Elections. Inflation. Interest rates. Just five months in, 2024 has already proven to be an unusually difficult year, including for investors. How can wealth managers guide their clients through it all? Racquel Oden, head of U.S. wealth and personal banking at
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Chana Schoenberger:
Welcome. I'm Chana Schoenberger. I'm the editor-in-Chief of American Banker, and I have with me here today Racquel Oden from
Racquel Oden:
Well, thanks for having me. So I'm Racquel Oden and I lead for the US for
Chana Schoenberger:
Okay, and you're relatively new. How long have you been there now?
Racquel Oden:
I have been at
Chana Schoenberger:
Wow, okay. So walk me through how you got here. You've worked at a number of institutions.
Racquel Oden:
So what I always share with people is you'd only move institutions if you feel like it is the job meant for you. I had the opportunity, which I credit to the
Chana Schoenberger:
Okay. So tell us a bit who your customers are, what sort of people are they?
Racquel Oden:
So the customers for
Chana Schoenberger:
So it's a lot of expats with connections to the US Americans who are living abroad, those sorts of folks.
Racquel Oden:
Those are great examples. Or it could also be individuals that live in the US who have a very internationally minded context where they travel quite a bit. They have businesses that are overseas or they have the ability where they live here and they move abroad for a period of time, they choose to come back or they just choose to have real estate and want to be part of the equity markets but still live in India.
Chana Schoenberger:
So a big problem that people like that have is even within one institution, it's often very, very difficult to move from a branch in one country to a branch of the same bank in another country. How do you guys deal with that?
Racquel Oden:
Well, what's great about the model
Chana Schoenberger:
Why is it so hard for institutions to get that right?
Racquel Oden:
Well, I think anything, it's almost saying is there a desire to do that Today some things become what I call prohibitive because it is so complex to do it today.
Chana Schoenberger:
Okay. So what do you see your clients asking for now? What are they most thinking about?
Racquel Oden:
Well, I would tell people, clients, whether they're international or domestic right now are actually all asking for the same things. They're concerned about inflation, they're concerned about upcoming elections. I tell people there are 60 elections taking place around the globe this year that are pretty critical. So not just US elections, but 60 other countries have some pretty important elections that are taking place, which what is the reaction of markets and what that's going to look like and interest rates. And so it's surprisingly the core fundamentals globally are the same concerns. And so they look for direction on how do we respond to the geopolitical market, how do we respond to the inflationary or non inflation environment that we're in? How do we react to interest rates and then how do we respond post elections that are going to change the paradigm of many countries and their views in policy.
Chana Schoenberger:
Yeah, that's kind of
Racquel Oden:
Simple,
Chana Schoenberger:
Just all the major questions of our age. How do you see them positioning themselves against this? Obviously, however one stands on the election in terms of who they prefer. Things are going to change in January if a new government comes in or even if the same sort of government is here and we get a new president, how do you hedge against that?
Racquel Oden:
Yeah, I mean I think there's a couple of things. One of the things I try to be very consistent about is I tell people that one, just stay invested, right? If you're already invested, you should stay invested. You don't want to react to all this potential economic changes or volatility that we're seeing because you're investing for the longterm. And so it will be normal that we will have these periods. But I also say it's about diversification. So in moments like this, you want to make sure that you're looking at vehicles that you can what I call hedge volatility. So there are products that really allow you think through hedging volatility. And if we think about what's going to happen between September and October, it's pretty normal that we're going to see this volatility, which we are seeing today. If you're buying instruments today, you're going to look for those hedging volatility instruments.
You're also going to look for opportunities where you could enter in some of these stocks and markets at a lower price because we are seeing the volatility. I know it's hard for human behavior when you see things going down, you think this is the worst time to enter, but this could be a great time to continue your diversification of your existing portfolio and adding other individual stocks, which previously were pretty highly priced. And so you have to have the appetite and working with your professional, getting comfortable with the opportunity to enter this market in the standpoint that it's going to help you continue your diversification. Then I always talk about the importance of understanding the fact that you're in an interest rate environment. That's also changing. That is a reality. I think we're all on pins and needles to see where the Fed's going to go in September.
But why that's important, it's going to tell you that cash is going to earn you less as time goes on. And so with a falling interest rate environment, it's an opportunity for you to then also think, again, back to diversification. If I have cash that's no longer going to earn, what should I be doing that cash? And so I should be going to some more what I call yielding products like T-bills still a little short term, and at what point does it really make sense for me to be truly invested in the market for the cash vehicles that I have today? And so these are normal debates that we have with clients every day and even when we think they're the most stable markets and everything looks normal, this is still the conversation you should always be having because it's about you individually where you are from a time horizon standpoint, where you are from a risk standpoint, and very importantly, how are you tracking towards your personal goals.
Chana Schoenberger:
Oh, that makes perfect sense. Are you seeing clients asking more for the sort of products that started at the very, very high end with family offices and are coming downstream to regular wealthy people like direct indexing or interesting crypto things? Private credit?
Racquel Oden:
I would say all of the above. So I think alternatives is a very important thing right now. I think annuities is a very important thing right now. I also see the opportunity for us to as organizations, when I tell you the beauty of now managing all of the client segments under one umbrella, we will have products that we will build for the ultra high net worth a hundred million plus relationship, but then we have the ability to also build those solutions that are more specific to what you call early wealth individuals that allows them to have a product with some of that complexity but more appropriate for where you are based on the assets that you have. And so I always say the ability for organizations to respond to client needs, it doesn't mean just because you're so exclusive trust are important to both very, very affluent client as it is to those who are in their early stages of wealth. The complexity of the trust looks very different. So the complexity of an annuity looks very different. So the idea is the products are there, but it has to be appropriate to where you are from a personal risk, what you're able to invest, and also how that money needs to work for you.
Chana Schoenberger:
Yeah, no, that makes perfect sense. What do you see them wanting next? What's the next thing that is available mainly to family offices that you think mass affluent investors will get next?
Racquel Oden:
I always say this family offices come to us for advice. I would say there's always going to be the next product that's going to answer and for another solution set that's missing in the marketplace. And that minute one firm builds it, we're all going to build it, right? So it's less about the products and I would say primarily what's really needed for that client base is mostly out there. Pieces that I stay away from or I tend not to recommend as many of us talk about is crypto and all of that. And there's many banks that have opinions and views on that. That's not something you'd be trading with us. But there are some that see that as a vehicle and an avenue that's important to them. That is still a little too unregulated for us as well as I wouldn't see that as a primary vehicle.
So I always provide clients choice and advice, and if that is a choice that they have that they want to invest or do anything with crypto, then that is what I call personal money that you always have the ability to do as you choose. I always tell people, my only advice there is make sure it's amounts that you don't need for daily living or long-term livelihood. It is where something you could afford to just take risk. And if it's all there tomorrow, great, and if it's not, it's not a problem. But outside of that, there's always going to be that next vehicle or product that people want. Our job is to listen to our clients, develop products that are specific to the needs that we're starting to see, anticipate those and then importantly be able to manage that as their lives get more complex and our ability to ensure that we keep them safe.
Chana Schoenberger:
So it sounds like you're not a fan of crypto as a market. Why not?
Racquel Oden:
Well, I think like anything, I think you can see many banks, it's not regulated and many banks are not approved to manage and hold crypto. It's also a lot more complex when you run an international company. If you think about cross border, the ability for fraud and risk to show up is quite high and so unregulated as well as it's not an approved currency across all banks. One would say large banks like ourselves would not choose to be part of that as well as part of our offering to clients today.
Chana Schoenberger:
So there's been a lot of talk and it hasn't really gone anywhere, but you do hear this on Capitol Hill a good amount. The question of whether there should pass legislation that would make it legal for banks to help clients with crypto or hold crypto themselves. On the other hand, there was also that bank not that long ago that failed because of what they call a pig butchering scam. It turned out that CEO got ensnared and he just got convicted and all this very scary stuff. Do you anticipate the rules on that are going to change such that the bank could help clients with crypto?
Racquel Oden:
I always say everything is possible. So until the rules do change, to your point, legislation goes through and it's confirmed as a true currency, then great. And I think then banks have to then figure out how does that fit and if we choose for it to fit. But at this point it is a legislation that could or could not happen, but currently it's not approved.
Chana Schoenberger:
True. Okay. Interesting. Alright, so I wanted to ask also about when you think about clients who are in the private banking sphere, right? Where do you, I think the stat is something like 80 or 90% of families will switch advisors when the principal dies, the grandfather for instance. How do you hold onto or attract those younger clients, the grandkids or the grown children?
Racquel Oden:
It's a great question and I think really important for all of us to be very tuned into. So it is wealth transfer and continuing the family legacy of continued wealth creation at the same time as well, what I have always shared with people, our teams is really focused on the fact and then there's ways that you're talking next generation. I also think it's the spouse as well. I always ask that you include every family member in the conversation, at least ask if it's a male that you're talking to, would you like your wife to join us? Would you like the kids to join us? I think once a year we should talk about everything with everybody so we have a sense of understanding. I always tell people if you wait to call the spouse or the children after an event has happened, it's a little late. So the benefit of having the relationship with the primary is making sure that you're always looking to reach out and understand how do I support the family? Additionally, we've built and have programs where we're really focusing on what we call next gen, the ability where we say, Hey, would you like to bring your kids in for financial bootcamp? Where we're connecting with them and it's not about them taking over and managing the entire client family wealth, but it really is teaching them the fundamentals. Because I think as parents, and I can speak as myself, your hope for your children is that whatever I pass on, it will be passed on with a basic understanding of how they protect it, how they grow it, and they understand how to manage it when I'm not there.
Chana Schoenberger:
Right. It's tough though because especially for people who have been founders and who have grown their fortune themselves without inheriting it, they don't want to feel mortal and they don't want to give up control. And there are also many people who are afraid of what will happen either to their relationship with their kids or to their kids' own work ethic if they were to find out exactly how rich they are. So they just don't want to tell the kids until something happens.
Racquel Oden:
So you're absolutely right. It's complex family dynamics. I think what's important about that, which is why I pointed to the financial bootcamp, it doesn't matter what the number is, right? The principles of how you responsibly manage your money, how you really reach out for advice, how you think about the intent of wealth, of how much you give away from a philanthropy standpoint. My point is bootcamp is on the fundamentals of healthy financial management. The number I could agree that doesn't change the dynamic. So you really want to just make sure they have the core components that if whatever that number is, because I agree sharing that too early, could one demotivate children, it could also allow them to think, they may not have to fight too hard. They know the number. There are lots of reasons why clients share with us why they don't. So that's why we really focus the conversation around ensuring they've got what I call good financial acumen. No matter what school you went to, what Ivy League school you went to, what amazing private high school you went to, they don't teach financial literacy in schools.
Chana Schoenberger:
They do not.
Racquel Oden:
It can only be taught at your kitchen table or from your parent or I talk about this financial bootcamp concept. And so from the perspective in some communities we focus on financial literacy, which is the basic fundamentals of understanding the literacy of finance to the financial bootcamp of understanding what it is to manage large sums of money. It's all behavioral. If you build the right principles, you build the right, I call structure and routines that you can assess at different stages in your life and of course ensuring that you're bringing in a professional that you can trust and figure out how to work with. To me, that's the balance of how you make sure there's wealth that gets transferred and also gets taken care of.
Chana Schoenberger:
I have this conversation with our interns every summer, you guys are getting your first 1099 in some cases, and you really need to set yourselves up a Roth IRA and put in as much money as you possibly can because now that you're officially getting paid on the payroll, it is time to start saving for retirement even though you're no 19 or 20, you will thank yourself later in 50 years when you retire and this is the money that you will have.
Racquel Oden:
That is an incredible conversation that you're having, which is very responsible for you. And I'm sure in that conversation you probably have many of them that say, what's a Roth IRA?
And that's great. So it's about education and financial literacy, and then you talk to 'em about this thing called a 401k, right? And so all of that, I can't always assume, and probably unfortunately not every company does that. And so you're not taking advantage of these great investment vehicles with tax protection because you just don't have the education and understanding. So when I talk about literacy, it's not, and I hate that people would somehow associate that to only underserved. Literacy is just the basic fundamental understanding of understand what it is to have healthy finances and education has been the piece that I think has been missing from our society as a whole. And so if you can find those gaps with great employers who are willing to give you the basics and the teachings also, if you have a trusted advisor who are able to provide those conversations with your children, and then also the opportunity for you to get into high schools, and I have a real vision for that of getting into high schools and much earlier. So you build what I call good money habits early.
And as you go to college and that first credit card, the spectrum goes from just the basics all the way to we could only hope to have the problem of hundreds of millions of dollars coming to you. You will have professional help with hundreds of millions of dollars. I always say that that's the part we have to remember, but you need to be able to manage those that are giving you advice and have an understanding of what they're telling you because it's almost you just giving an external person all of the power to make decisions. So that's why the basic, what I call bootcamp on financial understanding, you're able to understand some terms. You're understanding what the intent of the portfolio, what it should look like, and you understand how much risk you're taking and really think about time horizon. These are basic things and questions you should be asking. And then you should be stating what your expectations are.
Chana Schoenberger:
And for women in particular, even if they're wealthy, I'm always amazed by women who are executives who will say, oh, I don't know what my mortgage rate is. My husband handles that. And these are women who run a large group or a company.
Racquel Oden:
Yeah, I think it's two ways I look at, I couldn't agree with you more. I think when we've done tons of research studies, we find confidence in investing or finances, the number for men is very, very high. And then when you ask that same question to women, number's super, super low. And it's not that they don't understand, but it's also that confidence of, if I don't really know every detail, I feel like I don't know that. But I always say the reason why it's important as women that we may not need to know the rate of our mortgage, but we should know when we got the mortgage that we were involved, understand the rate that we got. We need to understand if payments were due over the next 10 or 15 years, what would that look like? Because I am working really hard in order to do that.
And I say that because 80% of women at some point will become head of household and not by choice. Whether that's single mother, whether that's divorce or whether that's death. Women live longer than men. So they statistically proven at some point the likelihood of a woman being in charge of finances is absolutely going to happen 80% of the time. And if you look at preparedness, it's actually the demographic that's most unprepared for it, knowing unfortunately, or fortunately, if it's choice, it's going to happen. We should do something about it. Which to me, I call it a crisis. We know when you, unfortunately, if a spouse passes away and you're inheriting all this all of a sudden and you're like, what do I do? And I've never met my advisor, which is my point around, we need to know the family from the beginning. And at the end of the day, it's a trust thing as well. And so I needed to hear questions you were asking my children or my husband or me as the female, as the spouse, and then the opportunity or my significant other, and the opportunity for me to be using this as a learning opportunity because at some point it may be me.
Chana Schoenberger:
Yeah. And on that note, death and taxes, thank you so much for coming in, Racquel, it was great to have you here.
Racquel Oden:
Thanks for having me.
