Latest / Merryn Talks Money / What the Next Generation Wants From Wealth Managers: Part 2

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What the Next Generation Wants From Wealth Managers: Part 2 · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to Merrin Talk
• 0:17
  Speaker 1: to Your Money, the personal finance edition of Merin Talks Money.
• 0:20
  Speaker 1: In these bonus podcasts, we talk about the best strategies
• 0:23
  Speaker 1: for making the most of your money. I'm Marenzumzep, Web
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  Speaker 1: Editor at Large for Bloomberg UK Money. We've got the
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  Speaker 1: second half of the special broadcast we recorded at the
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  Speaker 1: Bloomberg offices in London on the fourteenth of July. If
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  Speaker 1: you missed the first portion, go back and listen to
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  Speaker 1: last week's episode. It was an hour long panel focused
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  Speaker 1: on how the world of wealth management is changing, about
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  Speaker 1: the rise of next generation wealth clients and the growing
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  Speaker 1: role of alternatives in modern portfolio construction. The banelers were
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  Speaker 1: John Steppeck, senior reporter and author of the Money Dissold newsletter,
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  Speaker 1: Charlie Morris, chief investment officer and founder of byte Tree,
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  Speaker 1: a leading provider of investment research in traditional finance and
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  Speaker 1: digital assets. We also as your Dammy and Marie, Global
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  Speaker 1: head of Investments for Barkley's Private Bank and Wealth Management.
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  Speaker 1: Here is the second half of our conversation. I think
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  Speaker 1: we advertise where we're going to talk about how AI
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  Speaker 1: except with affect the wealth management business. So here we
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  Speaker 1: go and we do have to have questions. So de
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  Speaker 1: send more and I've got quite a lot, but more
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  Speaker 1: is good. This is kind of the key, the absolute
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  Speaker 1: key to the to the wealth management business over the
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  Speaker 1: next next couple of decades, technology and AI transforming the
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  Speaker 1: investment process. Where do you see AI creating the greatest
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  Speaker 1: value for advisors over the next three to five years.
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  Speaker 1: Is it improving productivity, enhancing investment insights, or delivering a
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  Speaker 1: better client's experience. I mean, I would hope that it
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  Speaker 1: will be all three.
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  Speaker 2: I think it's probably all three.
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  Speaker 3: Yeah, I think I think what's going to happen back
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  Speaker 3: to democrats journeys. What we're working on is ready to
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  Speaker 3: help clients enjoy the high touch. So is that you
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  Speaker 3: could only have thought at a certain level at the
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  Speaker 3: much lower level.
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  Speaker 2: And that's really the revolution, I feel, because you.
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  Speaker 1: Can use AI agency do basic work augmented done by somebody,
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  Speaker 1: and you can concentrate on the actual client server, place
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  Speaker 1: to face stuff.
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  Speaker 3: Absolutely, But what we've seen in our experience here is
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  Speaker 3: you do need human judgment.
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  Speaker 2: As I'm sure you know. We had a an attempt
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  Speaker 2: with robo advice. It didn't work out very well.
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  Speaker 3: We've launched a month ago planning let service with an
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  Speaker 3: advisor in the middle. That is the opportunity. I think
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  Speaker 3: clearly you're going to see a higher quality advice deliver
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  Speaker 3: that scale, I think thanks to AI.
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  Speaker 4: So it will definitely improve productivity.
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  Speaker 1: I mean, I think we know that, although it won't
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  Speaker 1: necessarily improve productivity in such a way that you'll end
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  Speaker 1: up getting rid of human staff.
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  Speaker 4: Right, people aren't going to lose their jobs over this.
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  Speaker 1: They're just going to become more productive and hence better
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  Speaker 1: at the client creazing it.
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  Speaker 2: Yeah, that's all experience. Really, We've actually really put.
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  Speaker 3: Back the human in the meal in that part of
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  Speaker 3: the advice process because this is what's working on.
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  Speaker 1: So the client experience and the actual relationship with the
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  Speaker 1: advances should improve. And what about actual better investment outcomes?
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  Speaker 1: Are you're going to be able to use it to
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  Speaker 1: improve your investment process, to improve the insights.
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  Speaker 3: So I'm more que guy by training, but I'm fascinated
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  Speaker 3: by the ability to go for research now through tools
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  Speaker 3: which are quite spectacular. All right, So so again the
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  Speaker 3: insights is still require like we value the opinion, we
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  Speaker 3: value the analysis but how much you can process quick
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  Speaker 3: is quite spectacular, that's for sure.
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  Speaker 2: And that's really moving fast. Now.
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  Speaker 3: Yeah, to the point of again, is alpha going to
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  Speaker 3: disappear thanks to that?
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  Speaker 2: I think that's all wide our discussion.
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  Speaker 1: The same tool of what happens to the answer, Yeah,
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  Speaker 1: I'm optimistic on now telling you construct portfolios.
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  Speaker 4: You must be finding that AI is changing the way
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  Speaker 4: you work.
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  Speaker 5: Well, it's like have you an assistance, So that's good,
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  Speaker 5: but there are better things you can do with it.
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  Speaker 5: By discussing this morning, would I trust trust it to
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  Speaker 5: H to reevaluate our portfolios? The answer is no. Would
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  Speaker 5: I trust it to even book trades? No, I wouldn't
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  Speaker 5: not at this point, although we have experimented. But as
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  Speaker 5: we grow to many more portfolios that I think we'll
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  Speaker 5: have to So I think that's the interesting part. But
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  Speaker 5: to answer that question, there's a lot of admin in
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  Speaker 5: having a client in the wealth management industry that's solved
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  Speaker 5: by AIR or improved by AI, and I think the
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  Speaker 5: client experience will be much better. But the most useful
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  Speaker 5: thing that the industry can do is deliver returns. But
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  Speaker 5: there's no more returns coming from AI. There's no alpha
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  Speaker 5: coming from AI. That the you know, alpha's axiosum game
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  Speaker 5: as we know it comes from some and it goes
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  Speaker 5: to others, and the beta is the direction of the
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  Speaker 5: returns of the market, and they're not going to be
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  Speaker 5: a return. They're not going to be changed materially by
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  Speaker 5: AI the long term either, So I don't think that
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  Speaker 5: anyone's going to make more money out of it in
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  Speaker 5: the next ten to twenty years. This current wave of excitement,
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  Speaker 5: you know, it's not going to last for ever, and
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  Speaker 5: once that's over look through that it's going to be
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  Speaker 5: back to normal. But I think that there's going to
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  Speaker 5: be a new bunch of actors who do better and
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  Speaker 5: others that lose out. But of course the buffetology would
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  Speaker 5: always win through long term decisions. I think that AI
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  Speaker 5: will have no chance against long term decision making, good
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  Speaker 5: decision making, which is what value investors thrive off, So
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  Speaker 5: that stays. I don't think that changes at all. But
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  Speaker 5: the short term shenanigans and the narratives and stuff, they'll
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  Speaker 5: just go even more crazy than they've already been.
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  Speaker 1: I suppose, because as you were saying earlier when we
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  Speaker 1: were talking about creating AI portfolios, if you're using an
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  Speaker 1: LLM of any kind. They're not creating new information or
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  Speaker 1: new ideas that are simply correlating old or more likely
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  Speaker 1: recent information, So maybe the insights are not there's.
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  Speaker 5: That, and so if they're just sort of, you know,
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  Speaker 5: really sophisticated Google in that sense, then then I think
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  Speaker 5: there's probably not much edge there. If everyone's got it.
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  Speaker 4: Okay, we do have more questions. Got to move on, John.
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  Speaker 1: I know you're not a wealth manager, but I still
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  Speaker 1: think that that you might be able to help with
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  Speaker 1: this one. And then I'd love to air your views
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  Speaker 1: on as well. Looking ahead, what do you believe will
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  Speaker 1: differentiate the leading wealth managers over the next decade? Will
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  Speaker 1: success be driven primarily by investment performance, access to private markets, technology,
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  Speaker 1: or the quality of client relationships?
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  Speaker 4: And I know we always come down on this.
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  Speaker 6: Don't we. Obviously investment if you can do it, but
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  Speaker 6: I far more is that I think that by far
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  Speaker 6: the more important thing is navigating regulation and government changes
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  Speaker 6: over the next If you told me in the next
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  Speaker 6: decade and tax is going to be where the biggest
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  Speaker 6: value I think for almost any wealth advisor will be.
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  Speaker 6: And when I say think outside the box, what I
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  Speaker 6: mean is somebody will turning around and say to you, well,
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  Speaker 6: that's the best investment you need right now is the
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  Speaker 6: second passport. And I know somebody who I can pass
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  Speaker 6: you on to. We've already seen a whole load of
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  Speaker 6: changes here in the UK in the last couple of years,
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  Speaker 6: and Britain is not the only country with a deficit
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  Speaker 6: and a debt problem. So I think we're going to
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  Speaker 6: see an awful lotic kind of government budget changes and
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  Speaker 6: that will put a premium more in decent tax advice
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  Speaker 6: completely above board. But I think that's where they'll be again.
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  Speaker 4: That comes back to hyper personalization, doesn't it.
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  Speaker 1: The idea the whole portfolio, not just the not just
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  Speaker 1: the investment portfolio, but the entirestic portfolio of someone's life
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  Speaker 1: is understood by the wealth manager, and the tax can
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  Speaker 1: be fiddled with the I'm.
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  Speaker 4: After optimized optimized.
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  Speaker 2: I think that's true.
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  Speaker 6: And the thing that's what it can come in as well.
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  Speaker 6: It's almost like if you go to your GP and
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  Speaker 6: the actually AI that works and it says, actually you
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  Speaker 6: need to send this guy too, you know, okay, this
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  Speaker 6: specialist of that specialist I.
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  Speaker 1: Think that you want.
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  Speaker 2: Well, no, I mean that's in my dreams.
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  Speaker 4: Dream medical world.
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  Speaker 1: Back to you on this idea of what will mean
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  Speaker 1: success in future investment formats, access to private markets and
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  Speaker 1: anything that's it by the way, but who knows client experience.
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  Speaker 3: Yeah, we concur with you, and actually I'm responsible for
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  Speaker 3: the investment business and Parkers, but I'm also responsible for weals,
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  Speaker 3: planning and advisories.
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  Speaker 2: Yes, under one team, and I completely agree with you.
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  Speaker 2: I think the planning.
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  Speaker 3: Side, that's like the GP work you do at the outset,
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  Speaker 3: is so important and probably more than ever to your point,
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  Speaker 3: the ability to to build proper plan, quality plan that
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  Speaker 3: you can actually deliver through various segments of clients is
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  Speaker 3: where you're going to make a difference. I think the
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  Speaker 3: return side will be very important. That the return side
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  Speaker 3: has to be fit for purpose, for the situation and if.
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  Speaker 1: You've made if you've made a mistake and you don't
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  Speaker 1: have a tax division portfolio, whether you make six percent
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  Speaker 1: or eight percent in real clouds every year, is mech
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  Speaker 1: differends correct?
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  Speaker 2: Yeah?
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  Speaker 3: Absolutely, I think the it's not by accident that we've
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  Speaker 3: launched this affluent service in the UK, which is planning
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  Speaker 3: led first and foremost. This is really really what we
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  Speaker 3: think is important clearly return will be important education as well,
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  Speaker 3: like time should be on your side, like this is
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  Speaker 3: real competitive advantage if you have time. It's great enjoyed
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  Speaker 3: time and compounds.
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  Speaker 4: And that planning has turned out really anticipate as well,
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  Speaker 4: doesn't it.
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  Speaker 6: We do.
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  Speaker 1: There's nothing in the UK now except for talk about
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  Speaker 1: what tax might go up next and how it might
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  Speaker 1: go up and whether it might be indexed or not
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  Speaker 1: index and you know where the mansion tax is going
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  Speaker 1: to be on one and a half million pounds or
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  Speaker 1: two million pounds, et cetera, et cetera, and basically our
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  Speaker 1: whole conversation. So as a planning you've got a lot
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  Speaker 1: of anticipation of what might come away.
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  Speaker 3: Absolutely and this is where you actually get into real
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  Speaker 3: deep conversation with clients Like I sit in a few
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  Speaker 3: conversations like this on Well's Planning when wes Advisor, and
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  Speaker 3: it's really you know, people open up. You actually understand
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  Speaker 3: the old family all the time, ynamics, all the beliefs
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  Speaker 3: as well, like the values for next gen et cetera.
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  Speaker 3: And I think it's really really important and then we
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  Speaker 3: can debate about bitcon TF et cetera. But like that
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  Speaker 3: plan at the very building is so important. I think
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  Speaker 3: this is where you're going to make a difference. And
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  Speaker 3: again AI will allow us to deliver that kind of
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  Speaker 3: a high touch diagnostic at much higher.
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  Speaker 1: Scale as well. Management evolves to serve the next gend
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  Speaker 1: of clients. How do you see banks expectations of third
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  Speaker 1: party data providers and technology partners changing. What will find
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  Speaker 1: a successful partnership going forward.
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  Speaker 2: It's a very good.
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  Speaker 3: Question, and I think the tech infrastructure is really at
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  Speaker 3: the hurt of our our our thinking both from a
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  Speaker 3: client experience side and a resilient site, right, I mean
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  Speaker 3: button to peplese daste. We really want to create the
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  Speaker 3: best architecture we can to do great CX. We will
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  Speaker 3: not built everything ourselves, for sure. We're really happy to
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  Speaker 3: to just partner with people so they can understand us.
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  Speaker 3: We're gonna own or really the one of the most
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  Speaker 3: critical parts of the equation, which is the data point,
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  Speaker 3: the data set.
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  Speaker 2: Right, we will it's going to be in the bank.
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  Speaker 3: We'll be more than happy if you want to benefit
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  Speaker 3: from this ecosystem where people are doing the watchhow reg development,
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  Speaker 3: you know to do things you need to do before
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  Speaker 3: you actually give an advice, and.
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  Speaker 2: Sometimes there's a lot of data involvement.
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  Speaker 3: There's it's moving, it's changing, it's changing now right as
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  Speaker 3: we speak. We're very open minded actually to partner with people.
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  Speaker 3: I guess question will be how many Uh, it's probably
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  Speaker 3: a question like in this world where you really want
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  Speaker 3: to be on top of your architecture security, how many
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  Speaker 3: partners can we have in terms of really understanding each
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  Speaker 3: other very well?
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  Speaker 1: And also if you have to fully understand how they
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  Speaker 1: are using new technology, they are using AI harm and
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  Speaker 1: suddenly you.
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  Speaker 4: Need to have a lot more oversight of the inside
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  Speaker 4: of every program.
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  Speaker 2: We've been involved for a very.
• 11:06
  Speaker 3: Long time in supporting a fintech for instance, so we
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  Speaker 3: want to strike the right balance between innovation.
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  Speaker 2: They're also like scaling resilience.
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  Speaker 1: Okay, a couple more quick ones are well funds using
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  Speaker 1: data well enough to understand client behavior, preferences and portfolio needs.
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  Speaker 4: Maybe not yet but soon will be.
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  Speaker 2: In the UK, we're working they're hard on the launching
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  Speaker 2: targeted support. So it's right GBR. It's a large part
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  Speaker 2: of that.
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  Speaker 3: The understanding of the client behavior across all dimensions of
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  Speaker 3: the touch points they have with the back across actually
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  Speaker 3: everything is a very big part. So it's actually happening fast,
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  Speaker 3: I think, and it's actually a very interesting discussion in
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  Speaker 3: terms of how far you go and what do you
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  Speaker 3: need to plan far knowing what you know on the.
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  Speaker 1: Client Charlie, we've talked about You've done the whole discussion
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  Speaker 1: is crypto and actic class? Isn't it that asset classes
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  Speaker 1: bitcoin in that classic? But really to stuff with bitcoin?
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  Speaker 1: If you're constructing a portfolio and we talk about digital assets,
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  Speaker 1: what else is in there?
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  Speaker 4: We're putting other cryptocurrencies in there?
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  Speaker 2: What's going into.
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  Speaker 5: This one of the sort of credible things sort of
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  Speaker 5: survived the last decade of innovation and all the rest
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  Speaker 5: of it. You've basically got Bitcoin as the only sort
• 12:18
  Speaker 5: of store of value, the sort of a digital gold
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  Speaker 5: proxy as it were. Then you've got what they call
• 12:23
  Speaker 5: the layer ones, basically the things that you can transfer
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  Speaker 5: assets with, theorems at Solana and near and things like that,
• 12:30
  Speaker 5: and they're the home for stable coins, and in many
• 12:33
  Speaker 5: people's eyes, that the future of markets generally, because I
• 12:36
  Speaker 5: think a lot of the people in the financial service
• 12:37
  Speaker 5: industry who are pro crypto believe that stock exchanges and
• 12:42
  Speaker 5: bond exchanges will end up using that kind of infrastructure,
• 12:45
  Speaker 5: and so they're very real tech businesses as it were.
• 12:49
  Speaker 5: And I think the third category really the exchanges themselves,
• 12:52
  Speaker 5: things like finance, and there are some other weird and
• 12:55
  Speaker 5: wacky ones, and there's lots of other stuff, but it
• 12:58
  Speaker 5: hasn't really got to scale or even itself. So those
• 13:01
  Speaker 5: are the things that are coming through. But the fascinating
• 13:03
  Speaker 5: bits I said earlier, just as the above ground supply
• 13:06
  Speaker 5: of gold is the vast majority of the tradeable value
• 13:09
  Speaker 5: of all the commodity markets, you know, the above ground
• 13:11
  Speaker 5: supply of all is actually quite small. Yeah, I mean
• 13:13
  Speaker 5: us a lot of oil, but it's not really there
• 13:15
  Speaker 5: as an asset. Commodity is overwhelmed by gold in investable terms,
• 13:19
  Speaker 5: just as bitcoin overwhelms digital as an investable asset. And
• 13:24
  Speaker 5: they're connected, you know, they're all connected. So I think
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  Speaker 5: that's the interesting point.
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  Speaker 4: Convinced yet working on it.
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  Speaker 2: For us, the tokenization part of it is really important.
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  Speaker 3: I think we'll see so many more clients coming and
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  Speaker 3: asking for us to you know, on board and assets
• 13:42
  Speaker 3: somewhere that's been tokenized somewhere else.
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  Speaker 2: We need to be able to do that marskiing.
• 13:47
  Speaker 5: But what we should do is do what everyone else
• 13:49
  Speaker 5: does in the financial service industry and say say I
• 13:52
  Speaker 5: love blockchain, but I don't like cropte, and that is.
• 13:57
  Speaker 1: The perfect place to end. Thank you, Thank you so
• 14:00
  Speaker 1: much for joining me today. Thanks John, Thank you Charlie,
• 14:02
  Speaker 1: Thank you JD. That was that was very interesting and
• 14:05
  Speaker 1: I look forward to every private bank portfolio having what
• 14:09
  Speaker 1: was it eight and a half percent of crypto isn't it.
• 14:12
  Speaker 5: Bigcoin? It was Sikes for sharing Bay, Yes, but Bold
• 14:16
  Speaker 5: is the alternative of course.
• 14:18
  Speaker 2: Thank you.
• 14:24
  Speaker 1: Thanks for listening to this week's Maren Talk to Your Money.
• 14:26
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