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We are live in Orlando, Florida, Commonwealth National Conference for Financial Advisors. It's raining here, but apparently we have a hurricane on the way. It's out in the I guess the Gulf of Mexico, but making its way to the west coast of Florida. Supposed to hit here on the coast. I think that Wednesday morning is kind of what they're saying at some point. So, but both Alex and I were scheduled to flow out of here tomorrow afternoon, so
we should be okay. And people here they are used to these hurricanes, but they've had a really tough couple of weeks here up at the Bend, up in northern Florida. Now here on the west coast, so let's kind of put some numbers around it. From an insurance perspective, at Matt Palazola, he does that or CC Insurance almost for Bltteberg Intelligence mat Can you just frame out what the last week or two for hurricanes and then this one
coming up to hit the coast. What are the numbers around these things because they seem pretty big here.
Yeah, So what we knew was going to happen was with Helene, the losses were mostly are going to be uninsured, so storm surge and flooding is not really a covered peril by homeowners insurance, so you're going to see a larger than normal diversions between insured and uninsured losses. With Hurricane Helene, we knew this was going to be a bad hurricane season, it wasn't actually living up to it
until like the past week or so. So now we've got Hurricane Milton in the Gulf, category four, it will probably probably hear worse news before better, so it will probably strengthen to a category five. What's going to happen is going to hit a bunch of wind shear before it makes landfall, and that will actually lower the intensity of it. So right now National Hurricane Center is still saying major hurricane, which is category three or above, so it should be three when it makes the landfall, and
I would just say one thing on the forecast. You look at the National Hurricane Center website and there's a cone on there and they call that the cone of uncertainty, and that cone goes across the whole Florida West Coast at this point, so it could be almost anywhere. The midpoint is that Tampa region, which is really a worst case for insurance companies, but that's where we're at now.
So there's significant uncertainty over the next two days. And like you said, Paul, probably Wednesday morning where we have a landfall.
Yeah, that was when my flight was supposed to take off, so we changed that. But to your point, Milton rapidly intensified into a Category four storm that happened around nine o'clock, and then now at about eleven o'clock, the National Hurricane continues to rapidly intensify, so worse. Before we get any kind of better news, I keep hearing that if the storm goes a little north versus a little south, little north is more catastrophic, little south would be better. What does that mean?
So the main thing with hurricanes is the location. Right, a larger storm could hit the Big Bend region and you'd see the property values there are just not as high as somewhere in Tampa. So a stronger storm could hit a lower property value area and you're going to have lower insured and economic losses. The real main problem would be a direct hit on Tampa Bay. So if you go Hurricane Ian was a little further south a couple of years ago, that was sixty five billion dollars
in insured losses. We're thinking this one just early, could be tens of billions, could be in that sixty five billion dollar range. It could be higher, frankly, if it hits as a stronger storm. So that's what happens there, and the path can shift pretty rapidly, So it's going to be down to the last minute before we actually know what will happen with insured losses.
Him.
If I'm and insurer, why do I even write business Florida. It's to say these four folks are getting hammered mold.
Lot don't anymore, right, I guess, So.
Good question, Paul, So a lot a lot don't. The large national carriers that we cover, a lot of them have avoided the region. All State is there, Progressive is there? So those are probably the two biggest public insurance state. Farm is one of the biggest there that's not public,
it's a mutual company. The companies that really have will probably take the brunt of this are Florida specialty writers, so the Universal Insurance, Heritage Insurance, they focus mainly, if not exclusively, on that Florida market, and those stocks are down significantly, and the teams of twenty percent today.
When we take a look at the insured losses, I mean maybe tens of billions, you said maybe the sixty five billion dollar range. What do we then extrapolate that the uninsured losses are because that was the part with Hurricane Helene that just sort of the numbers are staggering.
Yeah, so the numbers are early, and I'm skeptical of some of the numbers out there for the economic losses. Typically the insured loss maybe you're looking at forty percent or half of the losses. But what has happened in these events with large surge and flooding is that the insured portion becomes a lot smaller. The Tampa Bay I believe it was a Chamber of Commerce or had put out a report in twenty twenty looking at what if a Category five hurricane hit the area and they it's
a just residential property losses. We're somewhere in the range of three hundred billion dollars in that event. This probably won't be that bad. And you know, I don't know all the inputs that went into that, but you could see something like that which would maybe extrapolate a hundred billion dollar insured loss. But those were numbers that came out from Tampa Bay.
All right, Matt, thanks so much for joining us. Always appreciate it. Matt Palozola. He is the insurance analyst for Bloomberg Intelligence Center. Bloomberg Arrector broke the studio back in New York. Yikes, we are here. We're in Orlando, and the folks here again, James to com, I was at the park yesterday. People were there, got every the ponchos on, the families were there. I mean, I guess you know, they're kind of hoping for the best here. But the hardy people.
Those well, we were talking to trap earlier from Commonwealth. I was like, oh, we did a lot of people wind up canceling. It was just it was just a handful. Really, there was still two thousand people here, so maybe a few hundred maybe weren't able to come. But that just shows the commitment to financial advisers. I'm actually surprised we're not tasked with being outside with her hurricane storm. And I mean we're not offering, We're just saying we're surprised
we haven't been asked there. All right, Oh my gosh, that's hardcore.
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We need to get back to what's happening in the Middle East. That does not seem to be any lessening of the efforts and operations in that part of the world. Mark Champion joins us, he's a Bloomberg opinion columnist. You've got to calumn out today. Middle East transformation must start with Israel. Mark, tell us what you mean by Israel really has to be leading any kind of change there.
Well, I mean the point I really wanted to make was that, you know, Prime Minister Defension, I mean net Yahu has been criticized a lot for not putting out a strategy to you know, sort of make sense of all of the military action and create a sort of longer term pass so that we can see, you know, how to get out of the war and into some
kind of security and peace. So, you know, he went to the UN and he said, I do have a strategy, and I do have a you know, a long term vision, and he called it the sort of the blessed scenario. But it's it's one in which, you know, Israel becomes a kind of catalyst for the region with its economy which is incredibly strong and sort of technologically advanced, and you know, there are connections, you know, through pipelines and railways, et cetera, all the way through Israel to Europe from
Dowdi Arabia, et cetera. And you know, I'm just trying to make the point, really that for that to happen, he's right that there's no room for Hamatha the lah and for the whole acts of resistance that is committed and exists in order to get rid of the state
of Israel. But he has a problem at home, and that problem is that there are extremists in his own cabinet whose language and you know, kind of ideas about you know, the future of Israel are very similar in the in the way that they don't allow for any kind of compromise, any room for the other side, in
particular the Palestinians. So it's trying to sort of make that point and to say, you know, you really, if you want that sort of uh you know, secure, prosperous future where Israel is accepted and normalized within uh, you know, the the Middle East, then you really have to start at home, and you have to start you know, not just saying the Saudias are on our side, but you know, listening to the Saudiast when they say we want to be but there has to be some sort of vision for how we get out of it.
Yeah, and Mark, you kind of make that distinction between strategy versus military force, right, And I'm just wondering where do you think Prime Minister Benjamin And YEAHO stands on that spectrum of military on one side and then strategy on the other.
Well so forth, so far it's been all military. And you know, it's not that I'm saying that, you know, I'm not one of these people who sort of believes that Israel sort of you know, turned the other cheek after you know, the appalling events of exactly a year ago today they had to go in and deal with Hamma. They are dealing with Hamma. You know, there are always questions though about how you do that and how you you know, how you frame that in such a way
that you can get people on your side. You know, whether it's you know, Palestinians you don't particularly like Hammas, and there's a lot of those in Gaza, more than in the West Bank, for example, where they don't actually live under Hammah. You know, you could say the same in Lebanon, where a majority of the population is not the It does not like Hisbella does not want its country to be used as a platform for Iran to
you know, conduct its foreign policy with Israel. So you know, you can talk about the Iranians too, where a majority of the population doesn't like their regime or want their regime their scope here for a different kind of Middle East, it's just extremely difficult to get to and can't just be done with weapons alone. Weapons can you know, actually open a path, but they they can't get you to the other you know, to the other side, to a place of kind of peace and security.
So mark to that point, does Prime minison that yahoo, Does he have the political capital, does he have the support of the people to play this long game that you're talking about.
Well, I think he would if he wanted to sell it. It's very interesting when you know, opinion polls are done in Israel. There's a couple of institutes that have done Poles and when you ask the sort of bold question do you want to to state solution with a Palestinian state,
there's a majority against. When you ask the question, do you want a to state solution as part of a deal with Saudi Arabia with you know, the US, and that would create this sort of secure environment and a multinational you know force in Gaza to create a transition there. When you when you put it as part of a package where people can understand how it might actually work, you know, for their benefit, then you know, the numbers change quite dramatically and you get a majority in favor.
So I think that the you know, it's all as always it's a question of you know, what you sell, how you explain things, and I think you know that it's the choice on Netanyahu's pot part to to not go down that road, and there are you know, understandable reasons in terms of just pure power politics, because part of his cabinet has told him very clearly that if he does make any sort of you know, noises about a two state solution or a compromise, they will collapse the government.
So if we look forward and if we wanted to see some kind of pivot from Netanyahu or some rhetoric that may indicate some kind of change or subtle shift, how would that be canmunicated?
Well, I think you you know what you would start to see, you know, So the the main message I think, you know, people outside Israel may may not understand quite as well, but within Israel, what he's doing now in Lebanon, and you know, and in dealing with Iran directly, that is extremely popular Iranians. I mean, I'm so sorry Israelis are you know, convinced and with good reasons that Iran has been building up a kind of noose around their country and that this is all very calculated and extremely
hostile and they have to do something about it. So the fact that they see Nephnia who now doing something about that, I think that is very popular. But you know, you could he certainly could sell that by you know, at the same time he's going after Iran, he could organize the ceasefire in in Garda that would get the hostages out that you know, would start to sort of create some kind of scope there, just to create you know, a more political path and to start building on that.
So you know, it is imaginable. It's just a choice that Netnia, who at the moment does not want to make, and I can't see any sign of him making that change anytime soon, especially when he has people in his government, you know, who are absolutely opposed to it.
Right all right, Mark, thank you very much. We really appreciate getting a few minutes your time. Mark Champion of Bloomberg Opinion. Calum is giving us the latest on the Middle East and maybe what might be some next steps there, but a very difficult situation in fluid situation.
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Paul Sweeden and I we are live from the Commonwealth National Conference for financial Advisors right here in Orlando, Florida. We will be back and taken off before the hurricane hits though, So there is that. The theme for this year is the Future is Now, and that mission is to help advisors build a blueprint for their future and empower advisors to navigate business transitions. And this is the tenth year that Bloomberg Radio has broadcast live from Commonwealth's
national conference, so that's pretty cool. Joining us now is Trap Plowman, President and COO of Commonwealth. First of all, thanks for having us ten years Spielzic milestone.
It's terrific.
Did you get us anything for that?
Yes, I have some, but no, thank you for all your support and coming.
So walk us through the Future is now? What does that mean this year at the conference?
Yeah.
One of the things as we were, Commonwealth works to support so many advisors who are really small business owners. One of the things you have to do, absolutely is be thinking forward and constantly navigating an increasingly complex industry with regulation, with technology, and if you're just focused on the next quarter the next year, you're going to fall behind.
So the future is now.
You really need to be looking forward, and it's our responsibility and it's one of the things that we enjoy doing is helping advisors think forward and start preparing now for the future.
Trap Let's say I'm an advisor at a wirehouse of Smith Barney and Merrill Lynch. What's my thought process when I think about leaving the mothership and kind of going on my own and being a registered independent advisor. What's the thought process there?
Yeah, I think there's a lot of different reasons, but I think three that stand out and we commonly hear is one, as you get to build your own brand, you building your community, and you're known for what you want to stand for. Two is just the greater independence to make your own decisions and not necessarily have to follow the lead of a larger employer has many different conflicts and objectives and priorities. And the third and probably most importantly is you're now building value in your own
business that you can monetize. And so as an employee, oftentimes you know you're leaving to get the gold watch. Here, you're building an incredible value that you can leave to the next generation or sell. And we're seeing the values of these independent businesses increase dramatically over the last couple of years, and I think that's here to stay.
Why so, why is this increasing so much intoch a small amount of time and how do you see that playing out?
Yeah?
I actually think the businesses were chronically undervalued Historically. People didn't realize as there's been the transition from brokerage business, which obviously is commission based and it's sale to sale. Our advisors are over ninety percent pheebas, then many are one hundred percent phoebeas as an RIA or fee only.
And when you have that recurring revenue stream and you're doing more than just investment management, you're doing financial planning and building relationships with clients that are deep and sticky that now then has value versus something that previously was trained actional. So as we've seen the growth in Phoebe's business, that has exponentially increased the value of those businesses and gives them something to transition.
So when you meet with your financial advisors at event like this trap, what do you hear most from them? What do they need right now? Right now? It's weather advice?
Yes, well there's that for those of you wondering. It is cloudy, rainy, not too much wind.
Yet, no, not at all, I think we're in good shape, but it's it's an array of needs. And I think one of the strengths of a community like Commonwealth is we have fantastic advisors who are willing to share with each other, and so they're always you know, someone's already been there, done that, so no one needs to reinvent a wheel and Commonwealth we can play a great role in bringing, you know, the best practices together to unlock
them for advisors. So for a wide variety, it's you know, how do you scale your business and get to the next level. How do you add and attract new advisors and train them, how do you take your technology, your internal infrastructure stack, adopt AI. It's an array of challenges. One of the most fascinating things that has impressed me is so many advisors are like, where can I find
the next client? At Commonwealth, we never hear that they grow so incredibly fast through referrals, they're coming to us. How can I find the next advisor to keep up with the growth that we're seeing. And as you all know, as businesses are growing in scale and you have to change your processes, evolve and get more administrative support. So we really help them, not just as a BD or an RIA doing investment management. We're helping them run small businesses.
And that's really the central theme we're seeing.
How long do you think that growth can continue for?
Right?
Because in essence, people made more money the way does went up. We had the COVID stimulus, right, so they needed financial advisors, right. And you have a huge amount of equity within the stock market for regular individuals. At some point does that max out? And if we had like a huge drawdown or for some exogenous events, those small businesses get real small.
Yeah.
I actually, in looking all the different factors that can drive that activity, we're still continuing to see growth in the population, growth and savings overall, if you will. So I think the demand for financial advice is actually only going to improve. And there some concerns with the advancement of AI and what could the impact that be on many industries. But the reality is financial advice is not just again investment management. It's caring for people on a
topic that can often be insecure and stressful. So you know, the most successful financial advisors are the ones who are really great at human relationships and caring for people through very challenging times, and so I feel what we have great tailwinds behind us and we'll continue to see growth in this industry, not just in commonwealth.
Well, one of my offspring actually did follow me in my footsteps in financial services, works for a financial services firm, and you know, his firm says that their clients are really going to need them over the next twenty to thirty years because I have this massive wealth transfer from my generation to the next. How do you guys frame that topic for your advisors.
Yeah, that's absolutely accurate, and we have hundreds of breakout sessions here and many are on that exact topic. And you know, the wealth transfer between insurance, trust and state and taxation is very complex and it's obviously there's a lot of emotion and people behind it, and so it
is starting early in the planning process. And one of the things we have found and highly recommend and work with our advisors on is for whoever is managing the wealth or you know, controls the wealth, if you will, is to start engaging with the next generation now and really bring them into the planning and the reasons behind it. One of the most powerful things you can do. People always hear and understand, you know what, what is happening,
but why is this happening? And so are we We have our financial advisors really engage in that wealth transfer early on to really explain that part of it and help all aspects of the family, not just represent one side and turn it into you know, two people on the other sides of the table. We want to bring everyone to the same side of the table.
This is just curiosity. But how much is the conversation also revolving around retirement, not for say me and Paul, but for like our kids, Like who thinks that anyone's really going to have social security in forty years?
Right?
Like?
How much is that conversation evolving as the fiscal depicit continues to balloon out?
Yeah, I worry about that for myself, and I have three daughters who I don't even talk about social security because I don't think.
They're necessarily think or like you don't want to rely on it, Yeah, you surely.
Don't want to plan for it. I think of that as a bonus, not as the foundation. And so yeah, certainly one of the big things and think about retirement is if you quickly put the Social Security in that perspective. What actually becomes a much more exciting discussion we're seeing more in this day and age is people firmly want to keep working and extend their careers but doing something in their past about and that they love, and so
often it's really about that second career. At what point can you make that transition from where you're building wealth and focused on that in your family to where you're focused on yourself and your spouse, for the people you care about, and doing something you're passionate about. And so it's less about retirement and it's more and more still a key part, but it's more and more too about what's that second career and that really changes the retirement portfolio.
It's pretty cool.
It's a radium.
Yeah, I was gonna say, is are you apologizes at the moment?
Exactly?
Talent? How do you attract and retain talent and maybe even how do your advisors attract and retain talent?
Yeah, it's an ongoing challenge and it's one of the things when you're running a small business, as the advisors are, they're not just financial advisors, they're entrepreneurs, and that's a talent and skill that they need and so certainly they can work with us to help them with that. But you know, we're in all fifty states and they're in their local communities. So one of the cool things we've done here is, you know history, no one's going to
trust the twenty something to manage their portfolio. It was tough to break into the business. That's changed with financial planning and a lot of the technology that's come to the space, and so a lot of universities across the country have certified financial planning programs and they come out accredited and they can come join in office and do a lot of the investment planning and run the work
and then join in the advisor meetings. And so as we think about attracting and retaining talent, there's a growing pipeline. So in the past, the employee models used to train people cold. Now they're coming out of college prepared and can make a difference.
You have like about a minute left, But are the people who are going to the wealth advisors are they getting younger and younger or are they still older and older.
We've seen that overall the HOLD study as we look at the average agent demographics, which overall we see is promising Certainly people are getting older, but that means there are more people are coming with wealth, and so yes, people are addicted to their phones and are comfortable with apps. But once your wealth gets to a certain level, you know, you become a little bit more risk averse in terms
of owning that responsibility. And frankly, when you're in a relationship managing wealth together, you don't want to be the one solely responsible things go sideways. You know, you want to be with your partner, aligned on your interest and have some of the supporting both of you. So I think we're great with you know, the wealth transfer and next generation coming in and trusting financial advisors.
Trap.
Thanks so much for joining us. Really appreciate it. Thanks for hosting us again ten years running. We appreciate that. Trap Chlobman. He's a president chief operating officer of Commonwealth Financial Network. We're down here at their national conference here in our landowness place is massive.
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Thirty from Alex the alongside Sweeny Sweeney. We are live from Orlando, broadcasting from the Commonwealth National Conference for Financial Advisors. The topic is this future, The future is now and this is the tenth year the Bloomberg Radio has broadcasted live from this conference. Very much looking forward to all the conversations where we are going to have today. Let's kick it off now with Norman Grant, Managing director of Grant Capital. Norman, thanks for stopping.
Get to chat with you, absolutely, thanks for having me.
So the narrative in the broader market still after we get this job to report on Friday that was quite good, is that we still are in a US exceptionalism scenario where stocks can still be bonds. That this is kind of the narrative for the medium term. How do you guys look at it?
Yeah, we think that it's oftentimes really difficult to tell where we are in a cycle, and it's it seems like the Fed is doing a remarkable job of, you know, creating this soft landing. You know, we came into this year thinking that things were going to be very tumultuous.
There were a lot of you know, a lot of my clients were, you know, very concerned thinking that it was going to be a really challenging year, you know, but I think it shows that how resilient the United States economy is, and they've done a brilliant job of navigating I think the interest rates, it's been pretty challenging for still for some families. I think there's a dichotomy out there. I think if you're a family of modest means,
it's been pretty tough for you. It's been pretty tough for you, not just this year, but for a few years.
You know.
I think if you're you know, you've you've got some means, then things have been pretty well for you, you know, if you've owned assets. So it's been quite interesting on that front. But jobs are hanging in there. You know, we're still at pretty low levels of unemployment and things appear to be holding.
Up quite well.
And the fifth seems to be navigating this pretty good.
What's a typical client for granted capital and when what do they need from you? Mostly?
Yeah, you know, so a typical client for us is, you know, our really big jam is is to really think about super high networth clients. Like Jeff Bezos, Mark Zuckerberg, and what we like to do is d those services that white glove service all the way down to clients you know, who are let's say somewhere around you know, five hundred thousand, you know, on the on the low end, and I would say maybe up to about two point five million. That's our sweet spot of where we normally
like to engage clients. But we're very very big around holistic comprehensive planning. That's where Commonwealth, you know, our firm, really supports us well with a lot of great services that we can drive. We also run a very unique investment model as well that tends to be quantitative based to protect to the downside. And then lastly, the thing that we like to be known for is delivering exceptional client service. We feel that leading up to the pandemic,
client service was lacking. During the pandemic, it became almost non existent. A lot of people gave up on client service, and so we we really try to rally around that and make that a big part of our practice of what we delivered for clients, so families and then also businesses. We help companies with helping them optimize and strategize their cash flow. We help them think differently about what they can do with their capital. You know, so we do a lot of really exciting things with businesses.
Yeah.
First of all, I love that you said that's our jam, because that's how I roll, so right, I appreciate that. So when you're talking your jam to small businesses, I'm curious as to what are their questions and how did they differ from say the guy making a million or the guy making five hundred thousand.
You know, businesses are first and foremost it's about cash flow and cash flow.
But UNI, because this guy loves me, go ahead on a high touch state.
Yeah, obviously, you know muni's you know, definitely are very important to high network families, but also the businesses as well. But cash flow is a very critical component for them, and it's something that keeps you know a lot of the leadership teams of businesses up at night of how they're managing their capital. You know, are they really optimizing it? They're always thinking about their short term plans, intermediate plans, long term plans. How does how do they deploy this capital?
How conservative should they be with it? And you know, and so that's where we can really you know, come along them, be with them every step of the way, helping them understand how they can optimize both their short, intermediate and long term you know capital.
You know, I first started coming to these events, I was surprised that I thought most areas were pretty vanilla in the sense that stocks bonds. I was surprised that a lot of these ras, because of their clients want it. They want alternative investments, and they're more fully. I was surprised that the not only do they think about alternatives,
but maybe the allocation to alternatives. How do you guys think about alternatis, whether it's private equity and private credit, hedge funds, that kind of thing.
Yeah, you got to have it, Yep, you gotta have.
How much of it do you have to have?
You know?
I think that you know, for especially you know, a lot of our clients, I think it definitely deserves, if nothing else, a conversation with clients to let them know that we do have a broad breadth of alternatives available to them, whether it's private equity, credit, lending solutions. There's so many things in the alternative space, and it's a pretty hot topic nowadays as well, and so I love that about Commonwealth is that we continue to offer a
pretty robust offering in the alternative space. It's definitely something that a lot of high network clients talk about, It's something that businesses talk about, and it's definitely something that I think deserves a place in the portfolio, you know how much five ten, fifteen, I definitely don't think. I've heard that some family offices are as high as fifty percent alternatives, So it's definitely garnering a lot of attention and a lot of adoption.
Is it more private credit? Is it private equity? Is it just like a lump thing?
Well, private credit has certainly been extremely hot lately.
A lot of the products available to you.
Absolutely, absolutely, absolutely. We have quite a few of the major players in the space that are on our platform that we can offer clients, and it's growing and growing every day every day. In fact, we actually have a pretty big partner, I Capital, who is on our platform and they tend to be a central hub for a lot of our alternatives. But yeah, you got to be in the space, you got to be educated up on it,
up on it. It's an exciting space with a lot of really great offerings and I like to say there's a democratizing of it where it used to be just for that really high networth client. But Commonwealth is doing some pretty interesting things where they're really getting those the entry points down to make it a lot more accessible by.
A lot more of the clients. Norman, thanks so much for joining us. Really appreciate it. Folks on radio, you can't see it, but Norman is sporting his west Point sweater class of ninety three. I served five years active duty after graduating from west Point, so we thank him for his service. Norman Grant, he's a managing director a Grant Capital, given us his thoughts on these markets and on serving investors here. Coming up, we're gonna have Matt Palizola.
He's the insurance analyst at Bloomberg Intelligence. Yes, we only talked to him, it seems like when there's a hurricane coming, but where he's going to join us here and give us some thoughts about this new hurricane coming in towards Florida, what it means for uh, the insurance industry, and how the coverage will be and maybe what the insured losses will be, and kind of what we've learned I think
from all these hurricanes. Is there are insured losses, but then there are a lot of uninsured losses, and that's really where the pain gets a lot of folks. So we're gonna talk to Matt Palasola on that, get his thoughts on that, and of course we could provide in some on the ground reporting.
We got on the ground reporting, although currently in Orlando we got nothing. If we were in Tampa, maybe that would be different. Could see the largest evacuation there and.
People are still at the parks. I was there yesterday. People were there, you know, Hurricane be damn with her out there, going to see Mickey Melson.
Maybeg oh later, maybego later? I think you lad, Yeah, got it to go.
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Let's check with our next guest here right here Interlando at the conference. Virgil Kal, President CEO investment advisor at spring Ridge Financial Group, of the firm's global wealth advisors. Virgil, thanks so much for joining us here.
Happy to be Here's what's.
The conversation you're having with your clients these days? The SMP's up twenty percent, you know, I don't know, we got an election coming up.
What's the conversation like, Well, I think I could speak for myself and many other financial advisors that since July were happy that the market's broadening out because for the last year and a half, we just had a concentrated market and everybody was so laser focused on how am I doing compared to the S and P, and it got to a point where the SMP was no longer
as diversified as we'd like it to be. And so I kind of start with, Okay, most of my clients are in retirement or heading into retirement, and we've been blessed because of the extreme increases in interest rates to have better yield than we've had in more than a decade.
And so when you know that you can make some money without taking a lot of risk, and you have many parts of the bond market that are trading below par and yields to worse that are six seven eight percent, and you compare that to the higher evaluations of the S and P. You start to think, okay, well, remember diversification, Remember that things don't go up forever, and income is
a part of your return. And you know, before price conscious and we increase, the SMP became more tech focused, and it was price up, priced down.
Income was a big.
Part of a person's return prior to the zero interest rate environment. So to me in this environment, looking to add income and to diversify, and thank.
God, we've seen, we've seen that.
We now we kind of have a situation short term just as of Friday, that we might have stocks and bonds going down together right like we did last fall August, September, October. But in August when we had the scary cell off, it was like, okay, bonds were doing their job.
They were going up with this.
So we like to think that right now, I think the market's trying to digest. Okay, So we thought the economy was slowing down, but soft landing. We were saying, it's normalizing, and that's nice, that's a nice, nice word normalizing. It's you know, we're way past the pandemic now, but it's kind of like, Okay, a couple months ago, we got the data point that there was an eight hundred and eighteen thousand job revision, right, and then Friday we
get a surprise over one hundred thousand more jobs. And it's like, okay, which data point is correct? You know? And granted the economy and the stock market, you know, the market's a leading indicator, right, so the market wants to get happy, but not too happy to cause interest to go up, because then we'll have this volatility that shakes everything up.
So you're basically describing, you know, that soft landing, that goldilocks. And to your point about the jobs number, City had a note oubt that said, look, they are skeptical about that soft landing and say we could see revisions later and then that's going to affect how we view the overall economy. So if you're looking at a sixty forty, is still sixty forty.
The right way to go?
Like?
Which needs not for everybody?
Right?
Okay, so not for everybody, but you know, I think a lot of.
People would be happy to make I can figure there's a chart that if interest rates of all by one percent, we already got a half a percent cut, that the upside to many parts of the bond market excluding the thirty year treasury, because I think that has too much volatility for most people, is like five and a half to twelve percent returns on the upside and maybe two to four percent on the downside in the bond market.
And I'm thinking a lot of people that.
Are heading into retirement or are in retirement would be happy with the five to twelve with very low downside versus a market that's kind of riding high. I'm only saying that from the standpoint of the growth part of the market that I kind of think that you know, decide how much volatility do you want to take to get that extra couple percent If you don't need it, are you willing to take the ten percent downside the fifteen percent downside? So I just love that income can buffer,
can buffer volatility. Now, I think there's great dividends in many of the value side of the market, the value side of the market and the international markets. And everybody's like, oh, the market's overvalue, the market's overvalued, but.
The equal weight SMP isn't overvalued.
The small and mid caps are as attractive to the large caps as they've been since the year two thousand, So there's just like a lot of dislocations that I see where wow, like, why is everybody chasing this when there's all these other things that are not expensive that if interest rates do in fact continue to come down, you have to kind of look at your portfolio and say, Okay, now it's a different environment. We're not in a rate
hiking environment where rate cutting environment. What parts of the market are gonna do well when rates are coming down and it's the companies that have a lot of debt that get helped, you know, And and wages are holding up okay, and people are still spending, So you know, I think there's there's something to be said for opportunities.
If many of your clients are either in retirement or approaching retirement, how about alternatives? Is that not something for them? Because I hear a lot of ras that are they do talk about alternatives?
Yeah, And I do think alternative alternatives have their space in a portfolio.
A lot of people don't understand them.
I think it's interesting, you know, the media in general, we focus so much on the stock market, and then I'll have a person say, explain the bond marketing, and then Okay, we're gonna explain the bond market. Then we're gonna explain alternatives, and then how can a person track
what that alternative is supposed to do. Because I think a client is comfortable when they understand their portfolio and why it's structured the way it is, and does that resonate with their thoughts on the economy and the world and geopolitical risk and all these things that we have to deal with. And days like today when we see and even last week with the Middle East conflict, that when you have energy kind of being the sector that's going well, I'm thinking that's.
Not a healthy market.
You know, remember twenty twenty two energy did well, nothing else did, so it's kind of worry about that.
So when you take a look we were just talking about, you know, fonds and and where to take risk there? Do you think that the money are you telling your clients that have money and money market fund more high I'll save his account? Do they stay there or do they need to put that money to work elsewhere? And I guess when did they do that?
So reinvest a big risk because people got kind of happy with their five plus percent cash rates. And we've been talking to almost every client, you know, if you don't need this money for the next year. You know, if you need it, then keep it in a money market because you're going to use it anyway.
But this is the time.
And actually I would say the best time would have probably been last October when the ten year yield was five, right.
And the belts rang and it was like, oh my god.
Five.
We haven't seen five on a ten year in a long time.
So I kind of think even now, okay, the tenures above four, and the market doesn't like that, and everything's kind of repricing short term. But I think that if you consistently invest in, you're diversified across all areas of the income market, knowing that ninety plus percent of your return is going to come from your starting yield. I think it's a nice little setup.
So here we are at the Commonwealth National Commerce two thousand plus. Fellow ris here, Why do you come here? What do you hope to learn?
I just think Comal Financial Network has done a fantastic job of attracting like minded professionals. There's a lot of people that are serious professionals. We like to exchange ideas, we learn from each other. There's no like jealousy.
Aren't you all competitors too?
I don't think so.
I think we compete with ourselves, you know, and we try to make ourselves better. So I've gotten a lot of good ideas from my fellow advisors and to exchange them things that I thought were useful, and we all become better. In the industry becomes better because we share ideas.
And how are you growing your business?
Right now? It's mostly referrals.
If we do a really good job for our clients and we stay in touch with them, and we do a lot of you know, a lot of people are doing virtual meetings, but we're doing a lot of in person meetings.
That's kind of the nature of our of our business.
And I have a fantastic team, so you know, I can't be everywhere at all times, but we just have a wonderful team, and we keep our clients.
Very close to us.
We know exactly what's going on in their lives, and we know how to adapt their portfolio and their planning to the changes that their lives are.
Bait. Where are you based?
We're based in Reading, Pennsylvania. Okay, it's why I'm missing, But most people don't know where why I'm missing is a suburb of reading.
Right, So what's a typical client for you?
For you guys, you know what, people have a little bit more money than they used to have, Like have been the business for over twenty years. So I would say, you know, the average net worth of a person if they if you include their realists state is probably like one to two million. But you know there are people we service the the parents of uh, you know, baby boomers. We service the children of the baby boomers, and sometimes
the grandchildren. So when you say what's the average client, there's a lot of a client base that is the family members, which we want to know, the family members we want to know, We want to be a part.
Of their lives and so and it's like a pass down wealth effect, right, I guess, yeah, how's that going?
I just I and I love when when a client will bring in Okay, so my son or daughter is going to college and she's considering this this industry.
Can you talk to them?
Okay? That's love that okay.
And I love to see like.
Their eyes light up, like they're really interested in it, you know. And then sometimes they become interns and set them out to the universe. To do good things for good people.
First time my friend about when Ra was and her guys just went, I'm glad you get that from you.
So, I mean, we're all blessed to be in this and just you know, to gather knowledge, share knowledge, and improve people's lives. It's just a wonderful industry.
Virgil, thank you so much for joining us. We appreciate you for having me. It user your time, Virgil Kal. She's a president CEO investment advisor at spring Reach Financial Group, giving us her thoughts on these markets.
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From alex c alongside Paul Sweeney. We're broadcasting to you live from Orlando from Commonwealth's National Conference for Financial Advisors. This year's theme is the Future is Now, and the mission is to help advisors build a blueprint for their future and empower advisors to navigate business transitions. And this is the tenth year that Bloomberg Radio has broadcasted live
from the commonwealths National Conference. Joining us rare here right now in in studio, in our makeshift studio, I should say, is Chris Maximovitch. He's president of Louisville headquarters Global Wealth Advisors. He's based in Dallas, and he joins us right here in Orlando. Chris, good to see you.
Good to see you.
First off, just talk to us about the clients that you serve. Who are they, what their net worth is, and what they're kind of planning for in their questions.
Yeah, we're a holistic wealth management company.
Cloes holistic mean meaning we.
Really cover every facet of their financial life, ranging from asset management to their estate planning, retirement income planning, to business exit planning for our business owners, and you know, really try to step into their financial shoes the best we can to understand what they're trying to accomplish and help them get there.
Yeah. You know, I live down at the Jersey Shore and you drive down the coast and it's like any part of any coast, thousands and thousands and thousands of homes on the water, a couple million dollar house, half a million dollar boat in the back, I'm like, who are these people? And because there aren't that many Wall Street in New York law jobs for all these people. These are real people with real businesses, that's my conclusion,
and they're creating real wealth. How do you talk to those people when they maybe sell a business and they got to think about what to do with it all. I've already got my house at the down on the water, I've got my boats for families, I got my vespa. Family's all educated. But what do I do with this stuff? Now?
Yeah?
You know, the conversation goes from God, I built this monstrosity of a business all my life, worked hard to get there, accomplished all the things I wanted to accomplish. But now what right? And it becomes for a lot of our clients about legacy, you know, passing it on to the next generation and in some cases multiple generations, and not having it become a disruptive force that tears
the family apart. I think that commonly that's the biggest issue our our business owner's face as they exit their business.
If they don't exit and they're staying in and I'm assuming cash super important, So what do they come to you for to be able to have sort of cash on hand, et cetera.
I mean it starts with basic financial planning principles, having your cash reserve intact and having liquidity, you know, available for all of the you know, unforeseen expenses we can possibly think up hurricanes, you know, for for our Florida homeowners. Then from there, you know, continuing to build upon, you know, a framework that, hey, if these are the big ticket items I have in front of me the next three five plus years, I need to have liquidity at those
stages as well. Right, And I think too often we're we're chasing ill liquid promising you know, potential investments, not taking that into account.
So what are the types of questions you're getting from your clients these days? I mean, I'll just leave it at that. What are they really need for me today? Maybe? How's that changed over the last ten to fifteen, twenty years.
You know, over the last twenty years. I've been doing this twenty four years now. The fast pace of news drives a lot of emotion, right, So just last week I had multiple calls on you know, the port strikes. Oh my gosh, what is this going to do to the markets? My response was We've been through this before, right, We've had strikes before, and more often than not, it's not even a news item in a few days because they probably kicked the can down the road and it
wasn't minutes later. You know, they pushed it to January fifteenth, I think, right, we don't make decisions on short term news items.
One thing though, that isn't short term is what the Fed is doing. Like, yes, it it is like what the bets are, what they're going to do versus the longer term, what the Fed funds rate. It looks like. But what it does mean is lower yields. Even if they're stickier, they're still going to be lower than they
are SA today. That feels like a done deal. So when and where do you tell your clients to take their money out of money market funds are high healed savings account and where do you tell them to put it? And when do they do that?
Yeah, great question. We've we've had gosh numerous discussions over the last two months about positioning, you know, preparing for that and in some cases, you know I mentioned ill liquidity, Well, in some cases it makes sense to take some of those liquid funds and move into short term ill liquid you know, positions such as money market move to CDs to lock in a you know, a longer term rate.
It's you know, it's a it's a dilemma because obviously rates are coming down and you do have the opportunity to lock in certain bond instruments or other fixed income instruments right now, but then you take on ill liquidity and you've got to go back to that balance.
You're down in the Dallas Fort Worth area, one of the best economic stories in this country for the last I don't know, fifty years, it seems like, at least since I've been in the business. And I know that JP, Morgan, Goldman, Sachs, Morgan, Stanley, they put their best people down there, the wealths men. They're opening up wealth management office, messing around how do you compete with those guys.
I don't necessarily think we compete with them. I like to pull some people from them, but you know, I think at the end of the day, there's, like you said, it's booming down there, and there's enough people to go around, okay, right, But we also bring different things to the table, you know, where where they might specialize in certain banking instruments that we can't get our hands on. That's really not our
focus anyway. You know, wealth management, there's there's a hundred different ways to do it, and ultimately, our clients have faith and trust in us that we're doing the right thing, and.
That's it always boils down to its relationships. So we keep hearing over and over on that front. I know you mentioned that you want to kind of stay away from short termism, but we do have a US election. You do have the idea that a budget deficit, fiscal deficit is just going to keep growing no matter who's in the White House, and that becomes a real issue when do your clients care about it? Because you could have said this exact sentence like twenty five years ago.
Yeah, yeah, I mean, you know they cared about it when I got in this age. Yeah, it's I mean, it's it's it's an issue that continues to build and build and build, and eventually we're going to have to deal with it, and it's going to be I would think a pretty negative uh or have a negative impact on the economy and markets and and a lot of wealth. But you know, we have one vote, right, every one of us has an opportunity to get out and and vote for who we think can make a difference there,
and I think that's where it starts. I don't have the answer to it, though, yep.
I don't think a lot of people do. The candee, Chris, thanks so much for joining us. Christian Mexicovic, President Louisville at Louisville Headquarters at Global Wealth Advisors, located down there in the Greater Dallas Fort Worth Metroplex Center, which just keeps getting bigger and bigger and bigger.
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