Using Decision Science in Investing: Masters in Business with Omar Aguilar

0:02Speaker 1:Bloomberg Audio Studios, podcasts, radio, news.

0:08Speaker 2:I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Omar Aguilar. He is president, CEO, and chief investment officer of Schwab Asset Management. They run over a trillion dollars across 100 different ETFs, mutual funds, and separately managed account strategies. He also runs the Schwab Center for Financial Research, sits on the firm's executive council. He joined Schwab in 2011, specializing in equities and multi-asset strategy. Schwab's total assets are over $ 13 trillion, and its asset-weighted expense ratio of eight basis points is amongst the lowest in the fund industry. I thought this conversation was fascinating, and I think you will also With no further ado, Schwab's Omar Aguilar. Omar Aguilar, welcome to Bloomberg.

1:16Speaker 1:It's a pleasure to be here with you, Barry.

1:18Speaker 2:It's a pleasure to have you. So I want to get into your career and some of your conversations about what's going on in the market today and what's happening at Schwab. But you have such a fascinating background. I have to start there. Bachelor's in actuarial science, then a master's in applied statistics from the Institute of Technology in Mexico City. Then you come to the U.S. and at Duke, you're a Fulbright scholar where you get both a master's in statistics and a Ph.D. in decision sciences. Am I getting that right? It sounds like you were planning for a career in academia.

1:59Speaker 1:It is true.

1:59Speaker 3:And actually, I did in my last year and my Ph.D. program, I did apply for a couple of academic jobs before I was lucky enough to basically get back to Wall Street as an analyst.

2:11Speaker 2:Yes. So you your first gig is your your was it at Merrill Lynch was Bankers Trust, Bankers Trust and then Merrill Lynch. You have this deep quant research background. What did you do when you were first starting at Bankers Trust? And then Merrill Lynch.

2:26Speaker 3:Well, you know, if you recall from what the degree that you mentioned, you know, my dissertation and the work that I did was in how to use statistical models. Now they're called data science. Back then it was statistics. In terms of how you use those models for making decisions. The whole process of decision on their uncertainty was.

2:49Speaker 1:The whole, you know, research that I did.

2:52Speaker 3:And we apply that, you know, in particular to areas like currencies, you know, equity, asset allocation. And I was hired at Bankers Trust to develop those models. So, you know, I call that the, you know, before any AI or anything else, they were just quantitative models that were able to help people being faster to understand how people make decisions.

3:16Speaker 2:And I don't remember if it was the PhD paper or the 2001 paper. that it's still one of the most cited papers in quantitative research. How did you jump from Bankers Trust to Merrill Lynch? When did that transition happen?

3:31Speaker 3:Well, if you follow the path of my background, a lot of that is related to the activities on Wall Street because there were a series of mergers and events that happened that took me to where I am today. you know, Bankerstross was bought by Deutsche Bank. And at that point, the group that I was part of was lifted out to join Merrill Lynch. Merrill Lynch Investment Management was starting to just build their institutional business.

3:58Speaker 1:And that's where we became really nice fit.

4:01Speaker 3:Unfortunately, September 11 happened 25 years ago.

4:05Speaker 1:And then, you know, that.

4:06Speaker 3:Basically took us to create the private bank asset management services for Lehman Brothers that wanted to branch out into the asset management business for their wealthy clients. And then from there, it started to just get a little bit sensitive in terms of the Lehman business. So I had the opportunity to work with a former colleague of Bankers Trust at ING to basically rebuild their quantitative and systematic investment processes. So that was all related to activities that happened through the Wall Street acquisitions, events, and so forth.

4:41Speaker 2:And ING, now better known as VOIA, that was $ 20 billion across 15 strategies, including active index, enhanced index, pensions, variable annuities, and mutual funds. Once you stand that up and get that to a reasonable side, was Lehman before that or after that?

5:03Speaker 1:That was before. That was before.

5:05Speaker 3:You know, we were able to build a lot of these things at Lehman Brothers. It goes back a lot of what my philosophy is, is you have to be in a place where you can marry distribution with manufacturing. That's what we believe asset management success relies on. ING had a very good distribution, and our idea was to build these more institutional-type, scalable businesses using quantitative tools and technology to be able to deliver that to different folks.

5:35Speaker 3:And again, unfortunately, we were in the middle of a global financial crisis in 2008 that basically put a stop to every activity across New York and Wall Street and everything else. And that gave me the opportunity to go back to my academic roots and start working at Financial Engines with a lot of Stanford academics, you know, headed by Bill Sharp.

5:55Speaker 2:To say nothing, right, of the Nobel laureate at Bill Sharp. I just want to clarify one thing. Lehman Brothers, the quant research you were doing, was that for alternative investment management or for public equities?

6:07Speaker 3:It was dedicated to both the building asset allocation models for the private bank. And it was the first time that we were able to build a set of strategies that included alternative investments. So we had private equity, private real estate, you know, fund of hedge funds. And that was, you know, the whole concept of what we wanted to do for wealthy clients back then.

6:28Speaker 2:And then at Financial Engines, it's $ 40 billion in defined contribution plan sponsors. I'm fascinated by Bill Sharp's work. I was fortunate enough to interview him about 10 years ago. How did his thinking influence your approach to portfolio management and retirement planning?

6:49Speaker 3:Well, going back to this concept of behavioral economics, Bill and the economics of Stanford have been at the forefront of merging this concept of how do we create markets and invest in markets that are not necessarily efficient in the short run, but in the long run, they are. Bill has always been in this idea of capital efficiency in the long run. It's better to do the buy and hold and stay put at a low cost, as opposed to try to go in a market. The whole concept of market timing and avoid market timing was sort of the premise of everything. And that fits very good for 401k, for retirement assets, for pensions, where strategic asset allocation is what really drives your long-term results. So that was at the core of what we did at Financial Engines, and it's still at the core of the philosophy that we have at Schwab.

7:39Speaker 2:So I recall one of the most fascinating things of many really interesting things Sharp had said was the question of the annual 4% drawdown in retirement as the thorniest problem in all of finance. I've read that you've said 4% for many people doesn't make any sense. Do you want to address that?

8:01Speaker 1:Yeah.

8:02Speaker 3:Well, we've done and we did a lot of research. And, you know, the needs for income is not a static number. And it's not necessarily something where you can rely specifically about one thing. And what we have become is, you know, the 4% rule became just like a number that somebody picked out of the hat and said 4% works as long as you can generate those. And a lot of that had to do because if you think about it, depending on the level of interest rates, you know, you can actually, you know, 4% may be, it is right now, probably less than the risk-free rate. So there is no reason why you have to stay with 4%. So it is really a dynamic process that depends on the needs of the moment, inflation numbers, real growth, and the level of rates that may affect what is the drawdown that you need to survive.

8:51Speaker 2:To say nothing of when 4% was picked, the longevity projections were so much less than they are today. If you're 68 and relatively healthy, you got a good shot at another 15, 20, 25 years of living on that pile of capital. That wasn't true 30 plus years ago.

9:12Speaker 1:Absolutely, Barry.

9:13Speaker 3:And a lot of the challenges that we face, and this is something that we work on financial engines, is getting into the habit of early saving. Because, you know, in the generation for Gen X and any of these generations, there is no pensions that were like back in the day. So people rely on 401k. So the ability for people to use that savings and the matching of the companies It's critical for them to get to a point where they can retire. Unfortunately, you know, during all the research, we realized that the majority of Americans don't have enough to retire for this.

9:50Speaker 1:Precisely what you said.

9:52Speaker 3:It's more than 25 years of, liabilities that they will have ahead. And with 4% drawdowns, they will run out of money very quickly before they can actually get there, especially when you have inflation impacting.

10:05Speaker 2:So what's really so fascinating about your background, you're not only a quant, but somewhat unusually, you're a big follower of behavioral finance and thinking about decision-making and You lead Schwab's BFI program for advisors, including diagnostic coaching tools, and you run the BFI barometer study. How does someone who's that mathy and a longstanding statistics, probability, and quant student fall into behavioral finance?

10:38Speaker 1:Well, it is.

10:41Speaker 3:A great story because The area of statistics that were part of my dissertation, it's an area of statistics that's called Bayesian statistics. And Bayesian statistics is based on a theorem called by Reverend Thomas Bayes way back when. What it does, it basically combines information that you have today that is called a prior, that could be your experience, and then uses all available data to update your experience, which is really our life. If you actually just think about it without necessarily creating a model, Just think about it.

11:14Speaker 3:You have an experience. You know what you need to do. I always give the example of, you know, trying to get to the airport. So you have your prior knowledge about how you and your own utility function, how early you want to get to the airport, how difficult that may be, the potential problems, the probability you'll miss the plane, and everybody has a different way to approach it. You know, two people with the same background and everything else, one may actually want to get there three hours ahead. The other person may want to get there, like, just five minutes before they start planning.

11:42Speaker 1:They both take different types of risks.

11:44Speaker 3:Updating that information over time, that's basically how decision process is, and that's probability and its core. And that's pretty much what Bayes' theory does.

11:54Speaker 2:I wonder if Bayes... how he would have thought about this if he was married to my wife, who she doesn't want to miss a plane, will get to the airport two hours later, bring a book. That's just how it is. But it's interesting that, you know, people have very different approaches to that. How much time do they want to waste versus the headache of missing a plane? So I'm curious, how does your education and decision science shape the way you think about the big issues like markets, risk, and investor behavior. Yeah.

12:26Speaker 3:Well, you know, I have always been passionate about, you know, providing tools and services to investors to help them enhance their financial lives. That's at the core of Schwab Values. That's at the core of what we do in asset management. And a big part of that, Barry, includes the fact that, you know, we want to provide information to clients so that they can make better decisions on their process. So again, the whole idea of try not to time the market, try to look at your long-term investments, try to stay calm when things are. All that goes back to the core of their behavior because we're all humans. All of us have evolved over time with two parts of our brains. One, that is the amygdala, which is the more private, primitive version of us that allows us to react and go fly to safety whenever we see a problem and allows us to just be emotional about things. And then the other part, which is the part of the front of the brain that allows us to be rational and allows us to use data to make decisions. That combination, which sounds very familiar to the base TRM, one that is more gut feeling, the other one that is more analytical

13:32Speaker 3:and more brain-oriented, and they get combined. And every day, they're battling with each other. So for us, being able to provide the context for clients that are more emotional and with the information they need to adapt to their investment strategies so that they don't panic when the market goes down or they don't have to give them a process that is quantitative in nature so that they can stay the course is very important. On the other hand, we have other clients that are more analytical in nature.

14:00Speaker 3:They think they can outsmart the market. They think they know the answers. And we give them information and data so that they can inform and update their own beliefs so that they can have better decisions. So our main clients with the tools and products and solutions to make them and help them make better decisions is the core of what we do.

14:21Speaker 2:A little bit of thinking fast and slow. Bill Bernstein, neurologist, had said, you mentioned the amygdala, our whole limbic system is what underlies fight or flight. If we don't get that under control, we will die poor. And it really is quite fascinating. In In actual usage, when you're in the real world, when you're advising clients and investors about their various behavioral foibles and errors, how do you get them to stay on the straight and narrow? What tools does Schwab use to prevent investors from shooting themselves in the foot?

15:04Speaker 3:Well, two things we do is, first, we do a lot of education through our Center for Financial Research. We also provide a lot of training to our wealth advisors and our financial consultants. So it's precisely the tools that you mentioned at the beginning. We call it, it's a very cute name, biagnostics, which is supposed to diagnose your biases in a way. That's, you know, our market team was smart enough to put it together. So it is a diagnosis team for your biases. And the reality is that all of us have biases one way or another.

15:34Speaker 3:So the tools that allow financial consultants to get to know their clients better.

15:38Speaker 1:You know, we have data.

15:40Speaker 3:That basically says that the more information we get from the client or their biases allow us to build longer relationships with them. And at the core of what we do, we simplify it by saying, well, we have to balance their needs with what they want. There's a lot of clients, they tell you what they want. And you, as a financial professional, you know what they need. And we need to put them together. If you think about in the world of AI, You know, the need is basically what the computer is going to tell you. The computer is going to tell you this is the right allocation. This is what you need to do. But the want is what the client, you know, wants to have. And merging those two is the critical part to maintain and have a sustainable long-term investment strategy.

16:23Speaker 2:Really, really interesting. Coming up, we continue our conversation with Omar Aguilar. President, CEO, and CIO of Schwab Asset Management, talking about how he helped build the asset management group to over a trillion dollars in client assets. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Omar Aguilar. He is CEO, CIO, and President of Schwab Asset Management. helping to run over a trillion dollars of Schwab's 13 trillion in client assets.

17:03Speaker 2:So let's talk a little bit about your time at Schwab. You joined Schwab, gee, it's 15 years already, to run equities and multi-asset strategies. Back in 2011, after the financial crisis, the fund business was a fraction of its current size. What was the mandate when you first joined? Was it simply hey, build this up, or was it a little more comprehensive than that?

17:29Speaker 1:It was more comprehensive.

17:31Speaker 3:The belief and the reason why I joined Schwab was that we had a project that was to use technology, use systematic strategies to create and use scale. And scaling the business of this was to try to provide with different set of tools for the clients to be able to grow their wealth. That was at the time, you know, right after the financial crisis, there was a significant amount of apprehension in the market of what was going to happen because the experience that people had, you know, was bad.

18:06Speaker 3:So there was a lot of behavioral, you know, aspects and biases of risk aversion that happened during that time. You know, so what we ended up doing philosophically was saying, all right, we'll start with the foundations of how the asset management is going to grow and run for the future. It has to be transparent. You know, clients define transparency as being.

18:24Speaker 1:A key part.

18:26Speaker 3:A big value of Schwab is making it accessible. So all the solutions and all the products and services had to be something that was available for the retail clients. And it has to be also a low cost. Those three components were key components of what we have. We said we don't want to have a superstore where every single product is going to be available in our shelves. What we're going to manufacture is something that we call it core for every client. So we built a set of ETFs, a set of beta exposures, and a set of smart beta exposures that allow clients to define their core portfolio and say that core of your strategy should have the most transparency, the most liquidity, and the lower possible cost and an accessible route for you. So we built a franchise of Schwab ETFs. And today, we're still there, the fifth largest ETF manufacturer in the world, which is sort of a big part of the trademark of the wave of the asset management that I was part of at the beginning. At the same time, we say, what are the other components that will be important for clients going forward? Income will be a critical part. You know,

19:36Speaker 3:we know baby boomers are in the process of retiring. Gen X will come right behind them. And in that sense, you know, our clients, particularly the clients that show up, will require income solutions.

19:46Speaker 1:So we build dividend strategies.

19:48Speaker 3:We build, you know, liquidity-based money market funds that were targeted. At the time, the interest rates were zero or negative, so there was really nothing there. But we knew at some point, like it is now, the yields were going to go up and income was going to be able to generate. It took us probably 10 years before we were comfortable issuing more bonds, but that was part of the plan. And at the same time, we say, okay, well, we also need to start building technology to offer this, not just in ETFs and mutual funds but also in managed accounts so that then we use technology to start bringing these Customizations as part of that future generation. So that vision is what got us to what it is today now 1.9 trillion dollars in assets 1.9 trillion.

20:31Speaker 2:I've been saying over a trillion. It's really almost 2 trillion That's interesting. So so you're there for a full decade before you take on the CEO job in 2022 But unusually, you kept the CIO title. They're such different jobs. How do you split your time? How do you wear both hats? Does that help being able to see it from both an investment perspective and a business perspective?

21:00Speaker 1:It has been the best job I've ever had, Barry.

21:03Speaker 3:And a lot of that is because, you know, the experience I have as an investor and as a researcher, which is the core of my, you know, skills and the scores of my experiences on research. allows me to understand the investment, allows me to understand the risk we're taking any time that we create a new product or create a new solution, and at the same time, allows me to learn a lot about our clients and our business. I've been fortunate enough to have good mentors like Rick Wooster, which is our current CEO, which can combine the ability to run investment management companies with a business setting that allows us to just run it efficiently. And that, to me, has been a great learning and has been a great thing for me.

21:46Speaker 2:So you mentioned the word efficiency, and I discussed earlier you have one of the lowest fee rates for mutual funds and ETFs at eight basis points. How does that efficiency and scale operate? How do you take advantage of the fact that Schwab is $ 13, $ 14 trillion.

22:10Speaker 1:It's a behemoth.

22:11Speaker 2:It's one of the biggest asset managers and custodians in the world. How do you take advantage of that economy of scale?

22:22Speaker 3:Well, I'll tell you the core of this, and then I'll give you one specific anecdote of one of our products we're very proud of. But You know, at the core of what we offer at Schwab has always been that we want clients to have alternatives, to have options to pick. So we never go to any of our clients to try to tell them that they have to buy the proprietary products that is run by my group. We basically give them third-party options and just, you know, not too far in the past, we basically remove all commissions across all products altogether.

22:55Speaker 2:Yeah, that was less than 10 years ago.

22:57Speaker 1:That was less than 10 years ago.

22:58Speaker 3:So clients can actually go and buy and sell products from our competitors in asset management as long as they want. And we have the mandate to basically offer everything that we have. Because our philosophy, Barry, is that if we create high-quality products at a lower cost with high transparency, with accessibility, our clients will stay with us and will build trust because we're offering options for people to take on some other things. And that has given us the opportunity to grow the business and grow the market share in our own platform, but also off platform. Not only we serve good clients of Schwab, but also clients outside of Schwab, we basically get access to our products. Example is our ETFs. You know, we roughly get 35% of net new assets in our ETFs that come from outside of Schwab, which is just the core of the quality of the products that have the accessibility, that has the efficiency and the scale that allow us to create that product.

23:56Speaker 3:You know, the product that I said as an anecdote is our dividend product. Our dividend product basically started, you know, back in, you know, when I joined in 2011. And 15 years later, it became the largest dividend ETF in the world. And that's over $ 100 billion now. And that's, you know, at the end, it's among the lowest cost, but it's not the lowest cost. And it's also not the one with the highest yield, which is the reason why we created this. you know, set of dividend payers that basically build that structure, a hundred names. And that alone, because of the high quality investments and the results that it has created, the consistency basically attracted more clients to it.

24:39Speaker 2:Yeah, the very high yields amongst dividends typically means the prices recently come way down, which is why the yield is high. And typically that means that that dividend is about to get cut. uh... i didn't realize that that product was over a hundred billion dollars uh... but it raises a really interesting point you sit at a fairly unique perch you're at the crossroads of three major shifts in in asset management over the past few decades the rise of quantitative investing the the move at least in part from active to indexing and the role of behavioral science to improve investor decision-making and outcomes. And you're right in the middle of all three of those. Tell us a little bit about how those major vectors have changed how all of us invest.

25:35Speaker 3:Yeah, well, I think a lot of things have continued to evolve in certain way because of just capital markets efficiency. It goes back to Bill Sharpe's world and theories. And then also, you know, the the availability of information that clients have today that didn't have when I started my days at Bankers Trust. You know, the availability of information that you get today is instant, and the response they'll have and the different anomalies that exist. So what we have observed, and a lot of the core pieces of what you mentioned, you know, because of the rise of technology, the use of technology, you can actually create more efficient processes. Now, we're now in the next wave because AI is going to even improve that even further. And what we're doing instead is we have seen the trend that goes from active into passive. We have seen the trend where people prefer lower-cost beta solution. And then we also see the rise of alternative investments, and we also see the rise of AI as part of the process.

26:35Speaker 1:So one of the initiatives that.

26:38Speaker 3:We have now is how do we incorporate AI to help clients use that information and those tools to make better decisions?

26:47Speaker 1:So go back to decision processes.

26:49Speaker 3:Go back to base TRM, is how do we blend the information that the client is going to put into AI?

26:55Speaker 1:It's almost like the prompt that you put into all these agents.

26:58Speaker 3:And then how do you blend that so that then the answer that you get is the mixture of what we believe is the right answer for the client based on our research and what the client is looking for?

27:07Speaker 2:Really interesting. You mentioned alternatives. I'm curious, and given your background when you were at Lehman Brothers doing the quant work with alts, I'm curious about your view generally of alts. Obviously, there's been a lot of news this past year, especially in private debt, private credit. And then there's been this sort of nascent push to move alternatives into 401 s. Give us your perspective from Schwab about alternatives. Yes.

27:38Speaker 3:Well, we are we're pretty constructive on alternatives. You know, we just completed the acquisition of Forge Global. just a few months back. Our belief is that for certain clients, mostly mass affluent, wealthy clients, there is this leave that requires that additional level of diversification and potentially opportunities. I think the biggest misconception, even with the work that we have seen and all the headlines we have seen on private credit, is that it has not ever been a credit issue it has been always a misconception of liquidity.

28:18Speaker 3:And I think that liquidity education is critical, especially as the market goes down towards the mass affluent and potentially even lower to retail.

28:26Speaker 1:Which is a question mark.

28:27Speaker 3:But that is the big component of how do you establish, you know, if you think about the high yield market, public market, you can actually see it is transparent.

28:36Speaker 1:You can see what it is.

28:37Speaker 3:There is more delinquencies and there is more credit events there than it is in the private market. So in private credit, when you actually look at what the size of that market is and what the size of the potential credit issues is very minimal or lower than in some cases the high-yield market is at the worst possible time. But the problem is that the understanding that when you go into private assets and alternatives, there is a liquidity premium that you're taking advantage. That means that your money is not going to be available the next day. That is what really brings the headlines because a lot of the challenges that you know we have seen in some of the funds that are available is because people are requesting their money and they're not getting the full money back.

29:18Speaker 2:I'm always fascinated when that i'd watch that happen and i always want to grab people and say which part of the seven-year lockup was confusing you're getting theoretically potentially getting higher returns because you're asking for that look quickly uh... it seems that there's a little bit of an education problem with people thinking that they're going to get the best of both worlds, higher returns, yet still be liquid. How do you read that?

29:48Speaker 1:Absolutely.

29:49Speaker 3:And I think the biggest confusion, Barry, is people are trying to compare investing in public securities or public markets and private as if they were exactly the same. And even when you have quants like my team trying to look at back tests or trying to compare them, trying to put efficient frontiers, they're not comparable because of precisely the liquidity component that is into it. If you look at, say, private equity returns or private credit returns, they tend to be smoother over time and they tend to have a lag.

30:20Speaker 3:When the markets go down, usually the marks on private equity, they take two or three quarters before they go down. And a lot of that mistiming is precisely liquidity, is precisely how these things operate on valuation. So that component is something that needs to be clearly explained so that people understand this. Now, the big part of what we're doing at Schwab, and I go back to part of your question, is we also believe that, especially now, there is an opportunity for people to have access to those markets that didn't have access before. And the example of the reason why we have forged marketplaces is There is a lot of companies that are pre-IPO, that are being in the process. They're probably going to stay private for longer, but whose liquidity needs of those employees or founders is high because they may be in a great company that will at some point be IPO, but right now they're sitting on shares that they cannot use. On the other hand, there's clients that will have access to that, will love to have access to that, but they don't have access because in the past they were never available. So forged

31:26Speaker 3:marketplace allows to just create that supply demand so that employees and founders can actually tender their shares in a vehicle so that then all the clients can get access to those. So then you give access to private investments and at the same time you provide liquidity for those that want to desire it.

31:43Speaker 2:So not public and not liquid, but semi-private and semi-liquid.

31:47Speaker 1:Is that a good way to describe it? That is a good way to describe it.

31:49Speaker 3:But it's sort of an interesting because if you think the amount of wealth that has been created on these private markets over the last decade, it has been fairly concentrated in maybe 1% of the population or less. On the other hand, you actually see the amount of money that is in public equities that could access that. Just the view of Schwab over time is, can we give access? Can we provide that gap for the right client? It's not for everybody. So that actually they can have that a little bit better.

32:16Speaker 2:Will these end up in a 401k eventually? Because as much as some people have complained, they've run out of institutions to sell it to, let's fob it off on retail. It seems that people who have a 10, 20, 30-year investment horizon, that is a fairly rational place for an illiquid investment. What are your thoughts?

32:40Speaker 3:Yeah, our view is for retirement assets, and this is new, most 401k platforms, they will have access to what is called a broker window. And in that broker window, there is a significant amount of options that you can use, including some of these semi-liquid vehicles that people can use in their 401k. The biggest challenge in here is for those clients that understand the liquidity that goes with it, the duration that goes into that, it is clearly a good fit. For the majority of clients with 401k, they only want to grow And if you actually think the biggest challenge with alternative investments still today is that the cost is much higher.

33:21Speaker 1:So, and as we said, you know, part of our philosophy at Schwab, if you.

33:24Speaker 3:Add those fees over 20 years, you're already behind the market just by paying those fixed fees.

33:30Speaker 1:And those are for, you got to pay them.

33:32Speaker 3:So, you know, in our view, if you stay in these public markets, when you grow your portfolio, if you, there is this opportunity for using the broker window for the right, you that actually fits better. But overall, just because of the cost of entry in 401k over that long duration seems to be still not the right fit for the average 401k.

33:53Speaker 2:I couldn't agree more. Coming up, we continue our conversation with Omar Aguilar, CEO and CIO of Schwab Asset Management, talking about the current state of markets today. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Omar Aguilar. He's CEO and CIO at Schwab Asset Management, running nearly $ 2 trillion of Schwab's over $ 13 trillion in client assets. So let's talk a little bit about the state of the world and what's going on in the markets. So let's jump right into artificial intelligence. From Schwab's perspective, how do you see AI changing things within the wealth management business, be it portfolio construction, financial planning, communication, education, even the economics of individualized advice?

34:57Speaker 1:Well, it's making its way very quickly.

35:00Speaker 3:And the adoption is something where we all in this business started to just get on it. The way that we describe it is, this is like the third wave of AI in our society.

35:13Speaker 1:It started with the hyperscalers.

35:15Speaker 3:It started with that piece of big investments, give capital expenditures going into hyperscalers. It moved to infrastructures with data centers and semiconductors in there. And now we're going to that adoption phase that includes, you know, a lot of sectors, including financials, including healthcare. In our case for Schwab, you know, we're doing this in many ways. On one is efficiency, making AI tools efficient for all our employees so that they can actually make their time to do something else.

35:45Speaker 3:For client service, we continue to support our clients. We have been over time at Schwab always committed to pick up the phone as fast as we can and give them the service that they provide. And many of these things will basically get the benefit of an AI. We continue to work on analytics, AI analytics that will allow our clients to be able to access their accounts and look at the reports and look at the impact of the markets into their accounts.

36:10Speaker 1:Using, you know, some of their tools.

36:12Speaker 3:And for research, you know, we are now in the process where we, all the research that comes to our Center for Financial Research is now being packaged so we have what we call the research assistant that allows clients and financial consultants to get access to, okay, what happened in 2022?

36:27Speaker 1:What happened in 2023?

36:28Speaker 3:What we thought, you know, when the Fed make decisions, what was the situation we had? And then being able to have that information available very quickly to understand what it is. So AI in the adoption phase is clearly something that we're embracing and we're investing.

36:43Speaker 1:And I know, you know, all our peers are doing that too.

36:46Speaker 2:So when, in the, about a decade ago, maybe a little longer, when the robo-advisors, the digital platforms, first rose up, there was a sort of concern, uh-oh, this is going to replace individual advisors. That turned out not to happen. People, especially wealthy people, want to be able to pick up the phone and talk to another human being. And yet we've seen the same sort of thing play out with AI again. hey, what is this going to replace? Is this going to replace analysts and strategists? Is this going to replace portfolio managers? And what about advisors? Do you see a similar thing playing out where middle class and high net worth investors want a person on the other end of the phone? Or if it could be faster, cheaper, better, will people embrace AI for advice?

37:41Speaker 3:Well, it varies by generation, and it varies by many, many parts of the segments of the market. Our philosophy is, and it's still today, that the world of personalized relationships will be the key to the success in the future, and that cannot be replaced by AI.

38:04Speaker 1:When you get to see somebody, when you get to talk to somebody.

38:07Speaker 3:No matter what it is, that component of establishing the relationships because we're humans, we'll never be able to replace AI. What AI will do is basically create more efficiencies on tasks and things that normally financial advisors are using their time today to build better relationships. So if they were using time for creating reports, for doing analytics, to doing other things, and that took 50% of the time, and you can reduce that to, say, 10%, then now you save 40% of them for building more relationships, establishing and getting to know the client better, getting to understand their biases to see how they can help them better. So that is what we see the trend will going forward where the combination of AI tools, and I'll mention specifically AI tools, with the human expertise and relationship building is basically the formula for the future. And to your point, yes, people thought the robo-advisor was going to take over And it did work very well for many clients, but it didn't replace the relationship building for financial consultants.

39:10Speaker 2:Yeah, some of those AI tools, just something as simple as note-taking during a Zoom call. I used to watch people not be able to pay attention because they're jotting stuff down, or there's a third person on the call, a whole nother human taking notes and it just has made things so much easier and more efficient but again not replacing replacing individuals let's turn our attention to the markets your mid-year outlook said that earnings are driving the bull market but the leadership is a little narrow it's mostly been AI and energy and First, is that still the case today? And second, when does that concentration become a risk factor?

39:54Speaker 3:Well, you know, the concentration of the Mach 7 has been an issue for the last, you know, two years. We're starting to see rotation out of the large-cap, mega-cap names in tech. You know, at the end of last year, going into this year, and it comes and goes, we still believe they're still heavily concentrated. There's still significant concentration, particularly in technology. But we started to see that rotation going into other parts of the market, which is very healthy.

40:21Speaker 3:And we've seen even in days where the Nasdaq is down, the S & P maintains its stay in the right place. A lot of that has to do because some other sectors are starting to just carry the weight in some other parts, things that were a little better valued than tech. And I think that's starting to just get. So the breadth became better in the first part of the year. I'm a little more worried that when I've seen, you know, after that is that, you know, the breadth is starting to get narrow again. And we're starting to see that momentum trade, you know, taking a little bit of a second life.

40:55Speaker 2:It stumbles a bit in the middle of the year, the momentum trade.

40:58Speaker 1:It stumbled a little bit.

40:58Speaker 3:And that was, you know, in our mind was there because we've been working with clients to try to diversify their concentrations, try to just move, you know, assets to other parts of the market. And then, you know, it happened that momentum actually took a little bit of a hit. And then when you look at the last, you know, few weeks, you actually see that that is starting to just recover, which a lot of that is clearly because these companies have done really well earnings-wise. They're generating significant amount of business, and they're spending more on capital on AI. So, but, you know, we believe that it's healthy for people to continue to do the rotation and have opportunities to go outside of those.

41:35Speaker 2:I'm glad you mentioned the technology. capex cycle from AI. That's been a really significant engine of growth for the past, I don't know, five years. How much risk is embedded in that and how can investors position around something if you've underweighted the technology sector or the AI capex cycle you've underperformed? How should investors think about this?

42:03Speaker 3:Well, we have seen that continuous and we still believe that we're not completely done We believe that the capex cycle has extended. But what is good is it has extended beyond technology. When you look at the capital expenditures now going in other parts of the market, it's starting to grow. Maybe not as big as what we had with the tech, but it's clearly been over there.

42:24Speaker 2:What other sectors are you seeing?

42:26Speaker 1:We've seen healthcare. We've seen financials.

42:28Speaker 3:We've seen some of the industrials doing well on this and spending money on capex, which makes sense, right? They can make their products more efficient. They can make, you know, other things faster. And I think in a certain way, that adoption has increased that capital expenditure setting. I think the question you have is, what is going to be interesting going into next year is that investors are going to start trying to evaluate how much of that capital expenditures and that investment ended up being profitable. And I think profitability going into next year will be a key metric to watch because that's going to be where people will see, well, you're spending all that money, you borrow money to increase your capex for AI, but yet your return on investment is not working. So that is going to be a really good test going into next year.

43:15Speaker 2:So in 2024, there was a quote of yours, investors can expect 15 to 20% asset growth annually for seven years. That turned out to be true in 24. We were about 25 percent and 25 were about 25 percent. It's early September and we're not that far away from 15 percent. So it looks like, barring any problems this year, you're going to go three for seven. What was that number based on? That's a pretty healthy return above what we've seen over the past 15 years, which has been a great bull market. What do you base this on?

43:55Speaker 3:Well, you know, our research goes into starts always with the macro picture on where we see the economic cycle. And at the time, you know, we knew that we were in that sort of early to mid cycle that usually goes into an expansion. We were surprised, obviously, that the expansion continued. I think we never expected that it was going to continue as far as it has been so far. And a lot of that is and I would probably say I was the first one. You know, if you look at any report that we produce and most people produce back in 23, nobody mentioned AI. That came, you know, afterwards and it was very quick and it moved there. You know, had we known that, then that would have said instead of seven years, it would have said 10 years.

44:36Speaker 1:But that's a big part of this.

44:38Speaker 3:But if you look at the macro picture, even going that in that expansion where you have, you know, healthy economy growing, you know, the nominal growth expectations for this year is still, you know, close to 6%, which is impressive. When you look at labor market that is stable, when you look at the monetary policy and the fiscal stimulus that go into the economy, that allows us to extend that. And business investments, the credit market is healthy. Everything part of that that allows you to create that tailwind, it was working in the right place, especially because relative. to the rest of the world, the U.S. looked incredibly attractive.

45:16Speaker 3:And it was leading the charge and it was clearly moving in the right direction because we didn't have the same issues that some other regions in the world had. Obviously, now we're in that past where we're basically getting close to the peak of the cycle.

45:29Speaker 1:And, you know, from here, it's.

45:31Speaker 3:Difficult to sustain, especially because you know, the risk premium associated with higher rates is starting to just take, you know, a little bit of the oxygen away of those risky assets. So, you know, our expectations is that we're probably, you know, in that, you know, end of that seven-year run, and we think that at some point in the next year we'll start to balance it out with other asset classes.

45:51Speaker 2:So you mentioned trade policy tends to hit the economy on a 12- to 18-month lag. The full impact won't show up until sometime in 2026. 18 months ago was Liberation Day, so we're right in the heart of that. What are we seeing from trade policy? How is it impacting the economy and inflation?

46:15Speaker 3:It has had probably less impact than we all thought. It has an impact, and it has had an impact.

46:21Speaker 2:A lot of exceptions and exemptions.

46:24Speaker 3:A lot of exceptions, a lot of negotiations, a lot of exemptions, and a lot of practical implementations. Because it's one thing to set up a tariff. It's one thing to set up certain components. But for that to fully be implemented and checked is more difficult to do. Like the compliance associated to figure out how the tariffs get paid and who does what. And especially because there has been obviously a lot of discussions also even with the Supreme Court and how this gets reversed and how it gets implemented.

46:52Speaker 1:That obviously lacks the effect.

46:54Speaker 3:But it's very clear to us that any kind of tariff has an inflationary aspect. The biggest difference of what we have observed, at least so far, is companies have had very clean and very robust balance sheets. So for many companies that were involved in that, even though their prices have increased, their inputs have been more expensive, they have been able to weather the storm without necessarily passing it all through the consumers. That has started to change this year. And if you look at some of the cost of goods, it's starting to just get slowly higher, slowly higher. Even though the inflation rate seems to be stable, the prices have gone up. And I think that's basically part of the inflationary component that actually people feel.

47:37Speaker 2:Stable at 3.5%. It's not getting worse. It's not going 4% or 5%. But that still means prices are ticking up. Let's talk a little bit about yield, which is directly related to inflation and the Fed rate. Earlier this year, the House view was now was not the moment to reach for duration. Since you mentioned that, we've seen the 10-year move up substantially. At what point do you lock in that longer duration and higher yield? Is it 6%? Is it 7%? Right. When does it become too attractive to not lock it in?

48:17Speaker 1:Right. Yes, it's true.

48:18Speaker 3:Well, it turned out that our team that does a lot of the work on fixed income was very clear that there were two things that we didn't want to pursue further, which is credit spreads were too tight. There was no reason for us to try to go too deep into credit. And the second is duration was too volatile and too risky. And that has worked well so far this year. Now, when you started to get to like the 10-year being at 4.8%, close to 5%, that to us has started to just become a little bit more attractive than what it was before. Mostly because then now you see the balancing of upside and downside. And actually you see like, well, where does the yields go from here? When you actually have a good economy, again, go back to the economy. Again, granted that we have this term premium affecting the long part of the curve, and we see the deficits obviously affecting that component. inflation expectations, and the market itself will probably still keep the little bit of that on that 10 year so we believe that staying in that sort of Average duration maybe below what typical benchmarks have is still a pretty healthy component

49:24Speaker 3:and you can enjoy very nice yields With high quality again, we still don't think it's time to get credit risk So that is in a big part of what we look to stay in the middle of the curve intermediate bonds with higher quality is the place for people can lock in very nice deals.

49:40Speaker 2:Intermediate seven to ten years, is that about right? Yes. So let's talk a little bit about biases, since you spend so much of your career on behavioral finance and better decision-making. Last year, you said there are four dominant biases that seem to really be affecting investors today. I'm paraphrasing. Herding around the Magnificent Seven, home country bias... Recency bias, especially amongst young people, and confirmation bias. Tell us about those four. Why did you name those?

50:16Speaker 3:Yeah, well, those four, and they'll continue to be into this year. It's been fascinating to see. So herding is very clear. You know, people follow the momentum trade. They love the momentum trade. And a big part of the help that we have is to make clients and investors understand that that is staying too concentrated because the momentum trade works until it doesn't. And then when it doesn't, basically, it could be very painful. So a very natural cognitive bias that people have is they don't know how to sell their winners. It's impossible for them when they see them on a run to think that it's never going to end. And I think that's a big part of our education to try to help them take profits when you can, rebalance when you can. Rebalance is like a word they Hear me say all the time. The second one is recency bias. The recency bias is basically putting more weight into the recent events than what it is the entire history. That's a very typical, you know, emotional bias when, you know, in days when there is lots of volatility, people tend to say, oh, my God, this is the end of the bull market. You know, we

51:21Speaker 3:got to get out and they forget about their fundamentals. Or days when they see, oh, you know, there's another great earnings report by semiconductors. Well, let's go into that and then put more money into it. That recency bias, when you only look at the most recent information as your basis to do that, is something we try to understand. And that, you know, tends to work when you actually look at longer horizons, when you look at, you know, more information and more data. Confirmation bias is my favorite.

51:47Speaker 1:And this is the typical example.

51:48Speaker 3:When you buy a new car and then you start driving your car, And you're starting to see cars like yours everywhere. Because your brain is basically trained to try to look for things that convince you that you're making the right choice. And so confirmation bias basically have, and we have, especially in a bull market, when you have clients that call us and say, hey, I told you that stock was going to go up. It's like, well, yeah, it was going up, but not for the reason you said, but it went for other reasons. And, you know, even though they didn't have any fundamental reasons to it, it's actually going to that. Or I want to go into these particular classes.

52:21Speaker 1:The typical example is Bitcoin.

52:24Speaker 3:You know, Bitcoin is one of those that was clearly in confirmation bias when it was down at $ 16, 000 and people had doubts about how Bitcoin was going to work. When it went up to $ 30, 000, people were like, oh, yeah, this is the right thing. And they did the same thing again. And they had no basis other than the confirmation of them. They created their own theories on why that was happening. So that is another part that drives a lot of the market. And the fourth one, I forgot what.

52:49Speaker 2:Was the one.

52:49Speaker 1:Home country bias.

52:50Speaker 3:Home country bias is more like you know, the safety component where you prefer to stay in the U.S. One of the challenges we have as a country is that we don't have enough exposure to international markets. And there's great companies internationally. There's great opportunities to invest and diversify. But most investors tend to feel comfortable, you know, buying their stuff they're good at.

53:14Speaker 2:They're familiar with.

53:15Speaker 3:And, you know, and a lot of that is being, you know, tested a lot in the market. or of saying like, well, you know, if you think about, you know, your brands that you're loyal to, right? You go to a supermarket and you buy the shampoo that you like and you don't want to change, you don't want to do anything else unless you want to actually try something else. So it's this idea of diversification and trying to understand that it's not going to be always the same. It's actually something we try to teach our clients.

53:39Speaker 2:And up to two or three years ago, the U.S. was outperforming developed ex-U.S. and emerging markets. The past few years, we've seen international really come on strong.

53:50Speaker 1:Correct.

53:51Speaker 2:So if you were stuck with, I'm reluctant to say, the recency effect of seeing U.S. outperformance, you might not even think to look overseas.

54:00Speaker 3:Well, then that was the combination, Barry, because the recency bias that says, well, the U.S. has outperformed the international markets combined with the home bias basically will prevent any client to diversify away from the U.S.

54:13Speaker 2:So I want to stay with the biases and If you could convince clients of Schwab, if you could persuade investors to think about adopting one rule to thwart their own biases before whenever the next bear market comes along, what might that rule be?

54:32Speaker 1:Well, we don't have one rule. We have three rules. We have three components.

54:37Speaker 3:So we call it, you know, and a lot of that has come from me, but it's clearly a big part of what our philosophical is for clients. to mitigate those biases, and it works for all kinds of clients. Stay invested. That's number one. You know, it's very important for people to try not to time the market. Stay invested is the first component, and we have lots of data over long periods, long cycles, that shows that stay invested is much better than not being or trying to get in and out of the market at different times.

55:07Speaker 1:Stay diversified.

55:08Speaker 3:That's number two. Diversification, even though it's like the old trick, it still works. And as I said before, The challenge with clients today and the challenge for investors today is they don't realize their level of concentration until it's too late. So having to rebalance, having a strategic asset allocation, trying to just make sure that they follow that path is very important. If you think about it, if you put your portfolio three years ago and you invest there and you keep it there and you don't touch it for three years, today you will be highly exposed to technology just for the way the market dynamics is. So it is important to take a look and have an approach to rebalancing that allows you to just get that diversification that you have.

55:47Speaker 1:And the third one is to stay disciplined.

55:50Speaker 3:The discipline basically creates a mechanism to have a systematic approach for those people. So things that we discuss with our clients, especially with those that tend to be more biased emotionally, is to say, let's set up the rules now. before we get into the action on the market. So if you see the market is down 5% one day, we already have the playbook. We already know what we need to do. We don't have to panic. We don't have to do a lot of things at that moment.

56:17Speaker 3:We already know what exactly we have to do and follow that discipline, whether it's rebalancing portfolio, whether it's taking profits, whether it's buying some of the companies that may not be natural, and this is very typical, You know, the example that I always provide is, you know, if you had an equal weighted, you know, strategy, well, if things started to get out of whack, you want to get them back to equal weighted. And that's sort of a natural thing to have. People like it because it's like, yeah, I know, you know, that company went down, so I need to buy more. And that's a little better approach.

56:48Speaker 3:So stay invested, stay diversified, and stay, you know, disciplined.

56:52Speaker 2:Last question before we get to our speed round, our favorite questions. What do you think investors are not thinking about or talking about today, but perhaps they should be? What topics could be assets, geography, policy, data? What's getting overlooked but really shouldn't?

57:12Speaker 3:I think the main area where clients get distracted the most is they get concerned about geopolitical risks. They get concerned about inflationary pictures, and they have the right to do that. But a lot of the benefit of long-term investing, it's something that gets overlooked all the time. And again, a lot of that is because of the recency bias that exists today and the availability of information. So this concept of setting up your goals, setting up your investment strategy, setting up your strategic asset allocation, and follow that path, is something that, believe it or not, gets overlooked all the time. And it works no matter what part of the cycle is, as long as you feel comfortable understanding risk.

58:00Speaker 3:At the same time, the risk budget, and we always talk about this, is so critical for people to understand how to allocate risk. Not to allocate assets, but how to allocate risk. And I think that component gets overlooked all the time. And the way I think about it is that when you go to a dinner, you basically have your main entrance. You also have your salad. You also have your side. And you don't necessarily have the same level of weight to each one of those. That's a risk budget allocation. So you need to understand how much is going to be in your core portfolio. It's going to be long term. And how much is going to be in other parts of the market. Specifically nowadays, which there is a temptation to go into these predictive markets.

58:44Speaker 3:And I think we try to avoid markets that way because the difference between gambling and investing is huge.

58:51Speaker 2:Right, that's just pure speculation.

58:53Speaker 3:And it's, you know, the way that our team has explained it is, you know, when you're investing, you become an owner. When you're gambling, you don't have anything. You're just basically, you know, putting money in the box. The odds are against you, and you don't have any ownership.

59:08Speaker 2:The house usually wins.

59:10Speaker 1:Correct.

59:11Speaker 2:All right, so let's jump to our favorite questions that we ask all our guests. Starting with, tell us about your mentors. You mentioned one earlier. Who helped shape your career?

59:22Speaker 3:Well, you know, the person that, you know, brought me to Bank of Strauss was, you know, really an innovator that actually took a lot of faith. And he was able to see, you know, in a PhD student, that was doing Bayesian statistics and modeling, you know, the ability for that, and I.

59:40Speaker 1:Learned a lot from him.

59:41Speaker 2:And that was from who?

59:42Speaker 3:That was a bankers' trust, and his name is Phil Green.

59:45Speaker 2:Phil Green.

59:46Speaker 3:And Phil basically, you know, put together this vision where he wanted to create this, you know, concept. He bought into the idea of vision, and that helps me in just understanding, you know, how this evolves over time. I have also, you know, my advisor from, you know, Duke. You know, his name is Mike West. You know, he, you know, has, you know, obviously deep academic background, clearly a lot of technical, but he's also a business owner. He also understands the practical application of all these techniques, which I believe vary that, you know, combination of deep quantitative tools, you know, with reality and making that merge is something that we need more.

1:00:25Speaker 1:There's a lot of great technicians.

1:00:27Speaker 3:There's a lot of great people, a lot of really smart people, but having that idea to be able to solve, it's actually critical. And I would probably say, You know, the model that we get from Chuck on the values that he has put together.

1:00:40Speaker 2:Chuck Schwab.

1:00:42Speaker 3:At Schwab of getting access to clients, provide clients with the right solutions, being transparent, being accessed, and thinking through client eyes. That has been a big mantra for my life. You know, Schwab has been the longest job I ever had. And it's been great.

1:00:57Speaker 2:Let's talk about books. What are you reading currently? What are some of your favorites?

1:01:02Speaker 3:Well, I love the books of, you know, Sapiens was one of my favorites. Just to re-read it again. You know, I think Phantasm Slow was another great of my favorites. I like to read a lot about, you know, these components. I read the Hail Mary.

1:01:18Speaker 1:Book that was actually pretty fun. Project Hail Mary. So those are great.

1:01:22Speaker 3:And those are great, you know, components that I like to always think about the concept of how you apply those to things that I can do for my work.

1:01:32Speaker 2:What about streaming? Were you watching or listening to anything interesting these days?

1:01:36Speaker 3:I started watching this show called Silo.

1:01:40Speaker 1:On Apple TV? On Apple TV. You're a sci-fi fan.

1:01:45Speaker 3:Well, it has a lot of pieces that I think it was great.

1:01:49Speaker 1:I did watch.

1:01:52Speaker 3:Ted Lasso for a while, and that was also good, especially the first season was particularly good.

1:01:57Speaker 2:Fabulous, yeah.

1:01:59Speaker 1:You know, it's quite a.

1:02:00Speaker 3:And then there was this other show called The 100, which actually was very good because.

1:02:06Speaker 1:Again, it was sci-fi.

1:02:07Speaker 2:Yes.

1:02:08Speaker 3:And it had many, many episodes and seasons. But what it was great because it was, again, a sci-fi, very similar to Silo, but the whole plot was about the humankind was, you know, in this nuclear war. And therefore, they selected 100 people to just put them on space. And they had to survive, you know, there until the Earth was, you know, safe again to just come back. Once that happens, then, you know, there was a lot of changes. There was a lot of things for survival.

1:02:40Speaker 3:There's a lot of leadership lessons on how to, you know, deal with that and how to deal with adversity that I thought was fascinating.

1:02:47Speaker 2:I know you mentioned reading Project Hail Mary. Have you seen the movie yet?

1:02:52Speaker 1:Yes, we did.

1:02:53Speaker 2:Yes. Really, it's really quite amazing. Our final two questions, what sort of advice would you give to a recent college grad interested in a career in either quantitative analytics or wealth management?

1:03:08Speaker 1:Yeah, number one is the.

1:03:11Speaker 3:Yes, getting your exercise and trying to get up to speed on all the methods that we can use. And in this day and age, understanding, getting a CFA, getting some project where basic theory about investing comes into play. Second, which is very important, soft skills. That's something you don't get taught in school. But the ability to have the soft skills to be able to talk and explain They'll be able to say, all right, this is the things that you can do, and this is how you can structure it. That, to me, becomes like a big part of the assets. That combination of being able to be good technically, but being able to explain things becomes incredibly valuable.

1:03:55Speaker 2:And our final question, what do you know about the world of investing and behavioral decision-making and quantitative research today might have been useful 30 or so years ago when you were first getting started?

1:04:10Speaker 1:What do I think today?

1:04:11Speaker 2:What do you know today would have been useful 30 years ago?

1:04:15Speaker 3:I would probably say that, you know, underestimating the effect of how fast, you know, the market was going to move was there. I mean, I think there was a wrong idea that you can be faster than the market and that people can really get ahead of many things by just trying to capture information faster. I think that information advantage that people claim to have, you know, when after all these years in the investment, you know, it's very hard to actually capitalize.

1:04:49Speaker 2:Really, really fascinating. Omar, thank you for being so generous with your time. We have been speaking with Omar Aguilar. He's CEO and CIO at Schwab Asset Management. If you enjoy this conversation, well, check out any of the 662 we've done over the past 14 years, 14 years, 12 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you get your favorite podcasts. I would be remiss if I didn't thank the crack team that helps put these conversations together each week. Anna Luca and Elizabeth Sedrin are my producers. Sam Danziger is my video producer. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.