AI First Priority for Apple's New Chief John Ternus

26:23aimed at accelerating the commercialization of clean aviation fuel. The recipient is Boston-based Lydian, which is developing lower-carbon jet fuel made from hydrogen and carbon dioxide, and is one of a growing number of companies developing next-generation clean jet fuel technology. Lydian says it can reduce capital expenses by more than 50 percent compared with competing technologies. Lowering those costs is seen as crucial to making Sustainable Aviation fuel, or SAF, commercially viable, as it remains far more expensive than conventional jet fuel. Today, clean fuels represent a tiny fraction of the overall market.

27:02That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode, available on Plus and Pro Plans. You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale. To stay ahead, you need the tools that give you a competitive advantage, built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move in on match speed and scale.

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28:44Visit VitalProteins.com to learn more and where to buy. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. I want to talk a little financial technology about somewhat of the tools that are used right now by advisors. who are out there. InvestNet has an incredible view of this.

29:18It's a company that has significant assets under management. I mean, we are talking$8 trillion, 22 million accounts, 112 ,000 advisors use the platform. We've got Chris Todd with us, CEO of InvestNet. He joins us here in the Bloomberg Interactive Brokers Studio. We like talking InvestNet because you guys have such a great view of what's actually happening and where money's flowing, where new money is going. Before we get to that, I said$8 trillion in AUM. It's not really the right way to describe it because it's held by advisors at many different firms. Explain how the financial technology and the software works.

29:52We think of it a little bit differently than a financial advisor might think of it. But what you should think of, InvestNet, as the tech chassis upon which financial advisors operate their practices. So starting with the initial financial plan, builds a proposal. Proposal builds different portfolio structures. We then execute the portfolio structures. We sort of trade those, rebalance them, keep them in sync with the individual, the family's original goals. And every single night, we sort of settle that with the custodians, rebalance it, make sure the accounts are right. And then we handle the billing on the back end.

30:26Are you a software as a service provider? We are a software as a service provider. We have a variety of different revenue streams, but fundamentally, the technology is delivered that way. Is it pretty competitive? Is this pretty competitive? Yeah, it is a competitive space. Like a lot of the industries that you report on, right? This is a very attractive end market. that has good secular growth characteristics. Well, I would imagine it's sticky. If you're an advisor and you're using the platform, you're paying for it, you're like, well, the switching costs are probably pretty high. Right, switching costs are high and in that for the reasons you just articulated, right?

30:58As advisors learn how to use a system, they get comfortable with it. They want to use it simply to enable their interactions with their end clients and to a extent doing that, they like to stay. Well, I'm speaking of software as a service, service, I've been told there's a Saspocalypse going on right now. I don't see any AI versions of clawed zombies in here taking over InvestNet right now. Are you feeling the pressure? No, we're not feeling the pressure. Our business continues to grow nicely. We believe that the industry continues to grow nicely. That said, AI is absolutely a transformative technology that is impacting how InvestNet operates.

31:39But for us, as we sit here today, it's still much more of an opportunity than it is a threat. We've used AI and LLMs to transform how we deliver the products and sort of build them and test them and get them in the marketplace. And it's allowed us to deliver new solutions at a velocity that we've never seen before, which is exciting. So Chris, talk to us about that usage of AI in your business, right? Because in the advisory business, AI can prepare proposals, summarize, meetings, a lot of these things that kind of are part of an advisor's job. So what part of that role still remains inherently human and that your company can leverage?

32:18Yeah. So let me, I'll work backwards from like at the core, these relationships are inherently human, right? We are big believers in the continued viability and importance of the financial advisor, right? And I actually think, and we all, we all believe the better the technology gets, the more important that advisor relationship is, right? And advisors, if, if they're nothing else, like they're counselors, they're therapists, they're people, they're, they're individuals who like helping people through complex decisions. Um, and for that reason, like advisors are going to continue to stay and they're going to continue to thrive.

32:51And I believe that part of the industry is going to continue to grow. Now, our obligation is to use technology to make them more and more effective so that you can do a better job of that. And so we've built tools that allow us to take proposals from anywhere, immediately ingest them, and turn them into an immediate portfolio. We, too, can do the meeting summaries and have that downloaded right away in a way that's exciting. Given the scale that we have that you outlined in the introduction with$8 trillion in assets and 22 million accounts and we'll execute almost 300 million trades this year, the data that we have underneath this that we can apply AI to.

33:32And so we have decision intelligence that sort of courses throughout the product that advisors can use to see how am I performing, right, vis-a-vis benchmarks, vis-a-vis other advisors at my firm. What are the next best actions that I should take in order to sort of make sure that I'm sort of maximizing sort of my productivity and the returns for my clients? So you add that with the fact that we're able to take full components of the solution We just rebuilt our report studio and and ground up AI native three months, right? It was an idea that we had sort of five or six months ago and today Every single client has it we rolled it out last Monday.

34:09So like the velocity is just amazing Yeah, and what's been a reception like from your clients? Have they been quick adopters of the new offerings or have you seen kind of laggards who are just too stubborn to go into this AI situation. No, like the enthusiasm has been great. That said, like as sort of you know and all your listeners know, we are in a heavily regulated industry and we need to stay on the right side of that. And so we're having more conversations with compliance departments than we ever have before to make sure that the solutions that we are introducing to the marketplace are meeting the firm's needs and are keeping them on the right side of all the regulators as well.

34:46And so we're sort of talking more to the firms we work with about how to roll this out. But the enthusiasm has been fantastic. And one of the ironies of actually investing more in technology and it moving faster is we are actually hiring more people at InvestNet to serve financial advisors, to coach them and train them and work with them on the front lines so that they truly can adopt the technologies and use them to the benefits of their own clients. So really leveraging the human part of the advisor role. Yeah. In terms of regulation, since you mentioned it is a very heavily regulated industry, and I can imagine the application of AI to a bunch of your functions was probably drawing scrutiny, shall we say, from regulators.

35:30How is that playing out? Well, I think this is one of the examples where, I mean, we, like everyone else in the industry, are subject to, you know, SEC and FINRA regulations. regulations and um and we work actively with them to make sure that um as we're introducing our features we understand where their regulations are going and so that we all end up in the right place together i'm i'm wondering about um the a the boon that we're going to see as a result of all the wealth created with with ai yeah and and i mean i've seen i've seen like different way that people are talking about this like somebody was tweeting yesterday about how you know you're going to have these billionaires walking around san francisco after these ipos um a lot of it will be concentrated in in single stocks right what what are you what happens to your platform and to like seats that are bought on your platform if that's how it's sold when new money comes in right so we actually well i said to me we deliver as sass as software as a service we don't we don't charge as software as a service right so we sort of fundamentally get paid by sort of assets under management.

36:33So that's huge then for you. It's, it's, um, yeah, wealth creation is as, you know, in, in general or specifically like wealth creation is good for our business. How is it? So how, how, how are you passing or how are these advisors then passing along the costs to their customers? Is it all in the, is it all in the performance fees and the advisory fees? So what is it typically like a portion of an advisory fee? Let's say, let's say for, you know, just for illustrative purposes, a 1 % management fee, right? Flat, right. It's very, you know we're speaking hypothetically here right what portion of that do you think is is for you know tech a single digit single digit percentage portion okay yeah so like a basis point of that a single digit portion okay okay interesting yeah um so you're expecting so things are looking good when it comes to these ai firms uh yeah oh for us yeah yeah yeah no so the yeah our business continues to grow sort of nicely top line bottom line um and as market markets continue to go and wealth is created, our business will grow alongside that.

37:31Yeah. I mean, I can imagine with the growth of the business, right, you have customers coming in wanting more personalization or things like tax optimization services as part of that. Does that kind of change the industry and make the former one size fits all sort of portfolio approach now obsolete? I wouldn't say it's sort of obsolete for all sort of portions of the market. But for sure, as organizations sort of serve more high net worth and ultra high net worth clients, the value that our advisors are providing are in sort of personalized portfolios and in tax management. And in particular, as you think about some of the wealth created by some of the firms in San Francisco that you just highlighted, those are highly concentrated portfolios.

38:17And we have managed accounts. We have model portfolios that allow you to sort of, you know, sort of get that into a more diversified portfolio over time while managing the taxes. It's been about two years since InvestNet was taken private by, yeah, close to. Strategic investors included BlackRock, Fidelity, Bain, that was who acquired it. Is the next move an IPO? We don't know. We don't know, right? We're only sort of 20, 21 months into the Bain hold period. It's been a fantastic investment for them so far. Business continues to perform quite well. we're very bullish on the sort of prospects of continuing to grow uh we like the end market that we serve and i can say with all candor this early in the whole period we've had zero conversations around you know what it might look like interesting okay uh chris good to see you it's nice to see you yeah thanks for having thanks for joining us we appreciate it's a it's a really interesting part of the advisor space that we don't talk about a lot yeah but i mean it's an important part of the ecosystem it is and it hits every major theme that we're talking about right and underneath it's our technologies enable people to manage all the clients that need the services that they need.

39:29Chris Saad is CEO of InvestNet. Stay with us. More from Bloomberg Business Week Daily coming up after this.

39:41This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Bill Gates Breakthrough Energy Ventures is betting on a cheaper way to produce clean jet fuel and made its first investment from a fund that is backed by Alaska Air, American, and several other carriers. The investment is aimed at accelerating the commercialization of clean aviation fuel. The recipient is Boston-based Lydian, which is developing lower carbon jet fuel made from hydrogen and carbon dioxide and is one of a growing number of companies developing next-generation clean jet fuel technology.

40:18Lydian says it can reduce capital expenses by more than 50 % compared with competing technologies. Lowering those costs is seen as crucial to making sustainable aviation fuel, or SAF, commercially viable, as it remains far more expensive than conventional jet fuel. Today, clean fuels represent a tiny fraction of the overall market. That's the Bloomberg Tech Minute, brought to you by ChachiPT. Put ChachiPT to work on your most ambitious ideas and projects. Get started at ChachiPT.com today by selecting Work Mode, available on Plus and Pro plans. You already know how AI is changing how everyday work gets done, how much ground you can cover, and how fast a team can scale.

41:04To stay ahead, you need the tools that give you a competitive advantage built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move in on match speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win.

41:39That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

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42:33Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Well, at Teterboro Airport, the private jets are getting bigger, but the airport is not. Until now, it's a sign that private equity firms have come to see more value in a corner of aviation once regarded as just a service business for private jets. Ryan Gould is a Bloomberg News deals reporter. He has the deals and the latest on a big deal. He joins us from our Washington, D.C. Bureau. I just want to start with Atlantic Aviation. For people who aren't familiar with what it does as a service, Ryan, who are they?

43:12Who owns them? What do they do? How have they been growing? So Atlantic Aviation, good to be with you, Tim. Atlantic Aviation is essentially a, think of it as a private jet terminal. So if you have your private jet, you need to take off and land from somewhere. And generally, nine times out of ten, those aren't going to be your major airports like Newark or JFK or LaGuardia here in New York. These are going to be sort of more private regional airfields, Teterboro being one. They are fixed-base operators. That's what the industry calls them. They essentially allow you to fuel up your plane, take on sort of the food that you need, and therefore, you know, have maintenance conducted by engineers sort of in a much smaller footprint.

43:52Atlantic has been owned by KKR for quite a few years now. They just recently completed a deal to sell control or co-control to Apollo. Here you have two of the largest private capital providers on Wall Street essentially coming together here to put what is another round of fresh capital into this business to grow it beyond what it's hoping is going to be more than$10 billion in valuation. So, Ryan, break down this deal for us because this is quite a jump in the valuation, right? So, Atlantic was bought by KKR for$4.5 billion, and now Apollo is buying control at a nearly$10 billion valuation. So, what drove the enormous increase in value?

44:32What did KKR actually do operationally to turn the business into what it is? It's now a national infrastructure platform. Yeah, totally. It's essentially a private real estate story disguised as a private jet story. So when KKR bought this, it was essentially a group of businesses that were locally managed. There are around 67 locations. By where we are today, fast forward to today, there are around 108 locations. So this is also an acquisition story. KKR did its private equity playbook, played it out here. And what you've seen is essentially KKR acquire a ton of other operations at airports around the United States, bring them together, and kind of build up that back office.

45:13So think of things like procurement, think of things like fuel handling, even just, you know, how many engineers it takes or how many services it takes to service one aircraft. They've built their own proprietary operating system. So they've really just put the sort of nuts and bolts all together. And now you can sort of see at one glance on a map of your Atlantic aviation where you've got planes taking off from, where they're coming into, how long they're going to be on the ground. Because as we know, planes generally only really make money when they're in the air. Ryan, you know what's so fascinating about this is last week we had Leona Keyon of VistaJet.

45:48She's the U.S. president of VistaJet. She talked about demand for the service growing, not just in the U.S., but around the world. We also saw our Bloomberg News team report that Bombardier, the Canadian business jet maker, wants to expand manufacturing and maintenance capabilities because demand is surpassing expectations. Acquisitions could be part of the strategy there. All of this to say that the private jet industry, you know, no pun intended, is absolutely soaring right now. Totally. And I think that's one thing that the Atlantic CEO, Jeff Follin, said to me in an interview, which is that no one is really building these airports around the United States now.

46:27I mean, Teterboro is its own space. Palm Beach Airport is its own space. These sites aren't getting bigger. And so if you put that together with a private jet economy that is actually ballooning, I mean, think about some of these statistics. They didn't quite make it into the story. But by our reckoning, sort of global business jet departures are up around 5 % over the past 12 months. Deliveries are up around 9 % this year. And I think combined order backlogs are somewhere in the region of sort of$60 billion. dollars. So as you say, Tim, the fleet is expanding, but there's really nowhere else to put these planes unless you're doing things like knocking down existing older terminals or older hangars and building them out to take advantage of existing footprint and optimizing space.

47:11Yeah, very interesting. I mean, taking a look at Atlantic's network, right? So outside of Teterboro, obviously a gateway to Manhattan, they also have locations, Las Vegas, Palm Beach, Florida, Aspen. I mean, these are all kind of gateway destinations. These are kind of desirable locations, right? So do we foresee kind of moving forward how this develops? Is this something that mostly will be contained within these desirable destinations? Or could this actually shift the business model and the landscape to, you know, turning a formerly not as desirable location It is something more desirable if they build these facilities.

47:50I think so. I think there is definitely something to be said for the growth of private aviation generally. I mean, if you think about some of the headwinds we faced or the industry faced during the COVID pandemic a couple of years ago, when commercial airlines largely shut down or at least saw a very, very low passenger volume and people started to shift toward private aviation, I think you're going to want to be, first of all, where the money is. I mean, that's clearly centers of commerce like New York, like Miami, like California, big hubs in California. But I think in the middle, you probably could end up seeing a scenario where, you know, SBOs, FBO operators like Atlantic do go out and sort of start to build in those places which perhaps aren't so obvious.

48:29And that's, I think, going to be the sort of next leg of the stool here, as it were, for Atlantic. It's like, how do you think about how many acquisition opportunities there are? How lucrative are they on a sort of cost per basis revenue point from just selling seats? And I think Atlantic is also competing against other sort of major players in this industry. One is owned by Black Zone and GIP. That's called Signature. This is kind of a sort of small concentrated part of the private aviation sort of industry. And I think these guys are all duking it out, frankly, to figure out how best to get to those locations before the other does.

49:05Maybe also doesn't hurt that a lot of these executives are using the actual services for these private checks. Well, that helps. OK, so help us draw this out a little bit. KKR acquired it from Macquarie for about$4.5 billion in 2021. Now Apollo is acquiring control of Atlantic at a nearly$10 billion valuation after KKR expanded the network, as you write, to 108 locations. Just in the last 30 seconds that we have, what's next? Is it another sale to a private equity firm or is it an IPO? It's a good question. And, you know, it's one that I was sort of wondering as I was putting this piece together.

49:39I think, you know, I mentioned Signature just now. Signature was actually a take private by Blackstone and GIP a few years ago. It was kind of the last major public company in the sort of FBO spot. We're currently in a situation where the likes of Atlantic and Signature and so on don't really have a true public comp. So that's kind of difficult if you're a public equity investor thinking about what a potential investment could look like. But I do think that, you know, you mentioned the scale here as to how far the valuation has ballooned. As we know, private businesses tend to be harder to sell the bigger they get.

50:12And so I think maybe an IPO is perhaps an option if they can continue to show this growth on the top and bottom lines. All right. It's a circle of life for a deals reporter. Take private, sold by another private equity firm, bought by private equity, then taken public again. Not necessarily happening in this case, but certainly of interest to everybody on the deals. We like round trips. We do like round trips. A nice way to end it. Ryan Gould, deals reporter for Bloomberg News down there in our Washington, D.C. bureau. Check out Ryan's story on the Bloomberg Terminal and at Bloomberg.com. This is the Bloomberg Businessweek Daily podcast.

50:47Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com. the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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51:52To stay ahead, you need the tools that give you a competitive advantage, built for this new era. Welcome to Agentic Revenue. Adio is the CRM for this world. It meets you where you work, compounds every customer signal into context, then acts on it across your pipeline to let you move in on match speed and scale. With agents and automations for every job in revenue, Adio orchestrates your work around the clock. Built to handle the scale of your workloads, extensible with API and MCP, and with the infrastructure to keep up with your most ambitious agents. Loved by high-growth startups like Granola, Modal, and Etched, Adio runs the work behind every win.

52:28That's Adio, the agentic CRM, the intelligent system that never sleeps. Picks up leads at 2 a.m., catches renewals before they slip, hands you the answer before you ask. Try Adio free at adio.com slash iHeart. That's adio.com slash iHeart.

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