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