Surviving Immortality

1

The Perspectives Podcast

Episode 10: "Surviving Immortality"

With Candace Browning

Head of BofA Merrill Lynch Global Research

Chris Hyzy, Chief Investment Officer,

Merrill and Bank of America Private Bank

Haim Israel, Head of Thematic Investing, BofA Merrill Lynch Global Research

2

Aubrey de Grey, SENS Research Foundation, clip #1

There will come a time, and I believe that that time may very well be less than 20 years away, when we get to be pretty good at repairing all of the types of damage that the body accumulates. And when that happens, we will see this enormous, spectacular, almost incalculable increase in life expectancy.

Candace Browning: That’s Dr. Aubrey de Grey, Chief Science Officer at the SENS Research

Foundation, in Mountain View, California. What exactly might a spectacular increase in life expectancy actually look like?

Aubrey de Grey, clip #2

It’s highly likely that someone alive today will live to a thousand. And that means that from a financial perspective, and indeed pretty much every other perspective, everything has to be completely rethought.

Candace: A thousand years; that's a huge number. Living that long would take a lot of rethinking, in any number of ways. But even if a thousand is a pipe dream, we do know that old age is changing right now and it’s changing really fast. The number of people in their nineties has almost tripled since 1980, and it's estimated that a quarter of all children born in the U.S. today could live to a hundred or beyond. (Sources: U.S. Census Bureau, 2011; The Lancet, 2009)

But while living longer can give us the chance to see more and do more, it also comes with important financial considerations. How will we finance those extra years of living, and what do rising healthcare costs mean for our quality of life in retirement?

[Theme music]

Candace: Welcome to the Perspectives podcast. I'm Candace Browning, head of BofA Merrill Lynch Global Research. And with me is Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. Chris Hyzy: Hi, Candace. Candace: And we also have with us today Haim Israel, Head of Thematic Investing for BofA Merrill Lynch Global Research. Haim Israel: Hello Candace. Hello Chris.

3

Candace: Today our topic is what we're calling “Surviving Immortality.” We'll look at some of the new technologies that are making living longer lives possible, and improving the quality of life as we age. And we'll look at the financial implications of living longer and offer steps that you can take now to prepare for living to 90, a hundred or perhaps even beyond.

So, Haim, let's start with you. A thousand years? Really?

Haim: Well, Candace, age is just a number. If we would have this conversation back in the 1900s, life expectancy was 31 years. In the 50s, it was 54 years. Now we are talking about 75 years and in two years’ time, already at 77. (Source: United Nations, 2018)

And that is before we started to use technology really to start impacting our life. Candace: Okay. Well then Haim and Chris, let's talk specifically about some of the medical breakthroughs that we’re seeing right now that could move us actually further along that path towards immortality? Haim: Let's look at the genetics for example. That's a great example. So, if we had this conversation back in 2003, to have my genomic sequence and know everything about myself would cost $2.7 billion. It would take 18 months. And the accuracy was roughly around 75%. (Sources: Illumina; National Human Genome Research Institute, 2019) Candace: Did you say $2.7 billion? Haim: Billion dollars to have your genomic sequence. Candace: I'm not sure your sequence is worth that. (Laughter) Haim: I'm positive it's not worth it. Today, it would cost $100, it would take 50 minutes and the accuracy will be 99% and I can learn almost everything about myself. I can prepare for the future. (Sources: Illumina; National Human Genome Research Institute, 2019)

I know how my body will react to different drugs, different treatments, different foods and different conditions. That is one big revolution that we are seeing right now. You have

4

mentioned Candace, that global data, medical data, is multiplying itself every 73 days. (Source:

American Clinical and Climatological Association, 2011.)

We did not have ways up until now to capture all this data and create treatments with it and create more advanced drugs with it. And I'm still not talking about long-term moon shots like nanotechnology, future drugs, blood infusion that we are all talking about. Chris: To answer the other question, Candace, we’re switching from what used to just be reactionary type of medicine, antibiotics, antidotes, if you will, vaccinations, et cetera, to personalized medicine and the ability to use, as Haim said, that data and directly target issues before they become something that you just can't deal with. Haim: Ninety-seven percent of all R&D in the healthcare and pharmaceutical industry today are going for treatment rather than prevention; 3% go to prevention. (Sources: OECD, PwC, 2006.) That has huge implication on lifestyle. You have mentioned antibiotics. Antibiotics is a great example for treatment which does not prevent anything, and it’s not personalized. We are all getting the same antibiotics. So, personalization of drugs, once we know my DNA, once we know all of my condition, can work. Candace: So, I accept that because of these technologies and personalization, that we're all going to live longer. But what about the quality of life? I mean, is our quality of life also going to improve as we age or could it in fact be the opposite? Haim: Candace, did you know that we are wasting eight years of our life on diseases and bad medical conditions, eight years of our life. (Source: World Health Organization, 2018.)

So, when we are talking about the next stage, or the next evolution of health care about personalization and prevention, we can actually save eight years of our life living better. Candace: Chris, what are some of the potential effects on the economy of all of these older consumers? I mean, obviously they're spending on healthcare, but can you talk a little bit about some other sectors like travel, leisure, the housing market? Chris: If you play this out a little bit and you say people live longer, more active lives, perhaps with still the retirement age stuck at the mid-sixties level, you're going to have a lot longer time on earth in your nonworking life, which opens up the possibility to travel, leisure and entertainment even more than we're seeing today. So that's areas of potential investment.

5

Certainly, infrastructure's going to have a very difficult time accepting all of this. So, the movement towards smart cities is something that needs to happen at a more accelerated way. You could see the acceleration of autonomous vehicles. People age, they have to go to physical therapy, they want to get to the airport, et cetera. These are things that I think would actually advance autonomous vehicles going into the retail space. Candace: And Haim, are there sectors that you see that will be really impacted? Haim: Yeah. On top of what Chris said, the other thing which strikes me is that today 90% of advertising dollars are aiming Millennials and Gen Z. Ten percent aiming all the rest including Gen x or the silent generation and baby boomers. (Source: Nielsen, 2012.) That for me is a big consumer opportunity that has not been tapped up until now.

Second point is retirement communities, as Chris says, infrastructure will have to have massive investments. Telemedicine, which we think could be a fascinating concept going forward. Leisure is of course a big one. If will live better, we'll spend more. If we'll have the right advertising tool approaching them, this is a generation that will definitely increase spending. Candace: So, it sounds like living to 150 or beyond is, is a real possibility. But do all of us really want to live that long? We asked a few folks on the street, and here’s what they told us.

Female voice 1: Yes, because life is beautiful so I would definitely like to live longer

Male voice 1:

What’s the upside of living that long? I mean you hopefully can make a contribution and you know, enjoying life, right?

Female voice 2:

I’d like to see how the world changes from when I was young.

Female voice 3:

I don’t think I’d want to live to 150 because I don’t know, I don’t know if I’d want to see how the world is in the future.

Male voice 2:

I don’t want to be that old. I’d rather live to like 90 and appreciate life than have someone bathe me and take care of me that’s not cool to me.

Female voice 4:

6

No.

Interviewer:

Why not?

Female voice 4:

The aging (laughter). Living in a 150-year-old body.

Candace: So, people are mixed obviously in their enthusiasm for extreme old age. But the possibility of living to be 150 raises some key questions. One of the most important being, can we afford to live to 150? Chris, how are we going to pay for all of this? Chris: So, Candace, some proposed that we have to change the retirement age, raise it pretty dramatically. Right now it’s 65 and life expectancy in the mid-seventies, that's a 10-year gap. If we live to 150 is the retirement age is going to be 125? Not so sure about that, but still higher than what it is today.

Second thing that's very controversial, is means testing as it relates to whether or not you actually need that stipend, if you will, by the government. That's something that's going to be a lot more controversial than raising the retirement age.

And then last but not least, private retirement accounts is something that comes and goes. And today we have IRAs and 401ks to help with that. But what happens if you were born into this world today with a social security number and you automatically received a private investment account, quasi private-public led investment. That's an area that you could capture the power of compounding to pay for future liabilities. Haim: I completely agree with Chris and let's put some numbers on it. Today, the current worldwide pension deficit stands on $25 trillion, $25 trillion and that’s with the current life expectancy. If we are talking about going up to 100, you can imagine the numbers. Every year that life expectancy goes up, the current deficit goes up by $1 trillion. (Source: International Monetary Fund, 2018.) How will we pay for that? Yes, our pension, we'll have to start thinking about the pension. The job market will have to change, and the education market will have to change. Japan actually completely reshuffled their work market because they have a much older population that elderly people will be able to integrate back into the real economy. So, governments will have to be part of the solution and it's going to be up to us as well.

7

Candace: And we also know that technology is making huge advances in helping us to live better and more fulfilling lives as we age.

We work a lot with Joe Coughlin at the Massachusetts Institute of Technology AgeLab to help us think through things like this. Let’s hear his thinking on the role technology is playing in helping us to live longer and better lives.

Joe Coughlin, Director of the MIT AgeLab, clip #1

We believe that technology is converging with the longevity economy to create a whole new life tomorrow. Imagine an AI algorithm, a mathematical tool that is being able to collect information around the house. We have robots here in the lab that are social bots to keep you company for that vast number of people that are suffering from social isolation. For those who are craftsmen and trade workers and whatnot, exoskeletal systems or new robotic systems going into manufacturing will help what is now considered an older worker, in many cases in their fifties, to be able to stay on the line longer, safely and efficiently. So the fact of the matter is that technology advances are converging at a brilliant time of longevity to not just create new markets for products, services and experiences, but to help us all live longer and better.

Candace: So Chris and Haim, Let's talk some more about how big data and artificial intelligence and other high-tech areas are transforming our notions of aging; and does this whole idea of also smart cities that both of you follow factor in here? Haim: So yes, definitely we will see technology being used by us to improve life quality and life expectancy. Prediction, I think that's one important thing that actually technology will bring to us. How can we predict future pandemics, future situations? If we can predict and better plan for the future by using AI and big data technology, we can definitely help to create a better life and longer life altogether. Chris: Yeah, I think that's a great point. And in terms of just technology, you mentioned wearables, we talked about smart cities a little bit. Let's talk a little bit about climate and climate patterns. With climate patterns evolving, what happens if the aging society can't move away from areas where there's more fires or move away from the flooding capabilities. A lot of them are in areas right now that are coastal.

So, we have to think through all this and enable technology to allow greater mobility as people age; not to go to nicer places, but to make sure we keep them away from areas where climate patterns are changing rapidly.

8

Haim: That's a great point, Chris. There's one more element which we are forgetting and that’s the emotional element of aging. And remember that your health span is not just determined by what do I eat, but also, how do I feel? I think that's also a sector that has to be addressed. If it's psychological, if it's consulting, if it's a lot of things which doesn't necessarily have to do with traditional technology

Candace: Okay. So, we've been talking for the most part about medical advances and new tools and technologies that could make our lives both easier and healthier. But I guess Chris, that also begs the question, you know, who's going to pay for all of this? I mean, these therapies cannot be cheap, and I worry that there's a risk that some people can afford it and they will have access to it, but maybe others won't. Chris: Yeah, that's a, it's a real issue. And the most effective way in any new advancement, which is high cost to pay for it in the out years, is to make sure that high cost comes down. The solar panel industry is a very good example of that very high cost to start off with, and the cost curve is coming down. In this case, the cost curve in healthcare, a lot of it has to do with the digitalization of records. And the more those things are advanced and the more we have connectivity amongst specialists and hospitals, et cetera, the cost curve should come down. So that's the good news.

Having said all that, we have to take preventative measures, at the government level and at the private sector level, and use data the best way we can to predict where the cost curve is going to come down the fastest. And that lends itself to better utilization of resources, not just money, but certainly technological resources.

It also is going to beg the question, what do we do in the regulatory environment to allow some of these advances to happen quicker so that cost curve can come down. Haim: I completely agree with you, Chris, and let me offer your solution. The solution is actually going to come from the healthcare companies. Forty percent of all R&D of the drug companies is being wasted today. It's getting more and more expensive to develop each drug. (Source: pHRMA, 2018.)

So moving to big data analytics prediction to take all this data that we are creating to, and personalized drugs, prevention, which is going to decrease dramatically the overall cost, I think will find us a lot of those, of those billions of billions of dollars that we are talking about. So I think a lot of it could be paid by lowering the cost curve starting at the pharmaceutical companies and the healthcare industry.

9

Candace: And that's just the development of drugs. You know when I go to the doctor's office, I always see there's a lot of paper in the office. So, there's also the digitization of how healthcare is delivered to patients, which should eventually I would think reduce costs as well. Haim: And let me offer you another interesting idea here. How about if I'm monitored 24/7 by wearable devices, by sensors and everything. And I'm getting the information, do I really need to go to the doctor? Or can I upload all my information to a doctor that sits someplace else in the world completely. He's getting all the information, doesn't have to do any kind of medical exam to me because he has the information of what's going on, prescribe me a drug, which is going to be 100% for me and can treat even online, even without seeing me and talking to me, communicating with him by email or by any other digital way, can treat way more people cheaply and effectively. Candace: Wow. That would be fabulous.

Haim: I hope so.

Candace: So, the costs are real, and they clearly require some financial preparedness on our parts. And Chris, I do know, I have heard you, that starting to save early is part of the equation, but what about the actual way that we invest? Chris: Absolutely critical. Two ways to think about this. Today, a major portion of one's mindset about investing is just only investing. The integration of planning has to happen in a more assertive way. That's number one. What does planning mean? It's not just taxes, it's certainly not just allocation of assets and matching them up against liabilities. It's about future planning. It's about what your goals are, what are you actually trying to achieve in retirement, not just can I retire.

And then secondarily, the mix of assets in our view are going to have to change. It is said that as you get older, you increase your fixed income allocation to garner some level of income to pay for retirement. Given everything we've described and given the optimistic nature of living longer around your lifestyle, it's quite likely that the equity mix is going to have to stay higher and potentially for some people go higher, to pay for the active lifestyle that the new era of longevity is about to bring. Candace: Okay. Well we've covered a lot today I think, and it's all been absolutely fascinating. So, Haim and Chris, what are the key takeaways for our listeners?

10

Haim: This is happening. The revolution is here and now. So, my key takeaway is that, no matter if you're a Gen Z, a Millennials, baby boomer, Gen x, doesn't matter. You need to think, I am living to the year 100 and my financial planning, my overall, my reaction, my everything that I do in life has to be centered around that.

Chris: Yeah. And I would say that every major disruption over the last few hundred years or since civilization has been around is initially viewed as a major risk. But if you flip it the other way, this is one of the greatest opportunity sets we will live through ever, and we need to take advantage of that. Of course our lives are going to get disrupted, but in this case it's a positive disruption and that lends itself to much broader, much more fulfilling lifestyles.

Candace: Haim and Chris, thank you so much for your insights.

You've been listening to Perspectives. I'm Candace Browning, head of BofA Merrill Lynch Global Research.

My cohosts have been Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank and Haim Israel, Head of Thematic Investing for BofA Merrill Lynch Global Research.

We hope listening to Perspectives inspires you to see your financial life in a new light.

What would you like the power to do?

Thanks again for joining us.

This podcast was published on October 23, 2019.

Any opinions or other information correspond to the date of this recording and are subject to change. The views expressed are not necessarily those of Bank of America Private Bank or Merrill. The information contained in this podcast does not constitute research or any recommendation from any Bank of America Private Bank or Merrill Lynch, Pierce, Fenner & Smith entity to the listener.

This material should be regarded as educational information on Healthcare considerations and is not intended to provide specific healthcare advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.

The information is general in nature and is not intended to provide personal investment advice. The information does not take into account the specific investment objectives, financial situation and particular needs of any

11

specific person who may receive it. Investors should understand that statements regarding future prospects may not be realized.

BofA Merrill Lynch Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC, and wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).

The Chief Investment Office, which provides investment strategies, due diligence, portfolio construction guidance and wealth management solutions for Global Wealth & Investment Management (“GWIM”) clients, is part of the Investment Solutions Group (“ISG”) of GWIM, a division of BofA Corp.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of BofA Corp. MLPF&S is a registered broker-dealer, Member SIPC, and a wholly-owned subsidiary of BofA Corp.

Bank of America Private Bank is a division of Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp.

Investment products:

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

This podcast should not be copied, distributed, published or reproduced, in whole or in part. Neither Bank of America Private Bank or Merrill nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed.

© 2019 Bank of America Corporation. All rights reserved. ARBQDW7H