week." in the fall of america bought legendary investment bank merrill lynch. it was acquired on the catastrophic weekend that saw and the near collapse of aig. anthony: today' responsible for maintaining the maryland' s culture -- the merrill lynch culture. his strategies next. announcer: this show has never been solely about investments. we have talked about anything

announcer: from times square in new york city, the new wall street week. anthony: i am happy to welcome john teal, the hallowed -- the head of wall street management. john: i grew up in maryland. gary: he went to college where? john: i went to green valley state. i learned quickly that football was not in my future. i was living with my brother, paying rent, and i decided i so i transferred to florida state. [laughter] gary: did you play at for the state -- at florida state?

i started at merrill lynch in 1995 as a financial advisor. i had a cpa. anthony: what was your strategy? john: it is 1989. i am an accountant, not a salesman. i had been sent to sales training in the insurance agency. gary: when we mentioned they' ll kornegay, a public speaking and sales course. you have to get up and speak in front of your fellow classmates. did those help you? john: ideal -- i learned how to deal with people. i learned to accept people for who they were. it allowed me to really help understand people' s point of use

not only has a salesman, but as a leader. anthony: how did you go from being a producer to being in management? john: they pestered me. they loved at me -- they looked at me as somewhat successful as an advisor. gary: the ceo of merrill lynch came from the producers. tell us how important it is for management to understand what it is like to be a producer and what that is all about. john: wealth management is a friend. i don' t think -- is different. i don' t think there is any substitute for the apathy you have to have for clients. your -- i think it would be harder to understand what advisors do for their clients. gary: your firm'

the behavior you tried to instill in the organization. john: our values have been clear. it was declared that the customers interest must come first. we are trying to operationalize . that is why we have been in support of harmonious standard of care for the industry. we want to build it out. we want to demonstrate it to the clients. gary: there was a lot of internal training? john: and building the capability said, the technology to make it efficient. capacity. anthony: there has been some comments about your belief that a good advisor is a whole advisor. john: i may be older than you do, but at some point in your longevity and wellness.

as a result of that, i need energy. it is really common sense. if you believe in employee engagement and in having a place that people want to work, caring about them is a good place to start. and being well as a way to demonstrate that. so what is that mean? the way you work is important. the science shows -- you can i go at something 14 hours a day and be productive. so you have to take rakes. view of got to make sure that you refresh. food is energy. it is like putting gasoline in your car. you want to put the best energy into your body. anthony: you are not mandating people have to eat certain things or do certain athletic activities. gary: you' re going to quit the doritos? john: first of all, i don' t do the readers. i do do hot yoga.

i want your thoughts on that, why it' s happening, what the solution is and i want to talk about the overall advisor movement. john: let' s look at demographics first. advisors are getting older. why is that happening? it' s a great business. you actually get better and better with time and experience. it is a job and you can keep your mental faculties and you can do it physically for a long time. so we have advisors in their 60' s who have a lot of wisdom from their experience and they want to stay involved in their practices. it is their practice. we see a lot of people extending -- gary: does merrill lynch have a mandatory retiring age? john: we don' t. as long as advisors are serving saying there -- servicing their clients, it'

and what the advisors are doing. i' m not ok with it in a vacuum. those clients who are looking at their advisor age along with them are wondering. anthony: what is the solution? john: we are building teams. what we are really trying to do is focus on our development program. we want to hire, train and develop younger people. you have a generational opportunity with the kids of our clients. i will go to my parents and ask for advice. i will even consider the advisor if they treat me as my own self, as an individual, without my parents' agenda. anthony: the robo advisors are targeting your clients' children who are utilizing things like uber and airbnb. john: i' m saying i love the idea that automating investment

advisors' advice. it plays a very important role. we embrace the idea that technology can advance our offering to our clients. gary: what adjustments need to be made in this? low environment what are you suggesting to people? john: change of citations. announcer: like us on facebook and follow us on twitter and instagram. wall street week is sponsored in

anthony: one of the things you have to worry about is the different -- the difference between bonds and bond funds.

several -- similar periods of rising rates. if you want to ensure yourself that you are not going to have to exit at a point where it is dangerous for you potentially, that is really where a portfolio of individual securities probably makes more sense. you get permanent and definition. with a bond, you can hold it to maturity. if that is what you need to fund your lifestyle, that is probably the better way. anthony: this is something that i think a lot of people will worry about. if you buy a bond at 100 and you earn an interest rate of acts over a period of time, when the bond matures, let say in five years, you make the interest and the $500 back. if you sell it before maturity, it depends on where interest rates are in terms of the price you ask again for the bond. if rates have gone up, that bond

since rates have gone down, bonds or training of previous -- or premiums. john: you' ll get back less than the principal, but hopefully the long-term thinking of what you paid for that bond has been factored in. a bond fund, there is no terminal maturity. gary: you have gone out into the marketplace and explain to a lot of people who are self -- who are super focused on their careers, things that they need to be focused on in the world of investing. funds, private equity, things like that -- how do they fit into your portfolio recommendations for market? s take them separately. in the portfolio. s take hedge funds. typically, you see the name. a hedge fund will look to lower the volatility of the portfolio by producing non-correlated returns, returns that don' t move

that is value to our clients. if anything, folks really struggle with volatility. if the hedge fund can play that role, that is an important role. gary: you tell your client you want to use hedge funds in your portfolio to lower the volatility but reach your actuarial grows -- goals. john con we still expect a return, we just expected to perform differently in different periods of stress. gary: how does private equity fit in? john: you are allowing a longer investment cycle time and allowing the management team a little bit longer term, less quarter to quarter focus on their performance and allow them build a business. gary: what adjustments need to be made in this low rate returns?

what we are saying is that our job is to help deliver returns that the financial markets if they don' returns, we have to think about something else. we have got to save more. your work life. we have to think potentially of a second act in retirement. they key is we really want to be really transparent about the progress you are making towards that retirement goal. gary: i think this is a great message. expectation management and dealing with a retail -- the reality of the world the way it is. john: advisors are invested in the same things that their clients are. it goes beyond advance -- investing. it is our process. i consume our process from beginning to end. i want to know whether my goals are funded or not. i want to use a capabilities in the organization. my advisor

few other separate accounts. but absolutely, 100% of my money is at merrill lynch. maybe that is obvious. but it is the way i engage, as a client and not the leader of this business. >> i am watching "wall street week." announcer: sign up for the weekly wall street week news leader where we recap the financial markets and dive deeper into the most decent -- most recent episode.

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anthony: we are back with john teal and also rob sechan and jon hirtle. jon you have defined the researchers officer. jon: we have been in business 47 years. we are managing families, endowments, foundations and pension funds nationwide. anthony: a client walks into your shop and you say you will do the investment folio. jon: we are copying ourselves against the leading chief investment officers in the world.

rob: we think there is a lot to stay constructive on risk assets. we are at an inflection point where the fed has decided to higher rates. as such, we want to be more selective in how we identify and implement investments for clients. anthony: when more risk comes in, is one of the derivative effects rising rates? q en zero rates were all about taking fall out of the market. into the market. the obvious obligations of higher rates for emerging expanded mandate of global there, i think what you' re going to see is the possibility that

economy and business confidence, investor confidence, consumer confidence, lending, and ultimately could have an impact on our economic -- anthony: you talked about qe as an attempt to take volatility out of a market. the idea was that quantitative easing program' s make things one directional. that was your point. with qe gone and rates going up, the expectation of more volatility in the stock market. rob: why do i care so much about volatility? why am i afraid of volatility? it' s an opportunity to buy. u.s. equities better than bonds. i like non-us equities, meaning develop marketings -- developing markets even better. so now volatility is my friend. john: there is value emerging in different places. one being energy. we go from a secular growth

story today. and very quickly. what is different is some of the fundamentals are changing. 2 million barrels oversupplied today. now we are one million barrels over supplied. in emerging markets, what is interesting is john' s absolutely right. if you look at the price-to-book and the msc i, that is 2008 levels. the msc i is a composite of the global stock. global emerging markets. gary: do you agree with robert c chan -- robert sechan? jon: -- john: the relative performance will be subpar. rob: when i look at the market place today, there is a huge

it ranges from two to 10. john: active management should outperform. you' ve got clients who normally know what they are going to get with an index. rod: is it easier to index and then pay for beta for large-cap? it might be. you got to get access to them. we have to be able to find them. that is probably easier for john than it is for most of you. gary: talk about the election and the impact on austria. rob: the united states is so powerful that we will power

gary: let' s talk about how to raise the health of the u.s. economy. john: i think it is solid. i don' t think people are used a slow and steady. i think it is ashley very healthy for our country. we think about the 1950' s and the 1960' s and times when there was a lot of prosperity. gary: there is a theory that we have had seven years expansion and typically is that what our economy goes through cyclically. you are saying that it is more like silly putty in the expansion will last longer. john: yep. rob: i completely agree with that. real economic growth is tremendous in the u.s. right now. look at own -- look at lower energy costs and technology advances. you mentioned earlier the show

they are putting money in consumers' pockets. those consumers are spending. look at what airlines are doing now. look at professional services like health clubs, car sales. our economy is on a cell sustainable trajectory that is really powerful. gary: larry summers' s narrative is that they are not measured by the gdp. jon: i am more the slow and steady cam. i don' t care as much about the economic activity as the going price. the notion of going in price is the driving factor. gary: anything you are worried about and when he 16th? jon: we always worry. -- worried about in 2016? jon: we always worry. the real risk is the bubble in the equity market. every bubble starts with logic. for example, the dot calm bubble.

higher until it is ridiculous and it is a bubble. the logic today is the united business. it is safe. we have a strong dollar. john: the other way to say this is that the trade is crowded. rob: there are no signs of an overheated market right now. anthony: john, you look at merrill lynch. you have a snapshot of what retail investors are doing. when you look at 2000 and you look at 2007, you' re not seeing any activity or behavior that you would say you have to be a worried -- be worried about that. people' s minds. anthony: the excessive taking of margin to buy speculative

john: it is a positive for the u.s. equity markets. part 5%. right now, asp six by 5%. now it is 4%. john: half of that return is an even capital or gains. -- capital gains. jon: we are cash than ever before. you have to think of cash as the option value of cash. it is a german to stabilizer in the portfolio. there are very few bonds that are not overpriced. most yield vehicles that haven' t been damaged by dislocation are dramatically overpriced. april have been chasing yield so it is risky.

buying with a yielding estimate has a price associated with it. price for the stability of yield. you have to be careful what you buy. minimum on fixed income. got to be very nichey. gary: talk about the direction the impact on wall street. john: i don' t have a crystal ball. clearly, there are taxes on the agenda. it' s an opportunity for us, corporate, an individual to rethink something more simple. i think that' s got an opportunity. then we will see how everything that has been accomplished over the last eight years by the obama administration, depending on who wins, what will be addressed and what won' t. gary: so it is up in the air. what do you think? rob: one thing that is clear is that change is coming. if a tweak can take an entire

made about the pharmaceutical industry and pharmaceutical pricing and it caused a gigantic dislocation. john: i don' t forget matters. the united states is so powerful that we are going to power through this no matter who is getting elected. i think we have lots of candidates on the republican side who are qualified. i think we will survive a clinton presidency fine if that happens. i think there is something going on in the world that people have not grasped yet. globalization is so powerful and the information age that we are going to succeed despite the government. we can fight and succeed more or less based on less government which will help us succeed more. regardless of what happens, we will succeed and this rank order of cash flow is the dominant factor. anthony: i want to thank them for joining us that is it for today. you can check in a week at wallstreetweek.com.

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(applause) . well god bless you. it's always a joy to come into your homes. if you're ever in our area, please stop by and be a part of one of our services. i promise you we'll make you feel right at home. but thanks so much for tuning in and thank you again for coming out today. i like to start with something funny. i heard about this husband that died. he left his wife $20,000. after the funeral, his wife told a friend that she was totally broke. the friend said, "what do you mean you're broke? i thought you said you had $20,000." she said, "well, i spent $5,000 on the funeral and $15,000 on the memorial stone." the friend said, "wow, that's

big was it?" she held