204 Family Offices with Richard Wilson

204 Family Offices with Richard Wilson

Jason talks with Richard Wilson about family offices that serve families with assets of $100 million or more. 

Richard C. Wilson helps implement discreet full balance sheet family office solutions for $100M+ net worth families through his firm Centimillionaire Advisors, LLC. Richard is also the founder of the Family Office Club, the largest membership-based family office association (FamilyOffices.com) with over 1,750 registered family office members and 25 live events per year.

Richard’s has spoken at over 225 conferences in 17 countries, has the #1 bestselling books on the topics of family offices and capital raising industries. Richard’s latest publication is Centimillionaire Migraines: Proprietary remedies to turn the 6 most common headaches of $100M+ net worth clients into points of strategic advantage. Richard produces the Family Office Podcast and his website FamilyOffices.com is the most visited in the ultra-wealthy family office industry.

To learn more visit: familyoffices.com

Below is the full transcript:

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Announcer: Welcome back, America, to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.

Jason:  America, welcome back to another round of Sound Retirement Radio. So glad to have you tuning in this morning. You’re listening to episode 204. So, if you’re driving down the road in Seattle this morning and you want to catch the entire show or you want to maybe get the podcast extras, remember, you can find us at soundretirementplanning.com is where we host all of these programs for your listening enjoyment. I’ve got a great guest that we’re going to be bringing on in just a minute. But before we do, as you know, I like to get the morning started right to ways.

Jason:  The first one is by renewing our minds. I have a verse here for us. This comes to us from Philippians 4:5. “Let your gentleness be evident to all. The Lord is near.” Then my daughter shared this joke with me last night, and I have to tell you, she likes when I read to her before bed. So, I was reading and I was dozing off in and out of consciousness. She tells me this joke, and last night, I thought it was hilarious. Then this morning, I came in and shared it with my team and they didn’t think it was that funny. But what do you call an avocado who goes to church? Holy guacamole. All right.

Jason:  All right. Episode number 204. It is my good fortune to have Richard C. Wilson on the program with me today. He helps implement discreet full balance sheet family office solutions for $100 million plus net worth families through his firm, Centimillionaire Advisors, LLC. Richard is also the founder of the Family Office Club, the largest membership based family office association with other 1,750 registered family office members and 25 live events per year.

Jason:  Richard has spoken at over 225 conferences in 17 countries. He has the number one bestselling book on the topic of family offices and capital raising industries. Richard’s latest publication is Centimillionaire Migraines: Proprietary remedies to turn the 6 most common headaches of $100M+ net worth individuals into points of strategic advantage. Richard produces the Family Office podcast and his website, familyoffices.com, is the most visited in the ultra-wealthy family office industry. Richard C. Wilson, welcome to Sound Retirement Radio.

Richard: Yeah. Thanks for having me here. I appreciate it.

Jason:  Absolutely. So, man, what’d you think of my joke this morning?

Richard: It was better than my long bio. Sometimes, I cringe. I should have sent over a one sentence one just to save some time on this recording. But hopefully, we can make it fun and relevant for everyone listening.

Jason:  It is going to be fun and relevant. This is probably going to be a different conversation. When you’re talking about having $100 million of assets, you have different concerns maybe than the guy that saved a million or a couple million dollars for retirement. So, the first question I have for you, help our listeners understand just basics. What is a family office?

Richard: Sure. A family office is just a more holistic, more full balance sheet solution for someone who’s ultra-wealthy. The easiest way to understand why this is needed is that if you’re worth $100,000 vs. five million, you can imagine a completely different set of complications, investment interests, investment opportunities, might be buying a couple rental properties or investing in a fund manager. Then again, if you take the jump to someone not worth five million, but 50 million or 150 million, again, it’s that much different and transformational in the level of complexity you have. You might have 30 different LLCs, you might have 20 different K1s with eight different organizations that are independent from your own.

Richard: So, there’s a lot of coordination and a lot of potential mistakes that could be made. It could be a regulatory mistake, a past efficiency mistake, and investment overlook mistake. Those little mistakes can cost you a lot of money. So, if you have a more holistic solution, then just avoiding one or two mistakes could pay for a full-time person for each of those mistakes to help around your family office and source better opportunities for your family.

Jason:  How did you get started working with family offices?

Richard: At the beginning, it was really working for a capital portfolio management company and a hedge fund. I was calling on institutional investors that manage $100 billion each. Then I was calling on wealth management firms who often didn’t have accredited investors to invest in a hedge fund. I realized there was something called a family office and I said, “Wow, I’m just only going to meet with these guys going forward and that will be a much better use of my time.” Well, I decided that and found it almost impossible. It was very hard to find them, hard to figure out what they wanted. There was no thought leader helping me in the space.

Richard: So, as I learned and met with them, I shared what I was learning along the way and I started posting it online on a blog. It started to take off, so I started doing it religiously. Every week, I’d post something and that took off even further. I got on the front page of the Boston Globe and I bought familyoffices.com to post the content to, then got invited to speak over 100 times in a dozen countries and got book deals with

Bloomberg and 12 years later, hosted 115 events in the industry. I’ve written four books on family offices and we’ve just learned a ton by being in the middle of it all and turned into the number one thought leader globally on the space because there literally was none when we got started.

Jason:  Awesome. So, what asset level should people have before they start considering a family office?

Richard: Typically, as you change from a three, four, five million net worth and get closer and closer to 10 million net worth, you might want to employ the services of a multifamily office, a group that has the infrastructure and understanding of those that are worth usually seven to 10, 20, 30 million plus. That could be the time to start thinking about that. But the time when on top of that, you may want to have your own, or at least one full-time professional managing your own affairs and dedicated just to you, might start at the upper end of that multifamily office range.

Richard: So, it might be when you’re worth 20, 25, 30 million or more. The closer you get to 70, 100 million net worth, the more that for sure you should have your own dedicated resources for yourself as part of your solution because at that point, you’re paying for a family office whether you have one or not. It’s just whether you’re paying for it in mistakes, missed opportunities, increased chaos, increased stress. There’s no reason not to have one the closer you get to 100 million net worth.

Jason:  What are the costs? How much should somebody expect to pay for a family office?

Richard: It can range. So, sometimes, you can put together your own lean family office and just have one or two full-time professionals. You might be able to have it as low as 25 to 50 basis points when you include the outsourced services and your internal team. Other times, just the core resources can cost you 1% or 100 basis points or more. So, it depends on whether you want your family office to be doing bill pay for you and having total life support, personal and business support, and having everything managed internally vs. outsourcing everything and you have home resources, personal resources, or a separate system to help support you personally and you keep costs to a bare minimum. So, a big range there. But most family offices are spending 50 to 80 basis points on their cost is typically what I see.

Jason:  Okay. Tell me, I have some more questions, but I want to just get into your head a little bit because of the unique relationships you have with people. I have had the good fortune to meet with people worth several million dollars. But at $100 million, there seems like there are fewer of those type of people. But what I want to know about is the makeup. Who are these people? What gets them out of bed in the morning? What are they excited about? What are their values? What have you found to be some common characteristics among people that have $100 million plus of assets that they’re managing or overseeing or stewarding?

Richard: Sure. Well, a really common trait for us is that they’re first or second generation. The ones who are at third, fourth, fifth generation generally have layers of advisors or less entrepreneurial where someone who’s created their wealth or their father or mother did are usually much more in control, engaged, entrepreneurial, they want to have some parts of their investments that are transparent where they’re adding strategic value typically. So, these people have created their value not through … None of my clients won the lottery, and only one out of the 26 families that are worth over $100 million that we’ve signed contracts with have inherited the money. The rest have created value.

Richard: So, it’s very unnatural for them to just give over full control to everything and say, “Okay. Well, here, Mr. Private Banker. Here’s all of my assets. Please manage them well, don’t charge me too much, and keep me updated.” What I’ve found is that a lot of them rest better at night if they compartmentalize their investments into three segments and potentially have different advisors for each segment. The first segment would be the fully diversified commodity stocks, bonds, fund managers, etc. Compartmental should be the defensive area and that’s what traditional wealth management is all about.

Richard: The second compartment would be commercial real estate or real estate investments that are typically cash flowing that might have 10% of those be development related. But usually, it’s just cash flowing real estate assets. So, they’re hard assets, good collateral behind them, not too risky typically, and I can help grow the net worth in a tax efficient way. The third area would be direct investments into operating businesses. Unless the family created their wealth in hospitality or in senior living or apartment buildings, etc., then usually, that third compartment is investing into manufacturing of auto parts, if that’s where they made their wealth, or into consumer products.

Richard: Or they could even put a stake in the ground and say, “Hey. We didn’t make our wealth in stem cells. We made it in auto dealerships. We believe stem cells is the future. So, we’re going to focus our lens on moving up that learning and curve and being great in that third area.” So, I know it’s a little bit long winded of an answer, but I think managing your assets within those compartments and knowing that within each compartment, you might want a different level of transparency, control, cost, hands on involvement or not is very important.

Jason:  What industries would you say are most of these folks coming from, and what area did they develop most of their wealth? Do you see a trend there?

Richard: Yeah, I do. I think that real estate is an area that comes up often, but it’s because there’s so many types of real estate. It’s like saying business. It comes from business. It’s like neither comes from real estate or business. We don’t say they made their wealth in real estate and you’re like, “Wow. That’s so common.” But there’s many different segments of real estate, probably 15, 20 different major strategies in real estate, just like there’s many types of business. In the business area, I see a lot of wealth coming from manufacturing, tech, healthcare, consumer products.

Richard: The one that’s surprising to most people is the manufacturing. Most people think of that all being overseas. But a lot of wealth is still being created in the US through large manufacturing companies and there’s barriers to entry. So, these companies have been around for 20, 30, 40 years. But there’s a lot of wealth still being created in that space. Out of all those areas, people find that most surprising typically.

Jason:  You mentioned three segments. So, diversified equity, commercial real estate, and direct investment. When it comes to commercial real estate, what kind of cash flow, what cap rate, what percentage are investors happy with today if they’re going to have an investment in commercial real estate? What are most investors looking for?

Richard: Sure. Yeah. The big question is whether you want appreciation or cash flow. So, just a never touch it, it’s always going to be rented out fully type assets. They don’t want to have a hassle in filling up or the goal has to be aligned with what you’re acquiring. So, a lot of families used to try to get six, 7% cap rates on apartment buildings. Now, you’re only getting that usually if you go to a third tier city. The ones that used to be called second tier cities have now been having their cap rates beat down into the 5% ranges many times. So, it depends on your goals.

Richard: But a lot of times, people are looking for a 12 to 15% IRR at least on a cash flowing asset that they do investment in real estate development. They’re looking for hopefully a 20% plus. That’s pretty much in line with what most sponsors out there are promising. But the real estate cycle has been so long and for the last three years, many of the investors onstage at our events have been saying that sometime in the next 12 to 14 months, things are going to turn down and they keep on saying that and they keep on saying that. For three years, the market’s been extended beyond where people felt like it naturally should have been.

Richard: So, who knows? It might go on for another three or 10 years. But a lot of families who are going to cash two, three years ago are now saying, “Well, we’ll hold on to 15, 20% cash perhaps, or cash equivalents. But we are going to cautiously still invest when we find a great deal or we find something with limited downside,” which could be a lending deal, or maybe they are lending out money at 10, 11% and they’ve got collateral behind it at a conservative loan to value ration.

Jason:  So, I wanted to ask you, one of the things that we’ve done, and you may not know this, but at my firm, I developed a SAS, software as a service, called Retirement Budget Calculator. I’ve been personally funding the development of that SAS. But my development team has talked to me about going out and raising capital for expanding the growth of that particular tool. I’m curious to know, when investors are looking at a direct investment in something like technology, from your perspective, are they more interested in user growth, revenue, or profitability when they’re evaluating those opportunities?

Richard: What I’ve found is that the strategic acquirers will care about total size and whether you’re one of the top to market dominators and whether your revenue is high enough for them to bother with. I’ve had the experience that if you’re not at five million plus, 10 million plus in revenue, the strategic acquires who will pay the big multiples, a lot of people make the mistake of going on Shark Tank and say, “Oh, well, everyone exits in my space at 20 times revenue.” It’s like, yeah, well, they’re doing 50 million in revenue and they exit at that multiple and you’re a nothing burger that’s just starting out and you have no traction yet. Right?

Richard: So, you can’t have the same multiple at a start point when you’re a consumer products company, for example. You see that on Shark Tank, people getting burned on that type of valuation. But family offices come in an in between spot where they could add a lot of strategy value. They don’t want to invest near the end. They also, most of the time, if it’s not where they created their wealth, don’t want invest at the very beginning.

Richard: But if there’s revenue traction and things are break even or maybe are showing a small profit so that you’re just reinvesting and you don’t need to make a big profit because you have another business that you own, etc., that you’re just reinvesting, etc., they like those types of opportunities, especially if they can help you open doors, get distribution, help with maybe their marketing team or back office team.

Richard: A lot of times, family offices consider companies that are making as little as two to 500,000 a year in profit, or as little as one, two, three million in revenue because they know that while that’s not a venture capital play [inaudible 00:16:31] startup that could give them maybe 30 times return on their money, it could be something that could give them a five, 10 times return on their money and help them maybe in other ways in their portfolio. So, I think it’s they love to be able to value businesses based on a multiple of profits, not a multiple of revenue, and they like to come in in the middle, different than angels and VC, and different than a strategic acquirer usually.

Jason:  Interesting. So, tell us, what are, your experience, the advantages and disadvantages, hit on both of those, of family offices? What are some of the advantages that people enjoy being associated with a family office, having a family office, and what are some of the disadvantages or drawbacks of the family office?

Richard: Sure. Sure. My experience has been that if people have enough wealth where they could use one, it’s almost all advantages. A disadvantage could be a switching cost. Maybe you’re very used to how things work with a current wealth provider and switching over just might take some of your time. But typically, after it’s done, you’ll have a more holistic solution and better quality service providers all around you that are more appropriate at a level of complexity that you have that you’re not the learning curve of your CPA or for your CPA because you’re five times larger than his average account and he only has two clients of your size. So, he’s not used to all the strategies he could be employing for tax optimization, for example, or estate planning, etc.

Richard: But I think the most important part of your question is probably advantages vs. disadvantages of having your own single family office, meaning a dedicated team just for yourself running your family office vs. hiring a multifamily office, that’s something that families struggle with all of the time. Usually, when they hear about the concept, they say, “Yeah. I do want a family office, but which type do I want?” People get really hung up on which type. The truth is that if you are worth over 20, 25 million, or much more, you oftentimes will need both.

Richard: So, you shouldn’t have this thought in your brain of either or. It’s that you probably a [inaudible 00:18:35] family office for the fund manager, stocks, bonds, commodities, the compartment number one. They might be able to help with something in compartment number two on a cash flowing real estate. Then you might want to have your own one, two, three dedicated professionals to help you identify cash flowing real estate or investing within the niche where you created your wealth. Then that way, you’re not doing both.

Richard: I think this is a relief sometimes for people to hear because they’re debating forever internally and they don’t know who to trust because everyone seems to be giving them advice, but also selling them something in the next sentence. So, they just stall and don’t do anything and sit on their cash for a long time. So, it’s important to know that even at two billion, $3 billion in assets under management, almost all family offices are using multiple lines of service from a private bank or multifamily office.

Richard: It almost never makes sense to bring everything internally, even if you have the resources to do so, because it’s not what you’re excellent at. It’s not where you created your wealth. It’s not where you’re very strong. So, why allocate resources there when you could be allocating with something that gives you and outsized return every hour that you spend on it?

Jason:  Folks, if you’re just joining us, you’re listening to episode 204. We archive all of these programs for you at soundretirementplanning.com. I have Richard C. Wilson on the program. Familyoffices.com is the niche, his specialty, helping ultra-high net worth individuals and families manage that wealth and capture opportunities and avoid mistakes. Richard has agreed to stick around for a couple of minutes for some podcast extras for our listeners. So, again, if you’re driving down the road in Seattle this morning, by all means, listen to the podcast.

Jason:  Richard, I wanted to ask you, you touched on something there that’s a hot topic for a lot of the people that we get to meet with, which is taxes and tax optimization. What are some of the strategies or some of the things you hear people talking about in the circles you’re running with regarding taxes and trying to make sure that things are tax optimized?

Richard: Sure. One way is that if someone has a lot of cash flow coming from an operating business, sometimes a real estate transaction will be put into place where it’s a zero coupon structure. So, they’ll be basically investing in a piece of real estate, but not having any income come from it and they’re paying interest, etc. But the income just goes to servicing the debt alone and there’s no income, but the net worth is growing. That can offset positive income within their tax returns potentially, depending on who they are and where they’re located.

Richard: Having good estate planning in place can often save a family more than the cost of having a family office for several years to come. So, oftentimes, the best investment someone can make is in a family office quality estate planner or just making sure that whoever’s helping around your multifamily office or your retirement solution is helping get you guidance from an estate planner and from someone who can help structure things the right way. I’ve found that real estate, between cost aggregation or conservation easements, is something that comes up at our events that’s been a little bit under more scrutiny lately in the news that real estate in general has different types of write-offs that can allow you to be either offsetting the income or basically not showing a lot of extra income while your net worth is ratcheting up going forward.

Richard: So, I think that that goes nicely in hand with many families have a goal of saying they might want to invest actively a portion of their assets, but they might also want some in a trust account that just can’t get messed up after they pass away and is just going to be income that comes off of an apartment building, etc., for a generation or two to come. I think that that tax strategy goes nicely in hand with a lot of estate planning priorities that my clients talk about.

Jason:  All right. So, we only have about a minute left for our radio listeners. But I wanted to ask you about mistakes that you’ve seen people make in this space and some of the warning signs, things people should watch out for to avoid making mistakes.

Richard: Sure. Yeah. I love this question because in just a sentence or two, I know I could save someone $10 million who’s listening to this. So, many times, when a client has a big liquidity event, they’ve been building it up for eight, 15, many times 20, 30 years, they celebrate very expensively and they have their wallet loose and they’re just shooting money around left and right. It’s okay, obviously, to enjoy yourself. You earned it. You get to do whatever you want with it after 25 years of working so hard, of course.

Richard: But these are examples from clients I’ve worked with before, buying five private jets in the first nine months after an exit or buying a 15 or $25 million residence that’s going to be hard to sell in the future, and maybe it was on the market for 10, 12 years and then you came along with your exit, bought it, and now you have to wait yourself for a decade once you decide that you’re bored of it and you want to buy something else inevitably a couple years later. So, buying a very expensive single family residence and doing a very over the top renovation of it is a mistake. Many times, clients just go-

Jason:  Richard, Richard, hold that thought. Hold that thought. We’re going to be right back to continue this conversation for our podcast listeners.

Richard: Sure.

Announcer: Information and opinions expressed here are believed to be accurate and complete, for general information only, and should not be construed as specific tax, legal, or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives, or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program.

Announcer: All insurance related discussions are subject to the claims paying ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, an independent fee based wealth management firm located at 9057 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1-800-514-5046 or visit us online at soundretirementplanning.com.

Jason:  All right. Richard, you there?

Richard: Yes.

Jason:  Okay. Sorry about that. Sorry to cut you off. You were just sharing with us some of the mistakes that people make and I love that you bring this point up of spending because I find when we’re working with people, helping them get ready to retire, the number one most important number they need to know is how much they spend. It’s the only way we can really do a good job for them to help them know if they’re going to be okay in retirement. That’s the reason I developed my Retirement Budget Calculator. But I’m just reminded, it doesn’t matter if you have 100 million or one million or $500,000. If you don’t know how much you spend, it’s impossible to know if you have enough. But anyways, go ahead. Keep going on with your comments there about mistakes you see people make with a big liquidity event.

Richard: Sure. Sure. Yeah. So, buying a very expensive single family residence is going to be very hard to resell at that same price without a decade of patience. Big mistake. Investing all over the place with your brother-in-law’s idea for 500,000 in some mobile app that’s going to disrupt Facebook and some cannabis investment over here and then a local real estate deal and just shooting half a million, a million around all over the place thinking you’re getting diversified is a big mistake.

Richard: Many times, when you do direct investments, you need to be very, very focused. You let your compartment number one be diversified for you. You need to look at 50 investments in a single niche and then you can tell which one’s an anomaly. You’ll never move up the learning curve on nine different industries that you’re trying to invest in as a one or two person team. Even billionaires focus usually on two or three segments and focus on them like a laser vs. spreading their capital all around in direct investments. Those are some of the top mistakes.

Richard: You just talked about the burn rate. Many times, families can increase their wealth by five to 9% without taking a lot of risk or consistently be getting a six to nine, maybe sometimes they get 12% return across their total portfolio. That means that usually, they should have a three to 5% burn rate if they want to sustain their assets over time. But some clients after a liquidity event will go on a $3 million vacation for four months and just burn through a lot of capital quickly. So, you just have to nicely remind them that that could be a celebration, but can’t be their new life.

Richard: I think to sum it all up, just being very thoughtful about how you want your new reality to look and what your goals are, and then you can align everything else with where you want to go. I would just be careful with anyone who comes in and pitches you something or offers you something or says, “Oh, you have to do this or you really should do that,” before they really have gone through about 50 questions getting to know you because that means they’re just selling you something. They’re not really prescribing something based on what you need. You might not even know what you need unless you first go through the 50 questions on your preferences, priorities, risk levels, time horizon, etc.

Jason:  Yeah. How do you see folks in this group that you’re serving in terms of being charitable and giving? How important of a characteristic of a value is that for them?

Richard: It is important. All my clients are philanthropic. They usually have causes they’re already somewhat attached to because once they get to the 50 or $100 million level, they’re on different organizations’ donor lists and they’ve been donating to a private school or a cancer foundation, etc., in the past. So, I would say it is important for sure. The topic of impact investing is coming up more, but I still would say it’s not mainstream. I would say that 90% of their energy usually is still focused on being an entrepreneur and maybe 8% is on philanthropy as a family and one or 2% on impact investing if it even comes up.

Richard: Usually, people love running businesses and they just love chasing opportunities. That’s what makes them feel alive and excited and challenged and fulfilled because you can only play so much golf or fly around in your private jet to different resorts before you just feel like something is missing, which is your normal life of trying to address a business challenge or opportunity.

Jason:  That’s exactly right. That’s been my experience with the folks that we’ve talked to that have $10 million plus of assets. One of the things they’ll say to me is they’ll say, “Jason, I’m bored,” and they’re trying to get involved in different ways to give back, but they’re just, they’re bored. So, it’s a little bit of this entrepreneurial disease, if you will. We entrepreneurs, we like to make things happen and pursue opportunities. So, I wanted to ask you, you mentioned having a good estate planning team could be more valuable than the family office. If you’re going to hire an estate planner to help, what are the questions that you need to ask to make sure you’re getting the right people surrounding you as you are developing this plan for your wealth?

Richard: Sure. Importantly, I would ask before they know anything about you, I would ask them a bunch of questions. So, before they know how wealthy you are, etc., I’d come in unassuming and just say, “Oh. How many family offices do you work with currently? Or what specific structures or ideas are you typically applying to a family office solution?” Or I would ask, maybe even before all of those even, “What is the average net worth of your clients and how many clients do you serve? How many people are on your team vs. the number of clients you serve?”

Richard: Maybe if they can share the top five wealthiest clients in their roster, because if they don’t know, if it’s a normal estate planner and they’re not on top of the family office trend and they don’t know that you’re ultra-wealthy, then they might be proud because compared to the average estate planner, they might have a very successful practice and be doing very well for themselves and have a 20 person team by serving people who, on average, are at five million net worth, 10 million net worth. But if you’re worth $100 million, you don’t want to work with someone who’s used to working with someone at five or 10 because they’re not going to be able to deal with your level of complexity.

Richard: So, I would try to go in and be gathering information before they’re gathering information on you because I’ve found, and I talk about this in my recent book called Centimillionaire Migraines, and centimillionaire means 100 million plus net worth, that there’s often a feeling of a feeding frenzy. Once someone finds out how wealthy you are, everything gets five times more expensive, everyone wants to charge you a lot more, and what’s worse than that, everyone really wants you to be their client. So, you have to go into situations keep information close to the vest sometimes when you’re sorting out who should be a service provider to you or they might try to navigate that path where you become a client, but you’re really their learning curve.

Jason:  You have an opportunity to do these events where you bring family office together from around the world. When people are speaking at those events, what are some of the aha moments? What are some of the things that excite people there that they’re learning about? What is it that brings them to those events and has them coming back?

Richard: Sure. Usually, it’s the fact that at the investor summits, we’ll have 30 investors onstage in a single day and we talk about structures, fees, due diligence, sourcing direct investments, how do you structure real estate deals, what type of cap rates are normal. If you’re going to lend capital in real estate, what percentage is good? If you’re going to conduct due diligence on an early stage investment manager, how do you do that and mitigate the risk? We talk about new trends like the opportunity zones or whether you think it’s a good area to invest in or not, things like bitcoin or blockchain or cannabis or impact investing that are things that families are unsure on or they’re not sure if they’re real or not, etc.

Richard: So, we find it’s a place where it can just be an open discussion format. I just write the discussion panels for those events and what I’m curious about. I don’t want to get bored at my own event. After doing 115 live events, there’s a risk of that. So, I’m always trying to push on creating new content that we haven’t covered in the past essentially to keep my own interest and make sure that those that come to many of our events keep interest in it as well.

Jason:  Okay. What do you find is most counterintuitive about the family office industry and the ultra-wealthy?

Richard: Most counterintuitive is that people think they could pay any fee because they’re ultra-wealthy and they say, “What? Why is this person being so cheap? Why do they want to negotiate down my fees? I don’t get it. They’re a billionaire or they’re worth $100 million,” and it blows their mind. But it’s like saying, “How come this person who does a triathlon every week won’t eat this piece of pizza? Look how good of shape they’re in. They could eat a piece of pizza.” The thing is, well, they wouldn’t be a triathlete if they ate pizza and they wouldn’t be ultra-wealthy if they threw around their money without gauging the value.

Richard: So, families aren’t cheap. They just don’t want to pay a Rolls Royce sticker tag and get a Honda. The Rolls Royce is inconsequential. It’s the price of someone like us assuming you’re not worth $100 million staying at a Marriott hotel and paying $400 a night. Okay. There’s a real cost to it. But it’s not painful to their balance sheet. But they don’t want to pay for a Marriott and be at a Motel 6. That’s just not a good exchange and that’s not how they survived in the jungle and became who they’ve become. They have to assess value and return for their investment of time and money, and that’s very counterintuitive.

Richard: The second thing, even though you asked one, this other thing gets missed all the time. If there’s anyone listening who’s raising capital from family offices, time goes by so quickly for these individuals, they’re getting so many text messages, phone calls, emails, meetings, everyone requesting their checkbook and their time so frequently, but then the person raising capital might follow up three times in a week or twice in a day. For the ultra-wealthy professional who’s got a lot of people chasing them, once every 10 days feels about the same as once a day to someone on the other side of the equation.

Richard: So, just understanding the number of requests on their time is very important and often completely missed by those raising capital. They get a warm lead. If someone responds at an event or to an email, they just latch onto it like a piranha and burn the lead because they follow up way too aggressively.

Jason:  That’s interesting. So, we’re coming to the end of the show here, Richard. Tell our listeners, if there was just one thing that you would want people to take away from the work that you’ve done servicing the ultra-high net worth, $100 million plus of liquid invest-, of assets, maybe not liquid investible, but assets, what’s the most important thing you want people to take away from our time together today?

Richard: Most important thing is that I think whether you are someone who just had a liquidity event or you’ve been worth 10, 20, 30 million or a while or if you’re someone raising capital, I think the most important thing is extreme ruthless integrity, so having everything integrated. So, if you love the manufacturing world or you love the stem cell space, don’t try to manage stocks and bonds and move up all those learning curves where it’s not your strength and have your team aligned with where your strengths are and where opportunities are, not so you take concentrated risk in stem calls, but so that you don’t have the risk of trying to manage things where you’re not an expert.

Richard: You should move people off your team who don’t fit your core values. You shouldn’t hang out in social circles that aren’t supporting of you. You shouldn’t have any inputs in your life, personal or business or investment portfolio, that are not completely aligned with where you want to go. The exact same is true not only on the investor side, to a line of direct investment, solution providers, etc., but on the capital raiser side, it’s also true. Investors want to allocate too and close deals with people who are committed to their craft for very longterm so they can trust that they’re being genuine and honest and authentic.

Richard: Any hint that things aren’t authentic, there’s not genuine value, which someone sits in the short term for the profit, and the investor will go dark on you in a second. So, I’ve just found that in life and business, investing, capital raising, etc., integrity is the most important thing and that’s why it’s on a metal sign all around our office. Ruthless integrity is our number one core value because of me seeing that in the family office space for a long time.

Jason:  That’s awesome. Richard, I’ve really enjoyed our time together. Thank you for being a guest on Sound Retirement Radio.

Richard: Yeah. Appreciate you having me here.

Jason:  All right.

Richard: Take care.

Jason:  All right. Take care.