Private Wealth and the Future of Financial Security

Alright. Awesome. At the same time, we're preparing to witness the greatest wealth transfer in a generation for a $100,000,000,000,000 to move across generations in the not too distant future. How will this reshape not just who holds capital, how it's invested, and what it's expected to do. I wanna thank all of my panelists for joining, and kicking off. So, Aida, I'd love to start with you. As you sit in the center of capital from Hong Kong to the Gulf, to New York, what does the world actually look like for your clients today? Well, volatility is absolutely gonna be normal as you can see the last period of time post COVID has been incredibly for investors. In fact, the things has been up in the twenties, whereas in the prior decade, was in the low teens. So all volatility is absolutely the new normal, but we're looking at the three fundamental shifts what's happening around the world. Number one, very important to have geographic diversification globally for investors. Today, The US market makes up 65% of the global market index. So really thinking about diversification opportunities especially given the bifurcation of US and China. Secondly, looking at unstoppable trends, and you're gonna hear so much about AI, about technology here at Milton. It's important not to just think about AI itself, but AI ends all of its peripheral industries as well. Think about the data centers behind it. Brains behind AI, the semiconductor side, well as the energy needed to sustain the brain of AI get clean energy and alternative energy. Solutions as well. In addition to health care, which is incredibly high growing industry, especially given the aging population and the telemedicine the new generations are gonna live ten fifteen, twenty years longer than all of us. It's a lot of implications for that as well. Third and very importantly, we need said, where the wealth is headed. We're in the midst of the largest wealth transfer in history. A 100,000,000,000,000 is passing hands. NextGen, to Millennial. 30,000,000,000,000 of that is going to Ribbon, This has massive implications on portfolio allocation. And the way investors are investing, but I'm super optimistic about the future. And so I'd love to hear from the rest of the panelists. I know I start off with Ida, but Ida, I saw you Why don't you jump in? Oh, sure. Thank you. And Aida, those are terrific comments. And we think that aligns with a lot of those here on the panel in in a sense that one of the things that Ava should focus on is what the in sense one to what financial planning looks like, what what private wealth looks like, And, you know, it's really interesting to me just more generally I'm reminded twenty years ago, I was I saw Michael Milton present, and he was talking about buying in The United States because we have a bullet And he goes, it's it's not the fact that we have the technology as a warehouse. To build the bullet train into the tracks. And when I think about private wealth going forward, we're focused on the tracks that have been establishes for a long period of time. And we think incorporating health and and most important piece when we look at what happens in private things. But, you you know, whenever I stand up in front of group, always tell them one thing that they should be thinking about. Most of the things we are gonna hold forever. Think it's medical science stands today, that's probably not true. But, you know, there's never been an insurance six until they may not Right? I got a financial plan put to me that took me all the way to age 95. You know how many six foot five hundred ninety five year olds have ever lived or existed in human history? Here we So I think that we need to really start adopting things that don't really matter that people can really focus on giving incredibly low savings rate in The United States retirement. I think that we need to think about what really matters to people when they get there. Okay. At one point, item made about more and volatility. I think that there really hasn't been a major pullback since the financial crisis So although there has been has been volatility, I do think there is a little bit of complacency around risk. And I think you're starting to see kind of what that means is different challenges ripple through parts of both public and private markets. The opportunities are immense, but it's really hard to find real diversification right now. So taking that as such, further, though, in terms of geographic diversification, that's showing up in portfolios, not just for rhetoric. I know what are you seeing? So as The US and China, the first and second largest economies in the world, i4K, There's a changing supply chain that's happened around the world, which vary creates opportunities for investors, she sees it with the capital flows. Moving into Southeast Asia, for example. Supply chains around the world, there are definitely opportunities for investors to think more doably more diversified, not just about geography, but also as you think about the current state of interest. Anybody else wanna weigh in on the yeah. Know, I think that's a super important point you make because we have to take a look these days. I think there's a few points that was made here in terms of just how do you invest how should you invest this in video? There's also someone who has to do it. Think about things. Big things. Like, get into a decision. It's super important that we get behind these big trends put them in the portfolio of our clients of course, somebody has to do And, David, I'd love to get your quick snapshot on the big picture as well. Oops. Sorry. What was that? I'd love to get your quick snapshot on the global landscape as well. Yeah. And I think that that that they bring points in the diversification. I think one thing that I've always done is is how we measure diversification. Diversification. I think the top of the silos is the risk that you think about it. It's like Mhmm. So should we go down to retirement preparedness, I wanna talk to you a little bit about the gap between what people have and what they'll actually need. This is something that you you spend a lot of your time on. So, you know, there's a lot of perspectives out there around retirement. And I think that most people aren't where they should. And we just did a survey last year and found it. 90% of respondents thought they were gonna be on track for retirement, point 30% had a financial plan. And so I think the the issue is is that as as Jane noted, aren't saved enough for retirement. I don't think we have a retirement crisis that someone might disagree with me here. But, you know, if you look at the measures of retirement outcomes, people when they retire, at least in The US, are are better off than they were. And so I'm not focused so much on the gap that's there. We're it I think the larger issue is just decumulation. Giving people a pot of money when they retire and say, hey, go spend this. That's not working. And so I think that as we as we advance retirement globally, but I think about how do we help people actually accumulate their wealth however times they want. So how should we be thinking about it? Could you take it a step further? Yeah. I mean, I think that there like, it's it example is you can't really turn ants to the grasshoppers. Right? If you spend three or forty years of your life accumulating both, at least in The US, you get a statement every quarter has your balance on it. You don't wanna assume that balance. And so I think I think getting people into a a spending mindset, into a lifetime mindset, eases effort. And I've done some research that talks about people, they don't spend their savings. They don't spend wage income, capital income, any of that. They spend lifetime income. And so how we frame to create solutions for investors It needs to move beyond just like and projections to say, hey, Hey, who actually moves and you don't want to spend any last things like You're not angry. Yeah. I couldn't agree more. Yeah. Could agree more. Right? I think that's a super important point you're making. And but I think you're sick. You're so A link between way you made it happen, I mean, the the vehicles, the plans, and so forth, the education that you need to do, and then the investments. So they have to go hand in hand because you if you don't have the investments to make it happen, and if you don't have the plans and the indication also to make it happen, then you don't get the right outcome. There has to be that balance. That's why I think it's such important point we're in right now. For the globe. So both we get the education right the private individual be that the younger generation or the other generation in dehumiliation. Because no one likes looking at the volatility in the stock markets today. So if going more private, longer term, have that long term mindset absolutely what is needed. Please, like Yeah. What's the fundamental decision we should be making to say how I should allocate? Right? And that's when I keep coming back, if we're not looking at health, Right? We're not looking at longevity and lifespan. Right? When someone's thinking about this and they're saying, hey. My income for life is better. Indeed. Most people take too little income Number one, period of retirement is running at a month. Everybody chose this way. They don't spend, David. You're right. And they should be. Right? People were taking 4% control. That's broken. It should be eight or 10 in some cases. We could literally medically our and we break it down and say, this is actual what the holistic lifespan is. Right? We're gonna talk about this massive $100,000,000,000,000 franchise. It be nice to know when that's gonna occur? Right? Like, that's the types of things we should be doing. We would do a lot of work with pension funds to help you better understand on the liabilities Mhmm. Because that's just the mortality distribution for development is. And I think that as we think about the the track, right, as as Mike pointed out, I think it should indicate things like where the tracks are incorporating technology and AI as well as global asset obligation Pillar applies to transfer of wealth. It applies to millennials. These are the things that they actually care about. And for not providing that information, we'll never get to the Jed, you Ken. Yeah. Yeah. I mean, I you know, was gonna make a comment on the investment side, and and I do think both in the accumulation phase and the decumulation phase, phase the broadening out of the capabilities that you have to help people solve those long term goals is really important, and the rules there are in the process of changing. I mean, we've been investing in direct real estate in our target based funds for twenty years. But you have to do it with an eye towards more of the risk what's happened when things go wrong, how do you manage in a liquid asset into in something, that offers daily liquidity And it's I think it's a positive that that opportunity set is expanding. The DOL right now is a common period around expanding the usage of all sorts of alternative strategies in defined contribution plans. I think that can support those longer term goals in both the accumulation phase and the deaccumulation phase. We're looking at huge standard of publicity target ones. Like, just American College of Survey that was completed seven days ago, 3,000 US consumers And was the fourth highest resignment Minor high students in that age and coming wealth. The number one All of my health care expenses is emerging threat, which is US changes to pension policy. And so, like, I agree that objectively, WRS is the biggest in the world when it comes to solving retirement for someone. I probably have those who's not top of mind for retirees. And so I think that it but, it's a big deal, but the problem is we create solutions just focused on longevity risk, like the QLACs or deferred income into use longevity insurance. Not gonna be attractive for consumers or advisors, because it's not what they're flowing focused on when it comes to figuring out how to solve it. But could could be any If I I like what you're saying about volatility and why people are not spending money Could the answer just this might be interesting. Could the answer just be Because everyone looks at the volatility in the public markets, so they don't wanna spend it. Yeah. Right? So so our offer obligation is to take that mindset up, so the headline, the the volatility of the stock markets out. And put money to bear in long term investments. So, David, I wanna follow-up with you on the second IND community. Help me up. Because you write a lot about this. Is The US individualization of retirement a global story, or do you feel like we're exporting our problem? Know, we we export lots of problems. I guess you could say that or no. Don't think so. I think that that, you know, we're I I say that retirement is the most important purchase. That most people will ever be. Right? It's gonna cost millions of dollars. So I think that when people ask themselves, like, how much do I need? That is a a personal question. Right? I think everyone wants portfolio, a strategy, a plan that applies to them. I think that the movement towards defined contribution is this global phenomenon. And as I mentioned, I think that that's probably the right place for most people. Think that the fundamental plans aren't necessarily the best way to solve overtime for most people. I think that that that we do need to address some of the problems that emerge as we create plot of plaintiff's folks to start setting. I know you're not. I just think that everything that's been said has been absolutely spot on. Think he's just making a step back from our vantage point working with some of the largest families around the world really two points that matter. It's when you get in and when you get out. Many of our clients are incredibly sophisticated global investors, and we certainly sure that we're educating. We've said that a lot on the panel already. Educating empower, elevating their knowledge and awareness about how to achieve your life goals. And in fact, the HSBC puts out a global wow of entrepreneurship survey, and the number one concern on most of our clients minds was what's gonna be my legacy? Now how am I gonna think about passing the wealth responsibly the next generation, future generations, and how do I educate? How do I make sure they're well prepared? So, again, it it goes a little bit beyond, you know, the specifics of what we're talking about here. We're taking a step back looking at global architecture portfolios. And you no two plans are ever the same. Just gotta make sure that we understand that each of the family's goals purposes, and vision, really have help craft a portfolio that's durable and sustainable for the long term. And so that leads me to my next question about the adviser's job. Is it fine fundamentally different today than five years ago? Or, you know, I think you guys have this 30,000 foot view, but then you're speaking one to one to this incredible global client base across all of your firms. But I'm curious to hear what the feedback is to them and how you're advising differently. I'm not sure that I'm not sure the goals are are different. They're definitely more complicated when you're dealing with people living too 100 and a 120. I think, you know, either talking about legacy and planning and so I think the goals are similar. I think the tools that advisors have have changed dramatically. And I think that's across both public and private markets. You can start with, you know, ETFs. Dollars 20,000,000,000,000 ETF market. It's going to be another year of record flows record issuance, and record volumes. Now at were synonymous with passive, You know, the passive industry is now over $20,000,000,000,000. It's quadrupled in the last five years. But active ETFs are now 10% at the ETF market and growing at about 30 to 40% of the year. Wow, ETF market is changing, and it's probably gonna be a $50,000,000,000,000 industry by thousand and thirty. Which is about 10 to 50,000,000,000,000 ahead of where people thought it would be. And then private markets. I mean, these are US numbers and, you know, very similar to what's happening in Europe. You know, about five years ago, there were about 200 strategies if you looked at interval funds, tender offer funds, kind of more adviser retail oriented strategies. Now we're launching about a 100 of those every year. So 500 more in the last five years. You could argue that more choice is good. Mhmm. I will tell you, it does make it a little bit harder for, you know, the adviser and the consultant. Think you're gonna see returns kind of pushed together in the median and the middle. And then you'll have your high performers on the top on the bottom performers And the spread of these asset classes is wider than any in normal periods versus public markets. It really winds out when things are challenging. And again, haven't had a real prolong challenging period since the the GFC. So the the the goals and things I think are similar tools, though, that advisors have to solve them have changed a lot. And so how do you how do you deal with that on on the investor's side? How are you mean, I do I I do think, like, one of your questions later, I'll I'll foreshadow it around you know, what I think will change in five years. I think more will be managed into and and kind of professionally allocated. You know, portfolio construction risk management stress testing, you know, all of those things that go into building something that's sustainable and diversified. For the longer term versus choosing manager a versus versus manager b. So obviously Real quick. Yeah. Sorry. Go ahead and jump in quickly on that. What's changing continues it's gonna be much easier for us to Right? Because then we have AI justice with that. We have so many processes that are becoming much efficient. We have our teams around the world, the efficiency and dealing with our clients, the service offerings that we have for our clients are gonna be much more streamlined. The process continues to improve and the key here is just making sure that our teams are really well and really trained. To work with AI, to work with the adoption of AI, and how efficient that can be to unlock even more value on behalf of our clients. David? I was gonna say, I mean, just talking about investments and, like, I'm a portfolio manager. I I love the fact that the investment suite is You ask about, like, what's gonna achieve with the time in the next five years, it's it's the it's the holistic suite of services they're offering to clients. Right? I mean, my was a financializer, you know, twenty years ago, and it was analogous to stockholders. Right? Like, it was it's all you did. I you know, to me, what I'm excited about is that is that the the services advisor performing for clients is increasing the back of the day. Like, AI AI can be a huge win. So I think that, you people I think that there's this kind of radical redirection that's happened and it happened where more folks are gonna work with lasers that help them accomplish that goal with a a huge array of services solutions versus just how they build your efficiency And I I think That's Peter. What's gonna happen is that which is actually a good thing. Mhmm. Because what happens after you advise her in, the client is getting more and more informed. Asking more and more difficult questions. For the adviser. There will be some advisers that probably won't make it in the next five to ten years. Which basically will then drive that centralization is good. Because your lysine that comes along or the device that just looks at the stock market as well is not good for anyone. They change around portfolios all the time. Really not great if you have a thirty year horizon. So I I really much agree with Jeff. Surroggle of the Fittest. Which is, you know That's one dealing Yeah. Like any other history. Yep. Yeah. Take I was just gonna add, you know, if you take any estimate historically over a twenty year period, they all look like they're ten to ten and half. Right? Like, ultimately, everyone falls pretty close to me. Would be Calls. Right? And and whether it's it's gonna require equity and those all And so, ultimately, I think people about five years are gonna be in this world where you do see a depression A lot of the good ideas that those advisors ultimately use with those ETFs. But then you start to see And I keep coming back to this because I think it's so important. We're missing it. We're missing it right now. David, I respectfully disrepated. You can't judge 3,000 people on an ACLI study and you call that back. It's just wrong. There are millions of people who are faced with this And when we give our clients their life span, you know what they said? It's wrong. You know what they actually said? Zero chance I'm living now. And the reason why is because we're it's a toll. Maybe different issue. If I These the reason why they say it's not important is because we're not even providing the data We're giving them nothing. Right? And now all of a sudden, we're starting to provide them data, and then their response is, you're welcome. Provide You know what the agent did meeting assignment Opposite over the age of seven These things around health and feeling better Health spending is gonna be, I think, the most important topic we talked about how people not necessarily open instead, how they're gonna deploy these assets in a way that they can live longer not Right. It's super important. The advancements that are happening today is Mhmm. Medical medicine, personalized medicine. It's expanding the lifespans of our future generation by decades. Yes. So, again, you know, the solar solar data for investing not out living your wealth, getting good in place, like, all of those things that we talked about. Because I met the driver of that, not really knowing it, is people outliving are steering up. They don't wanna eliminate anyone. They run them back home. The son of movie generation. When you think about money on today, it's just the older inside edge of that is 40 to 50, 40 to 45 years old. Right? Maybe start thinking about what it's like to work. At seventy days. Mhmm. Because they're going to live longer. We're providing that data back to our clients. Right? What happens in your exercise? What happens in your body's thinking? What happens if you do a better job When you're your financial resources and having strong investments? Those things will match. And that's when I look at the financial advisory world, that's where it's going. My roof's doubled me on two years. How it goes? I I I I know they're millennial, and I was not planning to work what what he's doing really? You're gonna Right. You're gonna want to work till seventy two. How many? And think about the extra seven years. Right? That's another goal. Compounding at 10%, just too extra well. So real quick. Yeah. So with what Jay's body was on JL there's The average 65 for them radically underestimates how long we're going to live. That's a problem. A bigger problem, though, is what WLFC and WLF financial advisors. I've done lots of surveys on advisors too, not as big as last we decided. Like, in in my surveys, 80 to 95% of advisors use a multiple of five as the retirement end date for their furniture plan. Almost none of them personalized longevity based upon client expectations. Right? The gap in life expectancy for a 65 year old, if you look at the top and bottom decile, over ten years today. So to Jay's point, he is on. You know, if if if advisers who over the wealthy aren't talking about they're not understand how long they're going to live. They're not gonna build the best foundation. And I think here, we we still talk about these, would say, two different levels. So what is your great advice? That we need to give clients and clients need to understand and need to look after. Themselves, deliver and so forth. Guess what? There's also people who need to invest in in a health care company. That's right. Just taking that. Right? Taking that. Right? That's a great point. Yep. Also on growth companies, right, for innovation, looking after health and so forth. And not surprisingly, EPG is the largest investor in the healthcare sector globally. So there you go. Yep. Great. Great. So, Chad, JPMorgan has been a building private markets. For wealth channels. Okay. Tell us what's working and what's the height. Yeah. I'm kind of listening to all this. You know? And I on the kind of how we think about solving for these things as investors. I think it reflects what's going on in kind of the industry right now in terms of where capital is being allocated. And it's a bit of a barbell. Know, by their investors really looking for portfolio resilience, inflation protection, diversification, ease of yield. Or they're looking for high growth, and they wanna invest in AI, and they wanna invest in in in healthcare. And some of that's reflected in what we're seeing in the industry. For us, last year, infra alone was up 6% year on year in terms of in terms of industry industry flows. So going like, deeper into infrastructure, because there's a lot of different ways to invest in infrastructure, We're seeing the most demand inside JP Morgan is what we would call kind of core plus infrastructure that's focused on essential services, contracted and regulated power, very predictable. Think about powering the world's data centers as opposed to already and operating the data center itself. These themes of increased energy demand issues around energy security, obviously, what's going on in The Middle East right now, and, you know, Europe's, you know, reliance on on Russian gas and what that exposed. This whole idea of needing renewables to meet both increased energy demand and have energy security and reliability is incredibly focused. And these themes are resilient, and they're not really correlated to what's happening in public markets. The other part of infrastructure, which is a bit underinvested in, is transport. You know, think about that as kind of owning and leasing ships to investment grade, you know, lessees like like a Rio Tinto. Also, another area that's kind of been a bit overlooked in this cycle has been real estate. Obviously, there were challenges post COVID. We're seven quarters into a recovery now. And I think probably real estate would be one of the best risk adjusted return opportunities that we see in the next cycle. But it's not just been on a recovery in office and retail, It's sectors like logistics, industrial outdoor storage, student housing, So, you know, real estate has been through a number of cycles and recovery period tend to be long. And and very, very strong. So the other end of the spectrum is high growth, and I know we're gonna kinda get to the AI topic here a bit more. The bottom line is companies are staying private for much longer than they ever have before. And it's not just the companies that you read about in the headlines. It's true for most companies. 1999, the average company went public after about six years of corporation. It's about fourteen years. I like using an example. Google was private for six years. Databricks was has been private for thirteen. Palantir was private for seventeen. Compounding growth in investment opportunity at that stage for these companies is immense, and it's hard to even compute as you think about it as an investor in terms of the compounding of those types of growth rates. And the opportunity to own those companies as private companies and then hold them through the public period. Is also becoming a theme, you know, that's that's emerging more and more. So it's really a bit of a barbell risk diversification and high growth we're seeing opportunities across both. And just to add on to your comments there, we have such large opportunities also As you know, family offices are another key growth driver now and management around the world. We've been told over 10,000,000,000,000 every five to ten years institutions. Mhmm. They're looking for direct investments. They're looking for co investments. Looking for different types of way to express their views. With more direct investment opportunities so there lies this opportunity for entrepreneurs also to get patient count. You see a lot of replacement in many cases. Of family office investments into into entrepreneurial type endeavors as well. We're endeavors forward to your your calendars, there's no there's no mean, the climate markets are so deep and wide, and, of course, there's reasons to go public and you're likely to see some very big you know, private market IPOs this year. But when you talk to founders about their decision making, a lot goes into that. You know, they're thinking about, well, do they wanna justify every acquisition that they do Do they wanna be completely transparent about their strategy to the public market? So there's an ability to do a lot more as a private company, but at some point, there's a trade off. I mean, back to your comment, I mean, we've pulled up the data in Syria. L. You know, series l Yeah. That's the reality that I Growing very fast. So, you know, the opportunities on the direct side are are I just wanted to Yes. Please do. Think I'm the only seat go that went public in the last three years. Oregon. And and what you said I have to tell you, you you know, there were pluses and minus. I had asked frequently why we made that decision when we made it. As small cap stock. And, you know, I could argue that certainly looking backwards, amidst the effects we made, the cost of being public, also being public to this market company is incredibly acute unit. Putting everything else transparently, loading that process. But I will say this, like, one of the biggest things for us, we were you know, we had positive revenue We, you know, positive. We had cash flow. We had all the things that you needed as an ongoing as an upcoming public code. But with that said, I I would make the stronger argument why small cap stocks should go public and not wait. And the main reason why is sorry. I don't wanna mention I agree. I'm bragging about our numbers. But, you know, we tripled top of all the lines. Two and a half years. I would you because we were both. The the challenges of everybody is not happening really. Right? That's Right. It's but but I do think that's why investing in a like yours when they're the Like, I would organ being on that side of the table, though. Not like I made great offers for private Right? It it it feels when you're entrepreneur, you've built a business for some years, and you've got a half the table to build with people in me. And you sit there and say, what are they getting here? And I think that this is a real issue with business owners who either repeat a public or then want take advantage of us. Again, I'm a huge proponent of small cap stocks going forward because I've seen the results. Now you need them to need to be able to drive your business. You gotta work. You gotta you can invest, and you've gotta have, you know, really bottom line earnings. Because if you don't, it's gonna be really hard for you. But with that said, when I walk in with my k or q, and, you know, we're out soliciting new capital to raise not just selling public coat, two years. And it was because we were a public company, there was a way of trust there. That the institutions had a lot of opportunity So I'm curious, though, when you're talking to investors, which jobs are they most excited about? Right now? We're obviously the private market. Hold a lot of value. What stage in the private markets are they looking to jump in? Well, one of the questions that you asked that I did answer is, like, you know, where where is this money going and where's the height? And I think where the money is kind of going and where capital is being allocated again are kind of those those those four bells. Then what I had mentioned is, like, DIRECTs, which is you know, very concentrated right now, but it's but it's it's not just the companies in the headlines. It's the senses of the world. It's the rogos. It's companies that are playing financial services industry in in in in AI. I think the hype that I worry a little bit about is investors having a bad experience with private calls. And a lot of investors, this is their their their first experience. And we have to make sure as there's more product proliferation that you know, could result in a situation where the democratization of