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Need templates for a sales proposal that'll close that deal. Do that with Acrobat. Need an AI specialist to tailor the tone of your market report to sound real smart in real time. Do that with the all new Adobe Acrobat Studio. Learn more@adobe.com Dothatwith Acrobat. This is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. Bloomberg Business Week Daily with Carol Massar and Tim Stanweck on Bloomberg Radio. Hi everyone. Welcome to a special edition of Bloomberg Business Week. We are looking at some of our favorite guests from the Schwab Impact 2025 event held this past week in Denver, Colorado. This event brings together advisors from around the country and those in the industry that support them with services and tools. Coming up, we're going to hear from some familiar names, folks like Liz Ann Saunders and Kevin Gordon and more. Plus, look at how AI is changing the investing landscape. Yeah, we're going to talk about AI a lot. We begin with Schwab CEO Rick Wurster. Well, some deal flow. Charles Schwab agreeing to buy Forge Global Holdings. It's a marketplace for buying and holding shares of private companies. It's about a $660 million deal. We're talking about $45 a share. That's about 72% above the closing price on Wednesday. So delighted. I didn't expect to be talking to you so soon, but I'm delighted that you made time for us. Rick Wurster, of course, President and CEO of Charles schwab here at Impact 2025. It is your annual event for independent advisors. And I'm sure that they're kind of curious about this deal. Why now and why this company? Well, we're thrilled to be able to democratize access to private investing. This is a market that forever has been for the high net worth and the ultra high net worth. And with the acquisition of Forge, we'll be able to bring access to private companies to every investor. And so we're thrilled about that. Second, it continues our history of innovation, and our innovation has always centered around what can we do to provide more access, more opportunity to our clients so they can grow and improve their net worth. So we're just thrilled about this. And Forge was the firm we really wanted to work with. There's been a lot of speculation about this company, as you know. Yes. Well, you know, their Stock is down 90% off its highs, and at the same time, they're the leader in the private company marketplace. And so for us to be able to acquire the leading company that has the deepest relationships with the private companies and who have the stock opportunity, it's just phenomenal for us. Rick, was it a bit competitive? And I'm just thinking about the premium that you guys paid. I'm thinking of, was it. Morgan Stanley just did a deal to buy equities, and. Which is another similar platform. So it does feel like big firms are jockeying to provide this access to their investors. So was there pressure to do this deal and get it done now? Well, as a public company, Forge has to run a process, and so absolutely, this was a competitive process. They've been pretty, I think, transparent about this. Yes. From our standpoint, though, we think we're paying a very reasonable price. It's five times revenue. It's less than what we trade on on a revenue basis. And the opportunity for us in private markets is so much bigger than what we're paying for the company. We're paying $660 million for the company. This market could be huge. And when we bring our 46 million clients to this marketplace, I think the opportunity to grow our economics is significant. But most importantly, and why we did this deal was not about making money relative to the purchase price. It was about democratizing access to private investing and to helping our clients grow their wealth. Will this only be for accredited investors, or what's the plan in terms of new product placement or product offerings to offer it up to the retail investor? What I'm so excited about is we're going to have an opportunity for every type of investor to invest in alternatives. With this acquisition, we'll have three ways that clients can invest. Today we already have for both our RIAs and retail clients, a menu of alternative managers, the leaders that you're aware of, some of the big names in private equity and venture capital. That's one way our clients can invest. The second way is through this acquisition of Forge, which owns an asset management company. We will in the first quarter of next year launch an indexed fund that is an index of the 60 biggest private companies and any investor with any wealth, if they have interest in that will be able to invest. And then third for accredited investors, we will have a marketplace opportunity for those investors to buy individual private companies and invest in those companies directly. That does require you being an accredited investor. A couple of questions I want to ask you. So how does it kind of improve your ability to win more wallet share when it comes specifically to clients? We know that retail investors have been clamoring for more access to private markets. I think we've gone, I know it's not about money. Yeah. Or I know it's not about in terms of the price you paid, but it is about right, like you want to make sure your clients are happy and they're getting all the offerings. So I'm just curious, how does it help you win more share? Over the last 10 years we've become a premier destination for high net worth and alternate high net worth clients. And the reason for that is we have a product offer that can't be matched whether it's access to privates, lending capabilities that are that are straightforward, fast, efficient, with great rates, wealth, support on their tax, trust and estate needs, and access to live individuals to speak to. They can walk into one of our 400 branches all across the country, have a conversation with a real life person about their financial needs, have a discussion about financial planning and what's going on in their life. And so we really have become over the last decade a premier destination for high net worth clients. And this acquisition just adds to our capabilities. What about from your RIAs and I think about all the independent advisors who are here. Right. This is what this event is all about. So how much does this kind of help them in their pitch to clients? And I'm just curious, is this to some extent in response to what you've been hearing from independent advisors? It absolutely is. And this is a game changer for us in the RIA space. Today we have $5 trillion of RIA assets that we custody 1.2% of them sit in alternatives, we know there's more demand. That number probably should be closer to 5, 6 or 7%. And with this acquisition, we've now given them three different ways to get invested and I expect over the coming years we'll see that 1% grow more towards the 5%. So the RIAs are thrilled. They've wanted us to do more in alternatives and I think with this acquisition we've nailed it. And you said the new client offerings, it's next year, we'll see it early part of next year. Well, Forge is up and going today, so hopefully some of our clients will go find it and start getting invested if that's what they want to do. But non accredited, I think about like, yeah, that will, we're going to launch the fund in the first quarter of next year. That's the current plan. And then we'll, we'll continue to roll out their services in the coming months. You know, the other side of this, Rick, is, you know, concerns about hurdles in terms of transparency and investors really understanding what they're buying when they tap into anything in the private markets. So are there any kind of hurdles that you anticipate, regulatory or otherwise? That's why we really wanted to work with Forge because Forge is the market leader in providing robust research to clients and so clients will be able to access that level of research through Forge. In addition to that, we've also stood up a team of alternatives, investment experts at our firm that any client can call and talk to about, you know, question they have about a type of alternative or a particular investment that they want to make. And so we really are trying to do everything we can to support clients. This is a great opportunity for clients to be diversified, to grow their wealth in a new asset class. But at the same time, we want to make sure we do everything we can for them to be able to do this in a thoughtful, well researched way. Is there a company you're most excited about that's on the Forge platform or that might be on the Forge platform at some point? I mean, there's OpenAI, there's anthropic. Is there any company that you're really excited about? There's not a particular one I'm interested in, but, but I am thrilled that there are a lot of people on our platform and a lot of people that listen to your show that are active in markets and they, they want to get into Kraken because they love crypto or they love Elon Musk and want to get into SpaceX. So SpaceX was another one. I think that's what's so interesting is that we find a lot of our investors do have these passions and now they're going to be able to invest in them through private companies. So we know you took over in January. This is your first deal. Is there more ma to come? How are you thinking about what else you need to bring under the Schwab umbrella? Well, with 46 million clients on our platform, we have an incredible opportunity to continue to add capabilities to serve and meet more of their financial Life. The average 50 or older than 50 year old client has seven financial services relationships in their life. So we want to add more and more capabilities so they can handle more of their financial life at Schwab. And as we add those capabilities, we'll either build them, we can partner, or we can buy. And so we'll look at all three of those. But we want to round out our capabilities and do everything we can to stand behind our clients and make a difference in their financial lives. And just one last question. Mostly small, probably tack ons. I mean, you guys already have digested a large company. So I'm just curious. Or could it be a pretty significant ideal? You know, it's going to depend when again we'll look at build by partner based on what capabilities we want to add. But I think we're open to just about anything. We want to grow our company, we want to do the best job we can serving clients. We want to make a difference in their lives. And if there's a company or capability out there that we can add to our platform that's going to make a difference, we're going to do it well. The market environment right now we, we want to dive right in there because really this week we've heard from different Wall street executives that an overdue collection have weighed on the market this week. So reduced expectations for Fed rate cuts, a prolonged government shutdown. Michael Burry added to the negative tone with his disclosure of bearish wagers on Palantir and Nvidia. How do you see today's environment from sort of a risk reward perspective? We try to focus our clients on the long term. I think that owning securities and assets over long periods of time will generally go up. It's really hard to get the timing of markets down because you have to make two correct calls first. You got to nail it to get out at the, at the right time, which is really hard in the strength of the kind of market we've had and the momentum we've had to get out at the right time is incredibly hard. And then you've got to be able to get back in at the right time or you miss out. I was down in Charlotte, North Carolina, visiting with some clients and I heard from one client who back in 2016 didn't like the presidential administration and so had sold out of stocks. And this was back when we were having a pullback and they said would now be a good time to get, to get back in the market. And they'd sat out a huge amount of gains over a short term point of view, we try to have clients avoid that. If clients can stay in the market and tolerate some volatility, we think over the long run that gets rewarded because it is so hard to call the markets both when to get out and when to get back in. So as you walk around the floor and you're talking to advisors, I mean, what are they talking about, you know, in terms of timely advice that you're getting maybe from the advisors and what they are kind of hearing from their clients? I think one of the most pressing topics from investors today is how to navigate concentrated positions. The S and P is as concentrated as it's ever been. Right. The Mag 7, the Big Tech. Yes. And it's created tremendous wealth for lots of retail investors. And now they're wondering how to diversify their portfolio and to do so in a way to minimize their tax burden. And there's all kinds of strategies that they can work with their advisor on to create a more diversified portfolio portfolio without having to pay a tremendous amount in capital. How hard is it though, that that when clients are like, but why would I want to get out of Nvidia when I've seen what they've been doing for how many years? Like, how tough is that? Because we constantly have conversations of people saying it's time to, you know, broaden out, back off the big tech. And then it's the big tech with so much momentum. Well, you're absolutely right. And it's a really hard conversation to have. And oftentimes we don't win it. But we want to make sure the client is cognizant of, of the risk and the choice that they're making. Yeah. And to be fair to those investors, they've been right by sticking with their concentrated position for the most part because the names that have driven the market higher have been the same ones here for a while and so many people have stuck with it and they are sitting on more gains than they might have anticipated. So let's go further into the retail trader because they've grown to about 20% of the US equity market today. I'm curious about sentiment trends, like how the structure of this trend. How resilient are retail traders in an eventual downturn? Well, I think retail traders have been the ones leading the market higher and have been the ones buying the dips. And I think they were out actually in many ways out ahead of the institutional buyers. And so I think you have a retail buyer that has strong hands and will stick through the market. So we'll see how it all plays out. But markets go up and down and retail investors will inevitably make some decisions in there that's best for them. That's Rick Wurster, president and CEO of Schwab. Coming up, more from our conversations at the Schwab Impact 2025 event in Denver, Colorado. Up next, we hear from Schwab Chief Investment Strategist Liz Ann Saunders on what she expects in markets for the rest of the year. This is Bloomberg. 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It was held this past week in Denver, Colorado. It's all about bringing together financial advisors from around the country, those in the industry too, that support them with various applications, services and tools. And up next we hear from a voice that has followed financial markets Tim for a long, long time. Our conversation on markets with Schwab Chief Investment Strategist Liz Ann Saunders. I'm so glad you're here. Welcome to our cozy little event, 5,000 people. It's not cozy and it's not little, but we are happy to be here. It's a huge event. It was huge last year in San Francisco. It was huge for that in Philadelphia. You were, you were shaking your head when I was saying everything is awesome. Why? Well, it's, it's a bit of a tale of two markets. You've got cap weighted index returns and the lack of any significant downside, particularly since the April 8 closing low. But here's an example. The average member within the S and p just since April 8th has had a 16%, actually 17% drawdown. The average member within the NASDAQ since April 8th, when the NASDAQ's up 50 some odd percent, has had a average maximum drawdown of 36%. So the breath isn't there. The breath isn't there. But there's a lot, lot of churn and rotation going on under the surface that you don't Pick up. If you're only looking at the index level returns, are we starting to see signs where investors are kind of questioning some of the valuations that are out there, the spend and whether we're getting the return on investment on it? Tell us your thinking. I think the margin of error has, has narrowed a bit. There's obviously sensitivity, whether it is diminution in return on invested capital, whether you're seeing pressure on margins. Obviously the concern about circularity of financing and the fact that so far that's a real thing. I mean, we are kind of blown away. What feels like it's all in the family. Yeah. Here's $5 billion. So you can buy $5 billion worth of stuff from us. Right. You guys, Bloomberg had this incredible visual that I think made it on Michael Post. You're talking about the post. Yes, yes. But it's. That is such a great visual. I've seen more simplistic ones of a, you know, power strip with it. With the plug plugged into the power strip. Yeah, but that's exactly true. Right. And I think, you know, the boom so far has been financed out of cash flows. It's been largely equity finance. But now you've got as to just pick up, pick on the Mag7 cohort. Mag7 free cash flow growth has gone from more than 60% year over year, 6/4 ago to now 2/4 in a row of negative. And so you're starting to see more deals financed with that. That's not necessarily a bad thing. It's just a different environment. But I do want Meta and Alphabet. Right. Didn't they just recently do it oversubscribe like there was lots of investor interest. But I do, like. I don't know, Liz, what. We just have to keep, keep an eye on it or I think, you know, valuation is a, is a tough one. I think valuations and I'm going to say this generally not just specific to AI stocks or Max 7. It's not a market timing tool. It's more, it's more a temperature gauge than it is a timing gauge. It's almost an indicator of sentiment. There are times where valuations can get stretched and they can get more ridiculous stretched and the market still has a long Runway ahead of it. So I think it represents some of the angst that's coming into the narrative right now. But it doesn't necessarily pretend impending doom. It's just a, it's a cost saver AI and it boosts margins. So we had, we had the early focus solely on the hyperscalers and the chips. And then more recently it's gone into the energy usage and the data centers. Now I think where you're actually getting meat on the bones in terms of productivity statistics, in terms of the beneficial to cost is, is the users of, of AI. And I think that is likely to continue. But then does it create this destructive element in our society as a result of those entry level jobs, those white collar jobs, those blue collar jobs that end up being completely eliminated? I mean, I know we're talking about a future that none of us can see, but we had an interesting conversation with David Westin last week and he was basically like, how do we have the, this payoff without the money savings from getting rid of all these employees basically? I think that we're in a moment of creative destruction, to quote Schumpeter. And that happens anytime we have a major innovation or we've shifted our economy from being an Agatha economy to industrial industrial to innovation. And that happens. But ultimately new types of jobs are created. I actually think that companies that don't adopt AI are going to have more job losses. I think what we need to bring in is what AI doesn't yet provide and maybe won't ever. You know, the seas creativity and culture and community and connection, context. So I think there's still, I still think AI, yes, it is replacing certain kinds of jobs, but I think it's replacing tasks more than it's replacing full occupations. But I think workers have to adapt to it and adopt it and bring it into their lives or they will be left behind. You know, I pulled up my phone because someone came up to us and Duane, who is a financial advisor, he's here and he said, you guys did something on AI. You. I did. You did something at an event and we had somebody who showed how to use AI and you said, after that I went home and started playing. Which actually was the panel you did at this conference last year in San Francisco. No, it wasn't. No, I don't think so. Okay, well, it was something, but anyway, there's a lot of stuff, but, but what he said is he was able to, to ask it questions, do analytics so much faster. It was accurate and he said it just took less time and I actually produced better returns for my clients, which was pretty cool stuff. It is a game changer. But the hallucination rates are still high enough. They're low single digits, but high enough that I think it was Gene Munster. He spoke right before me at a recent conference who, who said, you know, LLMs are like an intern. They do a lot of the work for you, but you kind of have to check their work. Got to keep an eye on them. Yeah. Next six to 12 months. What do you think the investment environment looks like? I think these bifurcations that have pervaded the economy, even the inflation data and obviously the stock market, I don't see a convergence to any significant degree. I think you're going to still see those bifurcations whether it's from a capex perspective, AI or non AI, asset owners versus non asset owners, high income consumers versus low income consumers, tariff impact goods versus non tariff impacted goods from an inflation standpoint and then obviously all those bifurcations. What I would watch for that may be interesting is we could have a situation where if some of the mega cap names, some of the leadership names continue to have some sort of pullback phase, watch what the rest of the market does. I don't think it's going to be extreme as late 2022, but what was interesting about that low in October of 2022 relative to the low prior to that in June of 2022, is that when you had the real crush, there was greater participation under the surface. That's what you want to look for that. Schwab Chief Investment Strategist Liz Ann Saunders we turn now to our conversation with Schwab's Jelena Kerr, head of Advisor Experience and Wealth Solutions. My world is responsible for all things digital and investment products, banking solutions and how you harness those together and help advisors extend them into their client base, especially the ultra high net worth clients who demand a lot of debt. A lot. I was just, I was shocked to see you've been at Schwab for more than 30 years. I'm an old timer. You were on the advisor Services trading desks, the role of an advisor 30 years ago versus now. I mean those are like two different jobs, vastly different. Yeah. What are the expectations right now versus what they were 30 years ago? The expectations are frankly a little overwhelming due to the complexity of AI technology. Trying to figure out how to scale your business and still serve your clients. Those two things don't always just flow together seamlessly. Right. And so the demands on advisors to really understand all the solutions that are out there I think can, can get overwhelming. It gets overwhelming for me and I do it every day in my day to day job. So I think just their ability to think and learn on their feet as they're talking to different clients who have different needs because that customization trend is no Joke. Either does AI help with customization or does AI help you in your world at all? AI does help us in our world. We are taking it more from an internal view right now. So think about our service professionals trying to enable them, making sure they serve advisors. We've got a knowledge assistant that's powered by AI. Note taking those sorts of basic tasks we are using in house and we are working with advisors to make sure they know what's out there and how they can take advantage of it. Right. In a safe way. Right. You want to measure twice, cut once to AI. So yeah, we're still finding our way. What about alternatives? This is not a world that 30 years ago, you know, people were thinking about private credit, venture capital, private equity in their portfolios. Yeah. Now it's like what? That's table stakes. No longer high yield as being like kind of something out there. It's very different. It is and alts are a huge part of that. I think some of the complexity though is how do you connect the alts to the rest of the portfolio if you've got a 6040. Yeah. Alts have a role to play there, but it's not very seamless or operationally sound at this point. What do they want in terms of alternative? I mean when we think about alternatives, we think about real estate, we think about some hard assets. I'm just curious though. In a world where crypto is a bigger part of investing, the private markets world is. It's just it seems like nonstop that people have talked about for the last few years. What do they want in terms of alternative? It really runs the gamut. I mean I don't want to give you an answer, that's non answer. But in a way when you think about some advisors who are just really wanting to start inserting it, but they want to do it in a very well known name way, then you've got all the other, all the way to the other end of the spectrum. Advisors who are creating their own right alts and weaving that into the platform. But what we're most hearing is they want model flexibility and scale. So they want to be able to pull the altar assets into the model, do all the management and construction of all of those things in an automated way. And with illiquid securities that's a bit of a challenge. But we're all working through it. There's some great leadership that some of our partners. But that's so important for your clients because those are sticky. Those are what cause clients not to move to a Different. Raa. That's right. Because you can't just get out of them. No, no, you cannot. And I think that's why advisors are at their heart rate. Their fiduciary responsibility is to make sure their clients know they are illiquid. You're gonna, you're gonna be in this for a while. And they wanna make sure they're educating their clients so that they're not hitting a point where the client's like, oh yeah, give me all that money. Sorry, can't. Can't do it right now. So advisors have always been careful and cautious, but given the fact that these have now gone from like a traditional 5% component of the allocation to 10 to 20, like it's growing and it's out there. Juliana just got about 25, 30 seconds. As you walk the floor, what are you hearing from advisors that you're just picking up on in terms of trends or themes? And just quickly, yeah, really quickly. Automation, which, which does tie back to the thing, but automation of those tasks, construction management, transactional things that are not adding value and using API connectivity to do that. It's table stakes, yet people need help implementing them. That's Jelena Kerr, Schwab's head of advisor, experience and wealth solutions. Coming up, more from Schwab Impact 2025 held earlier this past week. Up next, we move on from equities to fixed income and hear from Schwab's Kathy Jones. This is Bloomberg. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC. Crypto trading provided by ZeroHash Complete disclosures available@public.com Disclosures when you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business Card brings the best Sapphire Reserve benefits to business owners who expect hard working rewards. Designed to meet the needs of business owners at scale, this Pay in Full card elevates your travel experience and offers premium benefits and value toward business services that can take your business to the next level. Sapphire Reserve for business provides over $2,500 in annual value. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits and more. Make every journey more rewarding with a $300 annual travel credit and access to a network of airport lounges. Whether you're looking for pre flight productivity or time to rest and recharge. Chase Sapphire Reserved for business with over $2,500 in annual value, it's the card that gives back all you put in. Learn more@chase.com ReserveBusiness Chase for Business Make More of what's Yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC. So have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK Co Stories to learn how CBS Caremark helps members save just by being members. That's CMK Co Stories. This is Bloomberg Business Week Daily with Carol Massar and Tim Stenovec on Bloomberg Radio. Let's get back to some of our conversations that were this past week at the Schwab Impact 2020 event. It was held in Denver, Colorado. We turn now to our conversation on fixed income with Schwab's chief fixed income strategist, Kathy Jones. You know, in general the economy seems to be chugging along great. Okay, it's not great for everybody, but in aggregate it's good enough. Inflation is stuck at 3% and kind of edging higher. Where, where do we go from here? If you've got inflation at 3%, maybe moving up at a 4% 10 year yield, you know, that's, that's equilibrium. Right now we need something to change. And do you know, do you think it's going to change? I think in 2026 we'll probably get enough slowing growth and some, some easing in inflation that will see yields come down. But I think the market was just way over its skis expecting the Fed to cut over and over again. And it is very difficult to forecast all the time. But now, between tariffs off, no data, policy shut down, policy making shut down. You know, I think the markets just kind of, the bond markets kind of just go, whoa, we're pretty well priced. Let's just sit here and wait for things to happen. We'll see. So then does that increase the chances, Kathy, you think of the Fed having a policy misstep here? It's certainly a possibility, but I think my impression that I get from Powell and from many of the other members is, look, we're back to this navigating on a cloudy night thing. Right. We don't have information. The path ahead isn't clear, and we've taken a couple of steps. We're not restrictive anymore. More so now we pause and we wait and see what happens. We go slow. I'm a sailor and I've navigated at night and it can be kind of not so great. You can hit a rock or you could hit something because you just don't read something correctly or things can be smooth sailing. Yeah. So is there a chance, though, that I don't like? I think so many people are shocked that, that the economy is still growing and we're kind of doing all right. And the market continues, continues the equity market to hit highs. Not necessarily what everybody was predicting a few months ago. But I just do wonder, what's the thing we could be missing? Well, right now, financial conditions have been very supportive. Yeah. And I think that's another reason the Fed can kind of wait. They're saying, well, where there's no evidence that the level of interest rates is holding back the economy, people can borrow as much as they still. Yeah, maybe. But I mean, you know, even housing starting to kind of recover, these prices are adjusting. So, you know, what is the thing that gets us? It's never the thing you're looking at in the face. Right. It's the thing you don't know. I'm worried about the buildup of debt, you know, behind the scenes and the shadow banking system. Private credit. Yeah, to some extent. We know that the quality isn't great there and we know that some, some firms are struggling. So how would, how would a crisis like that in private credit manifest? You know, I think the, the issue is who's lending to the private credit folks. Don't the banks lend to the private credit folks? Yeah. So. Right. What's their exposure? Well, we don't know. You know, it becomes. Because private credit is private, it's hard to know the quality of the assets on any given day. Your face is really telling. Are you concerned that the exposure by the banks is a lot more than we know? I think the banks. No, I think the banks are. The major banks are fine because against their will, they've been forced to hold a lot of capital since the baseline rules. And so I think the banks are okay. But it does get to be sort of a cascade. Right. You know, one thing leads to another, leads to another, and a lot of interwoven lending takes place and there's hidden leverage. And that's where you worry about things starting to change. I don't, I don't have any particular. I didn't mean to put you on the spot. I just. No, I don't have any particular. Like, this guy's going to blow up. We have story to tell. I just. These are the ways in the past we've run into trouble, Somebody gets over leveraged, asset prices get out of whack, people are overconfident, and then things change. Right. So it kind of brings us back to the Fed and how the Fed works in an environment such as this, in an environment where it's not getting much data. We did hear from Lisa Cook this week. She said she sees the risk of further labor market weaknesses greater than the risk of inflation will pick up. Chicago Fed President Austan Goolsbee said he was more nervous about inflation. Who's right? Yeah, we'll say we'll find out. We'll find out when we reach our destination. Yeah. You know, I'm more in Goolsbee's camp right now. Although the labor market has clearly softened, some of that is supply side. Right. So we got the ADP numbers today as a positive number. Who's to say that that number isn't consistent with equilibrium in the. In the labor market? So are these numbers accurate now? Because. Well, ADP is as accurate as we can. We can get right now. Yeah. But at the moment, when we used to get government data, we used to get the ADP numbers on, you know, the day before, a couple days before. Right. Before. I don't even remember this world. Wednesday, Right. Yeah, we get them earlier. Yeah. And then we'd get the numbers from the government and they would oftentimes not even be close to one another. Yeah. And that's true. I think part of that is ADP is private sector only. They didn't include government workers. So there's that discrepancy. And, you know. Yeah, their surveys are different, but it's all we've got to go on. So it looks like that they're picking back up A little bit. And that's good news. The ISM figures and the manufacturing figures were okay today with prices paid, continuing decline that Schwab's chief fixed income strategist, Kathy Jones. Return now to our conversation with Sam Kang, head of family Office and Premier Wealth Group. So you've got, it's interesting because you've got a small number of clients but a lot of assets. I mean, we're talking 100 clients and $200 billion in assets under management. Talk about these relationships because are you working directly with the ultra high net worth individuals or are their family offices serving as a conduit to you? Yeah, well, we work with both. So updated numbers, we're actually now at about 140 relationships. We've now grown to 260 billion just within the family office. So 30% growth just this year. In terms of assets, we've grown by 50% year over year. So there is a huge demand. To your question, we work directly with single family offices as well as professor managed multifaceted family offices. What is the definition right now of ultra high net worth individual? Yeah, so typically there's a wide range, but typically what we see is 20 million in investable assets, which really is about 30, 30 million in net worth. You know, is it often the case of just managing everything and anything and then the paths of that generational wealth? Like give us an idea of what this all entails. Because it's a lot of moving pieces, if we correct. Absolutely, it's a lot of moving pieces. It is beyond just financial planning and investments. It gets into reporting, but it goes far beyond that. It gets into family dynamics, family constitutions. Philanthropy that you just spoke about is a key factor in terms of that estate planning. You said family constitutions, meaning what? So creating the core values of family to identify how you want to spend that money down and how you want to pass that wealth down to generations. So this is really critical, especially with the wealth transfer that's happening. Latest reports, roughly about $124 trillion will be changing hands over the next two to three decades. That's roughly about 2 to 3 trillion per year for the next decade or so. So what we see is a huge demand, especially in the ultra high net worth, to create these family constitutions so that they have a plan of how they will pass down the wealth. You know, it's fascinating because we always, I think when we talked about the passing on of generational wealth, we talked about like your offspring, right. Your kids basically. But we've also had a lot of Conversations about the wealth going ex spouses, depending on the prenuptial agreements. Anyway, go ahead, make them tight. No, but passing on to women who tend to live longer and you maybe their spouse, their husband dies, but. So talk to us about the specifics. Is a lot of it big families, lots of family members. Is a lot of it thinking about maybe the husband passing it off to the wife? Give us an idea of what. Yeah. So first of all, typically people just think it's a passing down to the second third generation. What's going to happen first is the immediate passing down to the spouse. So as you're saying, roughly about 45% of that wealth is going to go to that spouse first, and then it will get into the second and third generation. So there's multiple families that will be involved in this conversation. We also see, you know, when we think about the transfer of wealth, there is a lot of conversations about how you create the overall plan in terms of not just the investments, how you think about that investment over two to three decades, but what you want to do with that money and do you want to use it for philanthropy? Do you want to create other businesses? So there's a lot of conversations along that line. Okay, let's cut to the chase here. Death, divorce, taxes. Those are the things that are, you know, those are the things that are, like, on the radar of family offices. We know that. But I've also heard stories of like, all right, we need the head of our family office to find a new yacht captain. Right now our yacht is in Bermuda. What's the craziest part? There are people who do that. Oh, yeah. So that is an actual example. We've heard stories where a family fired their entire crew. One day they come to the family office and they say, I need a new crew by tomorrow. So this is the key distinction. There are a lot of independent RIAs that want to get into the family office space. What it really is, it's that very first, first call that these families make. So you not only need to be there for their financial planning, their investments, but you really need to be thorough about all the capabilities that you need to be able to support a whole family. So who are the people support that do that? So are we talking lawyers? Give us an idea of who has to be all involved in that. Yeah. So at the center, think of it as a hub and spoke model. Right. So at the center is that trusted advisor. We call that more of that expert generalist. That person then would reach out to lawyers, estate planners. It could be aviation loans. It could be bill pay. Lifestyle concierge services, healthcare concierge. So it really goes the complete spectrum. Hey, last question. Our team reporting that at least a fifth of the world's 500 richest people now have a family office helping reserve fortunes totaling more than $4 trillion. That's according to the Bloomberg Billionaires Index. That was surprising to me. Why don't they all have family offices? Only a fifth of them do. Well, I think there is more and more interest in creating that family office. So along that lines, it's estimated that 17 trillion is within that ultra high net worth market. But only about 5 to 6 trillion is managed by a family office. So I do think that there is a growing trend for these services. That's Sam Kang, Schwab's head of family office and Premier Wealth Group. That does it for this hour of the special edition of Bloomberg Business Week. Looking at some of our favorite conversations from Schwab Impact 2025 in Denver, Colorado. We're not done yet. Still to come, more on markets with Schwab's head of macro research and strategy. We're talking about Kevin Gordon plus Fred Kaynor, managing director of relationship management for DAF giving 3, 360. We'll discuss the growth of charitable giving and use of donor advised funds. You're listening to Bloomberg businessweek. I'm Tim Stanwak. And I'm Carol Massar. Stay with us. Today's top stories and global business headlines are coming up right now. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. 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It's all about some of our conversations from the Schwab Impact 2025 Impact event held this past week in Denver, Colorado. Now, this event, held every year, is all about bringing together registered investment advisors, financial advisors from across the United States, and those in the industry that support them with services and tools. We begin with our conversation this hour with Schwab's head of macro research and Strategy, Kevin Gordon. There's kind of this internal turmoil right now in terms of the environment. Is it inflation we have to worry about? We saw that companies announced the most job cuts for any October in more than two decades. This from Challenger Gray and Chris Christmas, and they did talk about an AI component to it. I can't figure out where we are. What do you think you know, it's like the flavor changes almost literally every day. I mean, it was much more labor driven. You had the Challenger data you mentioned, but you also had data from Revelio Labs, which has become, you know, much more important to look at in terms of private sector providers and what they, what they're looking at for job growth. And what they showed for October was the decline of 9,000 for payrolls. But you know, for me, the labor market stuff is almost this hall of mirrors because all of the different indicators tell you completely different things as to what's going on in the labor market. If you look at claims data, which we're not getting at the national level, but if you aggregate everything at the state level, it still looks relatively healthy. It stayed relatively low and stable. If you look at ADP for October, were surprised to the upside. If you look at something like Revelio, though weak. If you look at something like Challenger, also weak. The interesting thing with Challenger is, and we always try to make this important distinction and emphasis for investors, they're layoff announcements. They're not exactly cuts themselves. So there is a little bit of a lag there in terms of what you can expect. Yeah, oftentimes 90 days. Right. Plus I think the one thing that is, I will say maybe a little bit more work worries them with the one for October relative to what we saw earlier this year because there was a huge pickup in Challenger job cut announcements earlier this year. But most of that was at the federal level that was focused on what everything was going on regarding. This one's a little bit more broad based, as you mentioned with the overlay. The concentration for the sectors was mostly in tech and warehousing. So clearly this cost cutting going on by companies. Yeah. Which is never a good feeling. No. And I think what's, what's been interesting so far. It's been relatively methodical where it's gone sector by sector. It hasn't been broad based across the economy, which I know I've talked about this with you guys a lot and Liz and you know, who I work with closely on this are the sort of, this concept and thesis of rolling recessions in the economy. You're still experiencing that to some extent. Where it's not filtering up to the, to the surface and it's not aggregating together to give you a full blown traditional recession. But it's still happening in pockets. We know her as Liz Ann. We all call her Liz Ann Sonders too. That's the Liz Anne you're referring to. So Kevin Corporate going from the corporate world and thinking about, okay, what are companies doing with employees, how are they hiring, how are they firing, how are they announcing this to consumer spending? Because the consumer powers this economy. Yeah, we're getting some troubling anecdotes. What do you see? You know what's interesting is that when you look at, I mean this is where the labor market's so crucial to understand the differences between the stock and the flow. So the stock of labor is still relatively, relatively healthy. I mean you look at a mostly fully employed America and that's where we're at. Any of the layoff activity we've seen is just at the margin relatively minimal. So if you see relatively low layoffs despite a very low hiring rate, which were basically at cycle lows, the fact that the stock of labor is strong means that the aggregate income growth month to month, assuming you stay employed, is relatively strong. So that's why real spending is still positive. But to your point about some of these anecdotes and some of these cracks under the surface, they are starting, starting to widen a little bit more. Especially if you look at that bottom half of the, what everybody calls now the K shaped sort of economy. Economists look at that bottom rung, you could break it down by wealth level. I like the Fed data and looking at sort of percentile levels of what in terms of like overall economic growth and what the Fed like, how do you think about this is the tough part because you know when you, there's a social answer and then there's like, well, the multiplier effect up the wealth in the income spectrum is just much stronger. That's just the math. And when you look at how well asset markets have done over the past couple of years, even this year, the bounce from the April lows, if you're benefiting from that as an asset owner, we have household exposure to equities at an all time high beyond where we were just slightly, but still beyond where we were at the peak in 2000. So the wealth effect and the power of the market in terms of an economic driver has become quite strong and quite potent. So I think with you add that together with what is traditionally an economy that has become more, or I shouldn't say traditionally, but over time has become more powered by that wealthy cohort, then you've got a pretty strong effect. When you say full employment, do you. How do you define that and how does the Fed define because relatively low unemployment rate to history compared to history, there has been a little bit of an uptick but you look at that and you look at overall payrolls and we're still right around, you know, all time high. But does it mean the person who's, who's has the computer science undergraduate degree is working in computer science or working at Chipotle? Oh yeah, exactly, fully. That's the question. Just sort of in nominal terms, looking at, at face value, a job being a job, whether that job is perfectly matched with what the person is doing, that's a little bit. How do we measure that? Well, it doesn't that, that seems like a concern right now. Well, that I think is going to show up, probably start to show up a lot more within the next year in a lot of the labor flows that we're going to get. Because one of the, you know, one of the longer term concerns I have for the labor market is what's happening right now in some of the churn with the pretty significant decline in immigration, but also not sort of the lack of replacement. A lot of, a lot of those jobs. We're just not seeing that happening. You see that happening in, you know, youth unemployment, black unemployment. It's really starting to spread in some of those pockets. So the areas that were supposed to benefit, you know, throughout this year as you had more of a domestic strengthening in the, in the native born labor force, it's not yet happening. So it's a little bit lagged. I hope it's delayed and not completely derailed. But I think in the next year figuring out replacements for a lot of those lost jobs, that's going to be key. And the reason I brought up the Chipotle computer science example, well that was what's been cited in that New York Times article back in August. Computer science degrees. Having trouble finding those computer science jobs. It's kind of this interesting environment we are when we look at the labor force. Hey, one of the things I want to ask you, your team shared with us that you believe Tina is back and it's not the Tina that we think about. There is no alternative in terms of like US equities. Yeah, but it's something we started off with about U.S. government data. It is important. No alternative. I mean the depth of the breadth of the government debt, you just can't match it. And I think, you know, so far, thank goodness the markets have been sort of maybe, maybe in a negative way, whistling sort of past the graveyard of no government data. But you know, they've been able to manage through with corporate earnings. I think that's been a nice bridge to get us to when the shutdown ends. I think though, you know, the longer this goes on, I think what we have to keep in mind and what we've really been emphasizing to our clients is that, you know, when you don't collect this data, yes, you can go back and retroactively get it, but it's not going to be clean. So you're going basically almost a quarter without this really key data. So you're going to have a delayed third quarter GDP report. You're going to have missing data in a way from the fourth quarter. And then you have benchmark revisions coming in February, which kind of throws another wrench into this. That's Kevin Gordon, Schwab's head of macro research and strategy on site at Schwab Impact 2025. We turn now to our conversation with Schwab's Lisa Salvi, head of Business consulting and Education. We held a Bloomberg AI Finance Summit. It was just last month. We asked attendees in financial services, which area do you believe agentic AI holds the greatest potential to impact? And of course agentic AI. We're talking about AI systems that can autonomously and maybe sounds a little scary, but autonomously plan and execute multi step tasks with minimal human oversight. Yes, that's a definition. Sounds great, but. I know, I know. Take over my world. I'm ready for it. So here's what the folks at that summit said. The findings. 62% Tim said the greatest potential would be an automating repetitive complex task tasks and workflows. 23% said generating alpha through faster, deeper insights. 11% supporting strategic decision making across the enterprise. And then 4% Carol personalizing client experiences at scale. All right, so let's see what our next guest has to say. She works with independent advisors and their firms. Lisa Salvi is head of Business Consulting and Education at Schwab Advisor Services. What did you think about those results? They're interesting to me. I lead a benchmarking study here for ras. Specifically it's industry leading amount of data. We had about 1300 firms participate this year. 68% of our firms are using AI in some form. 2025, obviously that was the year of the note taker. Right. So that's kind of the story I think on like a basic level they're using Depends. So basic is just note taking. Right. And then now we're seeing more integration into the CRM system. So we're starting to see that and it's starting to populate tasks and next steps. So a lot of firms are saying that saving them 30 minutes per client meeting. So that's a real ROI we're seeing which you don't always see with AI all the time. Up to, you know, I had one firm last week tell me two and a half hours of time savings. So that's kind of the year what we've seen this year. I think next year is going to be more of a two pillar type of year where you're going to see a lot of bottoms up type of projects and kind of citizen programming with the AI tools that are available within firms. But we're also going to start to see looking at larger scale projects that can actually build a transformative change or time savings in the organization that will be approached more like a project agentic agents and agentic. That's kind of, we're, we're just stepping into that. So you're starting to play with that. Some firms have it. Yeah, it's still very rare. I think what I would like to see firms do is really start to focus on well, two things. The boring one, the data. You got to get that data really good because AI doesn't fix bad data, it just amplifies it. Oh, we know. Yeah, I know. Well, what about the finding alpha part of this? Because that's surprised me. That's interesting. I hear that very much from registered investment advisors. I don't hear as much on the investment side. I hear it more on reading research reports, giving them something to react to. And on the portfolio management side, I will say one advisor came up to us and was talking about actually something I had done at a different event where somebody showed a demo and then got into like AI in a big way and said it did a lot of things like computations, different things, tasks and he was able to create better performance for his investors because it just happened quicker and there are things he wouldn't normally maybe do or spend the time on because he just couldn't. And that he did and that yeah, it did create. Where are you comfortable? So yeah, a lot of advisors are not wanting it to hit the client yet. Yeah. So that's where that's going to be, where we see some progression. But if you can create really comprehensive plans and advisors need to be prepared to their clients are going to start doing it and come in with something and that they're going to have to react to. When do you think we start talking about AI? Like we don't talk about the Internet today. The idea that it's just this layer of technology that we're all using. I think, I think it's still changing so rapidly. We're still seeing so many changes that we're going to be talking about it for a little while, especially as we get to that agentic layer. So first we're going to have projects. Then we're going to have agents that just do things like one off tasks like read a research report on its own and email it to you without you asking it to do it. Then we get to what you guys were talking about at the beginning, the agentic layer. We have a whole bunch of these bots that are doing things on their own and making decisions. We have a ways to go that Schwab's Lisa Salvi, Head of Business Consulting and Education Coming up, more from our conversations at the Schwab Impact 2025 event in Denver, Colorado. Up next, we hear from Omar Aguilar. He is the CEO of Schwab Asset Management. That's next. This is Bloomberg. Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss including loss of principal. Brokerage services for U.S. listed registered securities, options and bonds and a self directed account are offered by Public Investing Inc. Member FINRA and SIPC. Crypto trading provided by ZeroHash Complete disclosures available@public.com Disclosures when you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business Card brings the best Sapphire Reserve benefits to business owners who expect hardworking rewards. Designed to meet the needs of business owners at scale, this painful card elevates your travel experience and offers premium benefits and value toward business services that can take your business to the next level. Sapphire Reserve for business provides over $2,500 in annual value. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits and more. Make every journey more rewarding with a $300 annual travel credit and access to a network of airport lounges. Whether you're looking for pre flight productivity or time to rest and recharge. Chase Sapphire Reserve for business with over $2,500 in annual value, it's the card that gives back all you put in. Learn more@chase.com reserve business chase for business make more of what's yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank, NA member FDIC. So have you heard the story about the prescription plan? With savings automatically built in, it's where a family of any size can feel confident the cost of their medication won't hold them back. Go to CMK CO Stories to learn how CVS Caremark helps members save just by being members. That's CMK CO Stories. This is Bloomberg Business Week Daily with Carol Massar and Tim Stenovec on Bloomberg Radio. Back here on Bloomberg Business Week Daily, looking at some of our favorite conversations and highlights from the Schwab Impact 2025 event. It was held, Tim, this past week, of course, in Denver, Colorado. It was a little chilly out there. Well, it was. Yeah. It's Colorado. I know, I know, the foothills of the Rockies. That's so true. Yeah. 300 days of sunshine a year, though, so that's not bad. No, it's nice to be out west. We turn now to our conversation with Omar Aguilar, CEO of Schwab Asset Management. Well, let's talk about this year because as we were chatting ahead of this interview, you made, you made the joke. I wish we could just end the year because it's been a good year. It's been a good year. But what does that portend for the next two months? It's been great for investors. It's been great for investors. You actually see this. I would probably say there were many points throughout the year where we all wish things were actually going to be different. And I don't think anybody anticipated, you know, that we're going to be at this stage, you know, so far into this year, you know, from the beginning of the year, the uncertainty around administration to Liberation Day to recovery to, you know, the rise of AI to the economy, the consumer, all the way to where we are now. It's such, such has been a ride that I think investors have taken advantage of. You know, I was thinking about your background and I just want to lay that what you've got 25 years of investment management experience in equity markets, you've seen a lot of cycles and I know, I think I often reach out to you guys to ask you about this. What do you make of some of the recent stress that we've seen? Omar, Whether it was concerns about credit, some of the regional bank issues. Again, we've heard different stories about whether or not credit concerns are something that might linger for a little bit. Then there's the private credit market. So how do you see it and do you see it at all impacting kind of the tone of trade and activity on your platforms? Yes, it is, it is interesting because yes, I have seen a lot of cycles. I have to. So we're just like a good bottle of wine. You know, my gray hairs, you know, take, you know, I'm taking pride of it. But, but yes, you know, it is interesting because you know what we, what I have seen historically is you actually go through the source of what is actually maybe the reasons why something cracks. There will always be in every single cycle, you know, areas of rest that are what we call ideosyncratic. That's just a fancy word. But you know what that means is that there will always going to be things that, that will happen that will make people nervous. And we just need to understand whether it's systemic or is just isolated to certain area. Interesting enough you mentioned about particular the credit market. The credit market has been incredibly resilient since 2008. And I think when you look at the current, even the high yield market is not as junky as it used to be. I remember back in 2005, 2006 or 2000, 2001 and 2002, those were periods where you will really feel that there was a lot of delinquencies, there was a lot of risk, there was a lot of uncertainty around them. When you look at it today, you know, the delinquencies are growing, right, but not outside of the norm. What you will have in this part of the cycle. Why do you think that's not happening? Well, a lot of that has to do with corporate, corporate America. You know, their balance sheets are fairly, fairly strong and the amount of leverage that you see in corporate America has is basically to the lowest in many decades. So what that actually means is that yes, companies that are taking excess leverage to stay at risk and they're more risky in the way they manage their business, you know, they're clearly more at the risk end. But the majority of America, it's actually pretty solid in terms of how they manage their balance sheets. And in fact a lot of the Reasons we were talking about, you know, in other forums about the reasons why tires have not been having the impact as big as it has been is because profit margins have been very, very benign and have been not being affected as much. So does that mean that it's only a matter of time before we actually see inflation as a result of these tariffs? When these companies say we're not going to, we're not going to pad the impact anymore with our, with our healthy profit margins, we're ready to pass these on. Well, we're already seeing some of that. We're already seeing two things. One is we're raising companies that are, they're not going to have a choice but actually pass through those increasing prices to the consumers. You know, we have seen those companies that have the biggest, you know, opportunities and the biggest widest margins. They are, they're already good, but they're ones that are getting a squeeze and squeeze. We already see some of that already in the early parts of this earnings season. The second part that we're observing is consumption. You know, consumers and the demand destruction started to happen. You're starting to see a little bit in terms of like, you know, airlines and the tickets. And, you know, you see that actually on my way here for the first time, the plane was not full. That, that, that was unique because, you know, for the entire year, you know, you always go there and it's actually big, a big chunk of it. So you can see a little bit of that consumption starting to just get affected by it. This happened to us last month on our way back from Los Angeles. The person at the gate said, this is crazy. It's been full pretty much until now. The flight was empty. Heading back. Yeah. Again, it's an anecdote, hearing it from airlines yet, but, but airlines have been so smart about keeping those planes packed. Right. And so to me, it seems like a clear indicator. I know I said you've seen a lot of cycles, but, but I think about your background. Lehman Brothers, Merrill lynch, these are firms that are no longer around, you know, post gfc, the great financial crisis. So I guess I always try to think, you know, what mean I. Are we missing in an environment where so many people are like, it's okay, it's okay, it's okay. And I'm like, what, what are the possible risks, do you think, for investors in this environment? Well, we, we have seen, and actually we saw this in the last six weeks. If you, if you look at the performance of those companies that did not, that do not have positive Earnings, negative earnings. Companies in small and mid cap sectors, they outperformed by owners almost 20% in a short period of time. So what is called the junk route. And in many cases the concern is that this component of excess goes into areas that goes like that and that volatility is not healthy. Omar, thank you. Always, always appreciate it. Omar Aguilar, he's CEO and CIO of Schwab Asset Management. All right, so let's share some numbers with you. Check this out. 16,000 independent advisory firms. 5,000,010,10 in assets under management. That's the business that John Beatty overseas, he's managing director and head of Schwab Advisor Services. He joins us on site here at Schwab Impact 2025 in Denver, Colorado. John, you've been at Schwab for close to 30 years. Let's say 28. Just so myself. Okay, so it's a great run. 28. 28 years. You've been a member of the advisory services team for 16 years. That's correct. An RIA today versus what it was 16 years ago. They want different things. Well, it's amazing what when I first joined Schwab 28 years ago in the advisor business we custody to $100 billion for assets. Now it's $5 trillion. So that just gives you where is that in market share. So Advisor Services Charles Schwab has about a 44% market share of independent advisors, double the nearest competitor. So we were first to the space back then almost 38 years ago and have really focused in on it and made it a main priority here at Schwab. And we've been rewarded by our clients with their growth. You know my in laws are we're talking about their financial advisor and I was telling about this conference that I was coming to and they said we had a choice when we signed up for this with this financial advisor who we wanted as a custodian, we could choose Schwab, we could choose another company. Is that that was surprising to me. I didn't know that Rihanna had relationships with different custodians. Yes, RA industry is the industry of independent advisors. And independence means that they have choice as who their providers are. Whether that's custodian or asset management fintech providers in their back office. I think that is actually the secret sauce of the RAA space in that everybody has to be at their best every day to maintain their seat at the table. Whether it's us as a custodian and against our competitors or a fintech provider in the back office, an asset manager so everybody's at their best. That means consumers are getting a great experience, keeps everybody lean and mean and competitive. So what do investment advisors really need from you guys today? So really the way the hallmark is or the foundation and relationship is our custody experience, which means opening accounts, moving money, doing trades. The basics that advisors want to be brilliant is how they serve their clients. So easy secure. What? Easy secure, accurate, all of those things that matters important. And the last thing an advisor wants to do is have their custodian or any of their providers embarrass them in front of their clients. So we have to be at a 99% accuracy rate in everything we do for advisors, and that's why we're winning in the marketplace, is those brilliant experiences that we provide. What's the toughest thing in making sure that you guys are here hitting on all those things? The accuracy, the security, all of it. Yeah, it's really the move from paper to digital. Yeah. And that's a, that's a change management thing in our industry. So we've made great progress in the last five years on that. Now for example, moving money, wires, ACH transactions, we're 93%. What's ACH? It's the ability to move money overnight without a wire. Got it. Okay. Forgive me so bad. Yeah, it's an industry acronym. Sorry about that. But we're at 93% rate there where just five years ago that was less than 50%. So what digital brings is it brings faster, more accurate, less errors in the ecosystem, new accounts. You know, we're opening on a digital platform at about a 50, 60% rate. We'd love to get that in the 80 to 90's so that means modern experiences for the investor as well as the advisor. I was talking to one of the independent advice advisors before our program started and he was telling me, he's like, okay, I've got this whole machine that runs Linux that just runs my Bloomberg terminal. Separate machine, separate keyboard. Then I've got my other two monitors, so two monitors over there. Then I've got my other two monitors with basically the Schwab dashboard and everything that that Schwab offers that I can then offer to clients. What is that? Oh, it's. What is that tool? What is that? Dashboard. So our, our website is the place where we serve advisors digitally. Schwabadvisorcenter.com in that tool you'll find all the logistics of custody, moving money, opening accounts. We have trading capabilities on that website and a lot of other features that advisors can dig in you know, the industry has changed over the years and now we have our irebal capability which is an automated rebalancing tool. We have model market center where advisors can tap into pre built portfolios. So advisors are really looking to outsource some of the things that you used to do in house so that they can use their time in other ways with investors around planning, estate tax, those value added places. How much in terms of advisors from what you guys are seeing, how much are they doing like face to face or phone calls or actual conversations versus so much that they can do do either digitally. Like I'm just curious what that mix is. Well, it has to be a combination because if they want to free up time to do. Yeah, yes, yes. And there's nothing that replaces being in person with your client. And we had Kesselie talking about the need for social interaction. So what really advisors trying to bring is a recipe of digital experiences that take the less value activities moving money and transactional work so that they can use their in time person with clients on more of the intellectual, psychological aspects of investing. AI very briefly, yes. Going to be really important as we go forward. Not yet. Well, we see advisors, about 50% of advisors are already using AI enabled tools in their back office. These are things like recording meetings with clients and taking notes. We see them using tools to read contracts and give summaries. And so it's, it's basic AI, but it's a beginning and you know, this is an entrepreneurial community and so they're leaning into these types of services. How much back and forth is there with advisors and you guys about what we need in terms of AI? It's about our ecosystem. We want to enable them on the custody side and then they need to AI enable their experience with their clients related to the portfolio and other aspects. So it's going to play a big role in some industry as we go forward. John, thanks so much for joining us. There a chat bot that's like hey Chuck, how do I do this? Yeah, we have a knowledge center tool that, that our service reps use that is a and I enabled that makes us smarter on the phones with advisors. We'll turn that on to advisors at some point. Okay. Not yet. Once the learning is done. Right. All right, John Beatty, thank you so much. Really appreciate it. Managing Director, Head of Advisor Services at Schwab. Coming up, more from our conversations at the Schwab Impact 2025 event in Denver, Colorado. Coming up, Fred Kaynor, Managing Director of Relationship Management for daft, giving360 talking about the growth of charitable giving and the use of donor advised funds. That's coming up next. This is Bloomberg. 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We turn now to our conversation with Fred Kaynord, Managing Director of relationship management for Daft Giving360. We talked about a lot, specifically the growth of charitable giving and the use of so called donor advised funds. A donor advised fund is essentially an account set up to facilitate charitable giving. A donor advised fund is comprised of three different components, contribute, invest and grant. So a donor, with the support of its advisor, his advisor or her advisor, contributes cash, securities, appreciated assets, including real estate, collectibles, private business interests and the like. We accept those contributions. We liquidate them. If they're appreciated assets, we deposit them into the account. They invest those assets for growth while they're in the account and then when they they're ready to grant them to the charity of choice, they can do so in a matter of a couple of days. And the beauty of the account is from a contributions perspective, it affords the donor an immediate fair market value tax deduction at the time that the contribution is made and they potentially avoid capital gains tax that they would otherwise pay if they were to sell those assets first and donate the proceeds into the account thereafter. Should everybody be considering donor advised funds or do you need to have a certain level of wealth for it to make sense? He's gonna say yes. Yes. Really though? Really? Yes. I mean, no. It's a good question. A lot of people think that, you know, a donor advice fund account is set up for the ultra high net worth and the ultra wealthy. And the answer is no, it's not. There's no minimum to open an account. You can have an account with in fact a zero balance. Many people open an account for testamentary purposes. They they will fund it upon their passing to fulfill their charitable legacy. When you're young, you don't necessarily have a lot of assets to give to children charity. So you don't have to give 5,000, 10,000 to open an account. You can open it with a zero balance and you can fund it over time when you have the assets ready to give. But why open it early if you don't really have anything to contribute to it? It's a great question. And they do it for a variety of different reasons. Like I Said one is when it's used for testamentary purposes, when a person is planning their legacy, when they're planning, sort of they're trying to think about what they want their legacy, charitable legacy, to be beyond their lifetime, they would fund upon their passing, the donor advised fund account would be named as a beneficiary of their trust or their estate. And an amount would be put into that with the understanding of exactly how and where they want that be distributed to charities of choice. So that's what I want to talk about is control here. How much control does the person who put the assets in there, who had the assets, who donated the assets, have where those assets go or where that money goes? That's. That's a great question. So, so technically, when the assets are put into the donor advised fund account, they to refer, relinquish control of those assets because those assets, we are, as you said at the beginning, we are a 501c3 nonprofit. They are effectively making a contribution to a nonprofit organization. And at that time, they relinquish the control of those assets. However, they are the ones that recommend the investment strategy when the assets are in the account because we want to make sure that they are invested in a manner that's consistent with their personal goals and objectives. And they recommend grants when they choose to have grants go to the charities that you should support. So in other words, it's not them making the grant, they are recommending to us as the, if you will, owners of those assets, where they want those grants to be made and how. And so while they relinquish the control for a variety of reasons, when they actually make the contribution, they make the recommendations on how to invest and where, and they make the recommendations on where to grant them when. So two questions. Where do they. Where are folks often saying, here's where we want those assets invested and then where are they saying they want to donate? That's a great question. And there are a number of different investment options. And it really is up to ultimately the donor and the adviser supporting the donor on how they choose to balance their portfolio in terms of an investment strategy. Many, because I wonder if it's about growth or it's just about maintaining the principle or a little bit of both. Yes, it's both. It mostly it's both. People want to do a variety of different things. They want, want to maintain the balance, they want to grow it over time. And an interesting statistic is we have seen almost $4 billion in growth, in incremental growth as a result of utilizing a very effective and prudent investment approach while the assets are in the account. So above and beyond what they've contributed as a result of, you know, really effective and thoughtful investment of those assets, we've seen about 4 billion additional dollars ultimately made available to go to charities. So. I interrupted you. You. So where are folks investing and then where are they donating? So they're investing in a variety of ways. Some people want to invest around impact investing, for example. They want to do things SRI SG actually, that's even growing. Impact is an evolving term and it means different things to different people. But, yeah, that's a. That's a big thing. Others are investing in sort of much more conservative investment options where they're much more. More focused on maintaining the balance and making sure that, you know, it's not subject to the same investment volatility as others. So it really, the answer to your question is that they're investing in whatever way they feel most comfortable investing those assets if it's for impact. And that impact has social return in addition to financial return. And in other cases, it's just really maintaining the balance, making sure that they have those assets there to be able to grant a charity whenever they choose. And then ultimately, where does that money go? So then the third component is granting. So we allow grants to any organization that is a 501C3 nonprofit in good standing with the IRS. Our database, we rely on the IRS database that is about 2 million strong right now. So really, it's up to. And it's in the flexibility of solution. It goes to wherever they choose to support it. It could be their house of worship. It could be their alma mater. It could be providing grants to disaster relief organizations when floods occur in Texas or fires occurring in California. So it's really incredibly flexible in terms of where and how they grant. Any place that they cannot donate. Just real quickly, it's not really. As long as it's a 501c3 a nonprofit organization in good standing with the IRS, generally speaking, those that we fulfill those grant recommendations. All right, so appreciate. This was really fun. Thank you so much. Thank you guys very much for the time. He is managing director of relationship management for Daft Giving 360, an independent 501 C3 public charity formerly known as Schwab Charitable. Tim and I here at Schwab Impact 2025. Now, you might recall over the summer, it was in August, President Trump signing an executive order directing the Labor Department to reevaluate guidance to fiduciaries to get them more comfortable with including private credit, digital assets and other alternative assets in their retirement plans. Now, the SEC may also issue issue some new rules or guidance to change the definition of accredited investor or qualified purchasers. There's a lot going on that could open up a lot of different types of assets to retail investors. It's something that we've gotten into with the Schwab CEO and kind of on pause right now, at least at the SEC level. Because the government shutdown. Yes, but still, this seems to be the direction that things are moving. All right, we have a great guest to get into on all of this with some thoughts. And here at Denver, in Denver, at Schwab Impact 2025, Kayla Culver. She's head of Risk and controls for Schwab Advisor Services. Good to have you here. There's a lot going on that could change or there's a lot that is going on that means we won't see changes. How are you assessing kind of the regulatory environment and things that could change what investors can be investing in? So I feel like for advisors, it's a lot of whiplash right now. If we look at the priority administration and SEC Chair Gensler, there was constantly new rules coming out and it was just like regulation overload for people. And now under Paul Atkins, we're expecting to see a reduced pace of regulation. So we see it as a good opportunity for advisors to really focus on getting back to basics, making sure that their compliance programs are up to date, that all of their ADVs are accurate. What are ADPs, their disclosure documents that they have to file with the sec. Really just making sure that like their house is in order so that because if we're not under a constant flood of new things coming out and then, you know, we heard you talking about the executive order related to 401ks and being able to hold alternatives, different things in 401k accounts. That's something that, you know, some advisors have, have interest in for their clients. And it's going to really depend on the plan. Like, is this something that the plan chooses to allow for that client or, you know, for their plan participants, or does the plan not want to allow that? What direction do you see that moving in if it does get approved? If it all, if it happens, if the SEC says, okay, this is totally fine, is everyone going to be, is it going to be like us having stocks and bonds in our. I don't think it'll be for everybody. I think that we see it. Will everybody have the option well, it's going to be up to the plan administrator. So whoever sponsoring that plan, they're the fiduciary. They've got the ability to say you're allowed to invest in X or you're allowed to invest in, you know, not allowed. So would that be at the company level for, for a certain company and its employees or would it be at the. Whoever they decide as the plan administrator? Like an empower, for example? It's really like the plan sponsor who's choosing that. So why would a plan sponsor say no? Why would a plan sponsor say yes? I think they would say yes if they wanted to give their participants additional choices. Some plan sponsors may say no. We see it on the Schwab side where we've got some plan sponsors that have opted into our personal choice retirement account offering where, where you can Basically have your 401k and self direct it invest in stocks and bonds and things that are outside of the plan allocation. It just really depends on their comfort level. From a conservative perspective, you might say we want to stick more with these funds that we've chosen. Is it a good thing? I think it's choice is always a good thing. So more freedom of choice. But as long as people are doing it smartly with the, you know, with the advice of an investment advisor, I think it's a smart decision. But I think there's always additional risk there. Well, the risks are right in terms of all the assets. Some things are not as liquid as others. And you need to understand that if you need to be able to get out of something, it's not liquid. Like stocks and bonds. Exactly. In many ways. And that's why I think doing things with the advice of a professional versus just, you know, your friend told you this was a good investment. It makes more sense that way. On the regulatory front. In having advisors have less regulation right now, does more fall on them in terms of making sure that they're doing what's right? Because those, those regulations aren't necessarily in place. And I know kind of a judgment for me to say, you know, equate regulations with. Right. That's not what I do. But we know the, we know the DNA that, that Paul Atkins has the SEC chair when it comes to this stuff, and he's much more laissez faire than other SEC chairs in the past. Yeah, so what, what we keep reminding advisors of is just because there's, you know, all this noise about deregulation and less new regulations, you still have have to follow the fiduciary duty. You still have, you know, there's still regulations on the books, there's still rules. You still have to do all the things and be making sure you're in the best interest of your client. So just because it's a more like laissez faire kind of environment doesn't mean you still don't have principles that you have to adhere to that Schwab's Kayla Culver, head of risk and controls over at Schwab Advisor Services. And that does it for this special edition of Bloomberg businessweek, featuring some of our conversations and the highlights from the Schwab Impact 2025 from the Schwab Impact 2025 event in Denver, Colorado this past week. For all of them, be sure to check it out@Bloomberg.com and wherever you get your podcasts. Hey, and also be sure to tune in to Bloomberg Businessweek Daily Monday through Friday starting at 2pm Wall Street Time on Bloomberg TV, Bloomberg Radio and on Sirius XM Channel 121. And you can listen to us on Apple CarPlay and Android Auto. It's free in the Apple App Store or on Google Play. You can also watch our daily broadcast on YouTube. Just search Bloomberg Podcasts and we're simulcast on Bloomberg Originals, available at bloomberg.com originals and streaming platforms like Roku, Amazon Fire TV, Samsung TV and more. Find our Bloomberg Business Week daily podcast@Bloomberg.com, apple or wherever you get your podcast and the latest edition of the magazine. It is available on newsstands now@bloomberg.com and always, always on the Bloomberg Terminal. I'm Carol Massar. And I'm Tim Stanweck. Have a good and safe weekend, everyone. Stay with us. Today's top stories and global business headlines are coming up right now. Hiscock Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online'@hiscox.com that's his c o x.com there's no business like small business. Hiscox Small Business Insurance mint is still $15 a month for premium wireless. And if you haven't made the switch yet, here are 15 reasons why you should 1. It's $15 a month. 2. Seriously, it's $15 a month. 3. No big contracts. 4. I use it. 5. My mom uses it. Are you. Are you playing me off? That's what's happening, right? 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