【磨耳系列】专访摩根大通CEO玛丽·埃尔多斯 ：我们一直致力于为客户提供专业理财服务

When you were growing up, did you say I want to manage $4 trillion when I'm an adult?

I wish I had that Claire Voyance back then. But no, I my 1st foray into the money management business as been retold to me, is my grandmother asking me to balance her checkbook. And she actually paid me a couple of dollars every month to do that. And one day she said, I think you need to get a real job and sent me downtown to the city of Chicago to look for job.

I found one in the mail room equivalent of Steinro and Farnham, which was an investment management house. And the mailroom equivalent was a computer room where you ripped off the pieces of paper for the big portfolios, and then you walk the different floors and you deliver them to people. And over time, a few of them took interest in explaining to me what I was delivering to them every day.

And the rest is history, really. I mean, that's when I fell in love with markets and understood that every day it was different, that all of them manage portfolios in a different manner. And I also Learned about the concept of overtime, so that was pretty cool.

Too. Okay. So now you've been a JP Morgan for about 25 years. Yes. Okay. And now you run one of the most important parts of JP Morgan, which is I say is the asset and wealth management business. For people that aren't that familiar with wealth management, what actually is wealth management and how is that different than asset management?

Great question. The two are often used interchangeably. But the, but there they have distinctions. Asset management business is where we manage money on behalf of individuals, institutions, sovereign funds, pension funds. We manage them in mutual funds. We manage them in etfs.

We manage them in single stock, single bonds, hedge funds, private equity and the, and that is the heart of the fiduciary business that we run here at JP Morgan. Wealth Management is that plus understanding someone's entire balance sheet. For the individuals where we manage money, we also help them with their mortgage.

We help them with a loan that they might need. We help them with their basic credit card. And so wealth management is trying to help someone with their entire life, both their assets and their liabilities. They're planning, they're gifting the legacy that they want to leave for their families, the 5:0029 plans they need to prepare to get their kids to go through college. And it's a great insight into people's entire journey. Now.

Many organizations like JP Morgan have wealth management businesses. Some are bigger than, some are smaller. But basically, you're managing money for and doing other things for wealthy people, more or less. Is that fairly right for wealthy.

People. Although, you know, many of the successful wealth management firms today have figured out how to take all of those great learning for what they do with very wealthy people and also package them for people who are, do have their 1st paycheck and they wanna be able to save a little bit of money or wanna have access to things that maybe they wouldn't I normally have. And so we've been able to take things like what we do for a super wealthy family, package it into a bite size where you walk into a chase branch and you're able to get some of the same advice. And so it's, I think it's opening up the world to be able to help people.

And the most important thing is to be able to save early. And if someone can be there to help you through that, that's one of the most important things. If you look at an average investment in the world, if you just look over the past 20 years, take a balanced portfolio, it's about 6.4% average annual return for people that generally manage money.

The problem is most individuals actual return is less than 3%. So it's less than half of that. Why? Because they make emotional decisions when markets are one way or another. They get caught up in the hype of things. And so it's super important to have that advice as early on as we can give it. And I think that's the rewarding part about this business is being able to try to help people through all of those different journeys that they have.

But what you're saying is that the average person, if he or she says, I'll manage my money myself, I'll save some fees that I would pay to JP Morgan, somebody else, that person generally is either selling at the wrong time or buying at the wrong time, or at least they're not getting the returns that they could get if they had a professional manager helping them. Is that what you're saying? More or less.

Some people are very successful investors in their own right. The way that I've seen it over the 25 years that I've been doing this is most people make great sums of money by doing one thing really well. And when they master that one thing really well, maybe running the largest and most successful private equity firm in the world, nobody can beat them at that. And that's the way they make their money.

Then to keep their money and continue to grow it, the trick is diversification. Diversification comes with having to master lots of different things. And generally people find it hard to master lots of different asset classes, sectors, countries, areas to invest because they don't have the time to do that. And so being able to get other people to help with those components, maybe it's just the ones you don't master, maybe it's all of them, maybe it's components of that. Is the way most successful people have done.

That, I suppose somebody makes a big fortune and he or she all of a sudden becomes a billionaire. Do they just call you up out of the blue? Or do you kind of know that somebody took a company public, they made a lot of money, you call them up and say, by the way, how about some lunch? We could maybe help you. How do you actually get these billionaires or very wealthy people to be your client? Where do they just come out of the over the transom?

It's years and years of work and getting to know people because this business is based on trust. And you don't just wake up one morning and find yourself with a great sum of wealth and then just go trust someone you haven't known for years. And so it is a very long journey to get to know people, to get to know their families, to help them with a piece of something along their journey. And the more you do that, the more you can find your way and to be able to give them the proper advice as they go through it.

And the advice very often can be stay in cash or monetize or do nothing. Or look, it's not as much about talking about managing your money as is talking about structuring your money. Let's figure out where we're gonna hold it. Let's figure out how much you're going to give away, how much you're going to keep for your family, how much taxes are involved in the situation. And so there's just so many things that surround the advice that a wealth manager gives. And it's not just simply about the management of the money. Our place is to figure out how to ferret out those answers to the questions and then be able to apply a plan and work through that plan over time.

They wore their hair long, protested in the streets and promised never to trust anyone over thirty. That was decades ago. Since then, baby boomers have become the biggest holders of wealth in the US. Now, they're part of what will be the biggest wealth transfer in history. Over the next two to three decades, the 70000000+ boomer generation will leave a staggering amount of money, real estate and other property to their children and grandchildren.

Just how much isn't really known. Estimates range from a low of $15 trillion all the way to $68 trillion. Boomers may control as much as 70% of the country's disposable wealth. What happens when millennials get that wealth? Hard to say. It will depend on what the tax and estate laws are, plus the state of the stock market. One thing's for sure, financial advisors will have their hands full, both with those who are giving the wealth away and those who will receive it.

Let me talk about the great wealth transfer. Is that a difficult thing for families to deal with? They come in and say, I really don't want my children to really have too much money. And they say that in front of the children. Or they say, my children don't know anything about money. Don't let them make any decisions. I want to make sure they never have any discretion. How do you deal with those intergener generational issues.

Yes, intergenerational issues are probably the toughest thing to deal with. And they morph and change over time because there's basically four places you can give your money if you live in the United States of America. You can spend it yourself, you can give it to your children, you can give it away to charity, or you can give it to the government. And you just have to figure out which of those four buckets you want to have weighted in which manner.

And there's no right answer, there's no wrong answer. You work so hard to make the money, trying to figure out how to impart your values on the next generation or on philanthropies or how you're gonna live your life. That's not for any wealth manager to say that is not our place is to figure out how to ferret out those answers to the questions and then be able to apply a plan and work through that plan over time.

One of the most difficult things for wealthy people to decide I found in giving pledge meetings and other things is how much money to give to their children and also how to deal with their own estate. Is it awkward sometimes when you have to ask people about their will and what they're gonna do? And and sometimes you find out that the spouse hasn't told the other spouse where the money is going. Does that ever happen?

That happens a lot. And it's not about not telling, it's about not really understanding the mechanics of what happens when. And so a lot of what we do is just simply put on a piece of paper in a nice picture of what's actually gonna happen when.

The hardest conversation to have is when a client says, if I die. And so we 1st have to work through that, okay? And then once you get through that, these are awful conversations to have to think through, but if you think about it early enough, it becomes much less emotional. You can work through those issues as a family. And again, there's no right answer, there's no wrong answer. But doing with eyes wide open and then it can change through time. But the question about wealth to children is very different for each family. But if you think to yourself, would I have worked as hard as I did for so many years if I knew there was some of money behind, the answer could be yes, the answer could be no. It's all about the person you are.

Now, you and I both were in the financial service world during the Great Recession of 2008 and 9. And so or was there panic or how did you deal with the calming people down? Because it was a pretty difficult period.

Very difficult period. The seeds of which are also played themselves out during the pandemic that we are still going through today. The great recession that we experienced in 2008 was a very quick rude awakening to the safety and security of assets. And so About $1 billion a day at one point was coming into the bank and trying to help people to understand the safety and security of their assets and understanding diversification is key. And you have to ride through these times. You can't be emotional because at the end of the day, a lot of wealthy people, they don't need their money tomorrow to be able to spend. It's for many decades in the future. And so trying to keep that long term focus is probably the most important thing that we do.

If you fast forward to the pandemic, very many of the same things happen. So if you look back to March of 2020, and you think about all of the volatility that happened then, a lot of people thought I should sell all my assets, the whole world is gonna change. Other people thought, wow, I can take advantage of these opportunities and really think about the fact that all of this money, I don't need daily liquidity at any one point in time. And so let me think about taking advantage and investing through those markets. And again, safety and security of my assets also came into play. And now you're seeing constant flow of money to the firms where people are giving the good advice, are helping think through the long term issues and are not being short term in nature about how they manage the asset.

Let's talk about the environment we're in now for managing somebody's money. So interest rates have been low for a long time, and you would say the government has stimulated the economy a lot and prices are pretty high. So are you now telling people be careful because the economy might slow down at some point? You give them economic advice, as well as geopolitical advice, as well as financial advice.

Yes, so every day that's a different conversation. As you say, the markets are very healthy right now given the liquidity that has been infused all across. I mean, we had we had a recession that was five times greater than the average recession in 25% of the time, right? It happened so fast. And yet our response to it was to add deficits to the United States government that were greater than the last five recessions, and the deficits that came about. So we've had policy responses that are unprecedented here. And now we're seeing that play out in the marketplace. And when you have things like Doge Coin which were created as a joke and are now 30,40 billion dollars worth of value.

You have to ask yourself, is it the liquidity that is sloshing around the system that's causing this? Or are these real new things that are happening in life? And only time will tell the answer to all of those questions. But it goes back to one of the most important things that you pointed out, which is diversification. There's just no way to be able to know everything that's going to happen in the future in every single asset class. And so the most important answer is proper diversification of these.

Portfolios. If somebody comes to you and says, I want to invest in cryptocurrency, I'm willing to lose the money, but I just really love cryptocurrency, do you say you shouldn't do it or do you facilitate it or are you still evolving your position?

So blockchain technology, which is the underlying piece of all this is very real and is changing all of the ways that we did digitally interact with the different financial markets. Digital currencies are new and in general, digital currencies are being debated as to whether they're an asset class or not. And a lot of our clients say that's an asset class and I want to invest. And our job is to help them to put their money where they want to invest. So it's just it's a very personal thing. We don't have bitcoin as an asset class per se and time will tell whether it has the store of value. But the volatility that you see in it today, it is just has to play itself out over time. The very good investment advisors can take complex matters and make them very simple. And when someone knows how to do that and you can digest it and understand it, then you're allowed to invest in it.

Let me give you my three rules of money management to see whether they comport with yours after you've been doing this for a while. Number one, don't lose what you have. A lot of times my observations, people think that they made a fortune and they can double order, triple it and they're willing to lose everything. Often I willing to, but sometimes taking risk that might make them lose everything if you're not careful. So what do you think about the principle of don't lose what you already have?

I think don't lose what you already have is a very good way of thinking about it. It would be unfortunate to find yourself where you have stretched so much in your risk return trade off that you find yourself in a downturn, not being able to live the life that you had worked so hard to get.

To. Right. My 2nd rule of money management is diversify. Don't put all your eggs in one basket. I assume you must believe something like that as well. Absolutely.

Hundred percent. And we find it all the time. And you can see it in today's market environment. As a for instance, some of these things look very easy to make money in. Why? Because there's so much froth in the markets. There's so much liquidity that's pumped in by governments all around the world. And so what's seemingly easy may not be and it may not have the, the same path going forward. And so one of the jobs of a very good wealth manager is to always stress test a portfolio. And to say, I understand that this is what you have and I understand this one thing has grown so much, but if that one thing were to have a stressed out moment, how will you feel? And is, are we sure we want to be holding on to that large of an outsized position in your portfolio?

So my 3rd and final rule would be to have realistic expectations of what your rate of return is that you're seeking. If it's fixed income, be realistic about what you're gonna get, or its equities and so forth. Do you kind of tell people that there are different asset classes with different rates of return, and they should be realistic about what they're gonna get? Or they all think they're gonna double their money if they give their money to you?

It's such an important question, especially with interest rates where they are today. And if you use the tenure Treasury as a marker at one and a half %, everything is additive above that. So if you go to a client and you say, well, I can get you 1% over Treasuries is not very exciting especially when you turn around and the markets are providing 10,20,30,40,50% returns on some of these asset classes for a short period of time. But if you look over the past 20 years, the average balanced portfolio has been six and a half percent return, but six and a/2 percent return compounded each and every year for 20 years is a very sizable return. And so if you look over the past year, I mean, many people have had average balance portfolios up 30%. And then of course, that's what they become accustomed to and they want to hear from someone that's gonna say, I can get you another 30%. But if something sounds too good to be true, that's probably another rule you should maybe add to the rule.To be true.If it's too good to be true, okay, high likelihood that it is. So.

If you are the head of wealth management as you are, I presume, every time you go to a cocktail party, and those were things we had before Covid and maybe have them again, cocktail parties, people ask you for free advice, I guess. What should I do with my money or, or that? What do you think of inflation? Do you have to keep up with everything going on in the economy in Washington, DC? How do you get briefed all every day? Do you get briefed several times a day about what's going on? Be able to answer questions?

Yes, I'm hoping cocktail parties come back because the zoom parties are a little less fun. But the world really does feel much better, especially here in New York City. It's really starting to feel great and vibrant again, as it always does when it goes through these time periods, by the way.

But the job of any money manager or anyone working in any field where they're responsible as a fiduciary for other people's money, is that's your life journey. You are constantly trying to understand all the components of what's happening. But I don't have to do that. No one person at JP Morgan has to do that for every asset class. We have subject matter experts in each and every........