Bloomberg Talks
00:02:07 · S2, Rick Wurster, Carol Massar
[00:02:07] S2: Well, for us, we start with what's the end game? What are we trying to accomplish? [00:02:10] S1: And at Schwab, it's all about delighting the client, whether it's an advisor or a direct retail client. And so we've been placing our emphasis on how do we bring AI to our clients in a way that helps their financial journey and their investment life. And I think there's a plethora of ways that that can happen from stitching together more of their investment life in one place, to having insights that they wouldn't have before, to making all these advisors more productive with their clients. So We'd like to start with the end goal, and I think AI has a really big role to play in all of that. [00:02:39] S0: I'd love to know what you think about all of the bubble conversation that's been out, whether it's Ken Griffin of Citadel, some concerns, and then there are others who are pushing back over at Blackstone saying, no, no, no, we've got to keep going. You've seen a few market cycles. What do you think?
00:02:39 · Carol Massar, Rick Wurster, Tim Stenovec, S2
[00:02:39] S0: I'd love to know what you think about all of the bubble conversation that's been out, whether it's Ken Griffin of Citadel, some concerns, and then there are others who are pushing back over at Blackstone saying, no, no, no, we've got to keep going. You've seen a few market cycles. What do you think? [00:02:55] S1: Well, it certainly feels like a boom, and we've had several years of great returns, which is terrific. In terms of a bubble, one thing that gives me some confidence that maybe we're not in a bubble is there is a tremendous number of stocks that I think are either fairly valued or undervalued. And you certainly see stocks that are highly valued. Their fundamentals are incredible and they're creating an entire new market, new way of working. It's not surprising that they have high valuations attached to them. And at the same time, there's so many companies that I look at, I'm like, wow, this company is cheap. [00:03:29] S0: Yeah. [00:03:30] S3: So to that end, I mean, we spent a lot of time over the last two days talking about AI in terms of advisor services and what it can do for RIAs and ultimately the end client. But what is AI doing for you at Charles Schwab right now on your back end that's making you more efficient? [00:03:44] S2: It's helping us all over the place.
00:03:44 · S2, Rick Wurster, Tim Stenovec, Carol Massar
[00:03:44] S2: It's helping us all over the place. [00:03:45] S1: I visited a branch in Austin, Texas last week, and I sat with one of our financial consultants. Their job is to sit with clients and help their financial dreams come true and play an important role. That financial consultant told me that the AI tools we had put on his desktop saved him two to three hours a day. And so what he's able to do with those two or three hours a day is go see another family, go talk to another couple trying to retire, an individual trying to buy their first house. That's two or three hours he's getting back every single day to help more clients. [00:04:14] S3: Are you seeing it show up on the bottom line at all in terms of earnings? [00:04:17] S1: Absolutely we are. We for sure have... Fewer people per client answering phone calls. [00:04:23] S0: Wow. [00:04:24] S1: We're able to serve more clients with each of our financial consultants. Now, we're still net positive from a hiring standpoint, but we're more efficient. We have 1,600 more people than we had two years ago, so we're growing. But if you look at the number of people we have per client, per client account, we continue to scale our business. And AI has been an important part of that. [00:04:45] S0: So making you more efficient in certain areas, you are hiring. Where are you hiring?
00:04:45 · Carol Massar, Rick Wurster, Tim Stenovec, S2
[00:04:45] S0: So making you more efficient in certain areas, you are hiring. Where are you hiring? [00:04:49] S1: We are hiring a lot of client-facing people. And the interesting thing I'm seeing about AI, and there's so much talk about it, and justifiably so, at the same point, relationships matter either just as much or even more. And when I look at all the statistics in our business, relationships are driving more growth in technology. When we have a financial consultant relationship in a branch like we have here in Boston, and we have a client relationship, that client relationship grows three times faster than when we don't have that person-to-person relationship. Likewise, our RRA business is the fastest growing segment of our business. And that is entirely fueled by the relationship these wonderful advisors have with their end clients. [00:05:29] S0: So kids, go get a liberal arts degree, right? What do you think about? What do we tell the next generation in this environment? [00:05:37] S1: Well, I think EQ matters a lot, no matter what you choose to do. And I think there's probably lots of ways to learn EQ. [00:05:43] S3: So I want to talk a little bit, there's a lot we want to get to with you, but you know at this point that when you sit down with us, I'm going to ask you about prediction markets. [00:05:50] S2: There was a market on that.
00:05:50 · S2, Tim Stenovec, Rick Wurster, Carol Massar
[00:05:50] S2: There was a market on that. [00:05:52] S3: I wake up this morning and I see the news, Kalshi, a $ 40 billion valuation, raising another billion dollars today from a large group of investors, including some financial services firms, interestingly enough. Are you missing the boat on prediction markets? [00:06:04] S1: Well, my point of view on prediction markets is, Things related to financial events that could make sense in your portfolio, we think there's a market for that and a justification to have it in your portfolio, and we pursued that. We're working with the CBOE to make financial-related prediction markets available. I do not think, and I strongly feel, that sports gambling is not an asset class, despite some of these firms that offer it safe. [00:06:29] S2: It's gambling. [00:06:29] S0: They say it's not gambling. [00:06:30] S2: Right? [00:06:32] S0: They push back constantly. [00:06:33] S2: What do you say? [00:06:33] S1: I believe it's 100% gambling, and I have no problem against gambling. People like to go to Vegas, go to Vegas, have a good time. But you need to realize when you do that that you are very likely to lose some money. That is completely different than being an investor. And I just want to make sure people understand the difference, particularly young people who are being marketed to with sports... gambling being an asset class. Listen, go gamble if you want to. Take money you might have gone out to dinner with. [00:07:02] S2: Gamble.
00:07:02 · S2, Rick Wurster, Carol Massar, Tim Stenovec
[00:07:02] S2: Gamble. [00:07:02] S1: But don't mix that with buying stocks that if you're 22 years old when you're 65 are going to be worth a lot more. [00:07:08] S0: Why is that bad? [00:07:09] S3: Prediction markets say there's no difference between betting on the outcome of sports. [00:07:13] S0: Or the markets. [00:07:14] S3: Or betting on the outcome of what Fed chair Kevin Warsh will do at the next meeting. [00:07:19] S1: I think it's factually incorrect to say that sports gambling is the same as being an investor. Nine cents and a dollar on average people lose when they sports gamble. And again, that's fine. You go out to dinner, you leave with less money, you had a nice time with your wife or your friend, you're happy that you spent the money. And people enjoy sports and have a good time with it. If people want to do that, I think it's great. I just want to make sure the young investor in our country doesn't think that sports is an asset class the same way that investing in stocks is, because they are fundamentally different. One has a positive expected return that will benefit you in your financial life and make you wealthy. The other is going to take money out of your pocket. [00:07:57] S0: Do you ever think that these prediction markets are going to grow substantially when it comes to the financial markets and having a role in the financial system?