0:05 spk_0

Welcome to a new episode of Opening bid. I’m Yahoo Finance executive editor Brian Sai. Like I always say, this is a podcast that will make you a smarter investor, period. And this episode is definitely going to make you a smarter investor. I want to welcome in for our future interview Lindsay Hans and Eric Shimp. They are co-heads of Merrill Wealth Management. Good to see you all here at the NASDAQ in Times Square. Appreciate it.

0:27 spk_1

Good morning,

0:28 spk_0

Brian. Uh, level set for us, of course, Merrill Wealth Management.Inside of Bank of America, um, how big is this business, Lindsay? Just let’s get some numbers on the table here.

0:37 spk_1

Sure, we have the privilege, Brian, of leading $3.6 trillion in client balances, so 3, yeah, with a T, uh, we are spread out across 600 locations across the United States. We have thousands of financial advisors that lead those clients. So it’s a large scale firm and, and we’re growing. What is it

0:55 spk_0

like?Having the responsibility to oversee $3.9 trillion yeah,

1:01 spk_2

it’s, uh, well, first of all, good morning. um, it’s a big business as Lindsay said, and sometimes you look at it and you can say wow, it’s, it’s, it’s great, um.It’s a great honor. It’s a privilege, you know, Lindsay and I have, as she said, you know, we work with 28,000 fantastic teammates every single day who just look to care for their clients, and it’s, it’s big. It’s, it’s a fair amount of time on the road, as you would imagine it’s a great responsibility, um, but we work, we work with just a great team of people,

1:29 spk_0

so April, of course, has been a roller coaster for markets. Maybe that’s putting it nicely bring us inside.How your life has been so far? Where have you been? What are you hearing from clients because when I talk to investors, some of them are scared of their minds, others are looking for opportunities when I talk to CEOs, same vibe they wanna put money to work building new plants, but they have told me operations and plan.are in a state of chaos. How are you seeing things?

1:58 spk_1

Yeah, I mean, well, first off, as we headed into the year, um, I think all of us knew we were a bit overdue for a correction. So in some ways, um, we were expecting something. You never know exactly how it’s gonna come when it’s gonna come, and what the different dynamics are, as we know, um, but our advisers have made a career over helping clients through periods of volatility and every period of volatility feels a little bit different.Um, you know, this one a little bit different, um, you know, of course, but we work with clients in a way that tries very hard to prepare them. We’re very anchored in financial planning and when you’re doing financial planning the right way, you’re, you’re starting with a client of what’s your risk tolerance? What’s your time, you know, your time horizon for liquidity, um, you know, what could go wrong here.And so when these things come we feel that we’ve really prepared our clients and you know we also lately, especially the last month, we’ve been talking to clients about things like the power of staying in the market. When you look at since January 1st, 2020 and you look at the 10 best days in the market since then, had you been out of the market in those 10 best days, you’d be down 33%.Being in the market for those days and all all the time in between would have led you more like up 18%.

3:16 spk_0

Maybe Warren Buffett’s on to something. Yeah, I mean I mean he’s a pretty

3:19 spk_1

smart talk to clients about staying the course, right? And, uh, you know, we do listen to Warren Buffett as well,

3:24 spk_2

so it’s and as Lindsay was saying, you know, really grounded in a plan and when there’s bumps like this where things happen and again they’re never predicted, you know, but they’re due once in a while, um, it sort of puts that.It it tests that plan a little bit to the foundation, right? OK, we’ve talked about turbulence, we’ve talked about risk, we’ve talked about up and down sides down 20% 5% and then, and then, and then you have it, right? And so it’s a great time to sort of maybe revisit some of those tenants, you know, what’s the goals, what’s my time rise and what truly is the purpose of these funds and sort of get grounded back in and then I think the, the next steps are sort of.Easy then right? you sort of say, OK, am I allocated properly where my short, where should I be looking to maybe add some things or make somechanges?

4:14 spk_0

I’m always interested in what.Folks such as yourself are hearing from clients. What are you hearing from your financial advisors? These folks are on the front lines, especially in this environment. What questions are they coming to you with and what’s your message been to them when they’re on the phone with clients that might be scared out of theirminds?

4:36 spk_1

Yeah, I think we’ve heard a lot from financial advisors in some ways of, hey, we’ve been through this before.And we will get through this and again this just validates our model in many ways Brian right the power of having a human advisor sitting next to you the same side of the table looking across at what’s going on, whether that’s in the world, that’s in your portfolio, that’s different solutions we have to figure out what you want to do and that partnership and relationship.Becomes even more valuable in a market like this. So in many ways advisers are feeling great because um they’re being proactive with their clients they’re helping their clients understand um you know the guidance. I think this 1 may be a little different because our advisers have clients on both sides of the aisle and in this environment, given.What’s going on, there’s probably a bit more of a political conversation, uh, maybe even before we get to the portfolio and that’s being initiated by clients. Well,

5:30 spk_0

I’mglad you mentioned that. Um, I’ll stay with you on this one. Are Republicans.Investors, are they, are they OK with the volatility and they’re gonna ride through because when I talk to investors that have voted for President Trump, they’re like he’s going to bring back manufacturing. He’s gonna cut regulation. I’m OK if my stocks are down. I’m confident over the next 5 years these stocks might be back up. Do you hear thatfrom them?

5:55 spk_1

Various client by client, um, you know, you’re probably gonna get a bit more of that sentiment from clients on, on the Republican side of the aisle, but you know, everyone’s gonna process this a little bit differently again depends on where they are in their life, their portfolio, um, there’s just a lot of emotion going on right now as we know, so it’s just gonna depend on the client. I thought

6:12 spk_0

Robo advisors were going to take over

6:14 spk_2

everything, you know, I, I don’t think it would surprise you that the co-heads of Merrill Lynch believe the best advice is given by humans at the kitchen table, right, and.You, you asked Lindsay about, you know, what are advisors thinking right now? How are they it’s just been great to to watch them. I mean, it’s they’re at the kitchen table, they’re on the telephone, they’re just, they’re just again grounding themselves and their clients back in this financial plan the risk that you’re taking, is it proper? What’s the goal for your money and and being part of Bank of America.Um, we just have access to information and access to data, you know, one thing I would, you know, Lindsay and I encourage people to something called the Bank of America Institute. We have 70 million clients at Bank of America customers, and we see that data.Right, and we have real time what are clients spending money? What are what are payrolls looking like, um, what are savings account balances looking like when you have 70 million data points, um, you just sort of get a real time, you know, view as to what’s going on but then through the work.Chris Heisey and our research team, they take that data and they frame conversations for our advisers to have individually with clients, and it sort of helps with the pathway of, you know, of a wayforward.

7:33 spk_0

One piece of research we read at Yahoo finds from BFA is is the fund manager survey, and the most recent one dropped and had a lot of cautiousness in this report. Do you see that cautiousness with clients that reflected that, you know, that the report caught, I believe they didn’t.They just seem very bearish on thestocks,

7:51 spk_1

yeah, we saw that as well when we look though at the peak volatility period earlier this month as we were looking day to day, you know, Thursday, Friday, Monday and Wednesday, um, our clients were actually net buyers during that period on the wealth management side and particularly with ETFs, um, so we saw a lot of buying in ETFs. You saw some selling, but you saw more buying.Um, we saw a lot more interest in our centrally managed portfolios that Chris E and the team run, um, as well as our custom managed portfolios with several strong third party managers, um, you know, that come in and provide that for our clients. So, uh, we did not see and even on, even, even later in the week we did not see panic bond market selling, um, so again, we, we generally saw the power of this model of stay the course, um.And at the end of the day we’re gonna get through this and I’m gonna go back to my plan as a client and has anything changed for me and my plan? No, um, and then we’re gonna monitor, you know, we, we like everybody, there’s a lot of uncertainty as to what comes from here and we’ve got a monitor, but generally we did not see, you know, clients hitting the sell button across the board

8:57 spk_0

when clients are dipping their toe back into a market that is that it’s off its highs. What are their reasons for coming in here?And buying even knowing that the markets may turn on a dime because of one social media post,

9:10 spk_2

you know, it’s, I think it’s again it’s grounded in this financial plan that that Lindsay talked about. It’s this idea of.You know, I’m a big believer, you know, the old adages of the markets work, you know, dollar cost averaging, having some dividend, having a well diversified portfolio, um, buying on a regular basis, you know, if you look back over time, Brian, those things work.Um, and so it’s looking for ideas. It’s looking for, OK, where am I allocated for my risk tolerance again? What are those goals and then saying, OK, the things that we made a decision on six months ago, are those fundamentals still in place? Are the reasons why we made those decisions still the same? And now maybe we have an opportunity to, to, to add some things and if you look at.You know, our client balances, um, we have been net buyers over the last couple of weeks as, as Lindsay said, but, but cash is, is, is there, um, I would say there’s a fair amount of dry powder, you know, if you, if you look at that $3.6 trillion and I think that’s a couple reasons why, you know, there’s been an interest rate the last couple of years, so clients have been able to sort of have cash as in an asset class.

10:18 spk_0

Again, cleaning up on my BFA CD.

10:20 spk_2

There you go. Thank you. Thank you.Thanks

10:24 spk_0

Brian. Should I be thanking him? I don’t know the treasury.

10:28 spk_2

I don’t know, but there’s, you know, there’s been a rate on cash for the first time in a while, and clients have taken advantage of that, and cash has become an asset class again, and I think.That just gives clients an opportunity to say, OK, when the time is right to think through it again with a time horizon, you know, most clients aren’t invested for a day, right, or a week. What is that? What is that long term

10:51 spk_0

nobody wants to be long term until they’re they get punched in the face and their stockis down.

10:56 spk_2

But, but that’s why I come back to my opening, you know, the opening question you asked me is it markets like this test that result.They test the goal. Did you clients set to retire or said now you wanna retire tomorrow, or are we still talking about retiring 20 years from now and I come back to Lindsay’s comment of, you know, days in the market matter.

11:15 spk_0

All right, hang with us. We’re gonna go off for a quick break. We’ll be right back on opening bid.All right, welcome back to Opening bid. Uh, we’re having a great conversation with Lindsay Hans and Eric Schimpf, co-heads of Merrill Wealth Management. Hopefully they are going to help you make lots of money in the market, uh, in this episode, and really all for free. You have to watch this, um, but, but anyway, um, you know, I recently had a conversation with Treasury Secretary Scott Bessett, and he mentioned, uh, in terms of, you know, Treasury maybe not being, uh, in a crisis, where do you see the bond market headed?

11:52 spk_1

Yeah, so, um, we try to think about things, Brian, in the standpoint of scenarios, right? So, um.You know, there are, when we look at the broader macro picture, our, our CIO team’s base case scenario, um, is actually one of still some moderate growth broadly, um, you know, in terms of earnings growth, um, you’re gonna.Get periods of choppy volatility here and there, but overall, um, that’s actually our base case. We have a bear case scenario, um, that speaks a bit more to your question that’s gonna show, you know, flat to negative earnings growth, um, we’re gonna continue to see a pick up in bond yields, um, and, and things are gonna be, um, a bit more dire, um.Again, we’ve got to run the company in a way, as Brian Moynihan says often that prepares for any and all environments and we, we believe we set the company up that way, um, and we’ve got to be able to help clients through both of those different scenarios so

12:49 spk_2

and I and we listened to your, you know, we, we saw your thank you listen to the interview it much appreciated and um.I think we would agree he was a big proponent of financial literacy and, and having conversations and and working with with with advisors, um, I think he’s exactly right, you know, and we talked a minute ago about sort of old adages, you know, thing things work, um, I think one of the things that really works and we’re both parents, um, is starting early and starting young, right? What are first time investors doing? What are that next generation.Doing, um, to get started, um, hopefully

13:25 spk_0

they’re buying their kids on video on the dip, guys let’s just let’s just be honest. Well, let me, um, before I could go down the rabbit hole that one, well, the other thing the secretary mentioned to me is, is the tax plan, and he specifically said we might get clarity on.The next Trump tax plan by July 4th. I thought it was an interesting comment. What are you hearing? But he did not rule out letting, uh, tax cuts potentially expire on the wealthy. What are you hearing from clients right now? How are they preparing for a potential tax plan later this year?

13:53 spk_1

Yeah, so, uh, so much going on right now. You’ve got tariffs, you’ve got immigration policy, you’ve got the tax bill, you’ve got deregulation and the impact on multiple industries. I think any one of those alone is complicated all of those together, uh, is quite complex as you know, to try to predict and navigate, um, so you know we, we are.Waiting and watching like most in terms of how this is gonna play out, um, you know, again I’m just trying to stay with clients and manage to what does this mean for you, you know, at the end of the day, staying the course, um, but we, there’s, there’s quite a few uncertainties right there and and

14:33 spk_2

thecycle’s quick, right? And, and we often say, you know.What it could be versus really what it is and it’s a lot easier when we sort of know what it is.

14:45 spk_0

Well, if these if taxes do go up on high income earners, what changes do you anticipate them making to their portfolios?

14:54 spk_2

Well, I think you, you know.Tax advantage investing whether it’s a new tax plan that changes rates on the wealthier, it’s been a theme that has just been popping up even prior to this administration. I mean it is one of the biggest themes that we hear people leaning into whether it’s tax rates, um, the markets.Had a pretty nice run the last couple of years so embedded tax gains that people already have and they’re looking to transition their portfolio a little bit because risk might have changed they might have achieved a goal so we think you know having solutions that take really tax advantage investing at heart.Is really a big area of growth for us and Nancy Fahmy, a wonderful teammate of ours that leads our investment solutions group, has really been active in sort of how do we provide solutions that that help clients do that

15:42 spk_0

is the mis might tie somewhat into this is the 60/40 portfolio dead? You know, I recently had a guest on here and he was suggesting Larry McDonald, he was a bond investor, he was suggesting 30, 30, 30 with 30%.Uh, being tied to commodities, what are you, where do youstand

15:59 spk_1

on

15:59 spk_0

that?

16:00 spk_1

Yeah, I mean, you know, we were just looking at this the other day when you can go back to the periods of peak volatility in April, if you looked at a hypothetical diversified portfolio of domestic equities, international equities, and bonds, you were down 3%. You look at that compared to, you know, the S&P over that period, which was down 10% year to date at that point, so.Um, we, we, we continue to believe the power of asset allocation, diversification in terms of gold, um, gold could be a great hedge in periods of volatility.

16:30 spk_2

Yeah, I, I would add to, you know, 30, 30, 30, whatever the mix is, you know, I think there’s an asset class also that’s sort of starting to come out on this idea of alternates private, private equity, right? You know, 15 to 20% of the companies here in the United States are publicly listed right there’s a huge market out there that’s not, and we see clients, you know, ultra high net worth clients, wealthy all the way through the wealth continuum that are seeking for this demand.Of, of you know alternative investments and access to private investments and private companies.UmOur research, our asset allocation models could say, you know, some clients with the right time horizon, the right risk tolerance, up to 25% of their portfolio into something like alternative investments. So you know, the traditional equity bonds cash, maybe it’s equity bonds, cash and and alternatives in a very fast growing sector we talked about tax.Investing a few minutes ago I would say just, just the ability for the public, you know, investor to reach into the private space is really a theme I think people be paying attention.

17:37 spk_0

Thecool thing with this podcast is that viewers and listeners get direct access to our guests, so they’re getting direct access to you. Um, let’s say someone has a $500,000 nest egg and they are retiring at 6 months.But they’ve seen a lot of their wealth evaporated or eviscerated in the past month. What did they do? What’s their game plan?

18:02 spk_1

And they’re retiring in

18:04 spk_0

6 months. They now have a $500,000,000 nest egg. Maybe it was at $750,000. Prices are going up for their everyday needs. What do they

18:14 spk_1

do? Yeah, look, it’s it’s, every client again we keep going back to that we do not have a one size fits all approach to our clients.Each client’s going to have their own risk tolerance and sensitivity and you know time horizon, but you know somebody that would be that close to retirement needs liquidity needs to maximize liquidity in our views to really be looking at things like how do I maximize yield on cash to Eric’s point, you know, cash is an asset class and there’s now yield and.And, and so probably be more of that type of conversation with the client really being that close and then thinking about fixed income right from the standpoint of being able to put coupons, um, again, you gotta be, you think about what part of the fixed income market you wanna be in, um, but you know we’d be in a more defensive posture with a client in that situation.

18:59 spk_2

Yeah, I mean Lindsay’s dead on. I would come back to that asset allocation. I might even suggest.If someone knows they’re 6 months out from retirement, it’s not really a question for me of what’s going to happen short term, and

19:09 spk_0

thisisn’t for me full and fair.

19:17 spk_2

I’m not here but, you know, your scenario, right? Hey, I’m, you know, someone’s ready to retire in 6 months and they’ve seen the portfolio go from $750,000 to $500,000.I would be, I, I wish they would have had a conversation 2 or 3 years ago saying, OK, how close are you ready to retirement? What is the risk that you’re going to take? And yes, there’s got to be some risk exposure there because you’re not gonna hopefully live just 1 year in retirement, right? You’re gonna have a retirement you’re gonna have a retirement that you enjoy and you travel and, and whatever is important to you, you, you do, but it’s a, it’s a broader discussion, so you’re gonna need some growth.But again, markets like this test the resilience of a financial plan and was it built right? and that comes back to the power of working with an adviser and really just making sure it’s tailored at an individuallevel for you.

20:03 spk_0

In the last, uh, two minutes of the podcast, we always love to get our hot takes, uh, from guests. This one is, I’m a bit of a leadership buff. How does this work? Maing

20:13 spk_1

were waiting for youto

20:13 spk_0

$3.9 trillion with 3.6 $6 trillion with a with a T.Like what are your strengths and how do you combine them to run a business that shows up on BFA’s earnings release in a very big way,

20:27 spk_1

guys? Yeah, uh, you can imagine we got that question a lot. It was a popular one, especially in the beginning, um.But you know, we, we looked at a couple of things in, in our years combined 54 years of professional experience, um, lots of different geographies across country, lots of different roles, uh, and communication.It is really important in any job. It’s important in any marriage. It’s important in any team relationship at work. It’s important in any role that you have and so a co-head model um and how we make this work, uh, is very anchored in how we communicate and Eric has said sometimes I’ll steal the line um we start our day together on the phone or in person depending on where we are in the country, and we end our day on the phone and a lot in between and none of this works without the communication, um.

21:21 spk_2

Yeah, it’s been 2 years we celebrated

21:23 spk_0

2 years. I remember seeing the news yeah

21:25 spk_2

yeah um and as Lindsay said it was a very popular question, uh, when, when it happened for me, uh, and this happened within literally 30 seconds of us both knowing that that we had this opportunity to do this together, uh, grounded in immediate trust that that we know putting the best interest of our clients and our advisers and the people that we serve every day.At the heart of every decision we make, um, you just, you find sort of a, a common comfort in that so you know we have the best interest at heart. Um, my day does start and and and and ends with Lindsay. People sometimes ask us, uh, do we disagree? Um, sure, you’ll never know, but I think that’s the power of, you know, the old wives’ tale, two heads better than, better than one, and there’s a tremendous amount ofleverage.

22:14 spk_0

Do you think this model could work more broadly across Wall Street?Or is there something you need to be? Yeah, no, I,

22:21 spk_1

I, I actually am surprised it’s not more common and, and we can have our own theories as to why, but I mean Eric’s point on when you start from a place of um.Hey, like doing this together is gonna give us diversity of thought and get us some better outcomes for clients and the people that we serve and is gonna get us scale, leadership at scale because the efficiencies that come with being able to cover more ground when you’re two people and when you, as I mentioned at the beginning, you know, we’ve got people across 600 locations across the country and so we can be in a lot more places, um, separately and then.And then you know the part we we haven’t talked about yet in this podcast but we talk about often is both of us are parents as Eric mentioned and so we subscribe to the view of not a work life balance impossible to have balance on anything and but it’s work life integration and so you know when you think about um got something with my kids’ school now I don’t make everything at my kids’ school, but the things that are important I do.Um, hey, the place is gonna run without me. There’s, there’s amazing leaders, but knowing that there’s someone in the exact same job that I’m in, um, that has the judgment and has, you know, we have full autonomy to be able to say to each other, you got this, I got this, we’re going to make the decision and move on.Um, in times where there’s other things going on in life, uh, is incredibly convenient and valuable and powerful for the people we lead in the industry to see that we have two we each have two jobs. We are the presidents of Merrill and we’re also parents and both matter and you can’t do both of those A plus every day, uh, but we do prioritize both of those as best we can.

24:00 spk_0

Well, I will say this, uh, to wrap this up, hanging with you both for a while I can see why this works like there’s just.This one, this is one brain. I get it I get it I get it now more and I and I and I feel you. It should be a model employed by more of these firms because these businesses, as you know, have gotten so big humongous and very

24:19 spk_2

and it’s out there, Brian. I, I’ll tell you when we, when we were promoted and we got the job, you mysteriously hear from other co-heads in the industry outside of the industry that reach out to you and send you a little note and and wish you luck.

24:32 spk_0

You’re on.You’re the standard bearers.

24:33 spk_2

That’s right. Um so yeah, I, I, I’m surprised more people don’t do

24:36 spk_0

it as well. All right, well hopefully they will, uh, after this episode. All right, Lindsay Hans and Eric Schim, co-heads of Merrill Wealth Management. Good to see you. Hang tough. Uh, these are busy times. Appreciate it. You too, Brian. Thank you, thank you so much. That’s it for the latest episode of Opening bid. Hit us with those thumbs up on YouTube. Love your comments, always try to get them, get to them, uh, love the hearts too on the podcast on platforms. Um, appreciate the love. Talk to you soon.