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00:00I would say the best wealth managers in the world do much more listening than they do talking. You should never invest in something that can't be simplistically explained to you. The most important thing is to be able to save early. And if someone can be there to help you through that you know that's that's one of the most important things. When it comes to wealth management Mary Callahan overdose is best in class. Mary was a student in my class at Harvard Business School. There was something about her in that class where when she spoke people paid attention. People listen from Harvard Business School. Mary made her way to Wall Street. Joining JP Morgan in 1996 now was like a rocket was just fascinating to see her grow. Very became CEO of JP Morgan's Asset and Wealth Management businesses in 2009. And under her leadership client assets and those divisions swelled from one point six trillion dollars to four trillion dollars. And she's expanded the businesses into new markets everywhere from Las Vegas to Amsterdam. When you were growing up did you say I want to manage four trillion dollars when I am an adult. I wish I had had that clairvoyance back then. But no I. My first foray into the money management business as has been retold to me is my grandmother asking me to balance our checkbook. And she actually paid me a couple of dollars every month to do that. And one day she said I think you need to get a real job and sent me downtown to the city of Chicago to look for a job. I found one and the mailroom equivalent of Stein Roe and Farnham which was an investment management house and the mailroom equivalent was a computer room where you ripped off the pieces of paper for the big portfolios and then you walked the different floors and you and you delivered them to people. And over time a few of them took interest in explaining to me what I was delivering to them every day. And the rest is history really. I mean that's when I that's when I fell in love with markets and understood that every day it was different that all of them manage portfolios in a different manner. And yeah I also learned about the concept of over time. So that was pretty cool too. OK so now you've been at JP Morgan for about 25 years. Yes. So and now you run one of the most important parts of JP Morgan which as I say is the asset and wealth management business for people that aren't that familiar with wealth management. What actually is wealth management and how is that different than asset management. Great question. The two are often used interchangeably. But but but there they have distinctions. Asset management business is where we manage money on behalf of individuals institutions sovereign wealth funds pension funds. We manage them in mutual funds. We manage them and ETF. We manage them in single stocks single bonds hedge funds private equity and the like. And that is the heart of the fiduciary business that we run here at JP Morgan. Wealth management is that plus understanding someone's entire balance sheet. So for the individuals where we manage money we also help them with their mortgage. We help them with a loan that they might need. We help them with their basic credit card. And so wealth management is trying to help someone with their entire life both their assets and their liabilities their planning their gifting the legacy that they want to leave for their families. The 529 plans they need to prepare to get their kids to go through college. And it's a great it's a great insight into people's you know entire journey. Now many organizations like J.P. Morgan have wealth management businesses. Some are bigger than some are smaller. But basically you're managing money for and doing other things for wealthy people more or less. Is that fairly right for wealthy people. Although you know many of the successful wealth management firms today have figured out how to take all of those great learnings for what they do with very wealthy people and also package them for people who are have their first paycheck. And they want to be able to save a little bit of money or want to have access to things that maybe they wouldn't normally have. And so we've been able to take things like what we do for a super wealthy family package it into a bite size where you walk into a chase branch and you're able to get some of that some of the same advice. And so it's it's I think it's opening up the world to be able to help people. And you know the most important thing is to be able to save early. And if someone can be there to help you through that you know that's that's one of the most important things. If you look at an average investment in the world if you just look over the past 20 years take a balanced portfolio it's about six point four percent average annual return for people that generally manage money. The problem is most individuals actual return is less than 3 percent. So it's less than half of that. Why. Because they make emotional decisions when markets are one way or another and they get caught up in the hype of things. And so it's super important to have that advice as early on as we can give it. And I think you know that. That's the rewarding part about about this business is being able to try to help people through all of those different journeys that they have. But what you're saying is that the average person if he or she says I'll manage my money myself I'll save some fees that I would pay to JP Morgan or somebody else. That person generally is either selling at the wrong time or buying at the wrong time or at least they're not getting the returns that they could get if they had a professional manager helping them. Is that what you're saying. More or less. Some people are very successful investors in their own right. You know the the way that I've seen it over the 25 years that I've been doing this is most people make great sums of money by doing one thing really well. And when they master that one thing really well like maybe running the largest and most successful private equity firm in the world nobody can beat them at that. And that's the way they make their money. Then to keep their money and continue to grow it. The trick is diversification. Diversification comes with having to master lots of different things. And generally people find it hard to master lots of different asset classes sectors countries areas to invest because they don't have the time to do that. And so being able to get other people to help with those components maybe it's just the ones you don't master. Maybe it's all of them. Maybe it's components of that is the way most successful people have done that. Suppose somebody makes a big fortune and he or she all of a sudden becomes a billionaire. Do they just call you up out of the blue or do you kind of know that somebody took a company public. They made a lot of money. You call them up and say by the way how about some lunch. We could maybe help you. How do you actually get these billionaires or very wealthy people to be your client or do they just come out with a shrink over the transom. It's years and years and years of work and getting to know people because this business is based on trust. And you don't just wake up one morning and find yourself with a great sum of wealth and then just go trust someone you haven't known for years. And so it is a very very long journey to get to know people to get to know their families to help them with a piece of something along their journey. And the more you do that the more you can find your way and to be able to give them the proper advice as they go through it. And the advice very often can be stay and stay in cash or monetize or do nothing or look it's not as much about talking about managing your money as it's talking about structuring your money. Let's let's figure out where we're going to hold it. Let's figure out how much you're going to give away how much you are going to keep for your family how much taxes are involved in the situation. And so there's just so many things that surround the advice that a wealth manager gives. And it's not just simply about the management of the money. Our place places to figure out how to ferret out those answers to the questions and then be able to apply a plan and work through that plan over time. They wore their hair long protested in the streets and promised never to trust anyone over 30. That was decades ago. Since then baby boomers have become the biggest holders of wealth in the U.S.. Now they're part of what will be the biggest wealth transfer in history over the next two to three decades. The 70 million plus boomer generation will leave a staggering amount of money real estate and other property to their children and grandchildren. Just how much isn't really known. Estimates range from a low of 15 trillion dollars all the way to 68 trillion dollars. Boomers may control as much as 70 percent of the country's disposable wealth. What happens when millennials get that wealth. Hard to say. It will depend on what the tax and state laws are. Plus the state of the stock market. One thing's for sure financial advisors will have their hands full both with those who are giving the wealth away and those who will receive it. Let's talk about the great wealth transfer. Is that a difficult thing for families to deal with. They come in and say I really don't want my children to really have too much money. And they say that in front of the children where they say my children don't know anything about money don't let them make any decisions. I want to make sure they never have any discretion. How do you deal with those inner gender generational issue. Yes intergenerational issues are probably the toughest thing to deal with. And they they morph and change over time because there's basically four places you can give your money if you live in the United States of America. You can spend it yourself. You can give it to your children. You can give it away to charity. Or you can give it to the government. And you just have to figure out which of those four buckets you want to have waited in which manner. And there's no right answer. There's no wrong answer. You work so hard to make the money. Trying to figure out how to impart your values on the next generation or on philanthropies or how you're going to live your life. That's not for any wealth manager to say that is not our place. Our place is to figure out how to ferret out those answers to the questions and then be able to apply a plan and work through that plan over time. One of the most difficult things for wealthy people to decide. I've found that in giving pledge meetings and other things is how much money to give to their children and also how to deal with their own estate. Is it awkward sometimes when you have to ask people about their will and what they're going to do. And sometimes you find out that the spouse hasn't told the other spouse where the money is going. Does that ever happen. That happens a lot. And it's not about not telling. It's about not really understanding the mechanics of what happens when. And so a lot of what we do is just simply put on a piece of paper and a nice picture of what's actually going to happen when the hardest conversation to have is when a client says if I die. And so we first have to work through that. Okay. And then once you get through that you know these are awful conversations to have to think through. But if you think about it early enough it becomes much less emotional. You can work through those issues as a family. And again there's no right answer. There's no wrong answer but doing it with eyes wide open. And then it can change through time. But the the question about wealth to children is is very different for each family. But if you think to yourself what I have worked as hard as I did for so many years if I knew there was some sum of money behind the answer could be yes. The answer could be no. It's all about the the the person you are now. You and I both were in the financial service world during the Great Recession of 2008 09 and so forth. Was there panic or how did you deal with the calming people down. Because it was a pretty typical period very difficult period. The seeds of which are also played themselves out during the the the pandemic that we are still going through today. The the the great recession that we experienced in 2008 was a very very quick rude awakening to the safety and security of assets. And so about a billion dollars a day at one point was was coming into the bank and trying to help people to understand the safety and security of their assets and understanding. Diversification is key. And you have to ride through these times. You can't be emotional because at the end of the day a lot of wealthy people they don't need their money tomorrow to be able to spend it for many many decades in the future. And so trying to keep that long term focus is probably the most important thing that we do. If you fast forward to the pandemic very many of the same things happen. So if you look back to March of of 2020 and you think about all the volatility that happened then a lot of people thought I should sell all my assets. The whole world is going to change. Other people thought well I can take advantage of these opportunities and really think about the fact that all of this money I don't need daily liquidity at at any one point in time. And so let me think about taking advantage and investing through those markets. And again safety and security of my assets also came into play. And now you're seeing a constant flow of money to the firms where people are giving the good advice are helping things through the long term issues and are not being short term in nature about how about how they manage the assets. Let's talk about the environment we're in now for managing somebody money. So interest rates have been low for a long time and you would say the government is stimulating the economy a lot and prices are pretty high. So are you now telling people be careful because the economy might slow down at some point you give them economic advice as well as geopolitical advice as well as financial advice. Yes. So every day that's a different conversation. As you say the markets are very healthy right now given the liquidity that has been infused all across. I mean we had we had a recession that was five times greater than the average recession in 25 percent of the time. Right. It happened so fast. And yet our response to it was to add deficits to the United States government that were greater than the last five recessions and the deficits that came about. So we've had policy responses that are unprecedented here and now we're seeing that play out in the marketplace. And so when you have things like Dogecoin which were created as a joke and are now you know 30 40 billion dollars worth of value you have to ask yourself is it the liquidity that is sloshing around the system that's causing this or are these real new things that are happening in life. And only time will tell the answer to all of those questions. But it goes back to one of the most important things that you pointed out which is diversification. There's just no way to be able to know everything that's going to happen in the future and every single asset class. And so the most important answer is proper diversification of these portfolios. If somebody comes to you and says I want to invest in cryptocurrency I'm willing to lose the money but I just really love cryptocurrency. You say you shouldn't do it or do you. You facilitated or are you still evolving your position. So block chain technology which is the underlying piece of all this. It is very real and is changing all of the ways that we did judge digitally interact with the different financial markets. Digital currencies are new and in general digital currencies are being debated as to whether they're an asset class or not. And a lot of our clients say that's an asset class and I want to invest. And our job is to help them to put their money where they want to invest. So it's just it's it's a it's a very personal thing. We don't have Bitcoin as an asset class per say. And time will tell whether it has the store of value. But the volatility that you see in it today it is just has to play itself out over time. The very very good investment advisors can take complex matters and make them very simple. And when someone knows how to do that and you can digest it and understand it then you're allowed to invest. Let me give you my three rules of money management to see whether they comport with Europe. I hear you've been doing this for a while. Number one don't lose what you have. A lot of times my observation is people think that they made a fortune and they can double or triple it and they're willing to lose everything. They're not willing to but sometimes taking risks that might make them lose everything. If you're not careful. So what do you think about the principle. Don't lose what you already have. I think don't lose what you already have is is is a very very good way of thinking about it. It it would be unfortunate to find yourself where you have stretched so much in your risk return tradeoff that you find yourself in a downturn not being able to live the life that you had worked so hard to get to. My second rule of money management is diversify. Don't put all your eggs in one basket. I assume you must believe something like that is absolutely 100 percent. And we find it all the time and you can see it in today's market environment. As a for instance some of these things look very easy to make money. Why. Because there's so much froth in the markets are so much liquidity that's pumped in by governments all around the world. And so what's seemingly easy may not be and it may not have the the same path going forward. And so one of the jobs of a very good wealth manager is to always stress test a portfolio and to say I understand that this is what you have. And I understand this one thing has grown so much. But if that one thing were to have a stressed out moment how will you feel. And is are we sure we want to be holding on to that large of an outsized position in your portfolio. So my third and final rule would be to have realistic expectations of what your rate of return is that you're seeking if its fixed income. Be realistic about what you're gonna get or it's equity. So where do you kind of tell people that they're a different asset classes with different rates of return and they should be realistic about what they're going to get or they all think they're gonna double their money if they give their money to you. It's such an important question especially with interest rates where they are today. And you know that if you use the 10 year Treasury as a marker at one and a half percent everything is additive above that. So if you go to a client and you say yeah well I can get you 1 percent over treasuries it's not very exciting especially when you turn around and the markets are providing you know 10 20 30 40 50 percent returns on some of these asset classes for a short period of time. But if you look over the past 20 years the average balanced portfolio has been six and a half percent return but six and a half percent return compounded each and every year for 20 years is a very sizable return. And so if you look over the past year I mean many people have had average balanced portfolios up 30 percent. And then of course that's what they become accustomed to. And they want to hear from someone that's going to say I can get you another 30 percent. But if something sounds too good to be true that's why another rule you should maybe add to that will be true. If it's too good to be true a high likelihood that it is. But if you are the head of wealth management as you are I presume every time you go to a cocktail party and those were things we had before. Cohen And maybe have again cocktail parties people ask you for free advice I guess what should I do with my money or or what do you think of inflation. Do you have to keep up with everything going on in the economy in Washington D.C.. How do you get briefed every day to get briefed several times a day about what's going on to be able to answer questions. Yes. And I'm hoping cocktail parties come back because the zoom parties are a little less fun. But the world really does feel much better especially here in New York City. It's really starting to feel great and vibrant again as it always does when it goes to these time periods by the way. But the job of any money manager or anyone working in any field where they're responsible as a fiduciary for other people's money is that's your life journey. You are constantly trying to understand all of the components of what's happening. But I don't have to do that. No one person at JP Morgan has to do that for every asset class. We have subject matter experts in each and every field. Let me ask you a few lightning around kind of questions. So what's the best investment advice you ever got. If it sounds to be too good to be true it probably is. What is the biggest investment advice you would give to people about something they shouldn't do. They shouldn't invest in something. What should somebody not invest in. You should never invest in something that can't be simplistically explained to you. I'm one of the problems on Wall Street is that people use lots of acronyms and make it very complicated to explain something. And generally speaking it's like the difference between writing a long letter and a short letter. I didn't have time to write you a short letter so I wrote you a long letter. The very very good investment advisors can take complex matters and make them very simple. And when someone knows how to do that and you can digest it and understand it then you're allowed to invest in it. If somebody called you up tomorrow and said I'm not that wealthy relative to all your clients but I do have one hundred thousand dollars I'd like to put it somewhere. Where would you tell that person to put four hundred thousand dollars in a balanced portfolio well diversified that they can store away for a long period of time and hopefully it compounds healthily for them. What would you say is the greatest pleasure of doing the job. You have your wealth manager but you're running one of the biggest wealth management operations in what's the pleasure of it as opposed to the frustrations of it. The real pleasure is is helping. The big pension funds that we manage were managing retirement accounts. Right. And each and every little decision that we make now for someone's retirement in 30 or 40 years from now can mean an extra couple hundred dollars a month for every year that they're in retirement that can fundamentally change someone's life. I would also say the great pleasure for me for the past twenty five years has been working. A JP Morgan Chase and to work at a company that can make as much of a difference in the communities that we're in and to help the lives not only of the two hundred and fifty thousand people that work at our company but the millions of clients that we have and to be able to learn from each of them and share our learnings back with the others. I think that's a that's a very special thing for me.

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