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What Trump's Tax Proposal Means for Retirement Plans · Bloomberg Intelligence

0:05
Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
0:08
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
0:11
Speaker 1: bring you the most important, noteworthy, and useful interviews for
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Speaker 1: you and your money, whether you're at the grocery store
0:17
Speaker 1: or the trading floor. Find the Bloomberg p m L
0:20
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Well,
0:31
Speaker 1: I was reading a report from HSBC this morning that
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Speaker 1: showed that millennials expect to retire at age fifty nine,
0:37
Speaker 1: which is two years younger than the working age average
0:40
Speaker 1: of six one and seems rather remarkable in an era
0:43
Speaker 1: of incredibly low benchmark yields. I want to bring in
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Speaker 1: Peter Fendler for some perspective. Peter Fendler is a principal
0:49
Speaker 1: at Hub International New England LLLC, based in Portland, Maine,
0:53
Speaker 1: who focuses on retirement accounts and advising people. And how
0:58
Speaker 1: likely do you think it is that this current generation
1:01
Speaker 1: of upcoming workers will be able to retire at age
1:03
Speaker 1: fifty I think it's really unlikely, given the fact that
1:07
Speaker 1: we're living longer and we're saving less than we ever have.
1:10
Speaker 1: What's more realistic, I think seventy is the new the
1:14
Speaker 1: new sixty five and UM, you know, we're sitting with
1:18
Speaker 1: UH participants in retirement plans and looking at their average
1:21
Speaker 1: account balance and trying to project forward what they should
1:24
Speaker 1: be able to retire on. There's a pretty large disconnect
1:27
Speaker 1: between what they have, what they need, and what they
1:31
Speaker 1: think they need. You know, Peter, I wonder if you
1:34
Speaker 1: could just offer people a little bit of an insight
1:36
Speaker 1: into your business and also the changes that you have
1:40
Speaker 1: seen in your business. I mean you UH were independent
1:44
Speaker 1: and now you're part of Commonwealth, you know, family of
1:48
Speaker 1: Advisers and UM and HUB International is of course made
1:55
Speaker 1: the acquisition. What if you could just describe your role
1:57
Speaker 1: on how it has changed over the last couple of
2:00
Speaker 1: years and what's foremost in your mind. UM. I think
2:04
Speaker 1: there's a lot of consolidation going on and there's going
2:06
Speaker 1: to be a narrowing of of what we do as
2:10
Speaker 1: retirement plan advisors under the new realm of the fiduciary
2:14
Speaker 1: rule that's been promulgated recently. UM still in its finalization,
2:20
Speaker 1: but assuming it it maintains its current form, there are
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Speaker 1: going to be a lot of advisors that UM make
2:26
Speaker 1: the election to get out of this business because of
2:28
Speaker 1: the risk. UM, I think there's going to be Uh,
2:34
Speaker 1: we've got a conflict of interests that's inherent in the
2:37
Speaker 1: way that our retirement plan advisory work happens right now,
2:40
Speaker 1: where there's commission based resources and conversation formulas as well
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Speaker 1: as fee based, and the fiduciary rule really attacks the
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Speaker 1: commission based variable pay element of what's going on, and
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Speaker 1: it puts a premium on being a fee based advisor
2:59
Speaker 1: such as ourselves. UM So to that extent, I think
3:02
Speaker 1: with that increased liability under a commission based relationship with compensation,
3:08
Speaker 1: you're going to see those advisors that don't want to
3:10
Speaker 1: move to a fee base, or are not prepared to
3:12
Speaker 1: or don't have the infrastructure to go to that direction. UM,
3:16
Speaker 1: perhaps exit the market. Well let's let's ask a question
3:19
Speaker 1: that might seem basic, but are so many advisors for retirement?
3:25
Speaker 1: Are they necessary? Is it is? It is a certain
3:27
Speaker 1: consolidation important, right, I think there is, I thinks a
3:30
Speaker 1: great question. I think there are a lot of advisors
3:33
Speaker 1: that have two or three plans that aren't really expert
3:35
Speaker 1: in the retirement plan space. But um, they have a
3:38
Speaker 1: friend that has a company and they become the advisor
3:41
Speaker 1: just through kind of convenience and in relationship. But um,
3:46
Speaker 1: with the fiduciary standards that are coming out now and
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Speaker 1: the attention on fiduciary capability, UM, it's it's going to
3:51
Speaker 1: be one of those things where it gets rolled up
3:54
Speaker 1: to people that are expert in that space. So how
3:56
Speaker 1: small do you expect this interest try to become? In
3:58
Speaker 1: other words, can you give us some perspective and how
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Speaker 1: big is now and how small you expect it to become?
4:02
Speaker 1: That's a good question. I don't I really don't know
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Speaker 1: how large the advisor community is, but I think it's
4:07
Speaker 1: reasonable to expect that there's strinkage in the in the
4:10
Speaker 1: realm of twenty to thirty maybe that's a lot. Yeah,
4:15
Speaker 1: I think, well, where are those assets go? I think
4:19
Speaker 1: they will remain with advisors, but with advisors that do
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Speaker 1: a lot more of the work that are specialized in
4:24
Speaker 1: the retirement plan space. So where is the area. Is
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Speaker 1: there a specific specialized territory where advisors are really necessary?
4:33
Speaker 1: Uh with respect to people crafting retirement plans? I don't
4:37
Speaker 1: think so. I think it's up and down the market.
4:39
Speaker 1: So it's it's not specific to a certain industry. It's
4:43
Speaker 1: not specific to a size of a company. Um, if
4:47
Speaker 1: you are an employer and you are launching a four
4:51
Speaker 1: one K plan or or four or three B plan
4:53
Speaker 1: in the nonprofit space, it's a complex world and it's
4:57
Speaker 1: not one of those things that you really want to
4:58
Speaker 1: do for yourself. End employers or fiduciaries and they're looking
5:02
Speaker 1: to offset that fiduciary responsibility by hiring a co fiduciary
5:08
Speaker 1: through eight relationships which we are actually providing on the
5:12
Speaker 1: three twenty one level. That sounds expensive. Is it getting
5:15
Speaker 1: more expensive? Actually it's getting less expensive. Um, how much
5:19
Speaker 1: does it cost? So that that's a really good question
5:25
Speaker 1: and it's a complex answer. What's happening is there so
5:28
Speaker 1: much attention on fees that that there's been a continual
5:31
Speaker 1: compression of costs and what we're doing and within our
5:36
Speaker 1: organization is saying, look, here is our baseline UH set
5:40
Speaker 1: of services that where we're acting as a fiduciary at
5:44
Speaker 1: the plan level, helping you with plan design, with fund selection,
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Speaker 1: fund monitoring, and and educational fiduciary standards those things. That's
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Speaker 1: one fee set and it's based upon our liability as
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Speaker 1: advisor UH and the side as a plan. The other is,
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Speaker 1: do you want us to act as a fiduciary for
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Speaker 1: your employees helping them with education, investment selection, one on
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Speaker 1: one advice, um, And the fee for that is really
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Speaker 1: time sensitive. How much are we doing, how how often
6:14
Speaker 1: are we sitting with your employees? It sounds like, but
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Speaker 1: it sounds like at least that that the latter scenario
6:22
Speaker 1: um is Uh. It is, you know, part of the
6:25
Speaker 1: whole education process and is considered to be a positive
6:28
Speaker 1: if you can afford it. It is And I think
6:30
Speaker 1: employers needed time to change it from a fee space
6:33
Speaker 1: to an investment space because what's happening in the United
6:37
Speaker 1: States going back to Lisa's original question, is that Americans
6:41
Speaker 1: are underfunded for retirement. We're woefully underfunded and um, we're
6:45
Speaker 1: kind of going along going forward, and if we stay
6:48
Speaker 1: that way and don't have enough money to retire, we won't,
6:51
Speaker 1: which has the upstream of higher costs for employees and
6:54
Speaker 1: employers by employees not retiring on time. Well, we'd all
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Speaker 1: like to retire on and I want to thank you
7:00
Speaker 1: very much for helping us. Peter Findler, he is a
7:03
Speaker 1: principal Hub International, New England. We're broadcasting live and the
7:06
Speaker 1: Commonwealth Financial Networks twenty seventeen Retirement Symposium in Boston. Well
7:25
Speaker 1: Oil has been on a wild ride of late. Just
7:28
Speaker 1: days ago it was above fift dealers of barrel. Now
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Speaker 1: it's down to forty seven dollars a barrel. Despite news
7:33
Speaker 1: that Saudi Arabia is tightening the screws on Qatar as
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Speaker 1: punishment for its ties to Iran. And I want to
7:40
Speaker 1: bring in Javier blast who's our chief energy correspondent for
7:43
Speaker 1: Bloomberg Intelligence talking to us. Come just set the stage
7:46
Speaker 1: for us. Why did Saudi Arabia take these measures against Quaitar?
7:50
Speaker 1: What exactly are the exact parameters of these measures? Well
7:55
Speaker 1: over the last few years that the relations between Saudia,
7:59
Speaker 1: Abbia and Catar has been strained for a number of reasons,
8:03
Speaker 1: in part because Catar support the Muslim brother could a
8:06
Speaker 1: movement that Saudi Arabia does not, in part because Qatar
8:11
Speaker 1: has been trying to add some mediator between the conservative
8:16
Speaker 1: countries in the uh in the in the goal for
8:19
Speaker 1: the Arab conservative countries in the golf by Saudi Arabia
8:22
Speaker 1: and on the other side Iran. And also because of
8:25
Speaker 1: all Jasira, the Doja Base television station that Qatar controls
8:31
Speaker 1: has been quite critical of the Saudi regime. Those disagreements
8:35
Speaker 1: have been in crescendo over the last few months, and
8:38
Speaker 1: they erupted into a crisis last week. And now it's
8:44
Speaker 1: Saudi Arabia is retinally eighteen and getting several other countries
8:47
Speaker 1: behind it, several relations between itself and and and Doha.
8:53
Speaker 1: That is something unprecedented because Saudi Arabian and Qatar in
8:59
Speaker 1: theory on the same side uh in the Gulf Corporation Council,
9:05
Speaker 1: and also because both both countries are close allies of Washington.
9:10
Speaker 1: Is a very unusual situation in the Middle East. Well,
9:14
Speaker 1: I was just looking at some of the headlines of
9:15
Speaker 1: the newspapers in the Middle East tier and the United
9:19
Speaker 1: aramids quitar armed terror to spread chaos. Uh Iran is
9:25
Speaker 1: encouraging Qatar to leave the sixth Nation Gulf Cooperation Council
9:29
Speaker 1: and so on. And then you have also the same
9:33
Speaker 1: kind of thing in Saudi Arabia, and the response of
9:35
Speaker 1: the in Qatar is bark as you wish Qatar won't
9:39
Speaker 1: change its principles. Uh isn't the United States have a
9:44
Speaker 1: huge military presence just outside of Doha. It does and
9:48
Speaker 1: you're absolutely right, and that's what I was emphasizing. It
9:51
Speaker 1: is a very unusual situation in wh when you see
9:53
Speaker 1: two Middle East nations or or one one group of
9:58
Speaker 1: Middle East nations led by Saudia, we in the United
10:00
Speaker 1: Arab Emidates and on one side and the other side Qatar.
10:04
Speaker 1: Because the both sides of these confrontations have close links
10:09
Speaker 1: with the United States. Washington has a huge military operation,
10:14
Speaker 1: a military air base used on the Outskirs of Doga,
10:17
Speaker 1: the Central Command that oversees all the operations in the
10:21
Speaker 1: Middle East, and also in Afghani style, ten thousand more
10:25
Speaker 1: than ten tho troops. Yes, they's ten thousand troops, are
10:29
Speaker 1: huge air base and and the central Command that oversees
10:33
Speaker 1: all the operations in the Middle East and Afghanistan, all
10:35
Speaker 1: of that is based in Qatar. Yeah. Well, you know,
10:40
Speaker 1: let's let's put this in perspective. Saud Saudi Arabia, Bahrain,
10:43
Speaker 1: and the United Arab Emirates and Egypt that they will
10:46
Speaker 1: all suspend air and sea travel to and from Qatar.
10:50
Speaker 1: What prompted this action? Now, I mean, did did President
10:53
Speaker 1: Trump's visit to the Middle East have anything to do
10:55
Speaker 1: with us? Was in part that UM. Probably there was
11:01
Speaker 1: there was a bit of a link or that, because
11:03
Speaker 1: I think that the Saudia authorities have felt more UH
11:07
Speaker 1: in a stronger position of the after the Trump bus
11:10
Speaker 1: it UH to take a more um aggressive for or
11:14
Speaker 1: or or a more confrontational stanza towards towards Catar. There
11:18
Speaker 1: were also some comments carry by Katari stay home media
11:22
Speaker 1: and attributed to the mere Um criticizing the Saudist authorities
11:27
Speaker 1: during the Trump bus. It very quickly those comments were
11:31
Speaker 1: deleted from Catari media and and the catarists they said
11:34
Speaker 1: that those those were not real comments, that they were
11:38
Speaker 1: the work of a hacker, but very few people believed
11:42
Speaker 1: that explanation in Saudi Arabia. So really a couple of
11:46
Speaker 1: events after the Saudi the Trump busy to to Saudi
11:49
Speaker 1: Arabia really triggered this crisis. So let's talk about the
11:53
Speaker 1: market effects here, because the initial effect was the crude
11:56
Speaker 1: values rose as sensibly from the expectation the Catard be
12:00
Speaker 1: unable to ship as much crude and therefore that it
12:04
Speaker 1: would cramp supply to some degree, that gain has been
12:07
Speaker 1: absolutely raised. And then some what's going on here? Well, uh,
12:11
Speaker 1: it's it's a very classic um spike in the oil
12:14
Speaker 1: market when we have some kind of geopolitical noise um
12:18
Speaker 1: during trading hours in Asia, the media reaction is used
12:22
Speaker 1: to buy by futures using case something really goes really bad,
12:26
Speaker 1: but immediately has become very clear today that the oil
12:30
Speaker 1: is continuing flowing from Qatar as our six hundred excuse me,
12:34
Speaker 1: six hundred thousand barrels a day UM, and the same
12:37
Speaker 1: with the l n G, which is a much much
12:39
Speaker 1: more significant proportion of global supplies. So at the moment,
12:42
Speaker 1: I don't see any significant impact in the oil market
12:46
Speaker 1: unless this crisis really escalates, We're gonna leave it there,
12:50
Speaker 1: but boy, this is going to be a story that continues.
12:53
Speaker 1: And also you have the issues of whether the Opeque
12:55
Speaker 1: nations are mindful and stick to their limits in terms
12:59
Speaker 1: of production, and because that was something that also is
13:01
Speaker 1: looking to be renewed well, and this also crazes the
13:04
Speaker 1: question what are the standards for some of these Middle
13:06
Speaker 1: Eastern nations to sanction each other or not. I mean,
13:09
Speaker 1: it sort of seems a little bit out of the blue.
13:12
Speaker 1: Um cutting ties with a country that hosts an air
13:16
Speaker 1: base that has more than ten tho U s personnel,
13:20
Speaker 1: what can you say, I want to now bring in
13:34
Speaker 1: George Ferguson, our aerospace defense expert when it comes to
13:38
Speaker 1: Bloomberg Intelligence. Uh, Georgia wanted you to give us just
13:42
Speaker 1: perhaps a preview of what you understand the President may
13:45
Speaker 1: be speaking about in just a few moments having to
13:47
Speaker 1: do with privatization of the air traffic control system. Hey m,
13:52
Speaker 1: good morning. Yeah, we had we expect the President to
13:55
Speaker 1: announce something of a privatization of air traffic control, a
14:00
Speaker 1: structure that's going to look pretty similar to nav Canada.
14:04
Speaker 1: And essentially what it would do is, um create a
14:08
Speaker 1: separate entity that's probably gonna that's supposed to be removed
14:12
Speaker 1: from government bureaucracy to oversee both the day to day
14:16
Speaker 1: air traffic control as well as long term investment in
14:19
Speaker 1: that in the systems that support air traffic control. So, um,
14:26
Speaker 1: you know, we've we've heard that President Trump is laying
14:28
Speaker 1: at his vision, but it's going to include a separation
14:31
Speaker 1: of air traffic control operations from the Federal Aviation Administration.
14:34
Speaker 1: What's the biggest opposition to this? You know, I think
14:39
Speaker 1: that um, I don't know that there's a huge amount
14:42
Speaker 1: of opposition here. I think that there is a bunch
14:45
Speaker 1: of jockeying between the interested parties about who's going to
14:49
Speaker 1: pay in the future. Um. And for the interested parties,
14:52
Speaker 1: let's get a sense of of sort of who's on
14:54
Speaker 1: what side here? Sure, so interest party is going to
14:57
Speaker 1: be airlines, of course, would be the most interesting party
15:00
Speaker 1: because they're most affected by air traffic control, But other
15:03
Speaker 1: users of airspace are going to be business aviation and
15:06
Speaker 1: general aviation, and so I think those three parties are
15:09
Speaker 1: trying to figure out who's going to pay. I think
15:12
Speaker 1: they all would probably agree that they want this air
15:15
Speaker 1: traffic control system out of the federal government because they're
15:18
Speaker 1: their modernization efforts that I think all of them would
15:21
Speaker 1: agree should have happened by now are going too slowly
15:24
Speaker 1: or risk of not occurring the way they thought they
15:27
Speaker 1: would occur. Um. So again, I think what we have
15:30
Speaker 1: is a discussion about, Okay, what's the right fee for
15:34
Speaker 1: the business aviation community do you pay? What's the right
15:37
Speaker 1: fee level for the airlines to pay? And then g
15:40
Speaker 1: a sort of general aviation is in the mix too,
15:43
Speaker 1: but much less of a user. George, I want to
15:46
Speaker 1: know is is the air traffic control system in the
15:48
Speaker 1: United States? Is it considered world class. No, not now.
15:54
Speaker 1: So if you talk to some people, you know, talk
15:56
Speaker 1: to some people at different groups indeed see that advocacy groups,
16:01
Speaker 1: and they'll tell you that, you know, they're still using
16:03
Speaker 1: paper strips with airplane numbers on it, uh, you know,
16:07
Speaker 1: to line up airplanes for approach and departure at major airports. Um.
16:12
Speaker 1: Some of the computing systems are fifty years old. UM.
16:16
Speaker 1: So that's clearly not state of the art. And meanwhile
16:19
Speaker 1: technology is evolved so that we can get a lot
16:22
Speaker 1: better information on each individual airplane. Instead of using radar,
16:27
Speaker 1: which we use now, we can have them uh collect
16:30
Speaker 1: information on their speed and their exact location from GPS
16:34
Speaker 1: signals and then shoot that down to ground stations or
16:37
Speaker 1: even back up to satellites and provide air traffic controls
16:41
Speaker 1: of the much better picture of uh, the air traffic environment.
16:45
Speaker 1: And they can use that to space airplanes much closer
16:49
Speaker 1: and make make the system a lot more efficient. UM
16:53
Speaker 1: So that's sort of where we want to go. We're
16:55
Speaker 1: not there yet. We're still using radar and fifty year
16:57
Speaker 1: old technology computing technology. George do a sense of how
17:02
Speaker 1: much it would cost to bring the US aviation system
17:05
Speaker 1: up to speed. Um. So, look, I think nobody really
17:10
Speaker 1: knows this number correctly. I'll tell you that the f
17:12
Speaker 1: a A says it's a thirty billion dollar number, and
17:16
Speaker 1: they think that roughly thirty million. They think fifteen billion
17:19
Speaker 1: of that is it is something the f a A
17:21
Speaker 1: has to spend. Any other fifteen billion of that would
17:25
Speaker 1: be equipment in the airplane to the airplanes need this
17:27
Speaker 1: equipment to shootout the signal that tells their direction, their speed,
17:31
Speaker 1: their exact location, things like that and the Sorry, now
17:35
Speaker 1: I'm struck by the idea that it probably could save
17:38
Speaker 1: airlines money. No. I mean, basically, if things were more streamlined,
17:41
Speaker 1: they wouldn't have the delays, they wouldn't have to do
17:43
Speaker 1: the vouchers as much to compensate people who have gotten
17:47
Speaker 1: bumped in, uh you know, off of really crowded planes
17:50
Speaker 1: because of delays. I mean, it seems like it would
17:52
Speaker 1: actually save money and there could be some way of
17:55
Speaker 1: you know, expediting this money saving aspect it. And so
18:00
Speaker 1: the airlines are they're the ones that have absolutely showed
18:03
Speaker 1: their cards. They're absolutely in favor of this privatization. If
18:06
Speaker 1: you look at some of their organizations like airlines for America,
18:09
Speaker 1: which is the group organization that represents them. UM. They've
18:13
Speaker 1: got papers out where they're absolutely in favor of getting
18:15
Speaker 1: air traffic control out of the federal government and into
18:19
Speaker 1: sort of a semi private organization. George, is there any
18:24
Speaker 1: is there any precedent for doing this? Uh So, internationally,
18:29
Speaker 1: we do have some precedents for I think one of
18:32
Speaker 1: the more prominent ones is UM is NAV Canada. UH.
18:38
Speaker 1: You know, if a NAV Canada was spun out of
18:39
Speaker 1: the federal government UM airline. Actually, airspace users, including the
18:45
Speaker 1: majority funded by the airlines, pay the fees UH for
18:49
Speaker 1: air traffic control, and Canada they issue bonds to buy
18:53
Speaker 1: you know, UH, capital equipment for long term investment, and
18:56
Speaker 1: they pay those bonds off with excess user fees, and
19:00
Speaker 1: and they're in a situation now where they're actually lowering sees.
19:03
Speaker 1: So it seems like in Canada UM this type of
19:07
Speaker 1: system has been quite effective. I think the airlines are
19:09
Speaker 1: looking at that thinking they'd love to have that. You know, Georgia,
19:12
Speaker 1: I'm surprised that this is not already happening, and I'm wondering,
19:16
Speaker 1: you know, there's been a lot of discussion about the
19:18
Speaker 1: problem with air traffic control in the US. What's being
19:22
Speaker 1: done right now, if anything, to sort of bring it
19:25
Speaker 1: up to speed. Yeah, So the FAA is marching down
19:29
Speaker 1: a m marching down a road to modernized airspace. A
19:33
Speaker 1: lot of it is about this next gen air traffic
19:36
Speaker 1: control and these systems on airplanes that will shoot their
19:39
Speaker 1: um their coordinates to ground stations. UM. So it is
19:44
Speaker 1: being done. Airlines are critical that it's being done slowly. Uh.
19:48
Speaker 1: If you read some of the position papers, they're very
19:50
Speaker 1: concerned that there's not the maybe the project management skills
19:57
Speaker 1: that you might find in a more nim bull private
20:01
Speaker 1: organization inside the f A A. You know, there's concerns
20:05
Speaker 1: about how the FAA funds themselves. They have a they
20:08
Speaker 1: have a six billion dollar trust fund in them and
20:12
Speaker 1: Congress sort of dips into that trust fund to pay
20:14
Speaker 1: for operational costs every year. So maybe there's a lot
20:17
Speaker 1: of concerned again and met the skill set in f
20:19
Speaker 1: A A kind of about the funding, long term funding,
20:22
Speaker 1: and that's the reason people want to see it out
20:24
Speaker 1: of there. But they are marching down the road trying
20:25
Speaker 1: to try to implement modernization. I just want to follow
20:28
Speaker 1: up on the funding issue that what makes anybody think
20:31
Speaker 1: that the private corporation is going to be more ad
20:34
Speaker 1: child in terms of funding then the government. I thought
20:38
Speaker 1: the funding was at least some members of Congresses that
20:41
Speaker 1: the funding has been held up by Congress and it's
20:43
Speaker 1: been intermittent, so that that's one of the reasons why
20:46
Speaker 1: that big revamp of the air traffic control system has
20:49
Speaker 1: been so sort of caught up in a budgetary no turbulence. Yeah,
20:58
Speaker 1: the thought is to get it away from some of
21:00
Speaker 1: the political influence of Congress, Right, So, uh, Congress sort
21:04
Speaker 1: of always always struggles with that challenge where somebody wants
21:09
Speaker 1: to build done and uh, you know, a congressman from
21:11
Speaker 1: this state of that state wants to improve their small airport,
21:16
Speaker 1: and they try to pull money out of some of
21:18
Speaker 1: these trust funds and such to fix their small problem,
21:21
Speaker 1: which might not be a big, you know, a big
21:24
Speaker 1: issue in the in the broader scheme of things. And
21:26
Speaker 1: so I think the challenge is to get it out
21:29
Speaker 1: of the political um arena so that funding can be
21:33
Speaker 1: set aside and and um and projects prioritized by necessity
21:39
Speaker 1: rather than the political influence. And again, Congress is using
21:43
Speaker 1: what you'd consider sort of long term funds trust fund
21:46
Speaker 1: kind of money to fund operations. Um, you know, you could,
21:50
Speaker 1: you could bring in consultants and perhaps optimize operations, improved
21:55
Speaker 1: computer systems and reduce the cost of operating it. Congress
22:00
Speaker 1: doesn't always have an incentive to do that either. So yeah, George,
22:04
Speaker 1: when you talk about political considerations, I think about what
22:06
Speaker 1: Chan and Pettapeece said just a few moments ago. Chan
22:09
Speaker 1: and Pettipeces our White House correspondent for Bloomberg, and she
22:11
Speaker 1: was talking about all the things that are going on
22:13
Speaker 1: right now, and we are awaiting the president right now.
22:16
Speaker 1: That's right, We are awaiting the president who is expected
22:18
Speaker 1: to make remarks on this air traffic control reform initiative
22:21
Speaker 1: that we're talking about with George Ferguson. George, why is
22:25
Speaker 1: President Trump coming out today with everything going on with
22:28
Speaker 1: infrastructure spending? Although I suppose this could be part of
22:31
Speaker 1: infrastructure spending, uh, you know, with everything that's going on
22:34
Speaker 1: with his travel ban, etcetera, with tax reform, um, why
22:40
Speaker 1: why now is there something in particular that he is addressing.
22:44
Speaker 1: I mean, I think this is just part of his
22:46
Speaker 1: broader agenda. You know, maybe he said if a structure
22:49
Speaker 1: was going to be an important part. You know what
22:51
Speaker 1: we heard. I heard airline executives talking about this um
22:55
Speaker 1: right after the election, and even before he had made
22:58
Speaker 1: it to the White House. You know, he that she
23:00
Speaker 1: got installed as president about this being a priority. So, uh,
23:05
Speaker 1: it's been on his agenda. I think he's bringing it
23:07
Speaker 1: forward now. I mean, whether there's some timing around other
23:10
Speaker 1: news in the world that he's trying to distract from.
23:13
Speaker 1: I'll let Shannon sort of answer those questions. But I
23:16
Speaker 1: think that there's always been part of his agenda, and
23:17
Speaker 1: so maybe he also thinks this is a bit uh costless,
23:22
Speaker 1: you can get it done quicker um and sort of
23:25
Speaker 1: get his agenda and moving that way. But maybe some
23:28
Speaker 1: of that sort of thought process there too. George. While
23:31
Speaker 1: we have you, though, I want to ask you something
23:33
Speaker 1: about the industry, because I know you put out some
23:35
Speaker 1: original research today and I wonder if you could tell
23:37
Speaker 1: us about production rates and how each of the individual companies,
23:41
Speaker 1: whether it's the Boeing but there's seven three seven, whether
23:43
Speaker 1: you know a ye Neo, if you could just give
23:46
Speaker 1: us an update on that. Yeah, So from the air
23:49
Speaker 1: framers PIM, we are we are bowling an airbus being
23:54
Speaker 1: the largest two manufacturers of commercial airplanes in the world.
23:58
Speaker 1: They're both ramping up production of the seven, their narrow
24:02
Speaker 1: body airplanes, which are their most important, most profitable airplanes,
24:07
Speaker 1: which is good stuff for them long term. Uh. You know,
24:11
Speaker 1: we're gonna be at production rates that I think they're
24:15
Speaker 1: going to be around fifty for each company. UM the UH. Again,
24:20
Speaker 1: these are sort of the the prime money maker airplanes
24:23
Speaker 1: for these companies. UH, And so longer term it's very
24:26
Speaker 1: good news for their profitability and their cash flow. The
24:29
Speaker 1: challenge is short term that these are new versions of
24:32
Speaker 1: these airplanes that they're they're introducing as they ramp up
24:35
Speaker 1: there and the seven thirty seven Max. So there's some
24:38
Speaker 1: costs to the UH, to the learning curve of building
24:41
Speaker 1: those airplanes. So we'll watch that. That probably hurts them
24:45
Speaker 1: a little bit to the end of this year. But
24:47
Speaker 1: again as they get those the productions of those airplanes down,
24:51
Speaker 1: UM not out to help their profitability cash flow. And
24:55
Speaker 1: what we're watching in these companies right now is wide
24:57
Speaker 1: body demand. I'm seeing some rumors out today that Airbus
25:02
Speaker 1: may even cut production of the A three eight more.
25:05
Speaker 1: UM that airplane hasn't sold well, it's the biggest airplane
25:08
Speaker 1: in the world. It's a real challenge to get it
25:11
Speaker 1: into markets, you know, into into an Airport's all of
25:14
Speaker 1: those tickets and flying to a single airport not a
25:17
Speaker 1: dilute the price you sell your tickets for to fill
25:20
Speaker 1: the airplane. So it's not surprising we're getting ready to
25:24
Speaker 1: go into Farnborough air shows. So we're gonna watch those
25:26
Speaker 1: wide body owners closely, especially three eight. But the other
25:30
Speaker 1: two wide buddies are having challenges are the three thirty
25:33
Speaker 1: and the Triple seven, the three thirty from Airbus and
25:35
Speaker 1: the Triple seven from Boeing. Generally we're seeing, um, we're
25:39
Speaker 1: seeing weakness and long haul ticket prices for overseas travel
25:45
Speaker 1: ticket prices, and that means that airlines and less stores
25:49
Speaker 1: are less excited about taking the newest long haul airplanes.
25:54
Speaker 1: The Triple seven and the three theory don't have as
25:55
Speaker 1: much a backlog as some of the new airplanes have
25:58
Speaker 1: just been introduced. Uh So we keep watching that wide
26:02
Speaker 1: body space and trying to figure out one that's gonna
26:05
Speaker 1: when the dynamic dynamic there's going to improve. Thank you
26:08
Speaker 1: so much, George Ferguson. We really appreciate you giving us
26:10
Speaker 1: the perspective as we await President Trump's comments about air
26:14
Speaker 1: traffic control reform, which is badly needed in the United States.
26:18
Speaker 1: George Ferguson is our senior Aerospace, Defense and Airline analyst
26:22
Speaker 1: for Bloomberg Intelligence. You know, despite the sell off and
26:37
Speaker 1: municipal bonds at the end of last year, they have
26:40
Speaker 1: come roaring back, and there is a story on the
26:42
Speaker 1: Bloomberg today saying that US state and local bonds are
26:46
Speaker 1: the pricest against treasuries since the recession. How are these
26:50
Speaker 1: figuring into people's retirement plans? I want to bring in
26:54
Speaker 1: Marci Sprofits Principle at Boult Donnally and Suprofits consulting Group
26:58
Speaker 1: in Worcester, Massachusetts, and Marcy, as we talk about President
27:02
Speaker 1: Trump's tax plan and how people should prepare for retirement,
27:05
Speaker 1: how much do municipal bonds play into this? Because they
27:08
Speaker 1: are tax free and they were a popular investment, and
27:11
Speaker 1: they have been traditionally uh popular investments for wealthy individuals
27:15
Speaker 1: who want to preserve that tax free benefit over the
27:18
Speaker 1: long term. Do you think that these investments are still
27:23
Speaker 1: warranted because there will not likely be that much of
27:26
Speaker 1: a change to tax laws. Well, I think with um Obviously,
27:32
Speaker 1: with a Republican White House as well as a Republican
27:35
Speaker 1: controlled Congress, we are very likely to see some form
27:39
Speaker 1: of tax reform over the next couple of years. It's
27:44
Speaker 1: um so it's probably not so much a question of if,
27:49
Speaker 1: it's a question of when. Uh. We we don't know
27:52
Speaker 1: what this point, big unknown exactly what that will look
27:55
Speaker 1: like if um, if the rules are changed in the
28:01
Speaker 1: way that that would be Trump's calls. His biggest tax
28:06
Speaker 1: reduction is on the corporate side of things, right, moving
28:10
Speaker 1: from a rate down to about fifteen pent um. It's
28:16
Speaker 1: very difficult to tell at this point how his tax
28:20
Speaker 1: plan will affect individuals because it's very light on specifics. Um,
28:27
Speaker 1: we don't have much detail there. So he wants to
28:30
Speaker 1: reduce the number of tax brackets, he wants to raise
28:33
Speaker 1: the exemptions, he wants to eliminate certain deductions. So it's
28:38
Speaker 1: very hard to judge without specifics whether people's taxes are
28:43
Speaker 1: going to go down so much that municipal bonds wouldn't
28:48
Speaker 1: play much of a role. So this this creates kind
28:51
Speaker 1: of a problem if you're advising clients, right because you
28:54
Speaker 1: have to have long term planning and if there's a
28:56
Speaker 1: high likelihood that there will be some kind of tax
28:58
Speaker 1: reform which will probably change the investing dynamic for wealthier
29:02
Speaker 1: individuals or anyone who's planning for retirement. How do you
29:05
Speaker 1: come up with and some advice. Well, that's a very
29:09
Speaker 1: good question, Lisa. It's very hard to plan in in
29:13
Speaker 1: this environment. UH, specifically as it relates to municipal bonds.
29:18
Speaker 1: I do think for the average well off investors there's
29:23
Speaker 1: still going to be a place for that. I think
29:26
Speaker 1: the bigger issue we see with tax or form is
29:30
Speaker 1: how the changes might affect UH Middle America. Because of
29:36
Speaker 1: possible changes to I ras and four oh one keys
29:39
Speaker 1: and the tax preferences that they have, there's gonna be
29:43
Speaker 1: some way to pay for the major tax cuts that
29:47
Speaker 1: Trump wants for corporations and retirement plans tend to be
29:52
Speaker 1: a big juicy target there because of their current tax
29:56
Speaker 1: preferences and because of the way the government co currently
30:00
Speaker 1: scores revenue, they only look at a ten year period.
30:04
Speaker 1: Hold on a second, Does this mean that you think
30:05
Speaker 1: that they're probably will be some kind of increase to
30:08
Speaker 1: the amount that the raw fires and the furrow one
30:11
Speaker 1: ks are taxed? Um? No, that that's that's not exactly
30:17
Speaker 1: what I'm saying, but there have been suggestions that the
30:21
Speaker 1: limits on contributions perhaps be cut back to help pay
30:26
Speaker 1: for corporate tax reductions. That have been suggestions that instead
30:31
Speaker 1: of allowing people to contribute on a pre tax basis,
30:36
Speaker 1: that they only contribute on an after tax wrath basis,
30:40
Speaker 1: because today that increases revenue and allows the government scoring
30:46
Speaker 1: which only looks at a ten year period, to pay
30:50
Speaker 1: for the corporate tax cuts. That's our concern. Marcy. I
30:55
Speaker 1: know that you've done a work for the American Association.
30:59
Speaker 1: You've t to find before converse about the fiduciary rule
31:02
Speaker 1: and so on, what is the most pressing issue that
31:06
Speaker 1: you would like to bring to the attention of the industry,
31:08
Speaker 1: whether it's rollovers, whether it whatever that you feel h strongly,
31:14
Speaker 1: because sometimes you just can only get one thing in
31:16
Speaker 1: people's minds and get everyone behind. What would that be
31:19
Speaker 1: Are you talking specifically regarding the fiduciary It could be
31:24
Speaker 1: anything in your in your particular industry, because you kind
31:26
Speaker 1: of have a broad understanding of it. Um well, looking
31:31
Speaker 1: at the fiduciary rules, I think a lot of people
31:35
Speaker 1: are very much in agreement with the concept do everything
31:38
Speaker 1: in the best interests of the client. I think the
31:41
Speaker 1: problem lies in the execution because the way those rules
31:45
Speaker 1: were written, the oversight is in the plaintiff attorney's hands
31:51
Speaker 1: and UH and that's something we would certainly like to
31:54
Speaker 1: see changed. On the tax reform front, we that most
32:01
Speaker 1: members of Congress can um understand that the retirement tax
32:08
Speaker 1: preferences are permanent deductions. The way mortgage interest is that
32:13
Speaker 1: that money comes back into the system when people take
32:16
Speaker 1: their money out of retirement plans. It's taxable at that point.
32:20
Speaker 1: It's just the government scoring doesn't look at it that way.
32:23
Speaker 1: So those are two things. I know you asked for one,
32:25
Speaker 1: but UH, two things that we're really focused on. How
32:29
Speaker 1: are you advising clients at a time of pretty low
32:32
Speaker 1: interest rates across the board when you do have an
32:36
Speaker 1: increasing number certainly have pensions going into risk your and
32:38
Speaker 1: risk your assets, and you have investors who you have
32:42
Speaker 1: individuals who have to save up bigger and bigger cushions
32:44
Speaker 1: for the uh, the the age that they're trying to
32:47
Speaker 1: get to to retire, which is getting older and older.
32:50
Speaker 1: What do you advise them? What's the biggest you know, UH,
32:53
Speaker 1: concern that you have as far as people sort of
32:55
Speaker 1: ignoring some of the risks versus uh, the potential rewards. Well,
32:59
Speaker 1: I think, as we all know, it's all about the
33:02
Speaker 1: time horizon. So for young people who are investing for
33:06
Speaker 1: retirement today and have a lot of years before they're
33:10
Speaker 1: going to actually access that money, they have a lot
33:13
Speaker 1: of time to ride those ups and downs. And if
33:15
Speaker 1: you look at the market historically, we know that over
33:18
Speaker 1: longer periods of time the trend is up right. So
33:23
Speaker 1: the people who are much closer to retirement, it's very
33:28
Speaker 1: difficult in this low interest rate environment to take out
33:33
Speaker 1: a lot of risk and yet get the returns you need.
33:37
Speaker 1: I want to thank you very much for spending time
33:39
Speaker 1: with us. Marcy Provitz is the principal at Boulay, Donnelly
33:44
Speaker 1: and Consulting Group, and they are experts when it comes
33:47
Speaker 1: to retirement planning. Thanks for listening to the Bloomberg P
33:53
Speaker 1: and L podcast. You can subscribe and listen to interviews
33:56
Speaker 1: at Apple Podcasts, SoundCloud or whatever podcast by from you prefer.
34:01
Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm
34:04
Speaker 1: on Twitter at Lisa abramowits one before the podcast. You
34:08
Speaker 1: can always catch us worldwide on Blueberg Radio.