Good morning.
It’s time for the talk, and we don’t mean the birds and the bees.
In a recent survey from Fidelity, 56% of Americans said their parents never talked to them about money. The majority of respondents considered their wealth self-made, and one-third of baby boomers said they don’t feel a financial plan is necessary. It could explain why clients tend to shy away from talking about their finances with their children, or drag their feet when it comes to creating an estate plan.
But, with the Great $84 Trillion Wealth Transfer already underway, the talk is going to have to happen — and the sooner the better. We just hope clients don’t act it out with their kids’ toys.
Inside BlackRock’s Latest $12B Private Assets Deal
If private placements are the latest investments flooding Wall Street, BlackRock’s Larry Fink is about to make it rain.
The CEO of the world’s largest asset manager announced three mega deals this year, including an almost $12 billion buyout of the New York-based private-credit manager HPS Investment Partners this week. BlackRock manages some $11.5 trillion in assets overall, and the deal would boost its private-assets war chest to a reported $600 billion — on par with goliaths like Apollo Global and KKR. It is also expected to increase private markets fee-paying AUM and management fees by 40% and 35%, respectively. It’s a significant push toward Fink’s dream to “index the private markets” and package them up in easy-to-use products like exchange-traded funds.
“BlackRock is a behemoth,” said Kelly Ann Winget, founder of the private equity firm Alternative Wealth Partners. “Their dominance in the public markets has left them little room for growth.”
Saving Private Ryan
Once a murky corner of the investing landscape, private investments can offer exposure to deals not on traditional public exchanges, like home lending or real estate investing. Earlier this year, BlackRock struck a deal with Global Infrastructure Partners to buy the company for $12.5 billion, before deciding to take over private-market research shop Preqin for $3.2 billion in July. The HPS deal completes a stunning trifecta for the company, which will be able to offer a whole host of illiquid investments.
“No one’s going public anymore,” said Aniket Ullal, head of ETF research at CFRA, adding that the number of public companies has been dropping for decades. “There’s simply more private equities and more private debt available — and a lot more opportunity.”
The challenge will be tracking these notoriously illiquid assets. Investments in private debt or infrastructure can tie up money for years, and while public equities are bought and sold daily, private assets are sometimes only priced quarterly or annually. It makes packaging them for resale much more difficult … but that’s not stopping asset managers from trying.
The Race Is On. Apollo Global teamed up with State Street in September to propose a private-credit ETF that is still awaiting regulatory approval; KKR and Capital Group are also slated to launch two hybrid funds next year. A study from Cerulli Associates found:
- Financial advisors already own roughly $1.4 trillion in less-than-fully-liquid assets in the US.
- While just 13% of alternative assets are held by retail investors, that’s expected to jump to 23% in the next three years.
Winget said clients can start small and local by looking for opportunities to invest in community-based businesses or entrepreneurs. Advisors can also help them research self-directed strategies. “This is where private investors have an incredible opportunity,” she said.
TradePMR’s Robb Baldwin on Robinhood and the American Financial System
When TradePMR CEO Robb Baldwin was a boy, his grandfather showed him all the stock tickers published in The Wall Street Journal. Three and a quarter here, two and a quarter there. The company prices became a special language.
Decades later, the custodial platform he founded in 1998 was acquired by investment goliath Robinhood for $300 million, paving the way for the next chapter in his financial services career. It’s also a push toward the next generation of investors. “At every industry conference I’ve ever been to, we’ve always been formulating: ‘How do we meet our clients’ kids? How do we hold on to those assets?’” he told The Daily Upside. “They’re at Robinhood.”
The free-trading app turned financial services powerhouse has amassed 24 million users since its inception in 2013, most of them younger investors who are still accumulating their wealth. It has also built a tech platform that can go toe-to-toe with anyone in the industry, he said.
Advisor Upside sat down with Baldwin this week next to a lit-up Christmas tree at Rockefeller Center in New York City.
AU: Robinhood is geared toward retail investors. How does that jibe with wealthier clients in our industry?
Robb Baldwin: There are people who have, say $50 million to $100 million who still do their own thing on a platform like Robinhood because that’s their only way to play. It’s very difficult to call your advisor and say, “Hey, in my current asset allocation, would you mind adding XYZ? It’s a biotech. It’s a really risky play.”
The advisor doesn’t want to screw up their track record or mess up numbers in their portfolio. They tell the client to go elsewhere and put it in a different bucket.
How do you see the industry changing?
We have a whole generation that is about to inherit wealth that does things totally different. I read an article the other day that highlighted how America has one of the most unbanked generations that we’ve seen in a long time, and they labeled it as if it was a bad thing. The truth of the matter is that we have a lot of youth that don’t feel the need to have a bank account, and that’s OK. They’ll use Cash App, Venmo, Robinhood, or whatever, and that’s where they put their money, get their paychecks deposited, and have interest-bearing accounts. They don’t need a bank anymore.
If you want to see where we’re going in America, look at Revolut [based in London]. They have 50 million users globally. I saw a member of our development team in Lithuania pay for something with his phone through Revolut. He said “I do everything on here — buy my crypto, buy my stocks, pay my bills, send friends money. Everything you do with five apps, I do with one.” That’s the future of American financial technology: being able to do everything in one spot.
What’s something no one is talking about?
There’s only about five providers of back office systems that run the entire wealth management industry — Broadridge, FIS, Refinitiv [now LSEG], SS&C, and Fiserv. Schwab, Fidelity, State Street, Wells Fargo, JPMorgan, and Morgan Stanley are all on these same systems, and they’ve done the accounting and the recordkeeping for these firms for years and years and years. Those systems have to change. We’re never going to be able to compete with the non-banked applications with antiquated banking technologies.