Schwab Agrees to Buy Private Share Platform for $660 Million

20:17Carol Massar:Because one of the longer term concerns I have for the labor market is what's happening right now in some of the churn with the pretty significant decline in immigration, but also not sort of the lack of replacement of a lot of those jobs. We're just not seeing that happen. And you see that happening in youth unemployment, black unemployment. It's really starting to spread in some of those pockets. So the areas that were supposed to benefit throughout this year, as you had more of a domestic strengthening in the native-born labor force, it's not yet happening. So it's a little bit lagged. I hope it's delayed and not completely derailed.

20:47Carol Massar:But I think in the next year, figuring out replacements for a lot of those lost jobs, that's going to be key. And the reason I brought up the Chipotle computer science example. Because you're hungry? Well, no, always hungry. But that was what was cited in that New York Times article back in August. No. Computer science degrees having trouble finding those computer science jobs. It's kind of this interesting environment we are when we look at the labor force. Hey, one of the things I wanted to ask you, your team shared with us that you believe Tina is back. And it's not the Tina that we think about.

21:11Carol Massar:There is no alternative in terms of like U.S. equities yeah but it's something we started off with about u.s government data it is important there's no alternative i mean the depth and the breadth of the government data you just can't match it and i think you know so far um thank goodness with the markets have been sort of um maybe maybe in a negative way whistling sort of past the graveyard of no government data but you know they've been able to manage through with corporate earnings i think that's been a nice bridge to get us to when the shutdown ends i think though you know the longer this goes on i think What we have to keep in mind and what we've really been emphasizing to our clients is that when you don't collect this data, yes, you can go back and retroactively get it, but it's not going to be clean.

21:51Carol Massar:So the longer this extends, and presumably we're not getting a jobs report tomorrow, even if you don't get one the next month, it's weird. So you're going basically almost a quarter without this really key data. So you're going to have a delayed third quarter GDP report. You're going to have missing data in a way for the fourth quarter. And then you have benchmark revisions coming in February, which kind of throws another wrench into this for labor. So what does it mean for – I think I asked Lizanne this yesterday, Lizanne Saunders, that do we get a Fed misstep in terms of policy? Do they err on the side of doing nothing?

22:25Carol Massar:Yeah, I think they're nudging that way. And you look at some of the voters and what they've been saying. Which is what we kind of got from the October meeting, right? Yes, exactly. I mean Powell mentioned it himself. Well, Faustin Goolsbee was just out from the Chicago Fed saying that he's a little less comfortable making a move when you're driving in the dark, in the fog. So I can understand why they have to be in this reactive position. I don't fault the Fed at all for any decision they make. I mean, if they feel very strongly and highly convicted that inflation is not as much of a problem, they want to save labor, then sure, you can open up the door for more cuts.

22:53Carol Massar:I would be sympathetic to that view if you get more data like Challenger this morning in Reveglio. But on the other hand, if you do have the shutdown lasting longer and more of a delay in a lot of these government data, then I totally understand why they would want to wait. Especially if corporate earnings look like they do. I mean, the blended growth rate for S &P 500 earnings for the reporting quarter is almost 17%. So you look at that and you say, well, corporate America is still relatively healthy. We haven't seen mass layoffs. They've been in pockets. And it wasn't just the MAG-7. Right. Exactly.

23:22Carol Massar:It's spread a lot more. It's come over to utilities. to some extent parts of just consumer discretionary helping a little bit at x mag 7x tesla and amazon right so there it is it is a little bit of a broader story for the quarter jerry gordon head of macro research and strategy at the schwab center for financial research you know stay with us more from bloomberg business week daily coming up after this

23:48this is the bloomberg business week daily podcast listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130.

24:07Carol Massar:Now, you might recall over the summer, it was in August, President Trump signing an executive order directing the Labor Department to reevaluate guidance to fiduciaries to get them more comfortable with including private credit, digital assets and other alternative assets in their retirement plans. Now, the SEC may also issue some new rules or guidance to change the definition of accredited investor or qualified purchasers. There's a lot going on that could open up a lot of different types of assets to retail investors. It's something that we've gotten into with the Schwab CEO. And kind of on pause right now, at least at the SEC level because of the government shutdown.

24:42Yes. But still, this seems to be the direction that things are moving.

24:46Carol Massar:All right. We have a great guest to get into on all of this. With some thoughts, and here at Denver, in Denver at Schwab Impact 2025, Kayla Culver. She's head of risk and controls for Schwab Advisor Services. Good to have you here. There's a lot going on that could change, or there's a lot that is going on that means we won't see changes. How are you assessing kind of the regulatory environment and things that could change, what investors can be investing in? So I feel like for advisors, it's a lot of whiplash right now. If we look at the prior administration and SEC Chair Gensler, There was constantly new rules coming out, and it was just like regulation overload for people.

25:25Carol Massar:And now under Paul Atkins, we're expecting to see a reduced pace of regulation. So we see it as a good opportunity for advisors to really focus on getting back to basics, making sure that their compliance programs are up to date, that all of their ADVs are accurate. What are ADVs? Their disclosure documents that they have to file with the SEC. Really just making sure that their house is in order because we're not under a constant flood of new things coming out. And then we heard you talking about the executive order related to 401ks and being able to hold alternatives, different things in 401k accounts.

26:04Carol Massar:That's something that some advisors have interest in for their clients, and it's going to really depend on the plan. Like, is this something that the plan chooses to allow for that client or, you know, for their plan participants? Or does the plan not want to allow that? What direction do you see that moving in? If it does get approved, if it happens, if the SEC says, okay, this is totally fine, is it going to be like us having stocks and bonds in our 401k? I don't think it will be for everybody. I think that we see a good – But will everybody have the option? Well, it's going to be up to the plan administrator.

26:35Carol Massar:So whoever's sponsoring that plan, they're the fiduciary. they've got the ability to say you're allowed to invest in X or you're allowed to invest in not allowed. So would that be at the company level for a certain company and its employees? Or would it be at whoever they decide is the plan administrator, like an empower, for example? It's really like the plan sponsor who's choosing that. So why would a plan sponsor say no? Why would a plan sponsor say yes? I think they would say yes if they wanted to give their participants additional choices. Some plan sponsors may say no. We see it on the Schwab side where we've got some plan sponsors that have opted in to our personal choice retirement account offering where you can basically have your 401k and self-direct it, invest in stocks and bonds and things that are outside of the plan allocation.

27:32Carol Massar:It just really depends on their comfort level. Like from a conservative perspective, you might say we want to stick more with these funds that we've chosen. Is it a good thing? I think it's, you know, choice is always a good thing. So more freedom of choice. But as long as people are doing it smartly with the advice of an investment advisor, I think it's a smart decision. But I think there's always additional risk there. Well, the risks are, right, in terms of all the assets. Some things are not as liquid as others. And you need to understand that if you need to be able to get out of something, it's not liquid like stocks and bonds in many ways.

28:15Carol Massar:And that's why I think doing things with the advice of a professional versus just, you know, your friend told you this was a good investment, it makes more sense that way. On the regulatory front, having advisors have less regulation right now, does more fall on them in terms of making sure that they're doing what's right? Because those regulations aren't necessarily in place. And I know it's kind of a judgment for me to say, you know, equate regulations with right. That's not what I need to do. But we know the DNA that Paul Atkins has, the SEC chair, when it comes to this stuff. And he's much more laissez-faire than other SEC chairs in the past.

28:55Carol Massar:Yeah, so what we keep reminding advisors of is just because there's all this noise about deregulation and less new regulations, you still have to follow the fiduciary duty. There's still regulations on the books. There's still rules. You still have to do all the things and be making sure you're in the best interest of your client. So just because it's a more like laissez-faire kind of environment doesn't mean you still don't have principles that you have to adhere to. Are advisors, independent advisors, a little nervous about like kind of what's coming at them and the changes, especially when it comes to alt assets potentially?

29:34Carol Massar:Yeah, I think that they're just, there's the unknown. I mean, we get a lot of questions from advisors right now about artificial intelligence. because everybody wants to use it, but there's not a lot of guidance out there for advisors. And so we get a lot of questions on how can we do this compliantly when there's not really any guidance there. Kayla, where's that guidance going to come from? I do this with all due respect, but with all due knowledge about social media and things that many folks would say we weren't legislators, policymakers, just didn't understand the power, the impact, and the oversight, and the liabilities, perhaps.

30:17Carol Massar:And so I'm just thinking, how do we do that with AI? Yeah, I think where the thought is that we would most likely see... How do we do it with AI and get it right? Yeah. And we've been talking about that. So I attended the Investment Advisor Association's Advocacy Day in D.C. back in September, and artificial intelligence was one of the topics that we were talking to lawmakers about. And really just from the standpoint of don't create regulation that stifles innovation, don't make it be prescriptive, and really reminding them that advisors already have to follow the fiduciary duty. So don't be prescriptive in what you're trying to do.

31:00Carol Massar:I think where we would eventually see something come from most likely is probably the SEC. This SEC? Well, it's a very hot topic. So, you know, that's where we would think it would come from. But in how we think it'll be more principles based with this SEC than prior administrations. It sounds like advisors right now have to keep up with a lot. Just in 30 seconds, where do they do professional education? Where do they make sure that they are on top of the regulations? They make sure they're on top of what's happening with AI? Well, if they're a Schwab client, we have so many resources that we make available for them.

31:42Carol Massar:On our website, we do regulatory webcasts. We put out compliance review articles. We've got relationships with compliance consultants that they can use. And then they should also look at alerts that the SEC and other regulators put out. They're not putting any out right now, but on a normal basis, there will be things that they put out. But certainly for your advisors, there's lots of ongoing education. Yes. Which is pretty cool and interesting to hear. Hey, Kayla, thank you so much. Thank you. This is an important area, and I'm so glad we could cover it with you. Kayla Culver, she's head of risk and controls for Schwab Advisor Services.

32:14Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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36:08Carol Massar: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 think it's fair to say that Washington and Wall Street and the markets are inextricably bound in a way right now that kind of feels a bit different from other times in modern history. Yeah. Well, listen, we're glued to news out of the nation's capital because things the president says or administration does, even today in terms of the drug makers, like it's moving markets. Or maybe even things that are beyond the administration's control, like what the Supreme Court is going to decide when it comes to tariff policy.

36:48The U.S. government taking ownership of publicly traded companies, social media posts from the president that can move markets and take company leaders by surprise. This is enough to keep Mike Townsend on his toes. He's managing director of legislative and regulatory affairs for Charles Schwab. He's a political analyst based in Washington. He's also the host of Schwab's Washington Wise podcast. He joins us here on site at Schwab Impact 2025. You said that you can't walk like five steps without somebody grabbing you and saying, can I ask you a question about politics right now? What are they asking you?

37:18Well, I mean, obviously, just since we've been here, right, I spoke on the main stage at the opening session on Tuesday. Then Tuesday night, we had the election results. Then Wednesday, we had the Supreme Court case, you know, argued on the tariffs. And so this is my life now. Like 10 things happen in the course of our every day that people want to talk about. So pretty fascinating times.

37:39Carol Massar:So what do you make of what we've had in the last 48 hours or so? Yeah, I mean, you know, the first thing I would say on the election in particular is that it's very easy, and I think you're seeing a lot now of the sort of overreaction to an off-year election. And I said, you know, I told the conference here, off-year elections are kind of unique to their particular places, New York City, Virginia, New Jersey, obviously the California district initiative. But they're relatively confined to those places. So no question, big night for the Democrats. Is it a referendum on the sitting president? I mean, to some degree, I think it is.

38:16But, you know, I live in Virginia, and that race was about federal workers being, you know, fired from their jobs and, you know, the economy and that sort of thing. So, you know, yes, it was partly a referendum. I certainly think you can read it as a rebuke to the president and some of his actions. But whether that extrapolates out farther, we'll have to see. You went to Bowdoin College in Maine. Also, someone who went to Bowdoin College, Zoran Mamdani, the mayor-elect of New York City. You guys did not overlap because he's only been out of there for like 11 years. Did you go to alumni events together at all?

38:49Carol Massar:Never met him. But he's a democratic socialist. And I'm wondering if you see that as insulated to New York and New York politics, or if you see him as the face of the Democratic Party moving forward. So I think you can answer that question in sort of both ways, right? So I think it was unique to New York. He is a very dynamic personality. He's very, very good at social media. And he clearly touched a nerve with people in terms of the issues he was focusing on. Sorry, you could have just been describing President Trump. Yeah. Those things you just said apply totally to President Trump. So absolutely.

39:23So I think, and President Trump has probably taught us that personality is a huge, huge part of the political landscape now. So I think Mamdami did incredible at connecting with people and reaching out to people who maybe hadn't felt heard in the political process. Does that mean that he's going to become the face of the Democratic Party? I think Republicans are certainly going to try to make that the case. But I also think he's going to have a really hard time doing a lot of the things that he said he wants to do. That's just the nature of the role. and the ability of the mayor of New York City to act unilaterally is extremely narrow.

40:05So we'll have to see. And I do think you're seeing, you can juxtapose that with the retirement announcement of Nancy Pelosi earlier today. You're seeing some generational change in the Democratic Party that I think is really important and probably necessary for the Democrats.

40:21Carol Massar:So is that her passing the baton or acknowledging that that era is over? Like, what is that in your view? Yeah, I mean, I think that it's a realization that the Democratic Party has to get younger and appeal to younger people. I mean, the leaders, you know, most of the veterans of the Democratic Party, particularly in the House, are in their 80s. Nancy Pelosi, Steny Hoyer, Jim Clyburn. And so I think you're seeing that kind of transition happen. One thing I wanted to ask you, and I think about the titles we give to politicians, a Republican, Donald Trump. Most people would say he's not really your standard Republican.

40:54Carol Massar:Azhar Mandani, like we're talking a socialist. But you know what? He's going to have to take the job and look at his entire constituents. Do those classifications even matter in today's political environment? Yeah, I think that's a really good question because, you know, one of the things that really fascinates me is what does the Republican Party look like post-2028 into 2029 after Donald Trump is no longer president, no longer on the ballot? Do what we would call traditional Republicans sort of wake up and think, oh, that was weird. Let's go back to, you know, and if you want a great example of it, look at the Supreme Court case that was that was held on Wednesday.

41:32Yeah. Where you have essentially Republicans arguing for restricted trade and higher taxes and Democrats arguing the opposite. That can be seen as a complete flip. Bizarro world a little bit, right? Yeah. So. OK. Speaking of bizarro worlds. What? When the U.S. government buys 10 % of Intel, owns 10 % of a publicly traded company, or takes a stake in MP Materials, for example, that's a bizarro world.

42:03Carol Massar:Or Intel. Did you say that? Yeah. That's what we're living in right now. Yeah. And it's amazing to me how little reaction there has been to that. Are you worried by that? I think it's very strange. And I think it has a lot of risk to it. Are we getting to the point of state ownership of state-owned enterprises? I mean, this is like... I mean, the president today was in the White House talking about, with a couple of the drug companies, about lowering the prices of drugs. And he made one of his off-hand references about, maybe we should buy a stake in your company. And that's just become part of the rhetoric.

42:40Carol Massar:Funny, not funny. We're talking with Mike Townsend. He's managing director of legislative and regulatory affairs for Charles Schwab. He's based in Washington. He's also a host of Schwab's Washington Wise podcast. You know, I was talking to a Brit this morning and he said, you know, you guys are a young country. Your political environment is still a baby or a toddler or however you want to classify it. You're going to go through these tough moments. And she's thinking about Britain. Do we need a king? Well, all the things that it's gone through, right, and taxing. And there were kings that taxed.

43:11Carol Massar:And then there was pushback and, you know, didn't have maybe that power anymore. How should we as Americans? And I do think we're kind of apathetic in terms of some of these severe things that are going on. So I'm just trying to understand where we are in our political process. Yeah, I think a couple of things. First of all, when you say you're apathetic to things going on, I think it's just overwhelmed by the things that are going on. You can't react to everything. I mean, 10 things happen every day. Tell our producer that, could you? And I think the ordinary person, the ordinary voter, just can't take it all in every day and can't figure out what to be mad at.

43:45But when I go around the country, I talk to clients all over about the intersection between Washington and the markets. And there's so much emotion. I feel like I'm part emotional counselor right now. And part of what I say is a lot of what you may be emotional about isn't affecting the markets. The market is not concerned about that. It's fine that you have those feelings. But remember to separate those feelings from your investing.

44:10Carol Massar:How many records have we had in the S &P 500 this year? 30-something. records. Yeah. So, yeah, I think, you know, historically, probably the most common question I've been getting asked over the last couple of days is, is this the worst you've ever seen? Right. Or is this the worst we've ever been in terms of our partisan divide? And you think, well, we had a civil war, you know, we're not there. So that seemed pretty divisive. You know, so historically there's kind of a pendulum and maybe we're way out on one end of the pendulum. Historically, the pendulum comes back toward the middle. You know, David Sachs, the AI czar for this administration, said today in a post on X, there will be no federal bailout for AI.

44:48He said the U.S. has at least five major frontier model companies. If one fails, others will take its place. He said in a follow-up post, the White House wants to make permitting and power generation easier. From the executive branch's perspective, how can they actually do that? Yeah, I mean, I think this is a really fascinating question. I tell people all the time, I fly in and out of Dulles Airport in Washington. If you fly out of Dulles, you look down, you see these gigantic buildings with all these air conditioning units on the top, right? Those are the data centers. They can't build them fast enough.

45:21Well, what's happening in northern Virginia? Electricity prices are going up and water prices are going up because of the cooling needed for the water. And all of a sudden, you've brought this kind of back to ordinary people's bills, right? And they're sort of paying for it. So when the administration says something like that, I get it politically. It makes sense, and I think a lot of people want to hear that. But what can the government actually do to lower my water bill? I'm not as sure.

45:47Carol Massar:I don't know. Maybe make those who are building the AI data centers pay some kind of fee. Or using – I don't know, some kind of tax or something, right? Well, and you're seeing some of these companies are building their own power generating to try to take on some of that. Yeah, they're partnering with utilities directly. Just get about a minute, Mike. Man, I could go really long. We should come back soon. Maybe next week. It is an investing audience that's here at Schwab Impact. It's certainly the Bloomberg audience. What's your final thoughts to that? Yeah, again, one of my biggest things is try to separate how emotional you feel about everything that's going on in Washington.

46:23And remember that relatively few things are actually affecting the market. The market cares about what the Fed is doing. The market cares a lot about this Fed independence battle that is going to play out in the Supreme Court in January over Lisa Cook's firing. The Fed cares about, I mean, the market cares about tariffs and cares about tax policy, that sort of thing. But, you know, that's not, all those things aren't what people are emotional about. And you've got to sort of separate that emotion.

46:49Carol Massar:Ten seconds. Do folks in Washington, policymakers care that the Fed stays independent? I think they do. Even in this administration? I think they do. I think that would be a huge, huge setback for the country and the whole concept of central banks. Could we see policymakers, even members of the Trump team, fight back if that was in question real quickly? I don't know if you'll see members of the Trump team fight back, but I think a lot of policymakers will be upset. Mike Townsend of Schwab, thank you so much. This is the Bloomberg Businessweek Daily podcast, available on Apple, Spotify and anywhere else you get your podcasts.

47:26Carol Massar: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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