John Mathews – Steering the Largest Wirehouse at UBS (Private Wealth 2, EP.444)

John Mathews is the Head of Private Wealth Management in the Americas for UBS. UBS is the world's largest global wealth manager with $6 trillion in assets, of which $2 trillion are in the Americas. Private Wealth Management is comprised of roughly 230 teams and 661 financial advisors. Our conversation explores how the largest wirehouse empowers its financial advisors to act as entrepreneurs to bring tailored investment solutions to their clients. We cover the scale and scope of the UBS private wealth platform, the need for personalization, specialization, and customization, the bank's centralized investment strategy and decentralized implementation, its curated alternatives platform, and the evolving landscape for financial advisors. Here's the Head of Content job posting https://www.capitalallocators.com/about/#openings. Learn More Follow Ted on Twitter at @tseides https://twitter.com/tseides?lang=en or LinkedIn https://www.linkedin.com/in/tedseides/ Subscribe to the mailing list https://capitalallocators.com/ Access Transcript with Premium Membership https://capitalallocators.com/signup Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com https://thepodcastconsultant.com/)

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Ted Seides?

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• 2:06Ted Seides?

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• 2:47Ted Seides?

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• 3:32Ted Seides?

  Hello, I'm Ted Seides and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.

• 3:59Speaker 01

  All opinions expressed by Ted and podcast guests are solely their own opinions and do not reflect the opinion of Capital Allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Capital Allocators or podcast guests may maintain positions in securities discussed on this podcast.

• 4:19Ted Seides?

  30 years ago, institutional investors held most of their assets in stocks and bonds. David Swensen led a movement to an approach to portfolio management that broadened the asset mix to alternative investments, including hedge funds, private equity, venture capital, and real assets. These days, almost every institutional portfolio incorporates significant allocations to alternatives to produce better outcomes with similar risk or similar outcomes with lower risk. However, capital in the hands of individuals has not yet followed suit. Private wealth portfolios, particularly the so-called mass affluent, typically hold only 2% to 5% of their assets in alternatives, compared to

• 5:01Ted Seides?

  a range of 20% to 50% for institutions. But that's changing quickly. Innovations and structure have allowed individuals to access alternative strategies at lower minimums with liquidity options not previously available. According to Artos Partners, the six largest private banking and wirehouse platforms committed $110 billion to funds last year, approximately twice the amount invested from the six largest institutional investors in North America. And those flows are just beginning. The potential investment dollars from private wealth to alternatives are staggering. Every 1% asset allocation shift would equate

• 5:44Ted Seides?

  to approximately $500 billion of new investments. The impact of these capital flows will have ramifications for GPs and LPs for decades to come. How will the capital get deployed? What will it do to asset prices? What will it mean for returns and for fees? And who will win and who will lose? This mini-series, Private Wealth, explores the important questions raised by the accelerating convergence of institutional-style investing with private wealth. We'll hear from three of the most influential asset owners, one each from the private banking, wirehouse, and RIA channels, and three of the most significant

• 6:27Ted Seides?

  asset managers playing in the space. Just as this channel is in the early innings of changing the investment landscape, so too will this mini-series be just the beginning of our exploration of what it means for you.

• 6:43Ted Seides?

  My guest on the second episode of Private Wealth is John Matthews, the Head of Private Wealth Management in the Americas for UBS. UBS is the world's largest global wealth manager with $6 trillion in assets, of which $2 trillion is under John's purview. He oversees 230 teams comprised of 661 financial advisors, each of whom manages over $1 billion in assets. Our conversation explores how the largest wirehouse empowers its financial advisors to act as entrepreneurs to bring tailored investment solutions to their clients. We cover the scale and scope of the UBS Private Wealth Platform,

• 7:28Ted Seides?

  the need for personalization, specialization, and customization, the bank's centralized investment strategy and decentralized implementation, its curated alternatives platform, and the evolving landscape for financial advisors.

• 7:45Speaker 02

  Before we get to the interview, we're excited to share a new opportunity to join the Capital Allocators team. We're hiring a head of content to lead everything we create and share with you, our listeners and followers. That includes our flagship podcasts, our newsletters and written content, our website and social channels, and our new video content. We're looking for someone who's excited to roll up their sleeves, get into the weeds, and own our content processes from start to finish. Most importantly, we're looking for a fan of the show, someone who's jazzed about long-form interviews with leaders in the institutional investment industry, someone who brings energy, pride, and a sense of purpose to our mission of compounding knowledge and relationships among asset owners and investment managers.

• 8:30Speaker 02

  This person should be detail-oriented, organized, experienced in project management, and ideally have a background in media or podcast production. The job posting is in the show notes and on our site at capitalallocators.com/about. Thanks so much for spreading the word about our Head of Content job opening.

• 8:50Ted Seides?

  Please enjoy my conversation with John Matthews.

• 8:55Speaker 02

  John, thanks so much for joining me.

• 8:57Speaker 03

  Ted, good to be here with you. I'd love to have you take me back through your path.

• 9:01Ted Seides?

  That led to you being in this big seat you're in today.

• 9:04Speaker 03

  I call myself the accidental executive. So went to the University of Florida. I'm from a small town in the state of Florida. Always thought I was going to be a lawyer, but when I was graduating from college, all my friends were going that direction. So I said, why not do something different? And decided to become a stockbroker. Now we call ourselves financial advisors. I think I had somewhat of a successful early career. Was asked to get into management, into leadership. Fast forward thirty, four years later, and I now lead the private wealth business for UBS here in the Americas.

• 9:37Ted Seides?

  So take me back in those early years and through what you saw in the evolution from stockbrokering to what it is today.

• 9:45Speaker 03

  Back in the late eighties, early nineties, it was really all about equity selection, buying stocks, building positions, trying to make our clients money through buying the right equities. And then the industry really evolved to more asset management fee-based solutions for our clients. For some reason, I was always an early adopter. So I was the first person involved with managed accounts. And I was one of the first people involved with looking at estate planning insurance solutions. And to me, the consultative view of the business, which was much more appealing to me than the individual stock picking. Because of that, I guess I was thinking in the future and that became the future of our business.

• 10:24Speaker 03

  So much of our business now is tied to asset allocation, using managers as a proxy to picking individual stocks, using indexes and charging our clients an advisory fee as opposed to a commission per transaction. Early into that led me into trying to lead other people in that direction. At the same time, we've seen our clientele become extremely wealthy, especially in the last fifteen years since QE. And what I noticed back at that time, when interest rates are sitting at zero for a period of time, wealthy clients were going to get significantly more wealthy faster. When there's zero cost to borrow and you already have assets, regardless of what's happening in the markets, you can redeploy those assets.

• 11:07Speaker 03

  You can buy businesses and borrow to buy those things at basically zero. What we saw the last fifteen years was this enormous growth in wealth in the United States and globally. During those times, I found myself gravitating towards those complex situations with those clients who were accumulating wealth quickly. And what to do and how to help them with those situations. That's how we went from being an advisor from a small town, trying to figure it out, to now working with some of the wealthiest people in the United States.

• 11:35Ted Seides?

  The path of Accidental Executive, what were the most important steps for you in that path?

• 11:41Speaker 03

  I view my job as really a leadership position. And I love the business. I love clients. I love working with financial advisors. I love directing strategy to try to think five years ahead, to try to put our advisors in the best position and our clients in the best position. I love the leadership principle of it. And I have hundreds of private wealth advisors that report into our business here at UBS in the Americas. I think of it as like the special forces of our UBS Army in the United States. And I think we're really good at what we do. And so, the passion of me to help people grow professionally and help their clients do even better is what drives me at this. I tell people all the time, my job is to help our clients do better for themselves, our advisors do better for themselves.

• 12:24Speaker 03

  If we help our clients do well, our advisors do well, is all it's like one large partnership.

• 12:29Ted Seides?

  When you look today, what is the size and breadth of the platform that you're overseeing?

• 12:36Speaker 03

  Let's take a step back and just look at the UBS platform from a large perspective. We're the world's largest global wealth manager. We manage, on our wealth platform alone, over $4 trillion. If you include our asset management company, we're over $6 trillion of wealth around the world. 2.1 trillion of that wealth sits in the United States. So, we're a very large wealth manager in the US, but also globally. We're the largest wealth manager in Asia. We're the largest wealth manager now in Latin America, after our Credit Suisse acquisition. And we're the fourth-largest wealth manager in the United States, based on assets under management from wealth clients. Also, the largest wealth manager in EMEA.

• 13:18Speaker 03

  That global perspective and insights, and the ability to connect clients and learn from clients regardless of where they live, I think is really the special sauce of UBS. For example, if we have clients in the United States that are looking for insight... Sites from someone in Asia, or maybe they want to start a business in Asia. We can make those connections really quickly. We have boots on the ground everywhere in the world and we have clients on the ground from everywhere in the world. That's the exciting thing about our business. In the US, $2 trillion of assets under management. About 60% of those assets are in ultra-high net worth assets. It's been the fastest growing client segment that we've had at our firm for the last 15 years. We classify clients in different segments.

• 14:02Speaker 03

  We have core affluent, mass affluent, high net worth and ultra-high net worth. I get to oversee the part of wealthiest client segment here at the firm. And it ranges from anywhere from a business owner that just happened to sell their business and now they're wealthy to some of the largest families and their family offices in the United States and trying to help them navigate the complexities of the investment landscapes out there.

• 14:25Ted Seides?

  So that on the client side gives a sense of this incredible scale. How about the advisors?

• 14:31Speaker 03

  We have 661 what we call private wealth advisors. Those are the advisors that primarily focus on the ultra-high net worth client segment. You have to have some certain criteria to qualify for that. You already have to have a certain number of ultra-high net worth clients in your book of business. And then you have to go through an accreditation program that we make all of our private wealth advisors go through. So we have 661 of those. That's comprised of 230 teams. Most everyone's on a team now because what I've found is this is a team sport. Really hard as an individual to manage the complexities for our clients. So part of it's about investments, but a large part of it's about helping them with the complexities

• 15:16Speaker 03

  of everything else in their life, too.

• 15:18Ted Seides?

  I'd love to understand how you organize all this. There's the US piece, there's this global piece. And you mentioned, yeah, you should be able to have access information, but 660 just in the US. How do you even start to think about how this all comes together?

• 15:33Speaker 03

  We have different managers and locations around the country and managers will report into us. So it sounds complicated, but it's really not because everyone reports into another channel and that channel may report into me. Globally, I have people around the world that do what I do. We have regular communication and contact and very collegial. For me to pick up the phone and have a discussion with someone in Asia or the Middle East. So it sounds complicated, but it actually comes together pretty well. And I've also been running this business for 14 years. Maybe I'm simplifying a little bit more than needs to be, but the relationships that I've built with our internal stakeholders in the organization as well with our financial advisors at the firm and also our external stakeholders, our partners and asset managers that we work

• 16:18Speaker 03

  with, probably makes it a little bit easier for me.

• 16:21Ted Seides?

  So when you go from that highest level to where you're sitting, all the way down to the individual client, you can imagine there's a need for both some standardization on the investment side and plenty of customization. How does that all happen?

• 16:36Speaker 03

  It's really hard. A couple of things is we are an open architecture platform at UBS in the United States. So we can talk about different products and services and asset managers until we can't talk about them anymore because we offer just about everything. We have our own internal UBS products and services as well. We have our asset management company, which I think is one of our crown jewels, but our advisors aren't required to recommend that to their clients if they don't want to. It's whatever they think is the best possible investment for the best possible price for the client at that particular time. We're completely agnostic. In our private wealth business, we have this foundation that we try to build everything

• 17:18Speaker 03

  off of three words: personalization, specialization, and customization. Now, that's extremely hard in a wealth management business that's very compliant driven. We have a lot of regulatory requirements we have to work under, but at the same time, we have to be competitive in the marketplace. So everything we do has to be about how personal are we getting with that client and what they're trying to accomplish. Sounds like that's simple, right? Everybody is, but it's not. There's a lot of cookie cutter approaches to the wealth management business today. And especially in the ultra-high net worth space, there is no cookie cutter solution. It's not a one size fits all, it's a one size fits one. Those private wealth advisors, every client they have, they may be similar,

• 18:03Speaker 03

  but what client A needs can be completely different than what client B needs. So it's that deep, personal attachment to them. And then the specialization, which I think is some of the secret sauce of our business here in the United States, is many times our advisors are going to bring in internal specialists to talk about things like trust and estate, or philanthropy, or family advisory, or alternatives, or asset allocation. They'll bring these experts in as an internal, third-party subject matter expert to speak with their clients. I am convinced that that specialization is critical, because clients are smart. And if you bring someone here that's not really a specialist, the clients aren't going to say anything to you.

• 18:46Speaker 03

  They're going to smile and say, "Thank you," and they're going to walk out the door, and they're going to go find somebody who's a real specialist. So while our private wealth advisors, in many cases, are generalist in how they approach the business, they bring in these specialists. We have an army of specialists, I think, are the best in the business. For example, we have over 30 trust and estate attorneys. At UBS, we don't outsource this stuff. We only outsource if we feel like we can't do it internally. Most everyone an advisor will put in front of their clients is a UBS employee. And in many cases, the buck stops with me. Clients like that. And then the third leg stool is customization. We have to figure out how to customize the relationship, because that's what the clients expect from us.

• 19:29Speaker 03

  They expect some level of customization, whether it's something that they need a special report, I want to get that compliance approved, which is a highly regulated industry. But if our control partners are comfortable with what we want to do with our clients, they're great partners to have in this thing. Now, when you run a large wealth management business, you have to have a lot of consistencies. You have to keep it right down the middle in most cases. So my job as the leader of the organization is to try to find ways to operate within it, but to create that personalization, specialization, and customization.

• 20:02Ted Seides?

  When you hone in on just the investment part alongside all the services, where do you centralize and where do you allow the decentralization of decision-making?

• 20:13Speaker 03

  Our advisors, what I love about them is they're almost like independent contractors. They work for UBS, but they're entrepreneurs. They have their own styles and philosophies. Now, we have guidelines and guardrails in terms of what they can recommend to clients. They'll follow our chief investment office strategy, but they always have their own twist to it. One private wealth advisor may have a different overall strategy than the advisor in the office next to them. We think that's what makes us great, is that entrepreneurial spirit that they bring to it. But more often, when they bring in our specialists to talk to their clients about strategic asset allocation or the right alternatives to put in a portfolio as you build it out, we build a little bit more consistency into the overall offering.

• 20:57Ted Seides?

  If you look at, say, an individual advisor, maybe they're new and they're coming onto the platform, what is the CIO office telling them today about what those guidelines are for serving their clients on the investment side?

• 21:11Speaker 03

  Especially today, and we're talking about times of extreme volatility and uncertainty out there. And I think our chief investment office has done a great job of, let's stay the course. This is not the time to make major changes. Unfortunately, clients sometimes want to. We become the psychologist of our clients. So stay the course. If you have the right plan in place, you may want to tweak that plan, but you don't want to drastically change the plan. And history has told us that the S and P is going to return around 10% a year. Last couple of years, it's returned over 20%. Maybe there's some regression to the mean right now. The steering of our CIO office is, let's make sure we're allocated properly first. And then let's make sure we pick the right investment second and let's don't panic.

• 21:55Speaker 03

  We're trying to be pragmatic about it, understanding that when markets are volatile like this, clients get nervous. But if you take a step back and think longer term, maybe the world feels like it's fallen apart, but there's been other situations where the world felt like that, too. One of the things that I always try to do to put our CIO advice in perspective is I always give my five themes every year at the beginning of the year, and I try to think five to 10 years out. I'm not a futurist, I can't predict this stuff, but I'm pretty good at following demographic trends and understanding what interest rates do and where wealth is and how markets have reacted. We knew 2025 was going to be a year, probably to reset. It was going to be tough and we were going to have to manage expectations for clients

• 22:40Speaker 03

  because the previous two years had been so good. We had the euphoria of the presidential election and markets ran up at the end of the year. It's like, okay, well, this is going to be a tough one this year. And so trying to manage early so you're not completely surprised when it happens.

• 22:57Ted Seides?

  So if that's one of the themes, what are the other four that you're out talking to the teams about today?

• 23:03Speaker 03

  That's one is 2025 was going to be a year to be tested. The other four themes are really long term. The second one is the family is always the major issue. It's all about family. And so if you think about this whole demographic shift we're going through right now is most of the wealth in the United States of America is in the hands of baby boomers. There were 77 million baby boomers on the planet. Today, there's probably around 70 million baby boomers because they're starting to die, born between 1946 and 1964. The youngest baby boomer is 61 years old. The oldest baby boomer is 79 years old. But the average baby boomer is in the upper end of that. What happens is this baby boom generation, they're in the wealth accumulation stages

• 23:48Speaker 03

  of their life, about to go to the wealth distribution of their life. Depending on who you look at, 60%, 70% of the wealth in the United States is in the hands of those people. And so that's not going to change anytime soon. So we have this great opportunity to help them make sure they manage their wealth and how to make sure they distribute it properly. How to get it in the right hands at the right time and how to make sure that their kids and their generation three is financially responsible. If we focus on that over the next five to 10 years, it could be the greatest five to 10 years in the industry for a financial advisor. At the same time with that group, they're going to live longer. So our job is to help them have enough assets to make sure they don't outlive their money. We want their money to outlive them. And you would say, well, you deal with really wealthy clients. How can that happen?

• 24:34Speaker 03

  It happens all the time. And so we have to think about you're going to live longer than you originally thought you were going to live. There's going to be medicine. There's going to be drugs. There's going to be everything's going to make you live longer. So how do we as financial advisors make sure you're prepared for that today? So it's not a surprise in 2035 because they're going to be alive then. So that's number two.

• 24:52Ted Seides?

  On that second theme, what do you do differently in the investment side of the house, knowing that, let's say, the assets have to have longer duration than they used to?

• 25:02Speaker 03

  We have to make sure we can maintain a competitive rate of return. We have to outpace inflation. Inflation's for real. Many of these clients don't want to take undue risk either. They've made their money. Sometimes I tell people, you're the alpha generator in the equation because that was the business that you started. Our job is to preserve your wealth and make sure you don't blow it. But preserving wealth doesn't mean just to buy a fixed income security and hold on to it for maturity. Preserving wealth is to make sure we preserve it with inflation involved. So we have to have returns that outpace inflation. At the same time, we think that we can give you a consistent long-term return where you'll outpace the normal living standards. And so it could be, is it the traditional 60-40 asset allocation model?

• 25:44Speaker 03

  I don't know if that's it anymore, but we know that we can talk to clients about thinking longer term with some of their assets. Maybe some of your assets, you need more liquidity, shorter term, and so we'd be more conservative there. And then maybe there's intermediate term, time horizon on those assets for the next five to 10 years, we can be maybe more aggressive. But what about the money you'll never need? Why don't we think about longer term investments, things that we probably will never touch, but if we do, it'll be 15 years from now, that maybe we can take? A little bit more risk, maybe we don't need the liquidity in those investments and we can create more alpha in those returns so that if you live 10 years longer than you thought you were going to live, you're still going to have plenty of wealth to live by and hopefully give away.

• 26:27Ted Seides?

  How about the third theme?

• 26:28Speaker 03

  Third is the security of everything, meaning I think we live in a new world today. In the United States, we've lived in a bubble where we don't really worry about personal security that much. And that could be, an example would be if you had a house in Los Angeles, the fires came through and your house survived, but all your neighbors' houses were burned down, but there's no one there to protect your house and what's in your house. You may have to hire a personal security guard for the next year to protect your house. Or you need someone to make sure that your own personal computer system can't get hacked. And so you need internet security. Everything's about security. The rest of the world's been going through this for the last five years or a decade. We haven't, and I think we all

• 27:10Speaker 03

  have to be more focused on our own personal security. Either understanding how to access those capabilities is important, and we can help our clients do that, and understanding how to invest in those capabilities too is important because I think it could be a big opportunity down the road. The fourth one is AI. It's been on our list for four years now, and wow, is it accelerating? And we used to talk about ChatGPT. It's so much more than that. In fact, every day there's a new AI entrant into the world that we live in. I tell our advisors and our clients, you have to be a user of this stuff. You have to embrace it. You have to use it. Are you using AI technology to help you run your practice better and live a better life? At the same time, it creates investment opportunities for us.

• 27:55Speaker 03

  And then the fifth bookends, my first one about this year will be tested. It's, we have to find a way to stay in the markets. It's, bull markets are long and bear markets are short and painful. Trying to keep our clients focused on the long game and maybe repositioning, but staying in the markets so that they can obtain those returns that they're going to need over the long term of their lifespan. The fifth one is book into the first one, but this was a good time to reset things as well. Those are the five themes that we drive through.

• 28:26Ted Seides?

  So as you share these themes with the teams that are working with all your clients, they then have to go into the markets and implement. And I'm curious what you're seeing on the platform in terms of the shifts in investments over the last few years and what you see going forward.

• 28:43Speaker 03

  Especially in the ultra high net worth space, Ted, there's a larger and larger allocation to alternative investments, no question. What has been one of our differentiators that creates some distinction maybe in our platform for our advisors is that we have a very robust alternatives platform across a lot of different disciplines. And wealthy clients were asking for that. That's where they were looking for their alpha. And frankly, a lot of them, they like the liquidity premium. It's like, I don't need the volatility. I don't want to see it go up and down every day. What can we invest in that maybe we don't have to focus on day-to-day volatility? So alternatives through private equity and other vehicles has been a very attractive offering for our larger, wealthier clients. But now you see it becoming a little bit more mainstream, as long as clients are accredited

• 29:27Speaker 03

  or can fit the profile. You're seeing these liquid portfolios that don't have K1s in some cases, don't have capital calls. We've seen over the last couple of years, we're seeing the take-up in alternatives coming downstream, and it's just easier. The questions we get from clients today is, I don't know if I want to wait for a 15-year payoff. What do you have in the alternative space that maybe has a little bit more liquidity, don't need daily, and at the same time, maybe receive some payoff sooner? So we have a lot of different seasoned portfolios that we can offer the clients. But where it used to only be an ultra-high net worth investment option, now it's becoming an option for many people in the high net worth space as well.

• 30:07Ted Seides?

  How does that platform come together? How you architect the different investment options that advisors can choose from?

• 30:13Speaker 03

  If you take a step back on the larger platforms, we manage $2 trillion of wealth in the United States. It starts with just pure asset management, using separately managed accounts, using indexing. In some cases, advisors build their own portfolios. Most of it is tied to a fee. Very little of our business is actually tied to commissions today. So whether our advisor uses separately managed accounts from all the largest asset managers in the world. Including some you would never know. We try to give color all of those managers to our private wealth advisors and then they can decide on the asset allocation. That's the foundation. Then you have other products and services maybe above that. You can think of alternatives. Alternatives will be not for everyone, but they're going to be for the wealthier client

• 30:58Speaker 03

  segment and for the advisors looking for a little bit more sophistication and maybe alpha in their portfolio. We have a wide number of people in our organization that monitor managers that decide who to bring on the platform and not to bring on the platform. Our separately managed accounts are continuously going through due diligence processes to make sure they're doing what they say they're going to do and that the same management teams are in place that we hired them with because we have a responsibility to our clients as well. Then you get to the alternative space and it's a whole nother level of due diligence. Probably more risk to it. There's certainly a lot less visibility into them from a client perspective. So we have to make sure we do our diligence because we have a duty to our clients to

• 31:40Speaker 03

  make sure we're not just putting anyone on our platform. We're putting people that we've done all of the work to decide, do they fit? Are there light controls in place? Do they have the right leadership in place? And are they doing what they say they're going to do? Jerry Pascucci at our firm runs our alternatives platform. He runs a very curated platform over the last 15 years. Our alts platform is an area, I think, that we've really created that distinction with our private wealth advisors. Whether or not they want to invest in it or not, at least we get to show them some very interesting alternative investments in two different areas. We could either be the mainstream, big name, core holding alternatives, but there's also that unique and exclusive piece to it as well.

• 32:25Speaker 03

  Everyone wants something a little bit different that they can't get somewhere else. We have a couple of different ways to look at it on the platform.

• 32:31Ted Seides?

  How does that curation work under Jerry?

• 32:33Speaker 03

  We're trying to think, where's the world going to be in five years from now? Where's it going to be in 10 years from now? Not where it is today. Less identify the managers and the themes and the strategies that we think are going to fit in those categories. All the big name private equity firms have infrastructure funds and they have AI funds and they have data center type funds, they have real estate funds, which all of those are great for maybe the core holding in a portfolio. And then we have all these other managers that we try to identify that may be the new up and coming private equity manager. They may have a unique value proposition and a very tight window or a narrow focus that they can bring to our clients is maybe a satellite approach to that core.

• 33:14Speaker 03

  And so I think Jerry's done an incredible job of identifying opportunities, not because it's mainstream or because everyone else is doing it, but because we think it's going to be the place to be in five years from now.

• 33:29Ted Seides?

  We're going to take a quick break in the action to tell you about Brookfield. Brookfield invests in the thing behind the thing behind the next big thing. Their focus across infrastructure, energy, real estate, private equity and credit is helping to build the backbone of the global economy. Brookfield combines deep operational expertise with disciplined, long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Invest in the businesses that shape tomorrow. Learn how you can own what's next at Brookfield.com/own.

• 34:06Speaker 02

  This is not an offer to sell or investment advice. Investing involves risk, including the loss of capital. And now, back to the show.

• 34:16Ted Seides?

  What are some of the rules of thumb as, let's say, Jerry and the team are looking at different investment options, knowing there's two trillion just in the US, let alone six trillion around the world, that might want to have access to whatever that special opportunity is?

• 34:33Speaker 03

  We're agnostic to size of the fund and sometimes that creates a queue at the window to get them. And sometimes that creates clients not having the best experience because they didn't get it, or they got a much smaller amount that they originally wanted allocated towards them. The benefit of it is we are a global company and we have access to global opportunities. So we feel like there's an endless stream of opportunities for us to choose from. We're not afraid to go after smaller deals that we think are very unique because we know we'll find another small deal as well. But it could be something that comes from our colleagues in Asia that no one in the US is ever going to have access to, or it could come from our colleagues in the EMEA region. We think we have a variety of options.

• 35:17Speaker 03

  Sometimes they're so curated, you may not have access to it, but we're pretty sure eventually you're going to have access to one that you want to do. On top of the normal names that you know that are outstanding, they're incredible partners and they do great for clients, but there's larger capacity. We always have those on our platform as well.

• 35:34Ted Seides?

  In those situations with finite capacity, how does the allocation process work across the advisor base?

• 35:42Speaker 03

  We'll come out early with the fund and clients will have to submit indications of interest for it for their accredited clients, usually for these types of funds. And then we just usually go through to identify who are the clients that we know are capable of investing in these investments, who are the advisors that we know understand these types of investments, and how do we make sure the clients get their fair share. Sometimes the smallest ones are the most demand and it's hard, but we know if we're going to come out with something similar, we'll try to do that to complete them so we can fulfill the demand that we have. That's the scarcity issue. And having scarcity sometimes gives me more confidence in the manager because they're not overextending themselves. And we have to talk to our advisors and our clients about it, that you may not get this

• 36:25Speaker 03

  one, but you'll get access to fund number two. And that's a great thing for the manager because they can allocate funds to one offering and be focused on that particular fund. And then if they know they have additional capacity, we open up another one. I feel like they can manage it better themselves.

• 36:41Ted Seides?

  From a manager's perspective, who's talking to the team on the platform, how do they think about the process of educating this very diverse base of advisors?

• 36:53Speaker 03

  That's the tough one because we have advisors at a firm like ours and all the other firms in the US, by the way, that have no interest in doing alternative investments at all. And so, how do you break through? How do you get anyone's attention? Whether it's the advisor or whether it's Jerry and the due diligence team. The funds have to be able to demonstrate and provide evidence that they have a capability that's worthy of our clients' needs. And they can do that locally through our office managers. We'll have people come in and talk to them. They can come directly to me. We are not going to offer any fly-by-night, fund-of-the-days. And so, the key is, can you provide evidence? Can you demonstrate your track record? And then, what are you going to do going forward?

• 37:36Speaker 03

  We have a pretty rigorous due diligence process. Some say maybe more rigorous than others, but I think that's good. We have a duty to our clients to make sure that we do that. And everyone wants to be on our platform, by the way. When you manage over $5 trillion of wealth from two-legged individuals primarily, and you do it globally, so it's not just isolated in one geography of the world, the benefit is everyone wants to be on our platform. The challenge is, is that we have a lot of people we have to say no to. It takes a lot of time to go through the diligence work on them because it's a unique platform, different than anyone else's, in that it's globally diversified, skews to the ultra-high net worth segment.

• 38:15Ted Seides?

  Walk me through a manager, first getting on the platform. What might their time look like in getting from not having a relationship to having a very successful and broad relationship?

• 38:26Speaker 03

  First of all, they're going to have to have a distribution force. They're going to have to have a, I don't know if you want to call it a wholesaling network, so to speak, because our industry still is a relationship business. And you can post all the numbers you want to, but there's got to be some type of human interaction when you're talking about an illiquid, more complex investment. So, first of all, you're going to have to have some sort of a network out there. And it doesn't have to be large, but enough for someone, if they have a question, advisor can pick up the phone and give them a call. So, that's number one. You have to have a network of people, wholesalers, however you want to describe them, that can actually... Go press the flesh, talk to people individually. What we've done with a couple of our partners here is I'll do what we're doing right now.

• 39:09Speaker 03

  I'll do a podcast slash webcast and we'll talk about their fund, especially when they're just hitting the platform. And very similar about, give me a little bit of your history. How did you get here? How did you get in this fund? Now tell us about the sector, the scene that you're going after and how can clients participate in it? It's kind of gets broad distribution that way. But what we've found is that the most successful ones are already big and already have those networks in place. The newer ones struggle with it a little bit. I don't have these people in place. How do we do it? Can you help me? We work really closely with the private equity managers and the fund managers to make sure that we can get their message out there. A little bit more than just internal communications that you're going to see on our intranet. We are in a people business here.

• 39:52Speaker 03

  Those relationships that you have will make the difference in terms of someone saying, I like that fund and also like them because they take my call. When I have questions and that means a lot, especially in this space.

• 40:03Ted Seides?

  If you look out over the next couple of years, there's a lot of simple math that says, oh, and the private wealth channel only has two, three, four percent of their money in alternatives, the institutional channels, a multiple of that. If only a percent moves and you look at $2 trillion, a percent is a pretty big number, $20 billion. What do you see happening in asset allocation shifts within your client base over the next few years?

• 40:28Speaker 03

  At our firm, in our private wealth business, it's just about eight percent asset alts. I think it should be 20. Our CIO is calling for higher than 20. So we still have a long ways to go. Our alternatives managers know that too. It's a big opportunity for them. Our clients in most cases are demanding it. Our advisors in some cases have to get more comfortable with it. Just look at endowments and foundations out there that have a much larger percentage. We think it's important for the right client away. They have the right time horizon. We think they can produce alpha in the portfolio. We think it takes out some of the volatility. We just think it for all the right reasons. But it's not easy to convince someone to do something when they don't have instant liquidity. Where they can sell it, have daily marks on their statements or online service.

• 41:13Speaker 03

  So we're gradually getting to that spot. It looks like we're in a pause right now a little bit. Private equity, I think, has been difficult. And one of the reasons is volatility of the markets. But at the same time, exits have disappeared right now. Most people invest in private equity. They're hoping they're going to get some money flowing back to them in the form of exits, whether that's IPOs or acquisitions. And certainly, those have slowed over the last couple of years. And in environments like this, that could slow things down in terms of private equity takeup. So that's why you've seen a big shift into perpetual funds and late vintage funds because we're seeing, okay, do I want to go to the traditional new private equity lockup 10-year fund?

• 41:58Speaker 03

  Or do I want to buy a vintage fund that should all, you know, instead of going through this whole J curve, I'm going to get the bottom of the curve right now because the curve's going to start going up. So we see vintage, perpetual, and liquid alternatives filling the gap of where maybe the traditional alternative platform was. And we see all of our alternative asset management partners out there coming to market with those types of programs as well.

• 42:21Ted Seides?

  When you see 8% today, 20% or more in the future, what, if anything, could derail that from happening?

• 42:32Speaker 03

  I think a lot of this market psychology. We are essentially psychologists for our clients. Clients get nervous when things are probably the best time to buy and they want to sell. And most clients want to buy when everything's bubbly at the top. It's our job as financial advisors, and that's why having a financial advisor is such an important, key person to have in a client's life because we can moderate those mood swings. And I don't mean to be Pollyannaish about it, but the reality of it is, most people, if you look back over time, will tell you the best time to buy was when people didn't want to buy anything. And the worst time to buy is when everyone was buying. So our job is to make sure we stick to the fundamentals of asset allocation, stick to the fundamentals of investing, go back to the basics of why you invest, and then how

• 43:17Speaker 03

  do you allocate properly? And I think in the new world of investing paradigms, it's you have to have money in equities, you have to have money, probably some in fixed income if rates stay high or go higher. And then alternatives is that little bucket that you have out here that's bigger than 3%. Many of our advisors follow that school of thought. And when it's laid out that way, a client, I think, will make the rational decisions like, "Yeah, I think that does make some sense." And then we have to perform. You've got to demonstrate. You have to provide evidence that you can perform. For the wealthier clients, it's a little bit less of an issue because sometimes they have so much money, liquidity's nothing for them. They get tired of liquidity. So they're okay throwing a chunk of their assets and things. They don't want to mark to market.

• 44:00Speaker 03

  And they're very comfortable in seeing where it ends up in 15 years from now. But clients don't care about liquidity until they say, "I need liquidity." And so you just never know when that point comes as well.

• 44:10Ted Seides?

  As you stratify that client base across the ultra-high net worth, the high net worth, the mass affluent, how different are the asset allocations today?

• 44:19Speaker 03

  Sticking with this theme of alternatives, the further you go up the wealth curve, the significantly more alternatives are in there, either through us or them doing it on their own. So as we allocate capital to these types of programs, you'll see our wealthier clients have a larger percentage, more than 8% usually, to the alternative space, more heavily focused on private equity than hedge funds. That's been a flip 15 years ago. That was all hedge funds. Now it's mainly private equity. And as you go down, it's a much smaller number. But those clients in that high net worth, let's say a million to $10 million range, are trying to find ways to have access to the alternative platforms. And that's where you go into the perpetual funds and the daily liquidity funds and trying

• 45:02Speaker 03

  to gain a little bit non-correlated, if possible, returns on their investments. And sometimes going through a market gyration that we're going through, I think it's going to make everybody rethink it. I think long-term, the markets are going to continue to perform. This is another glitch we go through every five or six years or so. But there's always a little reset. As I tell our advisors and our clients all the time, "Listen, why not use this as an opportunity to sit down and maybe tweak the portfolio based on the new paradigm that we see happening?" Not a knee-jerk reaction, but a longer-term view. That's why I'm very optimistic about the role that alts play in our clients' portfolios. I've been a proponent for 15 years about this stuff, and I think it's going to continue to grow.

• 45:43Ted Seides?

  I'd love to ask you about alignment. And you have the UBS business, you have all these different advisors, you then have their clients, and then asset managers, and in particular, alternatives. That's been a big issue for a long time. How do you think about The different layers of where incentives lie.

• 46:04Speaker 03

  It's a good question. We try to be completely agnostic. Best possible solution for the best possible price for our clients. And we've set up the platform to where if you want to go in and charge whatever the fee is on, let's say, the private equity fund that's listed on our platform, you can charge that private equity, whatever the upfront fee, if there is one, and whatever the annual management fee. Or if you want to, we have a capability here where you can go in on an institutional pricing level and charge a client an advisory fee, no other fees. So think about separating the cost of manufacturing from the cost of distribution or advice. That's the fastest growing platform we have here right now.

• 46:45Speaker 03

  Advisors want to say, Mr. and Ms. Jones, instead of me buying this the traditional way, I'd rather buy it in a more institutional way, but I'll charge you an advice that's totally separate. So that way, we're on the same side of the table. In case the fund's not working, we can exit it right away and I'm only working for you. So you're separating the cost of your advice from the factory. And that's how many of our advisors today are recommending alternatives to their clients. But at the same time, we're a completely transparent place. Any fees that are involved in any of the products are transparent to our clients. We want them to be fully informed on what the cost is. We give them optionality on how they want to invest in these programs. And our partners, I think, are really good about this. Our private equity partners and alternatives partners.

• 47:29Speaker 03

  If we tell them we need to change the way that they're pricing something, and we're a big buyer, we're somebody that they look to, they'll usually entertain whatever we have to say.

• 47:37Ted Seides?

  And if you take that up a level of the advisors and their relationship with UBS, there's long been a history of, as you said at the onset, advisors as independent contractors. And sometimes there are deals and they take their book of business and they move to a different bank and then they move back and they're back and forth. How has that played out over the years?

• 47:57Speaker 03

  My view is real simple. If we can't create the best platform for them to operate on, then they should probably leave. My job, probably more than anything, is to work with partners like Jerry Pascucci and Salita Marchelli, who's our CIO, and everyone else in the organization to make sure we build the best platform for them to serve their clients. In the United States, when an advisor leaves from one firm to the other, they typically take around 80% of their clients with them. When we hire an advisor from another firm, we typically get 80 or more percent of their clients with them. Sometimes those numbers change a little bit. It's normal course of everyday business. I don't like it. I wish everyone would stay here. But my view is, listen, our job is to build the best platform for them and their clients. And sometimes clients say, I don't want to leave. And that's refreshing.

• 48:42Speaker 03

  But I respect the financial advisor. I respect what they do. I view my role as a partner with them. And if they think they can do it better at another place, I wish them well. The attrition numbers aren't as high as people think. It's a small percentage every year, annually, of the overall business. Actually, it's smaller than what anybody would guess. But they're headline grabbing sometimes. And if you're a client, it could be aggravating. It's like, I gotta move. I have to sign paperwork. And I don't think clients like it at all. But sometimes advisors think they can serve their clients better. And if that's the case, fine. But I'm myopically focused on making sure our platform here is the best that any advisor can choose from.

• 49:20Ted Seides?

  Now, alongside the demographic shift of the boomers and the wealth transfer, there's also this question about the demographics of advisors. Plenty like you have been in the business for multiple decades. It seems like there are fewer coming up. How have you thought about that from your business perspective?

• 49:40Speaker 03

  When I started, everyone was a sole practitioner. Everyone worked on their own. And then you started seeing people team up for a lot of different reasons to serve clients better, to maybe give them some more time off, to run a more professional business. Clients were demanding, and clients would say, what happens if you're not in TED? Who'd I talk to on the phone? So we went from being a sole practitioner business. And then in the late 90s, people started teaming up, where almost everybody's on a team. We have very few sole practitioners at our firm any longer. But the big transformation that happened, really COVID's what accelerated it, was those teams unfortunately looked like me. Three or four 55-year-old white guys in the room. There was no diversity of age.

• 50:25Speaker 03

  There was no diversity of gender. And there certainly wasn't any diversity of ethnicity. Our industry's done a poor job in that area. And so what you've seen accelerate since 2019, I've been speaking about this at every presentation and speech I give, it's about your teams have to start looking like the clients you serve, or they have to start looking like the world we live in. And that's not three middle-aged white people. It's do you have diversity of gender? Meaning, who's going to talk to the women in the equation? You realize, right now, women control about 33% of the wealth of the United States. In seven years, they're going to control over 50% of the wealth in the United States because of this baby boomer phenomenon. So the patriarch passes away, the money's passed over to the surviving spouse.

• 51:10Speaker 03

  Most of the times, it's a woman. And if there's no woman involved in the discussions, they just look at you and say, "Okay, I'm going to go work with the team that's got women on the team." So, most of our teams now have diversity of gender on their teams to make sure that we serve our clients the way they should. And now, we're really working on diversity of age. I tell people with this whole wealth transfer, it's not about Gen 2. Gen 2 is just under the baby boomer timeframe. It's really about how do you keep Gen 3? So, your Gen 1's in their 60s and 70s, Gen 2 is in their 40s, maybe late 30s. And it's the Gen 3 that has no interest in dealing with a financial advisor whatsoever because they do it on their phone. How do you connect them to the organization?

• 51:54Speaker 03

  So, you'll see most of our teams now, and this is they have an insatiable demand, is how do we find junior people to join our teams to provide that connection all the way through the family tree, from patriarch down to Gen 3? We have a thing called the Wealth Advice Center here at our firm. They now work with smaller accounts. They work in a highly controlled environment where we teach them how to have personal skills on the phone, how to talk to clients about asset allocation, how to talk to them about investing money. And that becomes the incubator, or the growing area, for these young advisors for our experienced teams to hire from. We actually home-grow these people in the organization, working on existing UBS relationships that are smaller. Sometimes they become bigger because they do a good job.

• 52:40Speaker 03

  And they become eventually the training ground for our teams to pick up to be their junior partners. The success rate has been really promising, and I'm super excited about it because... That was a hole in our industry. How do we find that next level of talent? Because you have to grow a business in non-traditional ways now. Here's a way we can just integrate them on the team immediately. The teams are sizable enough to help co-invest in these people. And my goal is in five years, there'll be full partners on the team and they'll cover one segment of the overall business. Went from sole practitioners to just teaming for teaming's sake. And now the teams are trying to evolving to look more like the world that we live in.

• 53:21Ted Seides?

  One last question before, I want to ask you a couple of fun closing questions. You were sitting at top, the largest wealth manager. In addition to some of these initiatives, how do you think about making sure that you stay at the top and continue winning?

• 53:37Speaker 03

  It starts with clients first. If everything we do is focused around clients, then everything else is going to work out. I mean, personally, I spend a tremendous amount of time understanding markets, understanding demographics, understanding wealth, what people need, what they're asking for, how to help them professionally and personally. And then that translates to financial advisors, is how do we become the best partners we can be for our financial advisors? So to build them the right platform. And if we continuously strive and challenge, and if we continue to push ourselves, we'll have the right capabilities and products that for our advisors to be super successful. It starts with the client. It's partnering with the advisor.

• 54:21Speaker 03

  It's never being afraid to listen to a suggestion. No suggestion's stupid. They're all good. We can't implement them all. The second I lose that is the second we go the other way around. The two things that I see that bring people down, or businesses down, or countries down, you name it, is ego and arrogance. If you think you're doing great and your ego gets really big, it usually turns into arrogance. And when it turns into arrogance, the end is near. You just don't know when. It's coming. And I've seen it happen throughout my career. And so I try to check my ego at the door. I hope I don't have arrogance. If I do, I hope people call me out on it. And I think if I continue to work with that and have people around me think the same way,

• 55:04Speaker 03

  no ego, no arrogance, let's just go get it done. You usually have pretty good business.

• 55:09Ted Seides?

  All right, John, a couple of last questions. What is your favorite hobby or activity outside of work and family?

• 55:15Speaker 03

  Anything outside. I like to be in the outdoors. I'm an avid fisherman. Don't do it as much as I used to, but I love to saltwater fish primarily. I love to play golf. And I love to hike. My wife and I love to go on hikes. We have a place in North Carolina in the mountains. And just being out in nature is a great detox. Changes the world. I get to energize myself every weekend. I try to do one of those three things. And then I come back on Monday, supercharged, tons of energy.

• 55:46Ted Seides?

  What was your first paid job and what did you learn from it?

• 55:49Speaker 03

  I grew up in a small town called Ocala, Florida. And my first paid job was my neighbor asked me to paint his house from top to bottom on the outside. And I said, sure, how much you're going to pay me? And he goes, eh, we'll just think about that at the end. He didn't tell me I was going to have to use a paint scraper, or whatever you could just scrape the old paint off the eaves around the... It was one of the hardest jobs I've ever done in my life. It took me three months to paint the entire house. But it was one of the most fulfilling things I've ever done. I learned hard work. It was hot. He would come out and inspect me. And at the end, he paid me incredibly well. As many times as I wanted to quit doing that, and as probably as many times as you wanted to fire me, he

• 56:31Speaker 03

  kept hiring me back. And it taught me a little bit about hard work and dedication. And I don't want to paint another house from top to bottom, but it was a good starting point.

• 56:39Ted Seides?

  How's your life turned out differently from how you expected it to?

• 56:44Speaker 03

  At the beginning of this, I said, I'm the accidental executive. I truly believe that. I'm honored to lead so many great people and be part of a great organization. But I never thought it was going to be this way. I thought I was going to be living in that small town. I'd maybe be a stockbroker in town or maybe be a lawyer in town. And here we are at Midtown Manhattan, talking from my office. I would have never expected it in a million years. And sometimes I still don't believe it. And maybe that's why I work so hard to make sure that I don't disappoint what I've already done, because I never thought I'd be in this position. In fact, at the end of this, I may be a financial advisor again. I love that part of the work so much. It's the accidental executive and it's been great. The people that I've met globally, from all over the United States of America, I've

• 57:28Speaker 03

  met so many great people. I'm so lucky to have lived this life up until this point.

• 57:32Ted Seides?

  What's a mystery you wonder about?

• 57:35Speaker 03

  Landing on Mars. There's a lot of talk about it these days, but I'm really fascinated about, can we actually get there and live there? Can we actually live on Mars? And I guess we're going to find out here in a few years.

• 57:47Ted Seides?

  All right, John, last one. If the next five years are a chapter in your life, what's that chapter about?

• 57:53Speaker 03

  It's all about having a positive impact on people, not just professionally, which I'm involved with so much of the time around here, but more importantly, personally. I mean, at this stage of my career, it's all about how much I can give back to help people do things better in their lives. And if I can tweak one little thing or help them think a little bit differently, and it impacts them professionally, but more importantly personally, that's a pretty good chapter in my book.

• 58:18Ted Seides?

  John, thanks so much for sharing this super interesting platform you're sitting on top of.

• 58:23Speaker 03

  Ted, thank you. It's been great. Great seeing you.

• 58:26Ted Seides?

  Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one and see you next time.