Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Retch swabinpat here in the Moscone Center. I just want to point out that UBS recently came out with a report. It found that millionaires already accounted for about one and a half percent of the adult population. They analyzed this in twenty twenty three, and they said, by twenty twenty eight, will that love risen in fifty two of the fifty six markets that it's surveyed. It's some markets the number of US dollar millionaires will increase by as much as
fifty percent over the next five years. Wealth management has been a booming business for the last year, the last few years, I would say, and it continues to be so.
Yeah, it's all kept those involved in the industry were busy client assets at the retail broker age Charles Schwab and the wealth arms of the six largest US bank Search five trillion dollars in the twelve months through September, twenty three percent jump is the group's revenue from the business collectively topped eighty four billion dollars so far this year.
Let's get to it with a guest. He knows what's going on. We're delighted to be here in San Francisco with a Omar Aguila. He's the chief executive officer, chief investment officer at Schwab Asset Management. Omar. Nice to have you here with us. You see a lot. Tell us about what you guys are seeing in terms of wealth management.
Yes, and welcome to impact.
Thank you for having us.
It's great to see you everybody here in San Francisco. You know, we see a continuous need and continuous demand of clients for advice. I think as people continue to grow in their lives and they continue to accumulate, well, you know, they need for them to have somebody that can rely on and continue to just work on how do what did I do with their money? How do
they actually set up? And you know, it's kind of interesting with all the information that is available today, there's not a lot of people that actually can make a decision on what to do with their money. Seriously, and it's just difficult to do.
Why what is it that they're lacking? What kind of information are they seeking?
I think it's almost like when you go grocery shopping. There is a lot, a lot of options. You know. Back back when I started my career, you know, you wanted to say, for retirement, there was one option, just just a buy a target day fund. That's it. You're based on what year you're going to plan to retire. That's one option. But now today there's multiple options, multiple things you can do manager accounts, you could do it on your own, you could do a model, you can
do there's several things that you can do. And therefore the there's a natural human you know, bias that tells you, oh, well, if there's too many options, I'm overly done. I cannot make a decision. It's almost like me trying to find a shampoo. It's like, no way you can actually pick something that will be good, and then once you pick it, there is a regret. It's like, well, did I pick the right one? Did I not pick the right one?
Maybe it wasn't that or the price. And that's a big part of the same thing happens when it comes down to finances and where it comes that. That's why there is what we call a bull market for advice, especially when you accumulate wealth, there is a significant amount of need for clients to reach a financial advice or an RIA to be able to just find what is the right solution for them.
What's interesting, though, is Charles Schwab offers both of these sort of different areas. You could do it all yourself using Charles Schwab's retail brokerage platform, or you could use an RIA whose back end is supported by Charles Schwab. How do you support both of those things even though they offer very different things.
Yes, well, that's a big part of you know, the the institutional knowledge of trying to do things through client eyes. And in many cases there's many clients that you want to use their tools on their own and in many in many cases, they actually know what they want to do and they're looking exactly what it is and just
thinking about you know, like a supermarket. You know, there's people that know exactly the brand they want, exactly how they want to do it, and they're loyal to what their pieces are and they will continue to do that. There are others that are feeling more comfortable, you know, relying on an advisor for them to find what their path is. And you know, both of them are reliable. Both of them are actually things that have people. There
are some clients that like to trade every day. There are other clients that want to buy it today and forget about it. So there's a lot of flavors for everybody.
Oh, Mark, in the wealth management business, I'm just curious how many people are you know, find it, park it, leave it there. They're thinking longer term and as a result, you know, we're gonna have a great bunch of the Schwab team tomorrow on Lysanne Sanders. We're going to talk equities, Global equities with you have Client hop. We're gonna talk fixed income with Kathy Jones. But increasingly we see people wanting access to the private markets, private credit, all assets.
How much of that does that play with you guys too?
Well, it is. It is a big part of the market. And I think to the first part of your question. You know, there's a lot of clients that like to have what we call a financial plan, that would like to have an asset allocation, that would like to have a long term setup and the majority of clients and our philosophy encourages for everybody to have a fundinancial plan. Everybody should have a financial plan. And then once you have a financial plan, you can set up your long
term investment objectives on what you're investing for. And in many cases you could be retirement, it could be income, it could be you know, growing, it could be buying a house, it could be a lot of things that you can do and then put them money to work that way. Now that being said, the human part of every investor on every client basically shows that when you hear the word character currency, bitcoin, do you hear the
worst AI? Do you hear them immediately you pick up the phone and say how can I be part of it?
Do your clients do that?
Of course they do that all the time, and they do it all the time in any situations where they have you know, and then you know how much exposure I have to the max seven? Do I need to get out of the max seven? Do I need to hedge my So the normal setup of a human behavior to try to act on recent information is something that happens all the time.
What's the pressure that your clients are feeling when it comes to fees. And when I say your clients, I mean the rias and the wealth managers who are out there offering their services for a percentage of the assets that they're managing on your behalf. Because there are a lot of robo advisors out there, including a robo advisor from Charles Schwab.
Yes, well, you know what we have done. We have run these studies over time that basically show what clients are looking for, you know. Number one, Yes, they're incredibly price sensitive. You know, price and cost is a big part of the driver for decision making. Transparency is a big part of Going back to the other question you had about private markets, that's a little bit of the hesitation today for clients to try to get more access
to it. They're interested, they actually like to have, but they're cautious about it because of the transparency and the liquidity, you know, and in many cases, once you once you explain that there is less transparency and they're less liquidity for a private market, then they step back and say, oh, let me think about it. I mean, initially sounds great, and initially sounds like a great opportunity, and in fact, we encourage you know, a portion of their investments to
be in private markets. However, you know, once you explain the trade offs, then it's started to just you know, make a big difference.
I kind of love to hear that because I think I feel like we've spent so much time at various investment conferences and everybody just wants to talk about private equity and in particular private credit. But a lot of folks are saying, you know, you got to understand that you lock your money up, you can't get access, and the transparency issues are maybe not there. So it sounds to me that like your investors are savvy enough to be asking these questions.
Yeah. No, And not only that, but the big part is, like you know, the investors like to see, especially younger investors, they like to see data. They like to see information, you know, before they make a decision. And this is a very you're looking at him.
As younger investors are You're not looking at me.
Looking at both of you. But when I actually think about it, when we do studies by generation, you know, like silent generation baby boomers, they tend to be a little more trusting in that sense, and in other words, like they trust the advisor they have a relationship with the advisor and they don't necessarily need to have that much evidence. You know, this happens actually when my kids, even when I recommend a restaurant, they still have to yelp it and try to figure out what the stars are.
And even in many cases like that, what do you recommend that it only had three stars? So it is one of these that they suggest evidence. They need evidence to make a decision. And in those cases, when you compare performance on private markets and public markets, you immediately start saying, like, why would I lock my money in where I can actually in there? Now that's not the whole story, but I think that's a little bit of the hesitation.
We tease that we were going to ask you about key behavioral biases to be able to look out for in today's environment.
What are they said that again.
The key behavioral biases that are out there in today's investment environment, Well.
There is, I would say there are three that are incredibly you know, prevalent in today's market. There are Number one is hurting behavior. Hurting behavior, which is exactly what we're just talking about. And the Max seven was clearly a big part AI Max seven Bitcoin and video. You know, definitely, you know, part of like, you know, what's going to happen. A lot of people will be watching this afternoon actually
in a few hours, just on that report. But that that component about that and in fact, for that particular thing, not a lot of clients knew what NBDIA was five years ago. It's not until now that became so popular. And that's and that's a big part of the what is it called the fomo And that's one of the biases. The second bias is called recency bias, which is people tend to just you know, look at the most recent
information and extrapolate into the future. Oh, you know, the market has been up for three months, it should be going up forever. And that that's the kind of behavior that people tend to have. Well, the same thing goes back to, you know, to when things go wrong. It's like immediately they become like, well, if we have had two bad two bad days, it's time for get out and then try to just panic that right, And those are two of the typical, you know, behavioral biases that are very typical today.
Uh.
Carol mentioned crypto. So I got to asked about bitcoin because it did reach a new record.
That's a whole show that's just about crypto. Everybody's doing your show that's just about crypto.
Feel free to tune it, but it is.
It's it's interesting because it's you know, the whole market of bitcoin, the whole market cap at Bitcoin, not even the market cap of Nvidia. So I think a lot of people would say there's still a lot of room for people who are crypto curious at this point. What portion of uninvestors' portfolio, if any, should be allocated to crypto.
Well, we have had points of view on crypto in general to basically say, like, look, any any client could actually use you know, traits as a way to just generate or try to find any solutions they have for an strategic long term asset allocation. We haven't adopted crypto as being part of like what you would use for
the long run. And in many cases the reason why is because for our strategic asset allocation work, we normally try to find what are the fundamentals that allowed that to be valued and what are the economic factors that drive the performance of certain asset classes. You compare NBDIA to crypto. Well, in the case of media. There is you know, earnings, there is clearly financial situations, there are results, there is everything else.
In the case of this is actually regulatory SEC filings right.
There is exactly they are accountable cash flows, the cash flow and actually there is that product out there that you can touch. In the case of crypto, a lot of these prices tend to be driven by supply and demand. It's supply and demand driven. You basically have people have asked me the question and said, like, well, but gold isn't gold the same like gold is also supply demand driven. Yes, it is, but the difference is there is a bar that you can touch.
Oh, Mark twenty seconds. Top question you think on everybody's mind. Are registered investment advisors right now in this environment? Number one question? Investment question.
The number one question is you know, what would we think about the market, you know, next year, given you know potential less regulation, potential tariffs and potential changes in the way that you know the sec you know will will move down their agenda next year.
All right, good stuff, Thank you so much.
It's good to see you guys.
Great, great setup for us here on this Wednesday. Omar agolar He is the chief executive Officer, Chief Investment Officer of Schwab Asset Management. Joining us here Schwab Impact in San Francisco.
You're listening to the Bloomberg Business This Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple.
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Co Master Jim Stanevik live at the Moscone Center in San Francisco, Schwab Impact surrounded by registered investment advisors, the Schwab team and really all of the support network that goes into the investment advisory world. There's just so much going on with its security, transparency, logistics, operational. This is what this event is about.
Also, something different about an event in San Francisco. Lots of umbrellas here because it is raining a lot out there.
What happened?
I don't know.
You come to California and you think it's going to beautiful. I had planned to go for a hike later today. That's not happening.
That's fine, that's fine. Can we work on that. It's all good?
All right?
Listen. One of the things we want to talk a little bit about is the fixed income world, because we've seen the US government debt market declined since mid September on expectations the president, like Donald Trump's policies will boost growth and rekindle inflation. So we continue to see I think it's safe to say in twenty twenty four the narrative of around fixed income kind of evolved. We've got a great.
Voice on this.
Yeah, Manji Buriah's portfolio manager and head of Systematic Systematic Edge of Fixed Income and custom SMA Investments at all Spring at Global Investment Title.
It is a big title. Does that fit on a business card? Is there an acroative you got to turnover for.
The second half of title?
Right?
That's true?
Yeah?
Actually, well look, I mean you are responsible for overseeing all active factor based and enhanced passive fixed income capabilities and solution joining us here at Schwab Impact. What's the conversation that's happening right now around fixed income given that we have an election result, right, but it's kind of unclear what's going to happen in terms of government spending and also the collection of money from the government or by the government.
Yeah, I think it's ups of policy away. So let's talk about what's in store for twenty twenty five.
Do you feel like you have like transparency around it?
Not really.
As you set your forecast out.
No, I don't think any of us have a crystal.
But it's your best shot.
That's my best shot.
So let's think about the policy that's actually been outlined for twenty twenty five. Right, So there's going to be deregalation coming forward, right, so I don't know how much reregalation. And where the second is around tariffs, so you know potentially tariffs, right. And then the third one is tax cuts, right, So tax kits for corporations are wealthy individuals. So when I put it all three together, they're essentially inflationary in nature. So I think what's in store for us? I would
say there's policy uncertainty, right. Policy uncertainty definitely translates to more wealthly across the different asset classes. And then also if all three or one of the three is enacted, I think there's potential inflation pressures that's going to actually creep in.
So that's moves by the Fed.
Then I don't know, potentially a pause, right, So from the pause December or pause next year, potentially a pause in December.
Really, if you think about the you know what Chairman Paul has been talking about, right, So the recent directric that came out of him was essentially that he said that we will have to obviously be data driven, but he said that the rates at this point, the policy rates are in line with the expectations. So if there is sideways moment in inflation, if you don't see that creep down another like notchdown in the next month.
Or so, potentially a pause.
But if you look at the fet fund futures, that's actually pricing in like fifty percent probability.
So we'll see what the data says, right, we get more inflation reads before the December meet, right where we used to have some data as you said, right, Yeah.
But what this translates to in my view is right, higher rates for London. That's really what it really means for fixed income, right for twenty twenty five.
So where do you find alpha? Then in the fixed income world, how do you do it? How do you find it?
Yeah, so if their rates are going to be higher or moving sideways. So I think there are kind of three pieces. So one is focused on income, right, So you got to essentially maximize your income by diversifying duration. So one way to do that is to really kind of position across the curve, not really positioned on one or two parts of the curve, so you can essentially ladder across the curve.
Right.
Intermediate to long term rates is where I think there is alpha just because of the policy three five I would say five to fifteen, five fifteen or five to twenty. So because of the uncertainty in policy, I think there is going to be premium demanded by investors, so which means that the long term rates are going to stay higher for longer. The other part is really bring in some international exposure, right em international debt.
So where internationally internationally it's a lot. Are you just saying pick a basket?
I would say pick countries where there's divergence in market policy, right, so you essentially have some amount of divergence from market policy perspective, and then look for quality. Right So I think look for assets where there is potential you know, physical stability, you know, balancing of the budget and things like that.
So I think you've got to pick wisely.
We got news last week that the money market funds have are past seven trillion dollars in assets. Yeah, maybe it's good that I'm not in the job of managing money because I thought that as rates move lower, things would move out of the money market funds. Right, Well, how do you look at that seven trillion dollars in where it's going to go and when it's gonna go?
Yeah, I mean that's the trillion dollar question, right, for the.
Seven trillion dollar question?
And should we assume it's going to go anywhere? Are people just gonna be happy and comfortable if rates go down?
Then they might not be happy?
Yeah, I mean that's again assuming the rates actually will go down rates.
There's a lot of people assuming in the crypto and the equity markets that rates are going to go down.
Yeah, but if you look at the allocation to crypto or any of the owls, that's a small portion of the overall portfolio. So I would say if the rates stay higher, right, not to four percent? I think people people don't really think about reinvestment risk, right. People are worried about what they're going to make over the next twelve months.
Right, reinvestment risk, So make it taking out doing something exactly.
Yeah, So if you think about, like why ladder strategies are really popular is because you don't have to worry about reinvestment risk and you can actually position for, you know, potential policy surprises. So I would say that's that's really the key question is what the Fed does in December, what the expectation says for the next year. After September FMC, there were like ten cuts priced in and now it's down to three.
I think could change again. Mand you twenty seconds. What's the question you think every investor should be asking themselves right now?
Just quickly, I would say, are they diversified enough? You know, do they have enough diversification in their portfolio? I think that's the key question.
All right, great stuff. Hey, thank you so much, so much, thanks for having work on that title. Acronymic.
I'm just kidding. You're gonna shot in next year.
Yes, man, you berea joining us here portfolio manager head of Systemic Edge, Fixed Income and custom SMA Investments at all Spring Global Investments. We talk to their team a lot, always get some great insight.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting a two pm Eastern on Apple car Play 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 playing Bloomberg eleven thirty.
Mac Journal.
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Gone to honey?
Please? I'll do the gravel.
Let's wat I want to drive.
It's a good question.
This is the drive to the clothes Well Bruneld on Bloomberg Radio.
All right, TikTok, everybody, we've got what about twenty minutes aft, Let's be right on the money, better on the money, eighteen minutes to go into the closing bell. It's a big day right in video earnings. That's certainly our focus front and center. I'm looking at the trade where up near our highs of the session, but it's not an exciting market. It does feel like a little bit of a wait and see mode. You've got the nasdak lower. We just heard Charlie talk about it. S and P
call it relatively flat. But we're just kind of waited to see what kind of message does Nvidia say about itself, about the AI trade, about the momentum.
I was listening to normal Inda and Matt Miller they were filling it for us, but back at they did pretty well.
If you they were awesome.
Yeah, don't get any ideas, guys.
But Norma was talking about how Bank of America came out with a note that said sort of contextualizing how important video is, putting it on par with like a federal reserve, meaning other economic data.
Yeah.
I mean, given it's market cap of you know, three trillion dollars, it kind of makes sense. But we'll see what happens when they report today.
Trading options signals this is going to be the most important catalyst left this year. Let's see what Brian Vednick has to say. He's chief investment officer at MJP Wealth Advisors one point two billion in assets under management. You're normally on the East coast. You're here on the West coast with us.
How are you doing?
Great?
Great to see you, guys.
So how often do your clients come in and say so about that in video? About that AI trade? Tell us what you hear.
Look, it comes up a lot, because you know, that's been the driving force of the market over the last eighteen months or so predominantly. We start to see a little bit of a shift second half the year and the broadening out of earnings, you know, coming from areas.
Outside of megacap tech.
But look, this is an innovative trend that's still going to play out over the next five to seven years. And we look at Navidia tonight, investors really want to
hear is competition changing in that space. I think it's more about not necessarily the demand, but can Navidia deliver on supply because when you look at analyst estimates for revenue growth year over year of over eighty percent, and these valuation estimates on future growth because people right now are overpaying for growth if you look at it from
a traditional perspective. So if those future earnings reports are delivered, we're actually not overpaying for growth for Navidia, They're delivering exactly. But I think that the real issue garyl Is goes back to your question is with the new generation of chips coming with Blackwell right, it's we're starting to hear little rumors of can they keep production up to meet demand? And if those things start to show that there's an issue there, then that opens up competition to come in
from AMD, Intel, other places. And then the other part of just add real quick is the tariff conversation, you know, the policy pieces, this mosaic that we're all moving through as investors. Well, if you look at Navidia's business, depending on how that policies are impacted, they could have some never to impact from shipping coming back for some of
their Asian made products. But then at the same point in time, you need to hear from them to say well that actually could those tariffs even boost demand that could go to the Middle East, which is something that's kind of interesting.
Explain explain the logic there.
The reasoning, Well, because when you think about the things that have been said on the campaign trail from the Trump administration, they are creating a tariff regime that could be disproportional to different parts of the world. So if you're making something in Asia and you get hit with a significant tariff, that can change the pricing for your product. That could impact demand.
But then are there areas of world that would be.
Outside of that somebody else that benefits, right, right, And so.
Could Navidia boosts more demand of their products going to areas that are underserved like in the Middle East for example. So these are the things that investors want to hear about, which is why we're in this period of time where demands, you know, expectations are high. The mosaic of these puzzle pieces need to play out a little bit more to kind of keep that sentiment going, I think, in the space, and that's why tonight is so critical.
Do you feel like we yet know what the risks are for twenty twenty five? New administration, new White House? We've seen President Trump there before, but I do think it's going to be a little bit different. We're seeing what is administration looks like. We know the policies he's interested in, but there's what you say on the campaign trail and what you get done with the Congress. So do you feel like we understand clearly the risks to investors in twenty twenty five yet, so I'll.
Be just overly transparent.
No, well said, you know, I don't believe so, and just to be that a little bit more to that. I mean, anytime you try to predict what Trump is going to do, just don't because it always ends up being a different probability outcome. And I think the thing that investors are dealing with right now is this push and pull between an environment when earnings are expected to grow. You know, tax policy probably will be extended that will
benefit stocks, and deregulation that part of the discussion. You know that the Fed still wants to cut rates over time to normalize relative to where we're seeing inflation going in different parts of the economy.
But then you have the other side of it.
You don't know exactly how the votes are going to play out on certain policy decisions. You don't know definitively if some of these folks are going to be nominated and go through the Senate process with approval. So I think this mosaic and these puzzle pieces I keep talking about have to play out, But the market will come back to fundamentals in a couple of months, Carol, that's really I think we'll.
Be like earnings and valuations in.
Consumer those types of things.
Well, I have so many questions here. I'm wondering about two and a half minutes. Well, I'm going to go fast.
How do you view the market as being a check on President Electrump and his policies.
We know he follows the S and P. Five hundred so closely.
I think anything that helps to support messaging is important to the administration. So if the markets are moving in a certain direction, if we're still getting positive economic growth on a quarter over quarter basis, if we're not causing a labor shortage due to implementation of an immigration policy change.
Which would be very tough, if you're going to overnight pull eighteen eleven million people out of this country more or less.
Right, So, these things and you look at some of the people that have been put in some of these positions, they're better than a maybe people that Trump had in Trump you know, one point zero and being communicators. So I think to your question, Tim, it definitely matters where some of these economic things go.
What would you say the tone is or what you're hearing around here as you walk around and talk to people. What is is there a common thread in terms of what people are talking about.
I think, recognizing these uncertainties, the thread is a heightened to where fareness of risk management making sure that you're.
Not worse than a year ago.
I believe so because I think we're in a totally different part of this unwinding of the unintended consequences of policy decisions that started back in twenty twenty, and now we have another set of policy decisions that are coming out. But going back to your question, it's very hard to do a probability assessment around politics and what Congress is going to do.
Wait, you know what they're going to do.
Well, let's say let's say Matt Gates gets confirmed as Attorney general, and that is that a signal to you that Senators will allow the Trump administration, will allow Trump to do whatever he wants?
Can you extrapolate that from that?
I think there's a I think it's fair to assume that there's a signal that there's more people in Congress that are more supportive of Trump now than his first administration, so that, yes, there could be pushing of the envelope in a certain direction. But I think going back to your earlier point there, it's unlikely that policies will go to extremes because of the unintended consequences of how it's
going to impact the economy. To me, that's the check, But it takes time for people to realize that as it plays out.
It's almost like you want to fast forward a year because you feel like things will settle in, will have a better feel of maybe what policies will actually make some changes. That's just kind of my gut feel.
Well, I'm going to say the classic advisor thing or investor thing here before we go. This is the reason why you stay broadly diversified and you don't have all your money in just a few companies, right sec Tech?
Got it, Brian, Thank you, thanks for stopping by. Thank you guys, Brian Viandick, President and Chief investment Officer at MJP Wealth Advisors.
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