's be cited
Speaker 8: in that New York Times article back in August. Yes,
Speaker 8: computer science degrees having trouble finding those computer science jobs.
Speaker 2: It's kind of this interesting environment we are when we
Speaker 2: look at the labor force. Hey, one of the things
Speaker 2: I wanted to ask you your team shared with us
Speaker 2: that you believe Tina is back, and it's not the
Speaker 2: Tina that we think about.
Speaker 3: There is no alternative in terms of like US difequities.
Speaker 2: Yeah, but it's something we started off with about US
Speaker 2: government data.
Speaker 10: It is important no alternative. I mean, the depth and
Speaker 10: the breadth of the government debt you just can't imagine.
Speaker 10: And I think you know, so far, Thank goodness, the
Speaker 10: markets have been sort of, maybe in a negative way,
Speaker 10: whistling sort of passed the graveyard of no government data.
Speaker 10: But you know, they've been able to manage through with
Speaker 10: corporate earnings. I think that's been a nice bridge to
Speaker 10: get us to when the shutdown ends. I think though,
Speaker 10: you know, the longer this goes on, I think what
Speaker 10: we have to keep in mind, and what we've really
Speaker 10: been emphasizing to our clients is that you know, when
Speaker 10: you don't collect this data, yes you can go back
Speaker 10: and retroactively.
Speaker 11: Get it, but it's not going to be clean.
Speaker 10: So the longer this extends and we don't get you know,
Speaker 10: presumably we're not getting a jobs report tomorrow. Even if
Speaker 10: you don't get when the next week, it's weird. So
Speaker 10: you're going basically almost a quarter without this really key data.
Speaker 10: So you're going to have a delayed third quarter GDP report,
Speaker 10: You're going to have missing data in a way for
Speaker 10: the fourth quarter, and then you have benchmark revisions coming
Speaker 10: in February, which kind of throws another wrench into this
Speaker 10: for label.
Speaker 2: So what does it mean for Like I think I
Speaker 2: asked Lezanne this yesterday, Zanne Saunders, that do we get
Speaker 2: a FED misstep in terms of policy?
Speaker 3: Do they err on the side of doing nothing?
Speaker 10: Yeah, I think they're nudging that way, and you know,
Speaker 10: you look at some of the vote and.
Speaker 3: Which is what kind of got from the October meeting, right.
Speaker 11: Yes, exactly.
Speaker 10: I mean Powell mentioned in himself Austin Goosbi was just
Speaker 10: out from the Chicago FED saying that he's a little
Speaker 10: more he's a little less.
Speaker 11: Comfortable making a move when you're driving in the dark,
Speaker 11: in the fog.
Speaker 10: So I can understand why they have to be in
Speaker 10: this reactive position. I don't fault the FED at all
Speaker 10: for any decision they make. I mean, if they feel
Speaker 10: very strongly and highly convicted that inflation is not as
Speaker 10: much of a problem. They want to save labor, then
Speaker 10: sure you can open up the door for more cuts.
Speaker 10: I would be sympathetic to that view if you get
Speaker 10: more data like Challenger this morning and Raveluo. But on
Speaker 10: the other hand, if you do have the shutdown lasting
Speaker 10: longer and more of a delay in a lot of
Speaker 10: these government data, then I totally understand why they would
Speaker 10: want to wait, especially if corporate earnings look like they do.
Speaker 10: I mean, the blended growth rate for S and P
Speaker 10: five hundred earnings for the reporting quarter is almost seventeen percent.
Speaker 10: So you look at that and you say, well, corporate
Speaker 10: America is still relatively healthy. We haven't seen mass layoffs.
Speaker 10: They've been in pockets.
Speaker 3: And it wasn't just the MACS seven right exactly.
Speaker 11: It's spread a lot more.
Speaker 10: It's come over to utilities to some extent parts of
Speaker 10: just consumer discretionary helping a little bit at x max.
Speaker 10: I have an ex tesla on Amazon right, So it
Speaker 10: is it is a little bit of a broader story.
Speaker 11: For the quarter.
Speaker 8: Teviick Gordon Macro Research and Strategy at the Schwaba Center
Speaker 8: is a document research.
Speaker 7: You know, stay with us more.
Speaker 8: From Bloomberg Business Week Daily coming up after this.
Speaker 12: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 12: thirty now.
Speaker 2: You might recall over the summer, it was in August
Speaker 2: President Trump signing an executive order directing the Labor Department
Speaker 2: to reevaluate guidance to fiduciaries to get them more comfortable
Speaker 2: with including private credit, digital assets, and other alternative assets
Speaker 2: in their retirement plans.
Speaker 3: Now, the SEC may also issue some new rules or guides.
Speaker 2: To change the definition of a credited investor or qualified purchasers.
Speaker 2: There's a lot going on that could open up a
Speaker 2: lot of different types of assets to retail investors.
Speaker 3: It's something that we've gotten into with the Schwab CEO and.
Speaker 8: Kind of on pause right now, at least at the
Speaker 8: SEC level because the government shut down. Yes, but still
Speaker 8: this seems to be the direction that things are moving
Speaker 8: all right.
Speaker 2: We have a great guest to get into on all
Speaker 2: of this with some thoughts and here at Denver in
Speaker 2: Denver at Swab Impact twenty twenty five, Kyla Culvert. She's
Speaker 2: head of Risk and Controls for Schwab Advisor Services.
Speaker 3: Good to have you here.
Speaker 2: There's a lot going on that could change, or there's
Speaker 2: a lot that is going on that means we won't
Speaker 2: see changes. How are you assessing kind of the regulatory
Speaker 2: environment and things that could change what investors can be
Speaker 2: investing in.
Speaker 9: So I feel like for advisors it's a lot of
Speaker 9: whiplash right now. If we look at the prior administration
Speaker 9: and SEC Chair Gensler, there was constantly new rules coming
Speaker 9: out and it was just like regulation overload for people.
Speaker 9: And now under Paul Atkins, we're expecting to see.
Speaker 3: A reduced pace of regulation.
Speaker 9: So we see it as a good opportunity for advisors
Speaker 9: to really focus on getting back to basics and making
Speaker 9: sure that their compliance programs are up to date.
Speaker 3: That all of their ADVs are accurate.
Speaker 9: What are avs, they're disclosure documents that have to file
Speaker 9: with the SEC. Really just making sure that like their
Speaker 9: house is in order so that because if we're not
Speaker 9: under a constant flood of new things coming out and
Speaker 9: then you know, we heard you talking about the executive
Speaker 9: order related to four oh one k's and being able
Speaker 9: to hold alternatives different things in four oh one k accounts.
Speaker 9: That's something that you know, some advisors have interest in
Speaker 9: for their clients, and it's going to really depend on
Speaker 9: the plan. Like is this something that the plan chooses
Speaker 9: to allow for that client or you know, for their
Speaker 9: plan participants, or does the plan not want to allow that?
Speaker 8: What direction do you see that moving in if it
Speaker 8: does get approved, if it if it happens, if the
Speaker 8: sec says okay, this is totally fine, is everyone going
Speaker 8: to be Is it going to be like us having
Speaker 8: stocks and bonds in our I.
Speaker 3: Don't think it will be for everybody.
Speaker 9: I think that we see you well everybody at the option. Well,
Speaker 9: it's going to be up to the plan administrator. So
Speaker 9: who's ever sponsoring that plan. They're the fiduciary. They've got
Speaker 9: the ability to say you're allowed to invest in X,
Speaker 9: or you're allowed to invest in you know, not allowed.
Speaker 8: So would that be at the company level for a
Speaker 8: certain company and it's employees, or would it be at
Speaker 8: the whoever they decide as the planned administrator?
Speaker 9: Like an empower for example, it's really like the planned sponsor,
Speaker 9: who's choosing that?
Speaker 2: Okay, So why would a plan sponsor say no? Why
Speaker 2: would a planned sponsor say yes?
Speaker 9: I think they would say yes if they wanted to
Speaker 9: give their their participants, you know, additional choices. Some plan
Speaker 9: sponsors may say no. You know, we see it on
Speaker 9: the Schwab side where we've got some plan sponsors that
Speaker 9: have opted into our Personal Choice Retirement account offering where
Speaker 9: you can basically have your four oh one K and
Speaker 9: you know, self directed invest in stocks, bonds and things
Speaker 9: that are outside of the allocation the plan allocation. It
Speaker 9: just really depends on their comfort level. Like from a
Speaker 9: conservative perspective, you might say, we want to stick more
Speaker 9: with you know, these funds that we've chosen.
Speaker 8: Is it a good thing?
Speaker 9: I think it's you know, choice is always a good thing.
Speaker 9: So more freedom of choice. But as long as people
Speaker 9: are doing it smartly with it, you know, with the
Speaker 9: advice of an investment advisor, I think it's a smart decision.
Speaker 9: But I think there's always additional risk there.
Speaker 2: Well, the risks are right in terms of all the assets.
Speaker 2: Some things are not as liquid or as others, and
Speaker 2: you need to understand that if you need to be
Speaker 2: able to get out of something it's not liquid like
Speaker 2: stocks and bonds.
Speaker 9: Exactly in many ways, And that's why I think doing
Speaker 9: things with the advice of a professional versus just you know,
Speaker 9: your friend told you this was a good investment, it
Speaker 9: makes more sense that way.
Speaker 8: On the regulatory front, and having advisors have less regulation
Speaker 8: right now, does more fall on them in terms of
Speaker 8: making sure that they're doing what's right because those those
Speaker 8: regulations aren't necessarily in place. And I know kind of
Speaker 8: a judgment for me to say, you know, quate regulations
Speaker 8: with right, that's not what I need to do. But
Speaker 8: we know, we know the DNA that Paul Atkins has
Speaker 8: the SEC chair when it comes to this stuff, and
Speaker 8: he's much more laisse faire than other SEC chairs in
Speaker 8: the past.
Speaker 9: Yeah, So what what we keep reminding advisors of is
Speaker 9: just because there's you know, all this noise about deregulation
Speaker 9: and less new regulations, you still have to follow the
Speaker 9: fiduciary duty. You still have. You know, there's still regulations
Speaker 9: on the books, there's still rules.
Speaker 5: Who still have to.
Speaker 9: Do all the things and be making sure you're in
Speaker 9: the best interest of your client.
Speaker 3: So just because it's.
Speaker 9: A more like laisse fair kind of environment doesn't mean
Speaker 9: you still don't have principles that you have to adhere to.
Speaker 2: Our advisors independents a little nervous about like kind of
Speaker 2: what's coming at them and the changes, especially when it
Speaker 2: comes to all thassets potentially.
Speaker 9: Yeah, I think that they're just there's the unknown. I mean,
Speaker 9: we get a lot of questions from advisors right now
Speaker 9: about artificial intelligence, so, you know, because everybody wants to
Speaker 9: use it, but there's not a lot of guidance out there, advisors,
Speaker 9: and so we get a lot of questions on how
Speaker 9: can we do this compliantly when there's not really any guidance?
Speaker 3: Kayla, where's that guidance going to come from?
Speaker 2: I mean, you know, and I do this with all
Speaker 2: due respect, but with all due knowledge about social media
Speaker 2: and things that many folks would say we didn't We
Speaker 2: weren't legislators, policymakers just didn't understand the power, the impact
Speaker 2: and the oversight and the liabilities perhaps, And so I'm
Speaker 2: just thinking, how do we do that with AI?
Speaker 9: Yeah? I think where the thought is that we would.
Speaker 3: Most likely see how do we do it with AI
Speaker 3: and get it right? Yeah?
Speaker 9: And you know we've been we've been talking about that.
Speaker 9: So I attended the Investment Advisor Association's Advocacy Day in
Speaker 9: DC back in September, and artificial intelligence was one of
Speaker 9: the topics that we were talking to lawmakers about, and
Speaker 9: really just from the standpoint of don't create regulation that
Speaker 9: stifles innovation, don't make it be prescriptive, and really reminding
Speaker 9: them that advisors already have to follow the fiduciary duty,
Speaker 9: so don't be prescripted and what you're trying to do.
Speaker 9: I think where we would eventually see something come from,
Speaker 9: most likely is probably the SEC. This SEC, well, it's
Speaker 9: a very hot topic, so you know that's that's where
Speaker 9: we would think it would come from.
Speaker 3: But in how.
Speaker 9: We think it'll be more principles based with this SEC
Speaker 9: than prior administrations.
Speaker 8: It sounds like advisors right now have to keep up
Speaker 8: with a lot just in thirty seconds. Where do they
Speaker 8: where do they do professional education, Where do they make
Speaker 8: sure that they are on top of the regulations, they
Speaker 8: make sure they're on top of what's happening with AI.
Speaker 9: Well, if they're a Schwab client, we have so many
Speaker 9: resources that we make available for them on our website,
Speaker 9: we do regulatory webcasts, we put out compliance review articles.
Speaker 9: We've got relationships with compliance consultants that they can use.
Speaker 9: And then they should also look at alerts that the
Speaker 9: SEC and other regulators put out. I'm not pretty getting
Speaker 9: out route right now, but on a normal basis, there'll
Speaker 9: be things.
Speaker 3: That they put out.
Speaker 2: But certainly for your advisors, there's lots of ongoing education, yes,
Speaker 2: which is pretty cool and interesting to hear.
Speaker 3: Hey, Caleb, thank you so much. Thank you.
Speaker 2: This is an important area and I'm so glad we
Speaker 2: could cover it with you. Kayla Culver, she's head of
Speaker 2: risk and Controls for Schwab Advisors Services.
Speaker 7: Stay with us.
Speaker 8: More from Bloomberg Business Week Daily coming up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
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Speaker 8: I think it's fair to say that Washington and Wall
Speaker 8: Street and the markets are inextricably bound in a way
Speaker 8: right now that totally kind of feels a bit different
Speaker 8: from other times in modern history.
Speaker 2: Yeah, well, listen, we're glued to news out of the
Speaker 2: nation's capital because things the President says or administration does,
Speaker 2: even today in terms of the drug makers, like it's moving.
Speaker 8: Markets, or maybe even things that are beyond the administration's control,
Speaker 8: like what the Supreme Court is going to decide when
Speaker 8: it comes to tariff policy, the US government taking ownership
Speaker 8: of publicly traded companies, social media posts from the President
Speaker 8: that can move markets and take company leaders by surprise.
Speaker 8: This is enough to keep Mike Townsend on his toes.
Speaker 8: He's Meta director of Legislative and Regulatory Affairs for Charles Schwab.
Speaker 8: He's a political analyst based in Washington. He also the
Speaker 8: host of Schwab's Washington Wise podcast. He joins us here
Speaker 8: on site at Schwab Impact twenty twenty five. You said
Speaker 8: that you can't walk like five steps without somebody grabbing
Speaker 8: you and saying, can I ask you.
Speaker 7: A question about politics?
Speaker 5: Right now?
Speaker 6: What are they asking you? Well, I mean obviously just
Speaker 6: since we've been here, right. I spoke on the main
Speaker 6: stage at the opening session on Tuesday. Then Tuesday night
Speaker 6: we had the election results. Then Wednesday we had the
Speaker 6: Supreme Court case. You know, argued on the terrace and
Speaker 6: so this is my life now, Like ten things happen
Speaker 6: then the course are every day that people want to
Speaker 6: talk about, so pretty fascinating times.
Speaker 3: So what do you make of what we've had in
Speaker 3: the last forty eight.
Speaker 11: Hours or so?
Speaker 6: Yeah, I mean, you know, the first thing I would
Speaker 6: say on the election in particular is that it's very
Speaker 6: easy and I think you're seeing a lot now of
Speaker 6: the sort of overreaction to an off year election. And
Speaker 6: I said, you know, I told the conference here, off
Speaker 6: yr elections are kind of unique to their particular places
Speaker 6: New York City, Virginia, and New Jersey. Obviously the California
Speaker 6: district initiative, but they're relatively confined to those places. So
Speaker 6: no question, big, big night for the Democrats.
Speaker 3: But is it a referendum on the sitting president?
Speaker 6: I mean some degree I think it is. But you know,
Speaker 6: I live in Virginia and that race was about federal
Speaker 6: workers being you know, fired from their jobs, and you know,
Speaker 6: the economy and that sort of thing, So you know,
Speaker 6: I yes, it was partly a referendum. I certainly think
Speaker 6: you can read it as a rebuke to the president
Speaker 6: in some of his actions, but whether that extrapolates out farther.
Speaker 6: We'll have to see you.
Speaker 8: Went to voting college in Maine. Also someone who went
Speaker 8: to vote in college Zorron Mamdani, the mayor elect of
Speaker 8: New York City. You guys did not overlap because he's
Speaker 8: only been out of there for like you, I've never
Speaker 8: met him, but he's a Democratic socialist, and I'm wondering
Speaker 8: if you see that as insulated to New York and
Speaker 8: New York politics or if you see him as the
Speaker 8: face of the Democratic Party moving forward.
Speaker 6: So I think you can answer that question in sort
Speaker 6: of both ways, right, So, I think it was unique
Speaker 6: to New York. He is a very dynamic personality. He's
Speaker 6: very very good at social media, and he clearly touched
Speaker 6: a nerve with people in terms of the issues he
Speaker 6: was focusing on.
Speaker 8: Sorry, you could have just been describing President Trump. Those
Speaker 8: things you just said applied totally to President Trump.
Speaker 6: So so absolutely so, I think and President Trump has
Speaker 6: probably taught us that personality is a huge, huge part
Speaker 6: of the political landscape now. So I think, Mom, Dommy,
Speaker 6: you know, did did you know incredible at connecting with
Speaker 6: people and reaching out to people who maybe hadn't felt
Speaker 6: heard in the public in the political process. Does that
Speaker 6: mean that he's going to become the face of the
Speaker 6: Democratic Party? I you know, I think Republicans are certainly
Speaker 6: going to try to make that the case. But I
Speaker 6: also think, you know, he's going to have to He's
Speaker 6: going to have a really hard time doing a lot
Speaker 6: of the things that he said he wants to do.
Speaker 6: That's just the nature of the role. And you know,
Speaker 6: the ability of the mayor of New York City to
Speaker 6: act unilaterally is extremely narrow. So you know, we'll have
Speaker 6: to see. And I do think you're seeing. You know,
Speaker 6: you can juxtapose that with the retirem announcement of Nancy
Speaker 6: Pelosi earlier today, You're seeing some generational change in the
Speaker 6: Democratic Party that I think is really you know, important
Speaker 6: and probably necessary for the Democrats.
Speaker 2: So is that her passing the baton or acknowledging that
Speaker 2: that era is over?
Speaker 3: Like, what is that in your view?
Speaker 6: Yeah? I mean, I think that it's a realization that
Speaker 6: the Democratic Party has to get younger and appeal to
Speaker 6: younger people. I mean, the leaders, you know, the most
Speaker 6: of the veterans of the Democratic Party, particular in the House,
Speaker 6: are in their eighties. In Nancy Pelosi, Stanny hoy or
Speaker 6: Jim Clyburn, and so I think you're seeing that kind
Speaker 6: of transition happen.
Speaker 2: One thing I wanted to ask you, and I think
Speaker 2: about the titles we give to politicians a Republican Donald Trump,
Speaker 2: most people would say he's not really your standard Republican
Speaker 2: Zara Mundani, like, we're talking to socialists. But you know what,
Speaker 2: he's going to have to take the job and look
Speaker 2: at his entire constituents. Do those classifications even matter in
Speaker 2: today's political environment.
Speaker 6: Yeah, I think that's a really good question, because, you know,
Speaker 6: one of the things that really fascinates me is what
Speaker 6: does the Republican Party look like post twenty twenty eight
Speaker 6: into twenty twenty nine, after Donald Trump is no longer president,
Speaker 6: no longer on the ballot, Do what we would call
Speaker 6: traditional Republicans sort of wake up and think, oh, that
Speaker 6: was weird. Let's go back to you know, and if
Speaker 6: you want a great example of it, look at the
Speaker 6: Supreme Court case that was that was held on Wednesday,
Speaker 6: where you have essentially Republicans arguing for restricted trade and
Speaker 6: higher taxes and Democrats arguing the opposite. That can be
Speaker 6: seen as a complete flip of the world.
Speaker 8: A little bit right, Yeah, Okay, speaking of bizarre worlds,
Speaker 8: when when the US government buys ten percent of Intel
Speaker 8: owns of a publicly traded company, or takes a stake
Speaker 8: in MP Materials, for example, that's.
Speaker 3: A bizarre world or Intel, did you say that?
Speaker 7: Yeah, Yeah, that's that's that's what we're living in right now.
Speaker 6: Yeah. And it's amazing to me how little reaction there
Speaker 6: has been to that.
Speaker 7: Are you worried about that?
Speaker 6: I think it's a very strange and I think it
Speaker 6: has a lot of risk to it.
Speaker 8: But we are we getting to the point of state
Speaker 8: ownership of state owned enterprises.
Speaker 6: I mean, this is like, I mean, the President today
Speaker 6: was in the in the White House talking about with
Speaker 6: a couple of drug companies about lowering the prices of drugs,
Speaker 6: and he made, you know, one of his offann references
Speaker 6: about maybe we should buy a stake in your company,
Speaker 6: and you know, that's just become part of funny.
Speaker 2: Not funny, not funny. Yeah, we're talking with Mike Townsend.
Speaker 2: He's managing director of Legislative and Regulatory Affairs for Charles Schwab.
Speaker 3: He's based in Washington. He's also a host of Schwab's
Speaker 3: Washington Wise podcast.
Speaker 2: You know, I was talking to her Britt this morning,
Speaker 2: and he said, you know, you guys are a young country.
Speaker 2: Your political environment is still a baby or a toddler,
Speaker 2: or however you want to classify it. You're going to
Speaker 2: go through these tough moments.
Speaker 3: And she's thinking about Britain.
Speaker 2: And all the king well, all the things that it's
Speaker 2: gone through, right, and taxing, and there were kings that
Speaker 2: tax and then there was pushback and you know, didn't
Speaker 2: have maybe that power or anymore.
Speaker 3: How should we as Americans?
Speaker 2: And I do think there's we're kind of apathetic in
Speaker 2: terms of some of these severe things that are going on.
Speaker 3: So I'm just trying to understand where we are in
Speaker 3: our political process.
Speaker 6: I think a couple of things. First of all, when
Speaker 6: you say you're apathetic the thing's going on, I think
Speaker 6: it's just overwhelmed by the things going on. You can't
Speaker 6: react to everything.
Speaker 7: I mean ten things have produce that could you.
Speaker 6: But you know, and I think the ordinary person, the
Speaker 6: ordinary voter, just can't take it all in every day
Speaker 6: and can't figure out what to be mad at. But
Speaker 6: you know, when I go around the country, I talk
Speaker 6: to clients all over about the intersection between Washington and
Speaker 6: the markets, and there's so much emotion. I feel like
Speaker 6: I'm part emotional counselor right now. And part of what
Speaker 6: I say is a lot of what you may be
Speaker 6: emotional about isn't affecting the markets. It's not The market
Speaker 6: is not concerned about that. That's fine that you have
Speaker 6: those feelings, but remember to separate those feelings from your investing.
Speaker 3: How many records have we had in the S and
Speaker 3: P five.
Speaker 6: Thirty year thirty something records? Yeah? So yeah, I think
Speaker 6: you know, historically, probably the most common question I've been
Speaker 6: getting asked over the last couple of days is is
Speaker 6: this the worst you've ever seen?
Speaker 2: Right?
Speaker 6: Or is this the worst we've ever been in terms
Speaker 6: of our partisan divide? And you think, well, we had
Speaker 6: a civil war, you know, we're not there, so that
Speaker 6: seem pretty divisive. You know. So historically there's kind of
Speaker 6: a pendulum, and maybe we're way out on one end
Speaker 6: of the pendulum. Historically the pendum comes back toward the middle.
Speaker 7: You know.
Speaker 8: David Sachs, the AIS are for this administration, said today
Speaker 8: on in a post on X there will be no
Speaker 8: federal bailout for AI. He said, the US has at
Speaker 8: least five major frontier model companies. If one fails, others
Speaker 8: will take its place. He said in a follow up post,
Speaker 8: the White House wants to make permitting empower generation easier
Speaker 8: from the executive branches perspective. How can they actually do that?
Speaker 6: Yeah, I mean, I think this is a really fascinating question.
Speaker 6: I tell people all the time. I fly in and
Speaker 6: out of Dallas Airport in Washington. If you fly out
Speaker 6: of Dallas, you look down, you see these gigantic buildings
Speaker 6: with all these air conditioning units on the top.
Speaker 5: Right.
Speaker 6: Those are the data centers. They can't build them fast enough. Well,
Speaker 6: what's happening in northern Virginia. Electricity prices are going up
Speaker 6: and water prices are going up because of the cooling
Speaker 6: for the water, And all of a sudden, you've brought
Speaker 6: this kind of back to ordinary people's bills, right, and
Speaker 6: they're they're sort of paying for it. So when the
Speaker 6: administration says something like that, I get it politically and
Speaker 6: it makes sense, and I think a lot of people
Speaker 6: want to hear that. But what can the government actually
Speaker 6: do to lower my water bill? I'm not as sure.
Speaker 3: I don't know. Maybe make those who are building the
Speaker 3: AI data centers.
Speaker 2: Pay some kind of fee they're using or like x,
Speaker 2: I don't know, some kind of tax or something.
Speaker 6: And I've seen some of these companies are like building
Speaker 6: their own power generating, you know, to try to take
Speaker 6: on some of that.
Speaker 2: Yeah, they're partnering with like utilities directly. I'm just good
Speaker 2: about a minute, Mike Man. I could go really.
Speaker 11: Long and I should come back.
Speaker 10: Yeah.
Speaker 2: Yeah, it is an investment investing audience that's here at
Speaker 2: Schwab Impact.
Speaker 3: It's certainly the Bloomberg audience. What's your final thoughts to that?
Speaker 6: Yeah, you know, again, my one of my biggest things is,
Speaker 6: you know, try to separate how emotional you feel about
Speaker 6: everything that's going on in Washington and remember that relatively
Speaker 6: few things are actually affecting the market. The market cares
Speaker 6: about what the Fed is doing. The market cares a
Speaker 6: lot about this Fed independence battle that is going to
Speaker 6: be play out in the Supreme Court in January over
Speaker 6: Lisa Cook's firing. The FED cares about it. I mean,
Speaker 6: the market cares about tariffs and cares about tax policy
Speaker 6: that sort of thing. But you know that's not that
Speaker 6: all those things aren't what people are emotional about and
Speaker 6: you've got to sort of separate that.
Speaker 2: Emotion ten seconds. Do folks in Washington policymakers care that
Speaker 2: the FED stays independent? I think they, even in this administration.
Speaker 6: I think they do. I think that would be a huge,
Speaker 6: huge setback for the country and the whole concept of
Speaker 6: central banks.
Speaker 5: So could we.
Speaker 2: See policy makers, even members of the Trump team fight
Speaker 2: back if that was in question real quickly.
Speaker 6: I don't know if you'll see members of the Trump
Speaker 6: team fight back, but I think a lot of policymakers
Speaker 6: will be upset.
Speaker 3: Mike Townsend of SCHWAP, thank you so much.
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