Bloomberg Talks
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?
00:07:57 · Carol Massar, Rick Wurster, S2, Tim Stenovec
[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? [00:08:05] S1: Yeah, I don't know because there's so many ways to participate in markets today and take different positions. I don't know how much that adds. I think it simplifies things and it might be a unique way for younger investors to engage. [00:08:17] S2: Maybe it's easier. [00:08:18] S1: But I think the reason you see 90 plus percent of the volume in sports gambling is because It's got around the sports gambling rules, and it's opened it up nationally and allowed people to do that. [00:08:27] S3: So just last question on this. When do you think we'll see the actual prediction products from you? [00:08:32] S1: Well, we already are in it in a small way. We're beginning with a relationship with CBOE where we have financial contracts on the S & P that are structured as prediction markets. We will launch more in the next year, but they are going to be financially driven. We're going to stay away from sports. Again, I have no problem with sports gambling. [00:08:48] S2: Have at it. Just don't confuse it with investing. [00:08:50] S0: I want to go back to AI and agentic AI. And I know you've had some, I think, thoughts about this in terms of that ability that do we want to be able to open up and let agents basically make decisions on your portfolio or your retirement assets? Do you have a view on that as you guys lean more and more into AI?
00:08:50 · Carol Massar, Rick Wurster, S2, Tim Stenovec
[00:08:50] S0: I want to go back to AI and agentic AI. And I know you've had some, I think, thoughts about this in terms of that ability that do we want to be able to open up and let agents basically make decisions on your portfolio or your retirement assets? Do you have a view on that as you guys lean more and more into AI? [00:09:09] S1: I think at the moment, I think very few people want to do that, number one. And number two, we're not going to allow it on our platform. There's too much risk for the client. [00:09:16] S2: Ever. [00:09:17] S1: I'm not going to commit to ever. Things can change. But as we sit here today, I think it's too much risk for the client to bear and too much risk for us to bear. Now, interestingly, we are blocking traffic from agents that are unauthorized. But here's an interesting thing. We track how many times we have to block a client. We've got 49 million client accounts. I get a weekly report with the weekly hits. It's like 30 times that news was blocked, 40 times that cloud was blocked. Clients are not yet willing to give their passwords to these agents to go take activity on their behalf? [00:09:48] S2: I'm not ready. I'm not ready. [00:09:49] S3: I don't think I ever will be ready. I mean, it's sort of the most sacred thing that somebody can do is part with their money and to make that decision themselves. But maybe I'm just old-fashioned. [00:09:58] S2: I don't know.