WEBVTT - Day Two live from Schwab Impact in San Francisco 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.720 --> 0:00:13.960 Wait inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business finance and 0:00:18.400 --> 0:00:22.680 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.000 --> 0:00:29.880 All right, well, Charles Schwab. The company recently out with earnings, 0:00:29.920 --> 0:00:31.920 the stock rolling on the news. Couple of analysts actually 0:00:31.960 --> 0:00:34.559 raising their price targets on the company following that report. 0:00:34.640 --> 0:00:37.159 Core net new assets brought to Schwab by new and 0:00:37.200 --> 0:00:40.080 existing clients came in at twenty four point six billion. 0:00:40.120 --> 0:00:44.040 Total client assets are now approaching tim ten trillion dollars. 0:00:44.120 --> 0:00:46.680 That's stock near a fifty two week high, up about 0:00:46.760 --> 0:00:49.879 sixteen percent. I gets say eighteen percent, yeah today as 0:00:49.920 --> 0:00:51.840 of today. With more on the company and the business. 0:00:51.920 --> 0:00:54.440 Joining us here at Schwab Impact is Rick Worcester. He's 0:00:54.520 --> 0:00:58.080 current president of Charles Schwab, also incoming CEO of Charles 0:00:58.080 --> 0:01:00.920 Schwab taking the ceospot comt January first. He's here with 0:01:01.000 --> 0:01:03.920 us on site in San Francisco. Good to be with 0:01:03.960 --> 0:01:05.160 you the big annual event. 0:01:05.200 --> 0:01:05.640 How are you. 0:01:06.480 --> 0:01:08.600 I'm loving it here at the event, forty five hundred 0:01:08.600 --> 0:01:11.160 people here. There's so much energy and it's all focused 0:01:11.200 --> 0:01:12.840 on helping the everyday American. 0:01:12.959 --> 0:01:14.560 So let's talk a little bit about that and start there. 0:01:14.600 --> 0:01:16.440 What are you hearing. What's the big theme you're hearing 0:01:16.480 --> 0:01:17.639 this year as you walk around? 0:01:17.959 --> 0:01:20.480 The big theme to me is always what can we 0:01:20.560 --> 0:01:23.319 collectively do to make a difference in the lives of 0:01:23.400 --> 0:01:26.360 every day investors. You mentioned the number ten trillion dollars. 0:01:26.720 --> 0:01:30.120 It's an overwhelming number, but behind every one of those dollars, 0:01:29.920 --> 0:01:33.959 it's a grandparent who's trying to help contribute to their grandkids' education. 0:01:34.120 --> 0:01:37.000 It's a family that's trying to take a nice vacation 0:01:37.080 --> 0:01:39.440 that they've been saving for. That's what matters to us. 0:01:39.600 --> 0:01:41.000 I love that you say that, because as I walk 0:01:41.000 --> 0:01:42.959 around and talk to some of the advisors, you know, 0:01:43.000 --> 0:01:45.040 there're may be a billion dollar shop, a two billion, 0:01:45.120 --> 0:01:47.760 maybe even smaller, and they're always kind of apologizing. I'm like, no, 0:01:47.920 --> 0:01:50.840 you're the guys who are managing everybody's money. I kind 0:01:50.840 --> 0:01:52.680 of love that perspective absolutely. 0:01:52.720 --> 0:01:56.200 And the thing about this community, we serve fifteen thousand advisors. 0:01:56.520 --> 0:01:59.600 They're in most communities across our countries, sitting down the 0:01:59.600 --> 0:02:02.760 table to the table with people helping them understand how 0:02:02.760 --> 0:02:05.480 to live their best financial life, and the power of 0:02:05.520 --> 0:02:07.040 that is so impressive. 0:02:07.160 --> 0:02:08.840 Rick, One thing that has come up. We did a 0:02:08.840 --> 0:02:11.880 great broadcast from here yesterday, and no doubt about it, 0:02:11.919 --> 0:02:14.560 the elections continue to come up. How are you thinking 0:02:14.600 --> 0:02:18.480 about the elections the impact that a new administration, new 0:02:18.480 --> 0:02:21.679 people running different regulatory bottle bodies. Certainly that plan to 0:02:21.720 --> 0:02:24.680 the financial industry, how it might impact Schwap. 0:02:24.720 --> 0:02:27.120 Well, there's a lot of potential change at play. We've 0:02:27.160 --> 0:02:29.600 heard a lot of proposals. It will be really interesting 0:02:29.600 --> 0:02:32.360 and important to watch how those play out. And we 0:02:32.480 --> 0:02:35.720 stand ready to do whatever we can to help the 0:02:35.760 --> 0:02:38.359 everyday investor. That's our focus. 0:02:38.560 --> 0:02:42.480 And all things change much because of a new White 0:02:42.480 --> 0:02:45.040 House and a new team. Do you anticipate from what 0:02:45.080 --> 0:02:47.359 we've heard on the campaign trail and some of the 0:02:47.400 --> 0:02:49.160 people that are being considered for positions. 0:02:50.280 --> 0:02:52.720 I certainly think that there will be change. Absolutely. I 0:02:52.720 --> 0:02:54.919 think with any administration there's change. And we've been through 0:02:54.960 --> 0:02:58.680 all sorts of presidential cycles and election cycles, and at 0:02:58.680 --> 0:03:00.440 the end of the day, what it means for us 0:03:00.560 --> 0:03:02.640 is we adapt and we do whatever we can to 0:03:02.680 --> 0:03:04.040 help the end the end client. 0:03:04.280 --> 0:03:06.520 Why are you thinking about this from a regulatory perspective? 0:03:06.560 --> 0:03:08.920 We did here today that SEC cherry Gary Gensler is 0:03:08.919 --> 0:03:11.720 going to step down by January twentieth. Certainly the crypto 0:03:11.760 --> 0:03:14.440 community cheering that. How do you look at a change 0:03:14.440 --> 0:03:15.560 in leadership at the SEC? 0:03:16.360 --> 0:03:18.920 Well, for us, our company is built on trust and 0:03:19.080 --> 0:03:21.520 has been for fifty years. Our entire industry is built 0:03:21.520 --> 0:03:24.560 on trust. If people can't trust their financial institution, the 0:03:24.600 --> 0:03:26.880 whole premise of what we do goes away. And so 0:03:27.120 --> 0:03:29.960 I think regulators play a really important role in that, 0:03:30.040 --> 0:03:32.760 and we've always had a great relationship with regulators. I 0:03:32.800 --> 0:03:36.600 think from our perspective, we want regulation that is thoughtful 0:03:37.000 --> 0:03:39.400 and makes sense for the end investor. And when that's 0:03:39.400 --> 0:03:44.440 the case, we'll do anything to support it. And we're 0:03:44.480 --> 0:03:47.480 looking forward to to seeing who the next chairman is 0:03:47.520 --> 0:03:47.840 going to be. 0:03:47.960 --> 0:03:49.600 Rick, What does it mean for crypto? And I'm curious 0:03:49.640 --> 0:03:51.560 if you guys see yourself getting into the crypto business. 0:03:51.560 --> 0:03:53.920 Here we are approaching one hundred thousand dollars. We have 0:03:53.960 --> 0:03:56.520 a president who initially maybe our president elect, who maybe 0:03:56.600 --> 0:03:58.640 wasn't so into crypto, is now very interesting. 0:03:58.880 --> 0:04:00.440 Hey got his own crypto company. 0:04:00.720 --> 0:04:03.360 What about for Schwab? What's the play here? Do you 0:04:03.360 --> 0:04:04.920 see yourself getting into it? 0:04:05.120 --> 0:04:08.560 Well, we're in the crypto business today. We have lots 0:04:08.560 --> 0:04:10.760 of different ways for clients to participate. They can buy 0:04:10.800 --> 0:04:14.680 et s today, they can buy bitcoin futures, they can 0:04:14.680 --> 0:04:17.640 buy closed end funds. I think we will get into this, 0:04:18.000 --> 0:04:21.520 into spot crypto when the regulatory environment changes, and we 0:04:21.600 --> 0:04:24.719 do anticipate that it will change, and we're getting ready 0:04:24.720 --> 0:04:25.719 for that eventuality. 0:04:25.920 --> 0:04:28.039 Is there some I don't know? Has crypto? Is it 0:04:28.080 --> 0:04:29.039 growing up in your view? 0:04:29.839 --> 0:04:32.360 I don't know. You know, it's an interesting asset class 0:04:32.360 --> 0:04:35.320 and people have really gravitated towards it. And you know, 0:04:35.360 --> 0:04:38.120 we never like to judge what people want to invest in. 0:04:38.760 --> 0:04:41.400 People on our platform, we think are very thoughtful investors, 0:04:41.480 --> 0:04:44.000 very sharp. They make decisions about what they want to 0:04:44.000 --> 0:04:48.000 invest in. And crypto has certainly caught many's attention and 0:04:48.720 --> 0:04:50.800 and they've made a lot of money doing it. I 0:04:50.839 --> 0:04:52.839 have not bought crypto, and now I feel silly. So 0:04:53.040 --> 0:04:55.200 they've been the ones making all this money. 0:04:54.920 --> 0:04:57.120 On crypto thinking about buying it now. 0:04:58.760 --> 0:05:01.560 Me personally know, but we certainly support our clients that 0:05:01.640 --> 0:05:02.080 want to do that. 0:05:02.160 --> 0:05:03.840 You know, you answered my next question, which is going 0:05:03.880 --> 0:05:05.960 to be do you own any crypto? But talk a 0:05:05.960 --> 0:05:08.000 little bit about that, because it's always interesting hearing from 0:05:08.040 --> 0:05:11.680 somebody in in your space about their views on something. 0:05:12.240 --> 0:05:13.279 What's holding you back? 0:05:13.920 --> 0:05:16.080 Well, I think what's holding me back is just a 0:05:16.160 --> 0:05:18.800 question around the true value of crypto. I you know, 0:05:18.800 --> 0:05:20.760 I like to invest in stocks, and with stocks, you 0:05:20.880 --> 0:05:23.240 there's there's cash flows you can rely upon, There's there's 0:05:23.240 --> 0:05:27.320 dividends that accrue to you. With with crypto, it's it's 0:05:27.360 --> 0:05:29.240 less certain what that will be, and it's it's less 0:05:29.240 --> 0:05:32.200 certain how to value it. So to me, on a 0:05:32.240 --> 0:05:36.080 personal level, that's what makes crypto not something that I 0:05:36.120 --> 0:05:38.880 invest in. At the same time, we encourage our investors 0:05:38.880 --> 0:05:41.599 to invest in what matters for them. And I've talked 0:05:41.600 --> 0:05:43.800 to a lot of our investors who tell me I'm 0:05:43.839 --> 0:05:46.120 completely missing the boat, and they tell me all the 0:05:46.120 --> 0:05:49.000 great things about crypto, and you know what, they've been right, 0:05:49.040 --> 0:05:51.200 not not me, because so far keeps going up. 0:05:51.360 --> 0:05:52.320 So far they've been right. 0:05:53.080 --> 0:05:53.480 We'll see. 0:05:53.520 --> 0:05:55.240 It's one we're going to continue to follow. It moves 0:05:55.279 --> 0:05:57.880 around a lot. It is a competitive space. Just this 0:05:57.960 --> 0:05:59.240 week I just want to look at my know it's 0:05:59.279 --> 0:06:02.360 Robin Hood andeing they're moving to the RIA space. I'm 0:06:02.400 --> 0:06:04.880 curious about how you were thinking about Schwab for the 0:06:04.920 --> 0:06:07.080 next fifty years as you get ready to take over 0:06:07.120 --> 0:06:11.560 as CEO and not a new thing traditional investors, they're 0:06:11.560 --> 0:06:14.279 getting older, younger investors how they want to play and 0:06:14.320 --> 0:06:17.719 have more options. So what are your thoughts about Robinhood's 0:06:17.720 --> 0:06:19.880 move and maybe what you guys need to continue to 0:06:19.920 --> 0:06:23.000 do to attract younger investors who want those more options. 0:06:23.200 --> 0:06:26.479 Well, for fifty years, our central theme has been to 0:06:26.520 --> 0:06:29.360 see through client size and do right by them, and 0:06:29.400 --> 0:06:31.880 we attract a lot of young investors to Schwab. In fact, 0:06:31.920 --> 0:06:34.880 sixty percent of our new to firm clients every year 0:06:35.040 --> 0:06:37.920 are under the age of forty. Our client base actually 0:06:37.920 --> 0:06:41.599 gets younger every year, so it's sometimes we're not thought 0:06:41.640 --> 0:06:43.159 of as that way, but we attract a lot of 0:06:43.200 --> 0:06:44.919 young investors because we have what we think is the 0:06:44.960 --> 0:06:47.640 best trading platform in the industry, and it also comes 0:06:47.680 --> 0:06:50.240 along with what we think is the best educational and 0:06:50.320 --> 0:06:53.240 training platform in the industry, and that aspect has really 0:06:53.279 --> 0:06:54.559 appealed to some of our younger. 0:06:54.600 --> 0:06:56.800 Newer investors got to ask you about the training side 0:06:56.800 --> 0:06:58.760 and talking with advisors here. I was up on the 0:06:58.760 --> 0:07:01.680 stage doing a panel on artificial intelligence, and so many 0:07:01.720 --> 0:07:03.440 people came up to me afterwards and they're like, we 0:07:03.520 --> 0:07:05.320 got to talk to Schwab because I think we need 0:07:05.360 --> 0:07:11.240 a Schwab chatbot. AI though, is impacting everything? How are 0:07:11.400 --> 0:07:15.400 you also, I don't know, acknowledging thinking about how that 0:07:15.440 --> 0:07:18.720 needs to be incorporated into what you offer up the 0:07:18.960 --> 0:07:19.880 advisory space. 0:07:20.240 --> 0:07:22.680 Yes, so that comment about wanting an AI chatbot, what 0:07:22.720 --> 0:07:25.120 they don't recognize is that actually, behind the scenes, we 0:07:25.200 --> 0:07:28.480 have built one for our client facing professionals. And so 0:07:28.560 --> 0:07:32.000 it used to be that sixty thousand times a month 0:07:32.400 --> 0:07:34.360 we would have a phone rep spend more than three 0:07:34.400 --> 0:07:37.280 minutes searching for a piece of information to answer a 0:07:37.320 --> 0:07:40.000 client question right, And now we have built an AI 0:07:40.160 --> 0:07:43.200 capability that finds that information in seconds, and so it 0:07:43.200 --> 0:07:45.480 makes a better use of the client's time and allows 0:07:45.520 --> 0:07:48.040 them to focus and go deeper on wealth issues that 0:07:48.080 --> 0:07:49.280 we could potentially help them with. 0:07:49.320 --> 0:07:51.760 But is there another level that you continue to think about? Okay, 0:07:51.760 --> 0:07:54.440 where does this go in helping advisors in terms of 0:07:54.480 --> 0:07:57.440 portfolio management are building out their businesses? 0:07:58.080 --> 0:08:00.360 I think AI will have a really big impact on 0:08:00.400 --> 0:08:03.160 our industry. I think it will do a lot to 0:08:03.200 --> 0:08:07.000 help us better serve clients, to empower our professionals to 0:08:07.040 --> 0:08:09.480 give them the right information at the right time. I 0:08:09.480 --> 0:08:12.760 think it will also allow us collectively to help serve 0:08:12.800 --> 0:08:18.120 clients that we couldn't otherwise. We have fifteen million retail clients. 0:08:18.400 --> 0:08:22.320 We can only have a person to person relationship with 0:08:22.360 --> 0:08:24.960 about ten to twenty percent of that client base. There's 0:08:25.000 --> 0:08:27.720 eighty percent that we don't get to to have that 0:08:27.800 --> 0:08:31.840 in person dialogue with, and I think AI could bridge 0:08:31.880 --> 0:08:34.440 that gap and allow us to reach more clients. 0:08:34.520 --> 0:08:35.880 Hey, before we let you go, I want to talk 0:08:35.880 --> 0:08:38.240 a little bit about the balance sheet, because you basically 0:08:38.280 --> 0:08:40.679 said you're trying to shrink the bank's balance sheet and 0:08:40.720 --> 0:08:43.400 not hold as many loans on the balance sheet. Given 0:08:43.440 --> 0:08:45.000 what happened a couple of years ago, close to two 0:08:45.040 --> 0:08:46.880 years ago with the regional banking crisis in the way 0:08:47.120 --> 0:08:48.680 you guys were brought into that, just give us an 0:08:48.720 --> 0:08:50.680 update there on what you're going to do when you 0:08:50.720 --> 0:08:51.320 become CEO. 0:08:51.720 --> 0:08:53.800 Well, I want to clarify we never said we wanted 0:08:53.800 --> 0:08:56.040 to shrink our balance sheet. What we did allude to 0:08:56.080 --> 0:08:57.520 and I think what you're referring to is on an 0:08:57.520 --> 0:09:01.400 earnings call, we said, as our balance sheet grows, we 0:09:01.440 --> 0:09:04.160 would consider using a third party bank to take on 0:09:04.280 --> 0:09:07.000 some of those deposits. That's something that could make sense 0:09:07.000 --> 0:09:09.240 for us because of the way the economics work, we 0:09:09.320 --> 0:09:12.800 have to hold capital against deposits. We can send some 0:09:12.840 --> 0:09:16.319 of those deposits to another bank and earn a better 0:09:16.400 --> 0:09:19.840 return relative to capital when we do so. So it's 0:09:19.880 --> 0:09:22.200 a tool to have in our toolbox. It's not something 0:09:22.200 --> 0:09:25.600 we're going out and doing immediately, something we're considering. We'd 0:09:25.600 --> 0:09:27.640 only do it as our balance sheet grows, and when 0:09:27.640 --> 0:09:28.480 it makes sense to do. 0:09:28.800 --> 0:09:32.400 Challenging here, certainly for Schwab with the regional bank crisis 0:09:32.400 --> 0:09:33.760 and so on and so forth. We talked about a 0:09:33.760 --> 0:09:37.160 lot on Bloomberg just got about thirty seconds. Are we 0:09:37.360 --> 0:09:40.120 pasted it? Do you feel confident or what's more to 0:09:40.160 --> 0:09:41.840 be done? In terms of the impact that we've seen 0:09:41.880 --> 0:09:42.520 in the past year. 0:09:42.760 --> 0:09:45.320 I've never been more optimistic about our business than we 0:09:45.360 --> 0:09:47.920 are today. We're number one or number two and the 0:09:48.000 --> 0:09:52.280 two fastest growing segments of the financial services landscape, and 0:09:52.440 --> 0:09:54.920 our client satisfaction scores have never been higher. Than they 0:09:54.920 --> 0:09:57.360 are today. So we're hitting on all cylinders as we 0:09:57.440 --> 0:09:59.480 roll into twenty twenty five, and I couldn't be more 0:09:59.679 --> 0:10:00.560 excit about it. 0:10:00.600 --> 0:10:02.600 Fifteen seconds. What's the most interesting thing in the investment 0:10:02.600 --> 0:10:03.720 space do you think right now? 0:10:04.160 --> 0:10:06.880 I think the engagement among clients. It's just wonderful to 0:10:06.880 --> 0:10:09.480 see how engaged they are in markets in their financial life. 0:10:09.520 --> 0:10:11.960 When people own their tomorrow, they tend to have great 0:10:12.000 --> 0:10:12.920 financial outcomes. 0:10:13.000 --> 0:10:14.520 Rick, thank you so much. I know there's a lot 0:10:14.520 --> 0:10:15.920 going on. I know this is a big event, but 0:10:16.040 --> 0:10:17.920 I'm carving out some space for us. We really appreciate it. 0:10:17.920 --> 0:10:19.480 Well. Thanks for making a commitment to be here. We 0:10:19.520 --> 0:10:20.240 love having you here. 0:10:20.280 --> 0:10:22.080 It's a great perspective that we get to come and 0:10:22.120 --> 0:10:23.679 take back to New York and kind of share with 0:10:23.840 --> 0:10:26.360 some of our other guests. Rick Weister, current president of 0:10:26.440 --> 0:10:29.599 Charles Schwab taking over CEO on January first. This is 0:10:29.600 --> 0:10:30.880 Bloomberg from Impact. 0:10:31.960 --> 0:10:35.520 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:35.520 --> 0:10:38.760 live weekday afternoons from two to five pm Eastern Listen 0:10:38.800 --> 0:10:40.959 on Apple card Play and then brought auto with a 0:10:41.000 --> 0:10:44.679 Bloomberg Business act or wants us live on YouTube? 0:10:45.280 --> 0:10:45.640 All right? 0:10:45.679 --> 0:10:47.839 As we just heared in our conversation with Rick Weister, 0:10:48.679 --> 0:10:51.880 Schwab alone has about almost potentially in dollars in assets. 0:10:51.920 --> 0:10:56.120 Those assets essentially split evenly between retail investors and advisors. Now, 0:10:56.120 --> 0:10:59.240 as for the many registered independent advisors that Schwab works 0:10:59.280 --> 0:11:03.240 with and provides more than fifteen thousand independent advisory firms 0:11:03.240 --> 0:11:06.439 with over four trillion in assets under management, and what 0:11:06.559 --> 0:11:09.760 Swab does you know? This by now provides us a 0:11:09.840 --> 0:11:13.800 variety of services. We're talking about custody of client assets, technology, trading, 0:11:14.000 --> 0:11:15.319 also banking, and a lot. 0:11:15.120 --> 0:11:17.880 More overseeing all that side of the business. John Body 0:11:18.000 --> 0:11:20.160 is head of Advisor Services and a member of Charles 0:11:20.160 --> 0:11:23.280 Schwab's executive committee. He joined us here at Impact twenty 0:11:23.280 --> 0:11:24.960 twenty four in San Francisco. How are you. 0:11:25.040 --> 0:11:27.720 I'm doing great pleasure to join you today. We are 0:11:28.080 --> 0:11:30.680 having a great time here at the conference. Lots of optimism, 0:11:31.080 --> 0:11:31.640 great vibes. 0:11:31.679 --> 0:11:33.200 Okay, well, let's talk a little bit about that, and 0:11:33.200 --> 0:11:35.000 I want to jump right into it. We got a 0:11:35.000 --> 0:11:36.640 good bit of time with you. But you have a 0:11:36.640 --> 0:11:41.000 big job overseeing all this side of the business. So 0:11:41.040 --> 0:11:44.079 I think retail investors don't really understand. But a big 0:11:44.120 --> 0:11:47.360 part of that is what happened with TDM or Trade 0:11:47.360 --> 0:11:50.480 and that purchase. Wow, at this point almost five years ago, 0:11:50.559 --> 0:11:53.120 it's amazing. Are you fully integrated? Has everything been fully 0:11:53.200 --> 0:11:54.080 brought over to Schwab. 0:11:54.240 --> 0:11:57.200 We have been through the whole process and certainly we 0:11:57.240 --> 0:12:01.640 did the conversion labor Day of last year, and since 0:12:01.679 --> 0:12:05.880 then we have been working through the opportunities for improvement, 0:12:05.920 --> 0:12:11.719 the feedback from our clients through that conversion, finding opportunities 0:12:11.760 --> 0:12:14.839 to enhance the platform for them, and so that is. 0:12:14.800 --> 0:12:15.960 In the rear view mirror now. 0:12:16.040 --> 0:12:17.720 So what is the bit what was or has been 0:12:17.760 --> 0:12:19.680 the biggest bit of feedback you've got from these clients. 0:12:19.720 --> 0:12:21.240 What changes have you made as a result of what 0:12:21.240 --> 0:12:21.840 you've heard from them? 0:12:21.920 --> 0:12:25.440 You know, we went into the acquisition with the aspiration 0:12:25.559 --> 0:12:28.160 to bring the best of both platforms together and we 0:12:28.240 --> 0:12:32.000 did that. But for advisors moving from one platform to 0:12:32.040 --> 0:12:34.520 another platform, it's changed, right, So they had to learn 0:12:34.840 --> 0:12:37.640 a new system. And while they were learning that, they 0:12:37.640 --> 0:12:40.480 gave us feedback on how the technology works for them, 0:12:40.520 --> 0:12:43.600 where we could find ease of doing business, more scale 0:12:43.640 --> 0:12:46.280 and efficiency so that they could spend more time with 0:12:46.320 --> 0:12:49.000 their investors. So they were coming at it from the 0:12:49.080 --> 0:12:51.800 right perspective in terms of wanting to be out finding 0:12:52.000 --> 0:12:54.439 time with investors as well as finding new clients to 0:12:54.520 --> 0:12:55.880 the platform JN. 0:12:55.960 --> 0:12:57.680 One thing I want to ask you is, okay, so 0:12:57.800 --> 0:13:02.400 technology things that advisors need? Did a panel here earlier 0:13:02.440 --> 0:13:05.000 about AI, and I can't tell you how many advisors 0:13:05.040 --> 0:13:06.720 came up to me and are like, oh my god, 0:13:06.920 --> 0:13:09.439 I wasn't using chat, GPT I downloaded and I've just 0:13:09.480 --> 0:13:14.840 been twenty minutes playing around with it. How is AI generative, 0:13:14.840 --> 0:13:18.640 AI LM large language models? How are you thinking about 0:13:18.679 --> 0:13:20.959 what you need to be offering up to your advisors. 0:13:21.040 --> 0:13:25.600 Yes, we are leaning into it cautiously optimistic, going at 0:13:25.640 --> 0:13:29.760 it with a good pace. Our first place of opportunity, 0:13:29.800 --> 0:13:33.360 we think, is in knowledge. There's a lot of operational 0:13:33.720 --> 0:13:37.560 experiences between us and advisors, and so if we can 0:13:37.679 --> 0:13:41.440 bring knowledge to the fingertips of our service professionals as 0:13:41.480 --> 0:13:44.200 they're working with advisors on the phone or through email 0:13:44.760 --> 0:13:47.880 or chat, we can be more precise in our answers 0:13:48.280 --> 0:13:51.800 and avoid work and not good order, which is slows 0:13:51.840 --> 0:13:54.640 down the business as a drag friction within the business. 0:13:54.679 --> 0:13:56.320 One thing, though, I got to say, is people are 0:13:56.360 --> 0:13:58.520 worried advisors are worried that they're going to be replaced 0:13:58.520 --> 0:14:01.720 by generative AI. So I know there's hype, I know 0:14:01.720 --> 0:14:05.520 there's reality, but the conversations I'm having is that, yes, 0:14:05.559 --> 0:14:08.200 some jobs are going to go away, there will be 0:14:08.240 --> 0:14:10.320 new ones created as a result. So how are you 0:14:10.640 --> 0:14:13.760 also thinking about maybe that fear among many of your clients. 0:14:13.840 --> 0:14:16.400 Well, we think, you know, as we have with lots 0:14:16.400 --> 0:14:19.840 of technology, there's a cycle to it, and certainly things 0:14:19.880 --> 0:14:22.800 that are basic or that can be automated will be 0:14:22.800 --> 0:14:26.320 great opportunities for artificial intelligence. But that will just allow 0:14:26.920 --> 0:14:31.000 people to spend opportunities and value added services in places 0:14:31.040 --> 0:14:33.720 that AI won't be able to go. And we think 0:14:33.760 --> 0:14:37.360 that investing is a relationship. Business people want to talk 0:14:37.400 --> 0:14:39.800 to a human, maybe a long time before AI could 0:14:39.840 --> 0:14:40.280 replace them. 0:14:40.360 --> 0:14:42.240 Sometimes I don't want to talk to a human. I'm 0:14:42.240 --> 0:14:44.920 just going to put it out there, but I get it, Yeah, 0:14:44.920 --> 0:14:47.240 get it. Yeah, I mean magic, Your money is personal. 0:14:47.360 --> 0:14:50.280 Yeah, investing is technical, but it's also emotional, right, Yeah, 0:14:50.400 --> 0:14:53.080 And so I'm not sure when AI will be able 0:14:53.120 --> 0:14:56.400 to handle somebody's emotions as it relates to the reaction 0:14:56.520 --> 0:14:59.160 to markets ups and downs, to be able to counsel 0:14:59.200 --> 0:15:01.680 somebody in that way. So we think that that's where 0:15:02.120 --> 0:15:04.280 the human intelligence plays a big role in the future. 0:15:04.440 --> 0:15:08.680 To what extent do you help with portfolio construction behind 0:15:08.680 --> 0:15:11.120 the scenes with the rias or is that left completely 0:15:11.160 --> 0:15:11.360 to them. 0:15:11.520 --> 0:15:14.280 Yeah, our job is a custodian to advisors to give 0:15:14.320 --> 0:15:17.640 them a platform where they can express their views on investing, 0:15:18.200 --> 0:15:22.000 whether that's through different kinds of products, ETFs, mutual funds. Certainly, 0:15:22.240 --> 0:15:26.320 alternative investments is a growing part of the portfolio today, 0:15:26.320 --> 0:15:30.040 even cryptos being discussed some between US and advisors while 0:15:30.040 --> 0:15:33.480 we're here. It's the newer part of the marketplace. And 0:15:33.480 --> 0:15:38.840 then it's the automation of investing, trading systems, rebalancing systems. 0:15:39.240 --> 0:15:40.120 That's where we can. 0:15:40.000 --> 0:15:42.960 Add value so that they can do their job of 0:15:43.000 --> 0:15:46.320 picking the investments and building the right portfolios based on 0:15:46.760 --> 0:15:49.960 the personal needs of one investor versus another investor. 0:15:50.280 --> 0:15:52.640 How much when you look at the growth that we've 0:15:52.680 --> 0:15:55.560 seen in the wealth management business and client assets coming in, 0:15:55.680 --> 0:15:57.480 how do you think about it going forward? You know, 0:15:57.520 --> 0:16:01.320 we talked about the aging population, transfer of well younger generation. 0:16:01.840 --> 0:16:02.960 What's your perspective on that? 0:16:03.200 --> 0:16:06.520 A ton of opportunity for advisors. So we see the 0:16:06.680 --> 0:16:09.600 RAA channels about a nine trillion dollar business right now. 0:16:10.400 --> 0:16:13.000 We think that by twenty thirty four it could be 0:16:13.040 --> 0:16:16.160 a twenty trillion dollar business based on math and the 0:16:16.280 --> 0:16:20.080 momentum around growth. Right now, there's thirty seven trillion dollars 0:16:20.400 --> 0:16:24.360 of investable assets sitting in the traditional advice models, and 0:16:24.400 --> 0:16:28.080 that's the market opportunity for the independent advisor who brings 0:16:28.080 --> 0:16:31.280 a fiduciary a type of advice model to the marketplace. 0:16:31.280 --> 0:16:35.360 And that's differentiating from an investor experience perspective, how much. 0:16:35.200 --> 0:16:39.360 Of your business is about getting new rias on the platform, 0:16:39.440 --> 0:16:42.760 getting them to leave other custodial platforms coming to you, 0:16:42.920 --> 0:16:44.400 versus growth of their own platforms. 0:16:44.520 --> 0:16:47.200 I'm glad you asked that it's about eighty twenty equation. Certainly, 0:16:47.480 --> 0:16:50.400 individual investors are waking up to the fiduciary model and 0:16:50.480 --> 0:16:54.200 choosing to work with independent advisors, but we see advisors 0:16:54.240 --> 0:16:57.120 in those traditional channels waking up to the business opportunity 0:16:57.160 --> 0:17:01.360 as well and exiting those channels to join the RIA space, 0:17:01.840 --> 0:17:05.359 registering with the SEC or their local state, starting their 0:17:05.400 --> 0:17:09.800 own firms, and joining the winning model. In addition to that, 0:17:10.040 --> 0:17:13.679 more recently we've seen advisors choosing not to start, but 0:17:13.760 --> 0:17:17.199 to join existing firms. In the RAA space, the joiner 0:17:17.240 --> 0:17:21.560 model is also fueling the transition or the transfer of 0:17:21.600 --> 0:17:23.600 assets from one part of the marketplace to the other 0:17:23.600 --> 0:17:24.360 part of the marketplace. 0:17:24.400 --> 0:17:26.840 What are you seeing in the advisory space. I mean, 0:17:27.160 --> 0:17:29.119 just as you said, you know, new folks coming in. 0:17:29.160 --> 0:17:32.719 But is it smaller firms that continue to dominate, or 0:17:32.800 --> 0:17:35.760 is it smaller firms combining to be bigger firms. I'm 0:17:35.760 --> 0:17:37.760 just curious about the competitive landscape. 0:17:37.800 --> 0:17:42.160 We serve fifteen thousand advisors nationwide. As you said, small 0:17:42.240 --> 0:17:44.680 firms one hundred million dollars of lasts of assets under 0:17:44.680 --> 0:17:47.320 management and firms with one hundred billion dollars of assets 0:17:47.359 --> 0:17:47.960 under management. 0:17:47.960 --> 0:17:49.280 That's the bulk, the bulk of it. 0:17:49.280 --> 0:17:52.680 It's always the eighty twenty rule, right, so have eighty 0:17:52.720 --> 0:17:55.440 percent of the assets. And as you know, M and 0:17:55.520 --> 0:18:00.000 A activity is grown in this space, and that's private 0:18:00.119 --> 0:18:04.159 equity and capital coming in to support a fast growing market, 0:18:04.600 --> 0:18:07.119 and we think that's a positive. But we also know 0:18:07.160 --> 0:18:10.560 there's a lot of fiercely independent entrepreneurs who are self 0:18:10.600 --> 0:18:12.800 capitalizing their businesses and growing as well. 0:18:12.880 --> 0:18:17.119 So consolidation in the space net good for you we 0:18:17.200 --> 0:18:20.160 think it's it's positive. Yes, what happens if these companies 0:18:20.200 --> 0:18:22.280 consolidate and then they go to a different platform though, 0:18:22.400 --> 0:18:24.480 or they're you know, they get bought by a larger 0:18:24.520 --> 0:18:25.920 company that uses a different platform. 0:18:26.000 --> 0:18:27.760 We're in We're in all parts of the market, so 0:18:27.800 --> 0:18:30.120