BlackRock's Jaime Magyera on Wealth Management and Retirement

24:56Appirio led the market working with ultra high net worth, they called it the new institutional, for the purpose of tax management, after tax returns. And you think about it, we live in an after tax world. I bought my coffee with after tax dollars, yet we manage our investments before taxes. And so we saw this trend coming, and we could have built it. It would have taken us probably a lot more time. But we saw what Appirio was doing and their capabilities and just their approach. And we thought, man, if we could match that with our distribution reach and our scale, we could really make some wonderful, wonderful solutions for our clients.

25:32And that's what we did. We acquired Appirio, and we have a very significant direct indexing business. And to your point, Barry, it is predominantly tax customization, tax management. Right. Especially when we see markets are at all-time highs, people are sitting on enormous gains. Sometimes that becomes very concentrated to say nothing of people who work for tech stocks and they've accumulated, or other companies that have just accumulated so much value that, hey, maybe I have too much single stock risk and I want to diversify into things. Tell us what else does BlackRock do with direct indexing?

26:10How do you differentiate yourself? Everybody these days seems to have a direct indexing product. What makes BlackRock special or unique? Yeah, so one of the things that we did is when we acquired Appirio, we already had a very significant separately managed account business. I mean, for decades, we had fixed income and active equity. And what we did not have was that direct indexing capability. When we brought Appirio into BlackRock, we then pulled it all together and said, how can we actually make all of these capabilities together better serve our clients? So that means, for example, tax loss harvesting on muni portfolios.

26:47So being able to take a capability and not just do it on equities, but do it on fixed income. Last year, we acquired a company called SpiderRock. I'm not sure if you're familiar with SpiderRock. We've structured notes. We've used them in the past. Yeah, and option overlays. Similar kind of, not quite the same, but occasionally similar, a different solution to a similar problem. Yeah. And to your point on concentrated stock, what a great way to hedge that concentrated stock position. If I want to continue holding that stock, but I want to hedge against it and manage the risk, or I want to manage for tax implications, why not run an option overlay on top of that?

27:22And so the beauty of what we're doing now is we're bringing all of these discrete capabilities together into one portfolio, one holistic offering. And so you'll be able to, will be able to work with advisors and say, let's look across your client's entire book and let us help you build a whole portfolio of public markets, private markets, direct indexing, option overlay, all in one. Really solving for unique needs, customized preferences. Really quite fascinating. So you mentioned you work with a lot of different wealth management firms. What does that relationship look like? What are these firms looking for from BlackRock?

27:58So I remember when I first started in the wealth business years and years and years and years ago. You know, the relationship between asset managers and wealth management firms was often a kind of a vendor relationship. Right. It was you have a product. Let's put it over here. Our position and our partnership with wealth management firms today is the only word I would say. It's like true partnership. Right. It's aligned interests. We are there to not only provide them with investment capabilities. By the way, we have incredible breadth to do so. But we're also there to help them with their technology needs, their operational and scale needs, their advisory needs.

28:39How can we help them think through how they can grow? Organic growth, that's everyone's challenge. How do I grow organically? Well, you have to scale your business and increase your margins to do so. We help them think through all of that. And the other thing that we do is we have incredible people that are so expert and working with these firms and advisors every single day to help them achieve their goals. And our view is if we can help our clients, the wealth management firms and their advisors grow, we'll naturally grow with them. So our job is to help them grow. So let's talk retirement. We're recording this post-Labor Day, but by the time this comes out, BlackRock's big report, the Read on Retirement, will be out.

29:19Tell us some of the big takeaways for this. So it's really special for me personally, because I've just now returned into the retirement business and have the responsibility for this retirement business. And I say it's a responsibility and an honor because we think about the 35 million people across America that we are helping to save for retirement. Like that is what we do. Over half of the assets at BlackRock, not many people know this, over half of the assets at BlackRock are helping people save for retirement in some way. Really? So when you say that, it's 401ks, 403bs, IRAs, any... Pensions, DB.

29:57Wow. Yes. That's amazing. Over 50%. I would not have guessed that. Yeah, not many people know that. And so it's something that we are so proud of. And really, for me, it was always my North Star. I remember when I was first in the retirement business at BlackRock, I was able to go home and tell my parents what I did and explain it to them in a way that I felt so good about and they understood. And that's what we get to do every day. You mentioned the survey. So it's our 10-year anniversary of doing the survey. We've been doing it for a decade now. Now, and every time we go out, we go to plan sponsors, who are the employers building the plans and offering them to their employees.

30:33We go to the savers, who are the employees at massive corporations. And then we also talk to retirees, people that have saved and had access to a 401k plan, but they're now no longer working and they're in retirement. And so this year, I'll break it down in this way. Savers, those that are still working, the employers of these are the employees of this company. Savers have the highest confidence we've ever seen. Like off the charts confidence. Now it's come down a little bit because of market volatility. And I think what that calls out is, of course, we're all more confident when markets are rising.

31:06But very strong confidence in their ability to retire. However, we've seen savings come down. And so the question is, is that because of confidence? When you say savings, we mean savings rates. Savings rates have come down. Thank you. And so the question is, is that because of confidence? Or is that because actually people are spending more money? They need to. Maybe inflation, maybe, right? So like we have to dig into that a little bit more. But importantly, savers are seeing more confidence or feeling more confident. You then ask the people in charge, the experts who are building those plans, confidence is very low.

31:39In fact, lower than we've seen. And I'll come back to that in a moment, but I think there's a really interesting tension there of perhaps overconfidence in savers and reality in those building the plans. And then when we move on to retirees, very low confidence once they've retired and their ability to actually figure out how to sustain their life in retirement. And so some of the actions or some of the insights that really came out of this, one, savers are looking for access to professionally managed solutions. Think target date funds, right? Life Path Portfolios, BlackRock invented the target date fund 30 years ago, but target date funds are very, very important.

32:16Two is savers are looking for some type of clarity or solution around guaranteed income. Give me something that will just tell me what I'm going to be able to spend every month, and better yet, make that guaranteed so I know I have it every month. So what does that look like? Are we talking an annuity product or something else? So imagine a target date fund with a guaranteed income sleeve in that. So we have a product called LifePath Paycheck. LifePath Paycheck is among a few other solutions in the marketplace, but LifePath Paycheck is the fastest growing guaranteed income solution. What's amazing about this solution, though, is that it gives employers and employees the choice to turn on that guaranteed income.

32:57So you're investing, investing, investing, and then you come to a point and you decide, do I want that guaranteed income? Flip the switch. Flip the switch. Really interesting. Really interesting. And then the third point is people, both employers and employees, are saying we need to close the gap on this savings shortfall and we need to find more returns and more protections. And so that's really where you start to point to private markets. So I think of the traditional retirement savings as classic 60-40. And what I've been reading about and hearing about for the past 10 plus years is, hey, 60-40 isn't going to get it done in the future, especially with yields as low as they've been up until 2022 anyway.

33:38How do you see this side of the business changing? Is it no longer 60-40? Is it 60-30-10? Or what does this look like? Yeah, so it's, you know, the one thing that's different about the retirement space is it's versus the wealth space is retirement is quite slow moving. The market itself is quite slow moving. And so if you actually look back 20 years, I would say there's probably less change over 20 years than we'll expect to see over the next 10. Meaning people are getting very focused, policymakers, employers, asset managers, record keepers on how do we close the gap between this retirement savings shortfall.

34:11And so to your question, the 60-40 worked. It works. But actually, if you were to have a 50-30-20, but strategically and thoughtfully make sure that that glide path, that target date fund that also incorporates private markets is doing so in a way that helps people get more diversification, gain alpha, possibly gain more income. We've done studies that show you can get 15 % more return on a portfolio with private markets, a target date fund with private markets over a 40-year retirement. And so that's something to talk about. Not nothing. That's pretty substantial. Coming up, we continue our conversation with Jamie Majera, head of BlackRock's U.S.

34:54Wealth Advisory Business, as well as head of BlackRock's Retirement Business, discussing the rise of alternatives in the investment space at BlackRock. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

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36:21I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My guest this week is Jamie Majera. She is the head of BlackRock's U.S. Wealth Advisory Business, as well as the head of their retirement business. The firm manages over$12 trillion. So let's talk about alternatives. This has been one of the fastest growing space in investing. Tell us what BlackRock is doing. I think of BlackRock of iShares and biggest manager of public equities and bonds in the world. What is BlackRock doing with alternatives? So if you think about the capital markets, public is only one piece of those capital markets.

37:08And for so long, private markets, the other part of capital markets, have been utilized for institutions or even the ultra, ultra, ultra high net worth. And so there is a world to believe strongly an investment thesis that if you're going to do the best thing for a portfolio or an investment, you need full exposure to public and to private markets. And so BlackRock is doing a lot to help advisors and their clients have easier access to private markets. So you may recall last year, we had a whirlwind news announcements around HPS, GIP, Prequin, three acquisitions all related to private markets.

37:51Prequin related to data, GIP infrastructure, HPS credit and private financing. And so we acquired these firms so that we could offer to our clients not just the full power of the capital markets through public, but now also through private. And so we are very focused on really democratizing access, helping everyday people, when appropriate, gain access to this very important part of the capital markets. And I mentioned earlier 60-40. you peel 10 % off the 60 and 10 % off the 40, and you end up with something that looks like 50, 30, 20. Is that the future of this? Because typically we see a lot of privates.

38:32They tend to be locked up for a long period of time. They tend to be complex to administer custodians and reporting and fees. It's like you buy an iShare, it's easy. You want to get involved on the private side. It anyone less than, I don't know, pick a number, 20 million, 10 million, 5 million. So what does the future of alternative investment look like at BlackRock? Yeah, so you hit on it, right? I mean, it was so hard for people to gain access to it. It was complicated if they were able to get access to it. And to your point, liquidity was not necessarily a top priority for various reasons.

39:12When you think about where the market is going now, there's just been so much change over the wealth industry on how the wealth industry as a whole is starting to modernize access to private markets. And so one thing we are doing at BlackRock is we focus very much on technology partnerships that allow and relieve the advisor of all of that operational complexity. So you think about a firm like iCapital. Of which you are on the board of, correct? I am on the board. And And, you know, iCapital has done so much to actually pave the way for advisors' ability, wealth management firms' ability to access private markets.

39:50But they are a technology platform. You still need the products. And to your point on drawdown and liquidity, we've done so much work to build solutions that actually are semi-liquid and that provide that liquidity on a regular basis for advisors and their clients. And so that's something that has, you know, really held advisors back in the past. I think the last point, Barry, is it's still new to so many. And there's a lot of education that's needed. And, you know, it's education on the asset class and what does this really mean? And how do I actually strip the 10 % here and the 10 % there? And so we've gone a step further to say, how do we make it even easier for advisors to build portfolios?

40:30Not that I have my private markets over here and my public markets over there and another account. But instead, how do I build a portfolio that's one account and it holds public and private together in one portfolio that's professionally managed, asset allocation, all of the due diligence has been done? And so recently we've engaged in partnerships with firms like GeoWealth and iCapital to be able to bring models to market, strategic asset allocated models that are professionally managed that incorporate private markets alongside of public markets. So the pushback I hear from various people about alternatives, they're expensive, they're liquid, you have these long lockups.

41:09Doing due diligence is complex and expensive. All of the back office aspects seem to be like a series of one-offs. There's no real scalability. How are you addressing these issues? We have found a way to scale and make it more convenient. in. So all of that work that you just talked about, the due diligence, the operations, the complexity, we have taken that on. We have built model portfolios that do all of that for the advisor. The advisor just has to offer that to their client. Is this in an SMA or is this, how does this? So my firm, we're BlackRock, Vanguard, a handful of other, the bulk of our portfolios, either direct indexing or mutual funds or ETFs, looks like that.

41:55Some Some clients say, what do you guys offer in terms of alternatives? And we have to click off a run of stuff. And what I've noticed is once you start working into the here's the cost and here's the lockup and here's what the reporting looks like and it's held at a custodian here, the complexity tends to be like, is this really worth it? Well, theoretically, it provides diversification. And historically, there have been some cases of outperformance. all that comes off the advisor's plate and you guys handle all of it. So if an advisor wanted to build a portfolio for you, you're the client, the advisor could call BlackRock, could say, I want to build a custom portfolio.

42:36I want it to have this component of public markets. Maybe it's iShares ETFs. Maybe it's direct indexing, a period. I would like it to have this component of private markets. Perhaps it's BlackRock Credit, BlackRock Equity on the private side. We will customize that for them. And then it's waiting for them on a platform like GeoWealth. which is a, you know, GeoWealth well, a technology platform that will automatically rebalance it for them. And that advisor can now then invest their clients in that portfolio. How about if a firm comes up to you and says, hey, we're pretty good on the stocks and bonds side.

43:07We really need help on the alt side. And we have such embedded long-term gains that it's painful to peel too much off. But going forward, we want to build this into what we offer and add this to existing clients, what does that solution look like? Call BlackRock. We have a team of, you asked about CFAs earlier. We have a team of CFAs, portfolio consultants, tax economists who do nothing but work with advisors every day on solving those problems. They will work, they will consult, they will help them take the portfolio they have. We want to meet the advisors where they are, right? So we want to help them build on what they have.

43:47And we will work with them to take that portfolio and transition it into whatever the destination is they're going for. We'll work with them in a way to do it tax efficiently and at the appropriate cadence for their client. And you guys very successfully took crypto and Bitcoin and put it into an ETF. Are we ever going to get to a point where alts become an ETF product? Look, I think there is a world where so much can happen, right? In the next five years, I think we're going to see a lot of things around private markets. Part of that is solving for data and having the transparency around the private markets.

44:21What is an ETF, right? It's transparency into that index. Part of our thought process in acquiring Pre-Kent was being able to offer data transparency around private markets. But I also think that sometimes people naturally go to ETF as kind of shorthand for liquidity, convenient, and low cost. And I think there's a lot of ways that we have to figure out as an industry, and BlackRock's working on this right now, how do you structure and build vehicles that allow for liquidity, allow for lower costs, and allow for easier access, less complexity around private markets? Maybe it's an ETF, maybe it's something else.

44:58Yeah, liquidity is always the challenge when you have an investment product that by design is supposed to play out over five, seven, eight years. They're not public for a reason. They need the breadth for whatever that market cycle is to realize those gains. So I get the challenge. What are you doing to educate advisors and clients about what this process looks like? I'm glad you asked that because I keep coming back to liquidity is a challenge when it does not match an expectation of a client. And so advisors need to fully understand what they're working with when they delve into private markets.

45:35And in some cases, it is a five to seven year lockup if they're doing drawdowns. In some cases, you do have a liquidity interval every quarter. And so we are working with advisors all across the industry to help educate them on the new type of private markets, the new vehicles, the semi-liquid structures, but then more so we're working with them to help them understand how do you actually put that in a whole portfolio. Talk to me about how private markets sits alongside of public markets and what that does for the risk profile, for the return profile, and for the liquidity profile. And BlackRock launched a model, I want to say earlier this year, that uses both private and public assets under one ticker.

46:20That sounds like really challenging to put together. Tell us a little bit about that. Yeah, it was challenging, very challenging. And it was something that we could not do alone for all of the reasons you mentioned. It took operations and technology platforms like iCapital. It took operations and rebalancing and trade platforms like GeoWealth to be able to allow us to deliver this portfolio. So this was something that we announced earlier this year alongside of GeoWealth and iCapital. And it was the first of its kind in the industry. A model portfolio that in one model, in one account, you can have public and private, automatic rebalancing, customized for your client, done so easily, so conveniently.

47:05Some of what you're describing sounds a little bit like OCIOs that kind of were the rage a few years ago, outsource CIOs where a professional manager can bring a higher level of professional wealth management to a smaller shop. Tell us, is this similar to that or what are the parallels? Yeah, it is one of the most accelerated trend we are seeing in the wealth market right now, which is this whole notion of outsourcing. And whether an advisor is doing it because they want to professionalize what they're offering to their client or whether an advisor is choosing to outsource because they want to save time.

47:44And their value is being with the client and talking about the holistic wealth plan, not the investment management component of it. And so they turn to BlackRock to be the outsourced provider. And so we have a models business, which is effectively an OCIO business. A models business for the Wealth Channel is$350 billion today. It's grown rapidly over the past few years. We think that'll double in the next few years. And it's because advisors are turning to us to say, please, let us outsource to you. And it's not just advisors. Wealth managers are doing the same. Because, again, wealth managers are going to focus on their core value, which is serving their clients, helping their clients build financial plans, and helping them navigate their wealth picture holistically.

48:27They turn to BlackRock to help them scale their investment management, and that's where our outsourcing capabilities come in. So we've talked about wealth management, we've talked about iShares, as well as Alpha Pursuit and retirement planning. My last question for you is, what do you think advisors, clients, investors are not thinking about, but perhaps should be? What important topics? It could be an asset, it could be a geography, it could be a policy or data point. What do you think's getting overlooked, but just shouldn't? I think taxes is still not being discussed enough. Taxes as a concept.

49:05I mean, there is so much value you can bring as an advisor to your client by just having that conversation, asking the question. So I would encourage everyone to do that. That is such a way to build loyalty, trust, and deepen relationship. And by the way, your client starts to tell you, where they have assets elsewhere. The other area I would say is just really thinking about the future growth drivers of our economy. So infrastructure, AI, we didn't talk about AI, but the - It's going to be another thing. Another thing, it might turn into something, right? Right, it's going to be big one day, exactly.

49:35But you think about some of these future growth drivers, infrastructure as part of why we acquired GIP, but we have iShare solutions that really align with infrastructure as well. And I just think that's such an under-discussed opportunity. Really interesting. All right. I only have you for a few more minutes. So let's jump to our favorite questions that we ask all our guests, starting with, tell us about your mentors who helped shape your career. Oh, so this is such a good question and hard question. I will answer it this way. There are so many. I love to have a board of directors approach. Like I have this whole crew of people that I go to for different things.

50:13And I truly like, you know, you mentioned Salim Ramji. He's one of them. Martin Small, Rob Goldstein, Rob Capito, Mark Weidman. Like, there's so many. Ann Ackerley, who used to run the retirement business at BlackRock. And they've all played a different role in my career and in my life. Really, really interesting. Let's talk books. What are some of your favorites? What are you reading right now? Llama Llama Red Pajama. To your kids at night? Is that what that is? He loves Llama Llama. So any Llama Llama you can imagine. But actually, I just finished a great book for the second time, A More Beautiful Question.

50:49Warren Berger, it talks about the art of inquiry and using inquiry to, I mean, gosh, the heart of any innovation. Why does the world not have this? What if the world did have this? How do we get the world to have this? And so it really talks about the art of inquiry as a way to better understand, to fuel curiosity, and to innovate and create better solutions. I love that name. I'm going to have to check that out. Let's talk streaming. What are you watching or listening to these days? Netflix, Amazon, podcasts. Tell us what's keeping you entertained. So I have this barbell approach. I go, I love reality TV.

51:28Oh, really? Below Deck. Do you watch Below Deck? No, but I know plenty of people who do. So good. But that's kind of one side of it. The other side of it is I like intensity. So like Mayor of Kingstown, I'm watching Terminalist, Dark Wolf right now. I think that's on Amazon. It is very good. Basically. Chris Pratt? Yes. Navy SEAL turned CIA operative. Very interesting. Right. Yeah. We just finished Killing Eve. Oh, I haven't started yet. My wife watched it, loved it, and said, you have to watch this. And she rewatched it with me. If you like that sort of high-intensity espionage, really great cast, really strong recommend.

52:12So our final two questions. What sort of advice would you give to a recent college grad interested in a career in retirement services, wealth management, investing? how would you advise them? So I go back to my way, my entry into this industry. I didn't know the first thing about anything. I didn't think I wanted to be in this industry, but I went in with open eyes and I asked a lot of questions. And in some ways it was like, because I didn't have the experience, it made it easier for me to be just like an everyday person that we were trying to serve. And so I say, come into this industry. You don't need a traditional background.

52:47In fact, I prefer people not to have a traditional background of finance or econ. come into this industry and help us make it better. Love that. And our final question, what do you know about the world of wealth management, retirement services, investing today would have been useful 25 years or so ago when you were first getting started? I was really fortunate to have my father tell me that the first thing I needed to do when I got a job was start saving in an IRA and in my 401k. And even when it hurt to do, I did it. I wish I had known back then that I could have been saving in many different ways.

53:22I could have been investing in many different ways. And so to anyone who's out there thinking about are they saving enough or investing enough, the answer is probably no, and you should do more. And there's so many ways to do it. You can use a financial advisor. You can go direct. You can do it in many different ways, but just do it, just start. That's something I would have done. Really, really good advice. Thank you, Jamie, for being so generous with your time. We have been speaking with Jamie Majera. She's head of BlackRock's U.S. Wealth Advisory Service as well as head of BlackRock's retirement business.

53:55If you enjoy this conversation, well, be sure and check out any of the previous 550 we've done over the past 11 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure and check out my new book, How Not to Invest. the ideas, numbers, and behavior that destroys wealth and how to avoid them. How not to invest at your favorite bookstore. I would be remiss if I did not thank the crack team that helps put these conversations together. Meredith Frank is my audio engineer. My producers are Anna Luke and Alexis Noriega. Sage Bauman is the head of podcasts at Bloomberg.

54:40Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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