Homer Smith: Blueprint Revealed! Attracting & Managing Money for The Wealthiest 0.1%

In this episode, we delve into the secrets of success and wealth management with our guest Homer Smith, Private Wealth Advisor, Konvergent Wealth Partners. We explore the decisions successful people make, the concept of a virtual family office, and the importance of making good decisions about wealth and taxes. We also discuss the challenges of managing wealth and the benefits of a comprehensive approach to wealth management.

Topics Discussed

  • The mindset and decision-making process of successful people
  • The concept and benefits of a virtual family office
  • The importance of making good decisions about wealth and mitigating taxes
  • The differences in managing ultra wealthy individuals versus those in the median wealth range
  • The role of taxes in wealth management and the benefits of focusing on tax efficiency
  • The challenges faced by accountants and lawyers in wealth management and strategies to overcome them
  • The importance of understanding the intent of wealth management solutions
  • The role of insurance in wealth management
  • The benefits of an All-Weather approach to investment and wealth management
  • The psychological worries of wealthy individuals and how to address them

This episode is a must-listen for anyone interested in wealth management, the psychology of successful people, and the intricacies of managing wealth. It provides valuable insights and strategies to navigate the complex world of wealth management and achieve financial success.

This is “ReSolve Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

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Successful people stand out from the crowd by making calculated decisions and taking actions that maximise their success. They arrange their lives around their goals, taking steps to protect their wealth, minimise taxes, and impact their chosen charitable causes. This can involve seeking out expert advice and making informed decisions about their financial landscape. Today, even those without a quarter billion dollars to establish a single family office can leverage technology and expert advice through a virtual family office. This allows individuals to manage their wealth, mitigate tax, and protect their assets more effectively. The virtual family office model, resonating with many, enables individuals to access expert services at a more affordable cost. It facilitates multi-generational conversations about portfolio construction and promotes an All-Weather investment approach. This means investing in diverse asset classes to withstand market fluctuations and ensure long-term stability. Wealth management isn’t just about managing investments. It requires an understanding of each client’s unique needs and goals, including tax reduction, estate planning, family planning, and business succession. Advisors who can provide comprehensive solutions to these issues differentiate themselves and can attract high-net-worth clients. Collaboration is key in wealth management. Advisors, accountants, and lawyers must work together to implement solutions that align with clients’ goals. This can result in significant tax savings and improved outcomes. Advisors play a critical role in simplifying complex concepts, enabling clients to make informed decisions. Despite potential hurdles in implementing wealth management solutions, collaboration can overcome these and provide the best solutions for the client .An All-Weather approach in wealth management offers numerous benefits, including the smoother performance of portfolios and reduction of significant declines in portfolio value. This approach provides peace of mind to clients, who appreciate the long-term perspective it offers. Advisors become crucial in this process, distilling complex information and helping clients make informed decisions. In conclusion, successful wealth management relies heavily on decision-making, understanding clients’ unique needs, and providing comprehensive solutions that go beyond traditional investment strategies. Collaboration between advisors, accountants, and lawyers is crucial to implement these solutions. An All-Weather approach to investing helps to protect clients’ wealth and provide long-term stability. The goal is to help clients navigate the complexities of wealth management and make smart decisions that will benefit them and future generations.

Topic Summaries

1. The importance of making decisions and taking actions that others are not willing to do in achieving success

Successful people are able to achieve better results because they make decisions and take actions that most others are not willing to do. They have a clear understanding of their goals and arrange their lives in a way that allows them to achieve those goals. This may involve making good decisions about their wealth, such as mitigating their taxes and protecting their assets. They also prioritize their charitable intent and make a significant impact in that area. These successful individuals understand that success requires going beyond what is comfortable or easy. They are willing to put in the effort and take risks that others are not. They are proactive in identifying and addressing any obstacles that may hinder their progress. For example, they may seek out experts and advisors who can help them navigate complex financial matters or provide better investment advice. They understand that achieving their desired outcomes requires a holistic approach. They take the time to assess their current situation and identify any areas that need improvement. By doing so, they can make informed decisions and take the necessary steps to achieve their goals. In summary, successful people stand out because they are willing to do what others are not. They make decisions and take actions that align with their goals and prioritize their long-term success.

2. The opportunity of a virtual family office

In today’s world, successful people are able to achieve their goals by making decisions that others are not willing to make. They have their lives arranged in a way that allows them to get better results and achieve success. However, not everyone has a quarter billion dollars to create a single family office. Fortunately, with the advancements in technology and access to experts, there is now an opportunity for individuals to create a virtual family office. This virtual family office provides similar services and expertise as a single family office, but at a more affordable cost. Individuals can receive assistance in wealth management, tax mitigation, error management, asset protection, and even charitable intent. The virtual family office allows individuals to build a portfolio and relationships with families without the need to change investments. It also enables multi-generational conversations about portfolio construction and the benefits of investing in a certain way. While there may be variations in investment strategies based on individual preferences, the core approach should be an All-Weather approach. This concept of a virtual family office resonates with many, as it provides an opportunity for individuals to access the same level of expertise and services as those with a quarter billion dollars. It is a way for individuals to take control of their financial future and make informed decisions about their wealth.

3. The importance of decision-making in wealth management

Making good decisions is crucial in wealth management. Successful people in this field are willing to do what others are not, and they consistently achieve better results. The way their lives are arranged and the decisions they make enable them to achieve their goals. One way to make good decisions about wealth is through a single family office, which helps with tax mitigation, error management, asset protection, and charitable intent. However, not everyone has access to a quarter billion dollars to establish a single family office. The good news is that with today’s technology and access to experts, a virtual family office is a viable option. This allows individuals to benefit from the expertise and services of a family office without the need for a large fortune. In wealth management, the ability to simplify complex matters and help clients understand their choices is highly valued. Advisors who can quiet the noise and guide clients towards good choices are in high demand. Despite the challenges, starting a career in wealth management at a young age can lead to success and leadership roles. Overall, the key takeaway is that decision-making plays a crucial role in wealth management, and those who can help clients navigate complex situations and make good choices are highly valued.

4. Understanding the needs of wealthy clients

Wealthy clients have unique needs and priorities that differ from those of advisors. It is crucial for advisors to understand and cater to these specific needs in order to effectively serve wealthy clients. One key aspect that wealthy clients prioritize is tax reduction. While advisors may not provide tax planning services, they can still offer solutions and ideas that can potentially save clients millions of dollars in taxes over the long term. Additionally, wealthy clients are often concerned about estate planning, family planning, and business succession. These are hot-button issues that keep them up at night. Advisors who can address these concerns and provide guidance in these areas are more likely to gain the trust and loyalty of wealthy clients. In contrast, focusing solely on investment portfolios may not be enough to satisfy the needs of wealthy clients. In fact, wealthy clients may already have substantial portfolios before seeking the services of an advisor. Therefore, advisors must take a holistic approach to wealth management, considering all aspects of a client’s financial situation. By demonstrating expertise in tax reduction, estate planning, family planning, and business succession, advisors can differentiate themselves and attract wealthy clients. Ultimately, the key to success in managing the wealth of ultra-high-net-worth individuals lies in understanding their unique needs and providing comprehensive solutions that go beyond traditional investment strategies.

5. The time required to see the fruits of labor in wealth management

Wealth management requires an upfront investment of time before seeing results. Advisors need to spend time understanding the client’s goals, needs, and financial situation. For example, it may take several months of engagement before specific investment decisions are made for the client. The process involves taking complex financial concepts and making them digestible for clients who may not have a sophisticated financial background. Advisors aim to distill down the complexity and present information to clients so they can make smart decisions. This approach is particularly important for ultra-high net worth families who have unique concerns and priorities. These families often prioritize tax planning, estate planning, family planning, and business succession. Investment decisions are not the primary focus, but rather a part of the overall wealth approach. Advisors work closely with clients to identify their desired outcomes and then develop solutions that align with those goals. The goal is to create a portfolio and relationship that can withstand market volatility and provide long-term stability. The process of wealth management is ongoing and requires regular communication and adjustments as the client’s needs and goals evolve over time.

6. The complexity of managing wealth for ultra-wealthy clients

Managing wealth for ultra-wealthy clients involves dealing with complex issues such as taxes, estate planning, family planning, and business succession. These issues often keep wealthy clients up at night. For example, investments may not be the primary concern for ultra-wealthy clients, as they already have significant portfolios and need assistance in other areas. The complexity of managing wealth for ultra-wealthy clients is evident in the need for a virtual family office, which can provide expert advice and assistance in making good decisions about wealth, mitigating taxes, protecting assets, and achieving charitable goals. The virtual family office model allows access to experts and technology that can help manage wealth effectively. While most people may not have a quarter billion dollars to warrant a single family office, the virtual family office model provides opportunities for individuals with more modest wealth. The focus of the virtual family office is on taxes, as they play a significant role in wealth management. By implementing tax-saving strategies, significant amounts of money can be saved over the long term. The virtual family office also takes a holistic approach to wealth management, considering factors such as estate planning, family planning, and business succession. By addressing these complex issues, the virtual family office aims to provide comprehensive solutions that meet the unique needs of ultra-wealthy clients.

7. Psychological worries of wealthy clients

Wealthy clients, especially founder-led business owners, have unique psychological worries related to their wealth. They may have started from humble beginnings and want to ensure their wealth is managed properly. For example, they may worry about preserving their wealth, passing it on to future generations, and avoiding the mistakes of previous generations. These worries stem from the fact that most of the clients the guest works with are founder-led business owners who have built their wealth from scratch. These individuals have experienced the journey of starting with very little and have worked hard to create their wealth. As a result, they have a deep understanding of the value of money and the importance of managing it wisely. They want to ensure that their wealth is preserved and grows for future generations. Additionally, these clients may have concerns about passing on their wealth to their children and ensuring that they are prepared to handle the responsibilities that come with it. They may have seen the mistakes made by previous generations and want to avoid repeating them. Overall, the psychological worries of wealthy clients revolve around the desire to protect and grow their wealth, pass it on to future generations, and avoid the pitfalls that can come with wealth.

8. Collaboration with accountants and lawyers

Collaborating with accountants and lawyers is crucial in providing comprehensive wealth management services. Advisors should help accountants and lawyers understand the benefits of certain solutions and work together to implement them. For example, advisors can help accountants identify tax-saving strategies and lawyers implement estate planning structures. By focusing on the ultimate intent of a solution, advisors can address concerns about strategies being solely for tax benefits. This collaboration allows for the identification of solutions that align with the client’s goals and can result in significant tax savings and improved outcomes. The role of the advisor is to simplify complex ideas and make them digestible for clients who may not have a financial background. By presenting the benefits of these solutions in a clear and understandable way, advisors can help clients see the value in implementing them. Additionally, collaborating with accountants and lawyers can help advisors overcome objections from clients who already have financial advisors. By working together, advisors, accountants, and lawyers can provide a comprehensive approach to wealth management that addresses tax issues, estate planning, and other concerns that keep high-net-worth individuals up at night.

9. Overcoming hurdles in implementing wealth management solutions

Implementing wealth management solutions can be challenging due to various hurdles. Advisors often find that the solutions they identify for their clients are too complex to implement within the constraints of their brokerage firms. This can lead to frustration and a need for external assistance. The conversation highlights the importance of collaboration between advisors and external partners to overcome these hurdles. The external partners can help identify solutions that align with the client’s needs and goals, while also making the advisor look good. Transparency is emphasized, with the external partners not expecting the advisor to bring business to them, but rather working together to provide the best solutions for the client. The discussion also mentions the role of accountants in validating the suitability of solutions, but notes that they may not proactively bring ideas to clients as often as desired. The goal is to empower advisors to be the ones bringing innovative ideas to their clients, even if the external partners are not ultimately the solution providers. These solutions are typically focused on tax and estate planning issues, but can also involve finding better investment advisors to achieve desired outcomes. Overall, the conversation emphasizes the importance of understanding the client’s goals and working collaboratively to overcome hurdles in implementing wealth management solutions.

10. Benefits of an All-Weather approach in wealth management

An All-Weather approach in wealth management provides numerous benefits for clients. One of the key advantages is the smoother performance of portfolios constructed using this approach. By diversifying investments across different asset classes and strategies, an All-Weather portfolio can deliver consistent returns even in volatile market conditions. This stability is highly valued by clients, as it allows them to navigate market fluctuations with confidence. Additionally, an All-Weather approach helps to reduce drawdowns, which are significant declines in portfolio value. By incorporating strategies that are designed to mitigate risk, such as hedging and diversification, All-Weather portfolios can limit the impact of market downturns. This not only protects clients’ wealth but also provides peace of mind. In fact, clients appreciate the long-term perspective that an All-Weather approach brings. They understand that wealth management is not just about short-term gains, but about preserving and growing wealth for future generations. This aligns with the idea of managing wealth like those who live in the Cayman Islands, or hurricane-prone areas, with a commitment to long-term stability. An All-Weather approach also allows for family conversations about portfolio construction, ensuring that all generations understand and benefit from this strategy. While there may be some customization based on individual circumstances, the core of an All-Weather portfolio remains consistent. Overall, an All-Weather approach in wealth management offers clients a reliable and sustainable way to achieve their financial goals.

11. The role of advisors in distilling complex financial concepts for clients

Advisors play a crucial role in distilling complex financial concepts and information for clients. They help clients understand the pros and cons of different options and make informed decisions. For example, advisors can present information on tax savings, estate planning, and investment outcomes in a way that is digestible and understandable for clients. By focusing on taxes and providing solutions that can save clients millions of dollars over the long term, advisors demonstrate the value they bring to high net worth individuals. They prioritize taxes, estate planning, family planning, and business succession, which are the main concerns for wealthy families. Investments, while important, are not the primary focus for these clients, as they often already have a large portfolio. Advisors aim to help clients achieve their desired outcomes by looking at the big picture and addressing their specific needs. They collaborate with accountants and lawyers to identify solutions that have no wealth management outcome but make clients look good. By doing so, they build trust and credibility with clients and other professionals. However, advisors face challenges in convincing accountants and lawyers to work with them. They emphasize that the solutions they propose are not solely for tax benefits but have other features that align with clients’ ultimate goals. By distilling complex ideas and making them digestible, advisors help clients navigate the complexities of wealth management and make smart decisions based on the outcomes achieved by other wealthy families.

12. The importance of long-term thinking in wealth management

Wealth management requires a long-term perspective, especially when considering multi-generational planning. Advisors should help clients understand the importance of long-term portfolio construction and the potential impact of global events. For example, advisors can discuss the concept of a 100-year portfolio and the need for stability and adaptability over time. By focusing on taxes and offering solutions to save millions of dollars over several decades, advisors can demonstrate the value of their services. The investments themselves are not the sole focus, but rather part of a comprehensive wealth approach. This approach involves understanding the client’s goals and current financial situation, and identifying areas that need improvement. Only after this analysis can appropriate solutions be recommended, which may include finding a better investment advisor or addressing tax and estate planning issues. The goal is to help clients achieve their desired outcomes and manage their wealth effectively for generations to come.

Homer S. Smith IV, CFP®, CRPC®, BFA™, CBEC®
Private Wealth Advisor, Konvergent Wealth Partners

A Private Wealth Advisor with over 18 years of industry experience, Homer has dedicated his practice to working with business owners and families of wealth with complex financial planning needs. His mission is to simplify the lives of his clients by quieting the noise that surrounds them both personally and in their business and allow them to focus on what matters most – their purpose and goals.

Homer has the unique ability of taking complex strategies and presenting them in a way that is remarkably intuitive and straightforward so clients can easily grasp the ideas. Working as a fiduciary and business consultant to his clients, it is his legal duty to put his clients’ needs first and act in their best interest while maintaining full transparency throughout the financial planning process.

Unlike traditional advisors, Homer provides a deeper level of service for his clients, going beyond investment management and traditional retirement planning to focus on advanced planning areas like wealth transfer, risk management, tax mitigation and philanthropy as well as personal development and family wealth planning. Homer’s goal is to be the trusted advisor for his clients, the guide they turn to when any major decision comes up, even those that are not financial in nature.

Homer’s financial experience spans many years in various roles. In his early years, he worked to coach, develop and train advisors, which grew to a branch management role in Honolulu where he led that office to become the firm’s #1 branch in the country. After shifting back into working with individual clients, he noticed there wasn’t a lot that traditional wealth management had to offer for business owners so he began to develop his long-term growth to exit service which is now at the center of his professional service model.

Homer is a graduate of Western Washington University with a Bachelor of Arts degree in Finance and a Minor in Economics. A passion for education and community involvement,

Homer serves on the Board of Trustees and is a current Board President for his daughter’s independent school. Homer enjoys spending time with his wife and daughters – hiking during the summer, going to Seahawks games in the fall/winter and traveling to Hawaii, their favorite destination after living there for several years.


[00:00:00]Homer Smith: Yes. I’m doing well. How are you all doing?

[00:01:13]Mike Philbrick: Great. Happy Friday.

[00:01:15]Homer Smith: Yes. Happy Friday.

[00:01:20]Adam Butler: Silence. Silence.

[00:02:09]Homer Smith: That’s right. It’ll be released shortly. We’re making a one minor edit to the cover. As you can see, there’s one little error we needed to fix, but, it’ll be released soon. This one, this book isn’t like a previous book we did. Not really released for the masses. It’s a very narrow book. So we’ll definitely have it available if anybody needs it, but yeah, it should be released during the next week or so.

[00:02:57]Adam Butler: Congratulations. Congratulations.


[00:02:59]Homer Smith: Thank you. It’s been fun.

Yeah. Great. Thank you guys for having me. Love working with you guys and love your research. And, as you’ve kind of already shared it’s been instrumental in how we’ve constructed our philosophy in the last few years around wealth management. So, just happy to be here and really appreciate everything that you all do.

So, with that, I guess I started my career actually, interestingly enough, the week of 9/11, 2001. So, graduated college, got my licenses. Went into work, got my stack of leads and like something, like three days later, 9/11 happened and wondered, did I make the right choice? Were people going to be interested in this?

And, something I found relatively early in my career and that people continue to tell me to this day, it’s somewhat unconscious, I guess, but I was very good at taking very complex things and quieting noise and helping people just understand the decisions they need to make, in those sorts of times.

And so in spite of all those challenges. 22 years old, starting a career in wealth management, I did pretty well and quickly went into leadership roles. So in addition to building my own practice, I started coaching and developing other 22 year old kids out of college and also older, second career people on how to be a financial advisor and eventually went into management.

So I built a whole team. I ended up moving to Hawaii for a few years, running a branch for a large broker dealer out there. I had to give up all of my clients to do that and kind of thought I was going to go in this corporate route. And after two and a half years of that, I realized that that wasn’t for me.

And we were pretty successful in what we did out there, but I realized that herding a bunch of cats in our industry really wasn’t what I really loved doing. I loved working with individual families. And so went back into management, moved back to the Seattle area, restarted my practice. And my first foray back home was, I built a relationship with a CPA firm and started helping them build out a wealth management offering for their clients.

They really saw the benefits of that collaboration between tax and wealth management. And I quickly realized, although I’d never really worked with them much before that, that all of their best clients were private business owners. My challenge was how do I bring value to them? You know, they didn’t typically have millions of dollars of liquid wealth.

It was tied up in their business. You know, they had 20 different professionals they were dealing with. And I just saw the stress, the pain and said, okay, I got to figure out how to bring value to them. And if I can solve that, that’s going to be valuable. So I spent 10 years really learning that world, getting exit planning designation, starting a growth strategy firm and incorporating growth to exit into my practice and, and really just educating myself and going to school on business owners and their needs, their challenges. And also, you know, did a lot of research through the groups that I’m a part of, Mastermind Groups I’m a part of that, if you think about the wealth in our country, for families with over 25 million of wealth, a vast majority of them are private business owners.

And so for me, it’s like, okay, well, I already like solving their problems and they’re the wealthiest. A good target to focus on. And what part of, what I built was, you know, most wealth managers love to be there, like when a business owner sells and the liquidity event is coming. They just get to come in, manage the well, do some estate planning with them and call it good. Well, I would love to do that every time as well.

What I decided was I want to be on the front end of that. I want to be helping them five years, 10 years in advance. There’s a lot more things I thought we could do to help them create a better outcome. And so, you know, really over the last three, four years, we’ve really expanded that focus on this, building this virtual family office approach and how do we, from day one of working with a business owner, make sure that every facet of their life has been addressed, optimized.

So if, and when they get to that ultimate exit event, you know, everything’s already set up, ready to go. And, you know, from a business standpoint, there’s no competition. When I’ve done all of that work for them, at that stage, I’m not competing with three or four other firms. You know, it’s, those assets are coming my way.

Yeah. So the way that we approach it and how I think we get to that outcome where we can manage the money and introduce our philosophy, and they get it is, you know, when I’m talking to a client, we focus a lot on taxes. You know, we’re not CPAs. We don’t help them file taxes or like necessarily do tax planning, but we do a lot of work around taxes and as I’m sharing with them, different solutions or ideas.

So, okay, if you implement some of these ideas and they work and we can save you, you know, 10 or 20 million in taxes over the next 30 to 40 years of our relationship, how long would I have to be like the best investment advisor in the world, outperform the market by 1%, to make up and do better than the taxes I just saved you.

And the answer is like, never, like, you know, it’s just, it’s almost impossible to do that. And once they really get it, that what we’re really focused on is this entire wealth approach and looking at all of those different areas, the investments really do become, they’re not an afterthought. I don’t want to make it seem that unimportant to them, but for it, we just finished a situation where we helped a business owner sell their business, family, four generation family business.

They had an advisor prior to me coming in, but we walked them through the value of the presale planning we would do for them. Two months before the sale, they’re like, all this, you’re going to help us manage all this money, right? Like I hadn’t even talked about our investment philosophy. I haven’t mentioned a single fund or anything we would do, but they’re like, you’re going to manage all this for us.

And then the wire came in, you know, a week ago and we’re just now after the money’s already landed, we’re just now talking about, okay, here’s the actual specific investments we’re going to do for you. And it’s six months after we started the engagement. So, that’s the, I think the difference for families with that kind of wealth and complication is the taxes, estate planning, family planning, business succession are much more hot buttons for them, keeping them up at night.

The investments are partly because a lot of them have a big portfolio before we start working with them. So they just don’t even know what they should be thinking about and asking about in that world.

[00:11:24]Mike Philbrick: Yeah. LATAM. STEP. Yep. And this is the Society of Trust and Estate Planners. So, and, and has, yeah. And he just now did it … today, as well.

[00:11:50]Adam Butler: On machine learning. They don’t give a shit about machine learning. On, on AI and language models. Yeah.

[00:12:10]Mike Philbrick: Well, it’s their advisors that are there, and I’m not sure I know what they care about. I was going to ask Homer to actually dig a little deeper from the standpoint, okay, you’ve got tax and then, you know, you have a million, 3 million, 5 million, you could run out of money. You have 50 million, 150 million, 250 million, it’s really hard to run out of money. So psychologically things change. And there’s a, I think there’s a different perception of priorities beyond taxation. And I wonder if you might sort of dig deeper into that on, on topics like maybe security or, you know, um, security of their assets, security of their family. There’s a number of things in there that, you know, we gleaned a little bit at the STEP Conference, but not really fully getting into kind of, we got taxes. The big one, planning and legacy. But there’s also a bunch of other kind of items that are very important to them, but they’re not related to investing at all.

And I wonder if you might kind of dig in and share some of those maybe less commonly known psychological sort of worries that folks of that wealth level experience.

[00:13:34]Homer Smith: Yeah. I would say, most of our clients are founder-led business owners. And so I think there’s something to that psychology. We don’t work with a lot of second, third generation, wealthy families. And I think they have a very different mentality when it comes to their wealth. So the families that we typically deal with started typically, started from not very much, and then they, entrepreneurs built their wealth.

They now have wealth that they never had. Their kids grew up, starting probably pretty poor, but now have, you know, by the last teens into their twenties, had had a lot better lives, didn’t have to go through what their parents went through. And so our experience is they’re very concerned about how the wealth will impact the future generations and they are very family focused.

They want their family to be okay. They’re worried about where the world is going and is there going to be the same opportunities for their kids and grandkids? And I think a lot of data out there is saying, you know, I think millennials for the first time at this stage of their lives are not doing better than their parents were at that stage of their lives.

So I think that concern is real. So they’re very concerned about that, but they’re also, they don’t want their kids to be trust fund babies. They don’t want them to grow up expecting the family, well, to just take care of them. They want them to have some of the drive that they had, which is difficult at times to bridge.

And so how they set up the structures for the, well, to go to the next generations in a way that’s positive and impactful and not destructive. That’s really, really important to them. They’ve also lived through, you know, the last 30, 40 years where you know, family separations have been very common. And so they don’t want their wealth leaving their family, in the future, even now we’re in the future.

So how do we protect the assets from leaving the family? And then, you know, we’re a highly litigious society. So how do we try to insulate this wealth from being unjustly taken through frivolous lawsuits and creditors and things of that nature. So we spend a lot of our time, a lot of time, walking them through the different ways that they can structure this for themselves, their family, from a estate planning asset protection standpoint.

So I would say that dominates a lot of the conversations that we have. The next one I’d say, biggest area, especially if they haven’t sold yet, is business succession planning. And whether they want to keep it in the family or ultimately, doing a future outright sale. We spend an immense amount of time helping them think through that. But I’d say the family planning is almost always top of mind when we start.

[00:16:02]Mike Philbrick: Yeah, you can do anything, but not nothing.

[00:16:04]Homer Smith: Yeah, yeah,

[00:16:06]Mike Philbrick: And why would you want to deprive your kids of the opportunity to cut your teeth and actually achieve something, you know, versus a trust fund type baby? Because my experience is, the entrepreneurs really kind of enjoyed that portion of their life. And so they’re caught in this sort of Catch 22 of how do I engage my kids like I was engaged, but also have them realize that money’s not an issue.

[00:16:33]Homer Smith: Yes, yeah. And also I see a lot of them recognize, not every one of their kids is going to be the risk taking entrepreneur that they were, and they want to support if they want to be a teacher, in the arts, whatever it might be, they want to support it. They just want to make sure that they can’t do it without still having to do something on their own, right. And then had earned some level of a living, and not just purely live off of a paycheck from the trust.

[00:17:00]Adam Butler: So what kind of…

[00:17:01]Mike Philbrick: And so does…

[00:17:02]Adam Butler: What kind of special training or knowledge does it take to differentiate in this space? Strikes me that it’s not just investment advisors that are sort of looking to serve clients in that category, right? You’ve got sort of people on the legal side. You’ve got people on the accounting side and you got people on the investment side. How do you, how did you think about differentiating your services, sort of specializing or having, you know, differentiated registrations on the investment side? Not making an investment forward, but knowing that you’re competing against people that have professional designations on, in some of the other dimensions. How did you think about that going into it?

[00:17:56]Homer Smith: Yeah. So part of it, what I recognize is most of these wealthy families are not looking for me. They likely have a me. If, you know, at that kind of wealth, they have advisors all over the place. And that was the first thing that I, you kind of had to learn to recognize is, it actually would be more shocking if they didn’t have a financial advisor.

And so what I recognized the approach really needed to be is, who are the people that they most rely on and trust. And it’s typically their CPA, accountant or it’s their attorney. And so the differentiation in the conversation that we do is much more focused on differentiating ourselves with their most trusted professionals and not necessarily with the individual client themselves.

I mean, we build a lot of content so that when they inevitably get introduced to us, we know they’re going to go to our website and they’re going to check us out. And so we want our content to speak to them. And so I think we do content that’s not just investment focused. It’s very much this family office focus, but our real, most of my energy is spent actually speaking to and differentiating with the key professionals that they would be working with. And the main differentiation there is, in that world, they get pitched by advisors all the time and they could literally, they could probably fill up their entire week, just having advisors come by and pitch their process.

And what we also know is it’s very hard to tell the difference. I could tell the best, to Rodrigo’s point earlier, I could tell the best All Weather story ever, and they would love it and think it was great until the next advisor came in and told their story and be like, oh, that’s, that’s great too. And how do I pick? How do I send clients to one versus the other?

They can’t tell the difference. And so we don’t do that at all. And so when I come in, I ask them about their practice, ask them about the types of clients they work with, where did they get them? Would you like as a professional, are you wanting to grow your business and move up market and serve more of your best clients? And I focus almost all of my energy on helping them better serve their clients and help, you know, go ahead, Rodrigo.

Yeah. So, a couple of things first. I don’t know how much it works in Canada, but in the United States, we have these crazy filing deadlines for taxes and CPAs who work in that space, that higher net worth business owner space. I would say it’s not the most attractive world for someone coming out of college to want to work, you know, a hundred hour weeks for months at a time, two times a year, to get through their deadlines.

And so they’re having, I would say, challenges with staffing and bringing in new talent. into their world. And so, um, they have to end up focusing almost all their energy on compliance, even though they’d love to do more tax planning with their clients. It’s just difficult for them to have the time to do it.

And so a lot of our focus is how do we help you identify those planning areas where we want to keep you at the center of it. We’re, you know, we’re a resource for you, but we can help you identify some of these advanced planning areas that your clients aren’t currently taking advantage of and that you can bring that idea to them and you can be the hero to them.

And we can even teach you how to increase your fees to justify the work that you’ll do for them. And so that’s a bit, you know, so as an example. We’ll talk to the CPA and say, think of a business owner that’s got like 30 or fewer clients that’s doing really well, and would like to reduce their overall taxes.

Can you think of one? Don’t, you know, don’t tell us names. Just can you picture one in your mind? Yeah, yeah, I can think of one. If we could help you implement a strategy that would save them half a million dollars a year in taxes, would they be interested? Yes. What would you charge them to help them implement that solution that would save them half a million dollars a year?

Well, how many hours would it take me? It doesn’t matter. If you could save them half a million dollars, what would you charge them? They never have a great answer. They say, well, the CPAs that are doing this successfully are typically charging a project fee of like $30-40,000 to do this. And the business owners don’t even blink.

And they’re, helping them think around their fees from an hourly billing to, you know, value based. We help them start to shift their thinking on that and that you don’t have to do all the work. We’ll do all the work behind the scenes for you and help you implement it. You just have to be the value provider, bringing the idea to them.

And it’s not a handoff. You’re not handing them off to us to go do this for you. Otherwise you can’t charge that fee, but we’ll help you do it. Right. We’ll help you implement it, or, you know, do you have a, do you have clients that have dynasty trusts or recently sold their business that have significant wealth and they’re paying a million dollars a year or more and just investment taxes on dividends, interest, those sorts of things.

You help them implement a structure that would shelter all that income from tax forevermore and pass to the next generation tax free, would they be interested? Same thing? Yeah, exactly. Yeah. And what we find with CPAs in particular is when we talk to their clients, they want their CPA to be the source of tax ideas, but they usually come from their attorney, their financial advisor, their friend at another business down the street that told them about something they’re doing. And then they bring these ideas to their accountant, the accountant will validate it or not, if it’s not a good fit.

But they’re not proactively bringing these ideas as often as the clients would like. And so we’re trying to help them solve that. We want to help them be the ones bringing the ideas to their clients. And, you know, obviously our incentive is if, if we do that and it ultimately, if there’s a wealth management introduction or solution that comes out of the back end of that, we’d like to be the source for it. But we don’t obligate them to that. We’re going to help them identify those, whether or not we’re going to be the solution. Because as I mentioned earlier, they usually have people like us working with those clients.

That’s usually their first objection. Well, they’ve got a financial advisor, so I can’t really introduce you. That’s fine. We’ll help you do the planning. And lo and behold, a lot of times those advisors can’t implement the solutions that we’re helping them identify. They’re too complex. The broker either doesn’t allow it. They admit, this has happened many times. It will start partnering with the advisor and they admit they can’t do it. And they want us to do it instead. And, and we’ll collaborate with that advisor, with the family and not take their business from them, but just work with them. And so, that’s a big part. I think we’re very transparent about it.

We’re not here, we’re not doing this only in return for doing the business. We’re going to help you identify solutions that have no wealth management outcome to them, but they’re going to make you look good. And so that’s a big point. And the same thing with the attorneys.

[00:25:28]Adam Butler: So it sounds like, you sort of hinted at this, right? Their advisor may not be equipped to do this. Like they may not have the infrastructure or they may not be set up to do this. Let me pull on that a little bit. So how do you set up your practice, maximum flexibility to deliver the solutions that that segment of the wealth distribution requires in a way that, people that are catering to sort of the mass affluent often just can’t do? They don’t have, the practice is not structured to facilitate that.

[00:26:05]Homer Smith: Yeah. So I’ll start a little bit higher level. And a lot of the things that we talk to the accountants and attorneys about are not unique, because we’re highly regulated just like you all are. And so anything that we would be recommending to a client or a CPA or an attorney, anybody else technically could, right? Because if it’s in the code, if it’s in our regulatory environment, anybody could do it. But what I will say is what we do is rare. And what I mean by that is, and it comes in the book as well as, you know, what we’ve basically done is we have gone to the family office world, and through professionals that we work with that are living in that space, those families with their, when they have a full time staff of accountants and attorneys working for them, they scour the tax code and legal code for advantages.

And once they find them and the IRS fights them and they win, or whatever happens, what, they’re now in the code, right, and we know that they work. And so what we basically focused a lot of our energy on is taking the best ideas from that space that they’ve discovered and spent a lot of money on. And I did it.

Well, where do these apply to everybody, right, mass affluent on up. And many of them do, and not all of them do, but many of them do. But it just takes some time and energy to learn all of those solution strategies. And then to kind of, to your other point, like the broker dealers that are more focused on a mass affluent client, which for good reason, there’s more of them, because of their compliance requirements, just don’t allow their advisors to implement some of these solutions because they’re complex.

And they just don’t want the risk of an inexperienced advisor implementing a very complex solution and screwing it up. And I had to discover that myself. I had to move from a more restrictive platform to a more independent platform where I knew I could implement, or at least I could, even if I couldn’t implement it directly, I could go find and work with the groups that could, where even in some spaces in the broker, do the roles, not even allowed to go partner and even suggest a client, do some of these things from a compliance standpoint.

And so I had to be in a platform where I knew I could, you know, be that fiduciary and independent voice for a client and get these solutions in place.

[00:28:20]Adam Butler: So what are some of these more complex structures or solutions that maybe work extremely well for a narrow segment of the population and that most others wouldn’t have heard of because, you know, they just wouldn’t be a good fit?

[00:28:37]Homer Smith: Yeah, I’d say the one that we’ve gotten the most traction on is private placement life insurance. And, you know, I think a lot of wealthy families are just exhausted from insurance sales people, and for probably for good reason. There’s a lot of people that start in our industry in insurance sales. And not that I think, you know, permanent insurance, whole life or universal life aren’t good and the right solution. I just think if that’s your only solution, then it’s the solution for every need a client has and then it gets oversold. And, and that’s, you know, every, every industry has those types of things.

And so, I think wealthy families are very wary of life insurance because they’ve just been pitched it so much and so are their professionals. And so when you first hear private placement life insurance, it can cause a few just, um, that come up because, Oh, it’s insurance. You’re selling the insurance, but private placement.

And I don’t know how much work you guys have done on this, but it’s a very particular kind of life insurance that again, was vetted by family offices. They spent a lot of money to create these structures where you can actually have a lot more flexibility on your investment structure. So instead of just getting the 20 funds the life insurance company gives you with high fees, as well as huge premiums and fees and commissions that come with the product itself. All of that gets changed with private placing. So all the fees and commissions get stripped out to the bare minimum. It’s very cost effective. And then if you can invest a minimum amount, typically 10 million or more, you can then have your investment advisor build you a custom portfolio that you wouldn’t be able to create.

And you can include things like Private Equity or Venture Capital or Private Credit or Managed Futures and more esoteric investments that you couldn’t get access to inside of a traditional life insurance policy. You couldn’t do All Weather. You couldn’t do Return Stacking inside of a traditional life insurance policy. If a client is interested in that kind of an investment philosophy, we can now deliver that for them, both at the retail and institutional level inside of private placement.

[00:30:49]Adam Butler: You’re muted.

[00:30:51]Homer Smith: Yeah. Yep. It’s, uh, about a year probably to go through and work with the insurance companies, get approval for RIA, build the portfolio, submit them to the States, because each State that you, mostly it’s, you know, we use certain States because of the cost effectiveness of them, but then they have to approve each State.

You might do a policy and has to approve the portfolios. And then even before that, I mean, again, that’s, this is a kind of a product solution, but I’d say that. So that’s one, that is definitely one of the more ones that most of our competition just can’t do, can’t implement. Maybe they’ve heard of it. They’ve read some white papers about it. Sounds really good, but they just can’t implement it. And so they don’t talk about it. And so the way it comes up, so back to the client conversation, we’re not just opening up a client conversation and say, hey, let’s do some private placement. It’s again, they usually have an advisor.

And so the question will be something like, so, what is your current advisor doing to reduce your overall taxes on your investment portfolio? And there’s like one answer or two answers. You can probably guess them, but it’s municipal bonds and it’s tax loss harvesting. And so I’ll ask them, so what are they doing to help you save, reduce taxes when you actually make money in your portfolio?

And they, it’s like, what do you mean? Like, oh, there isn’t, you know, you. And so that’s where it kind of can evolve into that conversation of, yes, tax loss harvesting is great, but most years the market goes up. And so it’s not like you have that many opportunities over time to do tax loss harvesting. We need a solution that works all the time.

And it can introduce investment categories that you might not have considered because the tax structuring of them, they just wouldn’t have made sense in your non-qualified portfolio. Things that are less tax efficient. We don’t have to worry about tax efficiency in this structure. So it opens the entire world of investment solutions that may have been just put on the shelf because it was a taxable account.

And they’re in a high tax state like California, where we work with a lot of clients. It’s like, ah, anything with a ordinary income hit to it. It’s just not, not going to be overly interested, right? And their CPA in particular isn’t going to very much like that. So, it’s always coming from a planning conversation, a tax planning conversation, or it’s an estate planning.

Oh, you got all this money sitting in this dynasty trust that’s never going to be touched for 20 or 30 years. Why would you have taxes being, you know, realized in there? Why don’t we put this in a structure that can never be taxed again, and if we structure it correctly…. And so, it’s usually, it’s always around some sort of a planning conversation that it ultimately comes up.

[00:34:54]Mike Philbrick: Do they, in that structure, they also benefit from like, the privacy of it too? I mean, I think. That’s is, is that the case for example, a will, or trust or these types of things or documents that are filed in public documents can be looked up and also challenged. So is that something that comes as a priority, or is that something that is…

[00:35:17]Homer Smith: The idea of that is very important. So we do a lot of asset protection planning where we’re setting up structures when, you know, when they pass away or transferring assets, it is less public. And then if you own something like private placement inside of that, it just obviously adds, it’s just a part of that mix. But private placement by itself isn’t, um, doesn’t really provide so much of that, but if it’s put in the right structures, it can.

It does life insurance, generally speaking, even traditional whole life, universal life has more asset protection features to it. So there is some benefit to that, by itself, but it really is powerful inside of a family trust. That’s, you know, dynasty planning or something like that. I’d say the general strategies are the same. They’re more powerful in high tax States. So, I mean, I love working with clients in California and New York. I mean, they’re, the Northeast pretty much in general.

[00:36:19]Mike Philbrick: Jersey.

[00:36:20]Homer Smith: Yeah, they’re, these solutions just are, they’re just more powerful, right? There’s more leverage in the tax benefits to them because of how bad the income taxes are. But then there’s other States, like I live in Washington State. We don’t have an income tax, but we have the worst estate tax in the country. And so, we do a lot of the work, there’s actually a lot more need for a estate planning in Washington State than most other States, because the threshold for when you kick into that is much, much lower than the federal level.

And so, you know, it’s under, that’s a part of it too, is understanding all of those components where, for each State that you’re working in, what is going to be the more powerful planning conversation, when it comes to those things.

[00:37:06]Mike Philbrick: One of the things I think we’ve run into a few times, and maybe this solves for it as well, but you know, if it’s a real estate family, they love real estate. And if it’s a business family, in some sort of area of business, they love that vertical. If they’re in Texas, it’s probably oil and gas. If they’re in California, it might be more technology related.

And they tend to look for, they’re sort of business people who feel they have business acumen. So deal, or a specific type mindset, tends to sometimes infiltrate, or sort of narrow the scope of investing. Is that something that…  experiencing that, you know, in our tertiary experience, this, is it real? Is it not real? And does the structures that you set up actually account for that and say, yeah, you can still do that in the structure. No problem. You want to put it in there. You put it in there and we’re good to go. And it’s tax deferred, et cetera. What, what are your thoughts there?

[00:38:04]Homer Smith: That’s a great question. We, so we work with a near billionaire real estate family in California, loves real estate, will only invest in real estate, you know, and every time they get any sort of big liquidity buildup, it’s to buy another building. They are not interested, we’ve never even talked to him about investment portfolios.

But, you know, one of the key themes that we find across the board is these wealthy families, and really the theme of the book that we wrote is, yeah, these ultra wealthy families are not well served by their professionals. Not intentionally, in that each one in their own silo might be doing generally okay, but things get missed even at that, you know, 500 million, billion dollar level.

So this family, when we were introduced to them, you know, you asked me, what’s your estate plan? Have you, when was the last time you updated your estate plan? Oh, we did it like a couple of years ago. Okay. Well, let’s take a look at it. They had done real, no real, what I’d call real estate planning. They haven’t done anything to get any assets out of their estate. And so all 750 million in assets are in their estate. And should they unfortunately pass away tomorrow, it’s like a 300 million estate tax bill and they own real estate. So it’s not like they just sell it and liquidate it tomorrow, and the cash is there to pay the tax.

That’s a problem for the family. And so, while, our work with them, we’ve been hired basically to come in and help them evaluate, what are all of the different options that they can do over the next 20 years to try to, at the worst, freeze their estate. So any future growth happens out of the estate or, and then even hopefully more, is how can we slowly but surely over time, be able to remove some of those assets from their estate.

But we know from day one, we are not ever going to get an investment account with them, likely. And so our planning is much more on, and we charge instead of, you know, an asset management, we charge a monthly retainer to put the process in place, put the team in place to help them do that. And that engagement will end at some point where we may, we’re not likely to be needed forever for that family, but it’s really complex stuff.

And it’s really fun stuff to work on. And I learn. Every time we take on an engagement like that, we learn more nuances on real estate or whatever industry they’re in. It’s a learning opportunity for me while we’re bringing that value to that family. And lo and behold, I know everybody’s got a question, but one crazy thing that came up is, they’re so busy being really good at real estate that all of their cash was just sitting in a checking account. And they had like, you know, millions and millions of dollars. And, and we basically helped him create like an extra million dollars a year of income just from managing their cash better. Um, so it’s little stuff.

So there’s a, there’s the U.S. tax code. There’s a, there’s a code section that allows for private businesses to defer out the estate tax and pay it over a 10, really a 14 year period. But they can basically defer that out real estate if you own it. Like if you own just a bunch of multifamily properties.

They don’t look at that as a business. They look at that as you can sell any one of those properties at any time and not affect the overall business itself. And so there are ways that you can navigate that though. And it’s if, one of the biggest questions is, do you own a management company, and says a management company managing all of those assets and that, and that’s, it’s not a surefire, but that in that case, the business is actually the management company. The real estate is incidental to the management company, and they’ll much more likely look at that as a business. But if you outsource all of your management to outsourced management companies, we’ve seen court cases where they say, no, you don’t get the deferral. You’ve got to pay it now. So there’s lots of tax benefits for real estate ownership, but the estate tax code is not friendly, in that sense.

[00:42:22]Adam Butler: Speaking of not friendly, sorry, speaking of not friendly, how have you observed the tax and regulatory environment over time to make this more challenging for wealthy families to be able to implement the kinds of protections that…

[00:42:49]Homer Smith: Yeah, that’s a great question. So what, what we typically see happen is, you know, a smart family will, their professionals will identify an advantage in the tax code and they will implement a solution. It’ll get fought by the IRS. They’ll win, you know, they’ll get a letter or it’s in the code. And then, other smart professionals will hear about it and then they will turn it into a marketing scheme and they will probably even, I would say, be more aggressive with that solution than was intended, to the point where the IRS finally comes around and says, well, you ruined this for everybody. We’re now going to basically unwind that benefit because people are abusing it. And so for an example, like with private placement life insurance, one of the key tenants to private placement life insurance, is investor control.

So you as the policy owner, cannot be the person picking the investments inside of the policy in order to get all those tax benefits. That’s the main issue. The IRS says is you can’t be the one. So you can’t put your private business in there. You can’t move your Private Equity portfolio in there. You need to have a an investment manager making the call on your solutions. Well, again, smart people said, ah, there’s probably some workarounds and we can create some structures and do some stuff and still get your private business in there.

And, you know, the IRS, it can’t watch everything and see everything all the time. And so it got to the point where there’s promoters were out there at exit planning conferences, telling business owners, you can move your private business in, and doing webinars on this. And so the IRS finally came back and said, fine. This year, they said no. And now we’re subpoenaing records at all these insurance companies that do private placement. And so far, all they’ve come out and said is that we’re just going to actually enforce the rules we’ve said from the beginning. We’re not going to change the structure because if they did, they’d have to unwind Whole Life and Universal Life too, but they basically said, okay, no more. We’re not going to let this slide. We’re actually going to enforce the Investor Control Doctrine. And so stuff like that happens all the time. Same stuff with other solutions like, Captive Insurance. People abuse them, and to the point where they either completely unwind them at all, or they crack down on them severely, and to the point where they, their biggest tactic is they’ll really go after the accountants and they’ll basically scare the accountants into believing these things aren’t good solutions, so that they are usually the devil’s advocate trying to help their clients not implement some of these solutions that are really good in the code. They’re right down the middle, but the IRS has basically told them don’t do these solutions because there’s abuse in, and again, it’s not, I don’t necessarily blame them. Again, these promoters come out there, abuse the rules and go away and do the dark gray of it.

And, um, it’s kind of ended up ruining it for everybody. So I’d say is over the last 10 years, the number of solutions available, reduced into what’s, from a tax planning perspective, there’s fewer of them that are available than there used to be, yes. Yeah. So I think one of the main things we focus on is, most of these solutions that get into trouble with the IRS is when, what they don’t like, is they don’t like strategies put in place purely for a tax benefit. And so most of these solutions, that wasn’t the initial intent. They just happened to have features that allow for tax efficiency to them.

And so when they’re sold by promoters for the tax benefits of them, that’s where it ultimately gets in trouble with the IRS. So we, when we’re speaking with the accountants and the attorneys and the client, it’s what’s the actual ultimate intent of this solution. So if we’re going to do a sophisticated retirement plan solution, it first and foremost has to be a retirement benefit that we’re speaking about that happens to have a tax deduction to it, or private placement.

There needs to be an Estate Planning/Life Insurance benefit to the family to do this that happens to come with a really nice tax benefit to it. And Captive Insurance is another one. You need to have real risk in your business in order to implement a solution like that. It can’t just be for the tax. And so whenever we’re implementing or looking at it for a client, first, we’re starting with an overall complete view of their world and looking at all the different gaps and opportunities and where there might be advantages for them, in gaps.

And it’s never coming in with, I never, when I meet with a client, and thinking, okay, where can I fit Private Placement in, where can I fit, you know, a retirement plan? And it’s, what is their, what’s their overall situation? And what are the, they might not even need any of this stuff. They just might need to update their estate plan and fix a couple of holes that they had in there.

Great. That’s fine. Or, you know, they don’t need a super complex asset protection plan. They just need to up their umbrella insurance because that’s the one gap that they have. Or they make it really clear, like I don’t want any complexity in my life. And it’s like, great, like there’s limitations to that, but there are ways to still do some things and we’ll, we’ll help them identify what can you do that doesn’t bring any complexity, and that’s fine.

And so it’s, these solutions come only after we’ve really dove in with them very deeply on what are they looking to achieve as a family and what are they currently doing that’s not going to help them get on track to achieve that, and what needs to come into the picture to get there. And then, these solutions might be a fit, right?

And sometimes it’s just, you just need a better investment advisor because you’re not getting the outcome that you want from them. That’s usually not where we start. That’s usually not even a part of the conversation. It’s usually because of the tax issues or the estate planning issue. But, yeah, these solutions only come in when we’ve done the work to look at the big picture first and start with the outcomes they’re trying to achieve. And we ended up working our way back to where these might fit.

[00:49:44]Mike Philbrick: Yeah, it’s…

[00:49:45]Adam Butler: So when does the…

[00:49:46]Mike Philbrick: …at the end. Oh my God, you saved a whole bunch of tax. Who knew?

[00:49:51]Homer Smith: Yeah. Yep.

[00:49:52]Adam Butler: What are we going to do with all this extra money?

[00:49:55]Homer Smith: Yeah. Yeah.

[00:50:26]Mike Philbrick: I’m doing a majority misrepresentation. I’m looking for a good… good impression. I want it to sound as though they belong to this, on cleaning up after yourself, you know, rather than distracted by them. So succumb to inertia.

[00:50:47]Homer Smith: Yeah. I’d say it’s, it’s pretty rare. Because we charge pretty high fees to go through this process. So…

[00:50:53]Mike Philbrick: perfect. Just like the trainer. You’re paying me a thousand dollars a session, whether you show up or not.

[00:51:00]Homer Smith: So, that’s it. And then we will always, like when we do like, so our process to get to, that is we will do a whole lot of work up front before we introduce a fee because we don’t know whether we can actually bring value or not. And so partly, also that we’re often getting introduced to the attorney or the CPA.

So we want to bring value to them and show them and vet the solutions with them first too, so that they’re comfortable with us putting that in front of their client. And so we’ll already have a lot of their financial data, personal financial statements and tax returns and the estate plan. So we’ve already done a pretty deep review to identify if there’s gaps and opportunities.

And we, you know, we often could even quantify what the solutions we would bring to the table would mean for them and so when we’re then delivering our fee, it’s like, look, our fee might be a hundred thousand dollars to do a project for the next year, to help you fix all of the gaps and take advantage of the opportunities, but if you do them, it’s on you, we can put them all in front of you, you still have to implement them when they’re there, but we can save you X dollars in taxes. And it’s usually going to be a significant multiple on what the fee is that we’re charging. And oh, by the way, because we’re focused on your business, you can most likely run this fee through your business or at least part of it.

And that’s a tax deduction. So really I’m already saving you money on your taxes by how we’re charging you our fee and it reduces our, we get the same, but it reduces your cost to work with us. And so, but now they’re paying that fee and oftentimes it’s a monthly retainer to do this work. They show up, they want to get this done and implement it.

And because they see, they could actually see the number. And I, and that’s one thing that I think we do really well, that I see most professionals have a really hard timeline, but many of our clients for years, it’s rare that we’re bringing all new ideas to them. There might be one solution that they haven’t heard of or weren’t aware of, but most of the time, the updating of the estate plans and even some of the trust strategies that will help them think through and evaluate, their attorney has been talking to them about for years.

But what we’ve, attorneys just aren’t good at translating the value of what they bring compared to the fees they charge to do it, and we get in and say, oh my gosh, you’ve got all these issues with your estate plan. Let’s go. We’ll go negotiate a fee with your attorney. And I guarantee it’ll be a multiple, the benefit will be a multiple of what you pay them.

So we turn it into an investment. And so the attorneys love us too, because they actually then get to implement what they’ve been trying to convince them of for years. And so kind of back to what I mentioned at the beginning, I’m, and clients will say this, I’m really good at taking very complex ideas and making them digestible for, again, these families don’t come from sophisticated financial backgrounds.

Typically they built this business. They’re business owners. They’re not legal experts, tax experts. And so to, you know, their eyes just start to roll in the back of their head and attorneys start talking with a bunch of acronyms, they’re just like, I have no idea what he’s talking about. And they just can’t help themselves.

They’re really smart people and they’re really good technicians. And it’s very hard for them to get out of that mode and speak to a client in a way that they can actually truly…

[00:54:18]Adam Butler: I had the most illuminating experience on this topic. This week, our wine fridge broke and the guy came to fix it, the technician came to fix And he was the most chatty technician imaginable. And, you know, I said, look, I gotta go work. I got a bunch of deliverables, whatever.

So he calls me down when he’s got the news, holds me captive for 40 minutes. Well, he talks about the solenoids and he talked about the valves that are on specific models of fridges that, you know, and the compressor and, you know, touch, go back and touch the fan on the back at the top and the back and the bottom. And, you know, I said, there’s not, I’m like, dude, I just want you to fix my fridge so I can go back to work. And I was thinking to myself, I know, I know now how I sit and talk to people and they’re like, dude, I could care less about all these fixed details, man. Are you going to make me money over the next 10 years or what? Like that’s just leave…

[00:55:21]Homer Smith: I’d say that’s the biggest, the biggest change for me in the last three years, that’s really accelerated what we’re doing, is this focus on outcomes. And so even our whole proposal process with clients, even evolved in the last two years to go from a 40, 50 page, very elaborate deck and all the advanced planning that we’re going to do.

And then we still, and half of it on the back is our investment philosophy. Beautifully built out. And we would still get clients to say yes almost every time, when we walk them through that to now, when we’re typically doing a proposal, we put nothing on the screen. It’s a 15 minute conversation. I walk them through three or four general areas that we know we can bring value and what that value equates to. And here’s our fee.

And it’s like, okay, because it’s the outcome that they care so much about. And, so one example of that too, and this was kind of in our learning process. So we had a client that came to us last year on December 19th from a CPA and he had sold his business in October. So he’d already has the liquid wealth.

So great, right? We have a crack at this guy, but we found out that he’d been interviewing advisors for two months and just happened to ask the CPA, who he was just also engaging, who, if there’s anyone else he should talk to. So we kind of got through into the mix. And in the first meeting, I’m asking the client, okay, so, when do you want this proposal back to you?

It’s like December 19th. He’s like, I’d like it by the 23rd because I want to make my decision next week. So I’m leaving the country and I want to have my, all my stuff in place before I leave.

[00:56:54]Mike Philbrick: In place.

[00:56:55]Homer Smith: Yeah, decided on and money transferred. I said, all right. So clearly we’re just, he’s not really serious, but we’re going to treat it just like we would any client.

Good practice for our team. It’s a big client. It’s like 40 million. And we did our  whole proposal. I had a nice deck built out, but I only went over one page with the client. So we met on the 23rd and I’m just going through all of this, these outcomes with him. So if you worked with us and we could identify ways to eliminate X dollars in taxes through these different ideas, was that, is that what you would want?

Okay. Yeah. If we could help you restructure your estate plan to eliminate X dollars, X millions of dollars in future estate taxes, is that what you would want? Yes. And we got like two bullets and he’s like, wait, wait, when are we going to talk about the investments? I’m like, just, just wait, right? Just, we’re going to get there.

And by the fourth or fifth bullet point, he got it and he would, he really understood, and that’s what I delivered at the end, like the fourth or fifth bullet point, I said, okay, so if we did all these things and you implemented, and we saved you all these dollars in taxes, I could be the worst investment advisor in the world, and you would still be better off hiring me. And he’s like, I get it. And he called me on the 24th, Christmas Eve, said, we’re working with you. And the next week we got the wire. And yeah, we’re not right. I know I’m not going to say that. So I actually think we’re pretty good at it. But you know, but even if I was just average, you would be dramatically better off working with us than…

[00:58:33]Adam Butler: Remember, um, remember CUNU and forgetting Sarah Marshall, right? The surf instructor, right?

[00:58:39]Homer Smith: Yeah, I…

[00:58:40]Adam Butler: Do less, do less. Yeah, no, you gotta do something, but not, that’s too much.

[00:58:47]Mike Philbrick: Too much.

[00:58:58]Homer Smith: Yeah. Yeah. I can’t wait to see that, because I think we presented pretty well. So I’m excited to see how you guys do it as well. Yeah, so first I’ll just confirm what Adam was saying as well. Back to the refrigerator story. I mean, most of these clients, they don’t want to know the intricacies of all the details. They want to know that we’re providing a general overview, pros and cons. And the way we describe it to them is like, look, you’re successful business owners and families. You can make good decisions if the right information is in front of you. Our job is to still it down so you have just enough information to be able to make the call on which of these are going to be right for you. So, that’s a big part of it. And it’s the same thing with the investments, right? So when we get into helping them navigate the portfolio construction, first we start with outcomes.

What are they needing this money to do for them? And for the most part, by the time they get to the liquid side of where we help them, they’ve sold their business. They’ve inherited money. Back to, I can’t remember who talked about it earlier. They have a hundred million dollars. They’re not going to run out of money.

They generally know that and so they don’t, they’re not trying to get NASDAQ- like returns, right? They’re not hoping for 30 percent a year with an 80 percent downside potential, you know, when things go really bad. So they already, generally, I think are prone to want our solution. They just need to be helped to understand it in a way that makes sense for them.

And so, I think we’ve developed a presentation. We’ve stolen a lot of stuff from you, a lot of stuff from Jason Buck, a lot of stuff from Corey, and we’ve put it all together, I think, just in a way that walks them through a framework of what the last 40 years has looked like, what data has changed so dramatically that we can’t necessarily expect the next 40 years to look the same.

And the whole idea of wouldn’t you want things in your portfolio that are not correlated, are going to go up when these other pieces are going down? I mean, generally speaking, that’s the crux of it. And a much, much shorter version of it. And the answer, when we get to the end, we walk them through the quadrants.

We walk them through, you know, stocks, bonds, long volatility, you know, commodities, trying to manage futures. And we say, you know, doesn’t this one that has all of them in it make more sense? You know, you know, like Yeah, that totally makes sense. They, if you present it right, if they totally get it and they say, why wouldn’t you, of course, why wouldn’t everybody want to do that?

And we also know that, you know, again, most of our clients are founder-led business owners or they’re, why they have egos. They’re not, they’re not like the country club investment promoter guy who wants to tell about some crazy investment that, you know, is amazing, right? And so we, while they do want unique solutions or they want to know that they maybe have access to things, others do not, that’s always a good story.

And we have those too, we have access to managers that, you know, if they weren’t working with us, it would be much harder to access and the solutions might be harder to access. But most of our clients, that’s, that’s not really that important. They just want to know their money’s going to be okay, that they’re not going to have to see huge deficits when the market’s down and that whenever they do look at their portfolio, which isn’t super often, there’s green stuff, all the, you know, every time they look at it, like today, you…

[01:04:45]Mike Philbrick: Yeah,

[01:04:46]Homer Smith: …crushed gold today. Right? So there’s going to be at least one or two items in their portfolio that crushed it today. And so I think that for us, number one, I think there’s a lot of reasons why I love All Weather/ Return Stacking or combination of those, you know? It’s great for the client. They really like, we, you know, and you guys have experienced this, I’m sure, you know, with your funds, the last year, you know, 2022, we did fantastic. Our models, first half of this year, opposite. Not so fun. Last few months, much, much better. And net/net, when we look at the last like 18 to 20 months or so, we’re about the same as a 60/40 portfolio, but the line to get there was much smoother for clients. And so that’s great for clients. They really appreciate that.

For a business owner that I am running my business, I don’t do it just for this reason. I do it for the clients. It happens to work out that we’re typically paid, you know, a good chunk of our, our revenue is still assets under management. And so same for me, right? My, my income stream has not dramatically shifted.

So I’ve been able to hire and build my team over the last couple of years, where others have had to like, make decisions on holding back, or not around that. So it’s, it allows me the flexibility mentally to keep building my business and going after the things that we need to serve our clients because I’m not so worried about a 50 percent down year in the market. So I think for a lot of reasons, it works really well for, for what we’re trying to do for the types of clients and for the type of business that we’re building.

[01:06:30]Mike Philbrick: That reminds me of the story that we, in the ReSolve Masterclass on actually stewarding very long-lived assets, right? It’s very much like living in a hurricane zone that we live in, in the Cayman Islands. And if you’re going to live in the Cayman Islands, it, and you’re going to have a family there and you’re going to have generations there, you are not, not going to have a hurricane.

You are not, not going to have a catastrophic event. And those people who live here and have made a commitment, don’t often live on the beach. The people who are sort of here for five, ten years, or escaping, or snowbirds, or whatever you want, they love to live on the beach. But those who don’t, those who have been here and suffered through hurricanes, and have had multiple generations here, it’s not if, they’re under no illusion of if. No, it’s just when. And how do I make sure I’m prepared for that? And how do I domicile myself on the island? They’re like, no, I can go to the beach. You’ll notice my house is a little higher land and a little bit off…

And it’s the same with long lived assets and, and ultra high net worth, high net worth. When you transition from I might not have enough, to I’m going to have enough for a lot. These assets are going to be around for a hundred years. Well, in a hundred years, I feel pretty good about promising you that we’re going to have several catastrophic events, whether they’re related to war or pestilence or COVID pandemics. Your assets will be alive and invested during that. We’re not saying, hey, you’re going to retire at 65. You’re going to die at 85 and have a little bit left and away you go. No, everybody’s going to have money for generations. Now, how do you manage wealth? How do you think about the construction of wealth in that construct? I think you think about it much like people who live in the Cayman Islands or who live in a hurricane zone and have made a commitment to be there for a hundred years. They’re like, it’s not if. They are, they are keenly aware. You know, an 80 percent drawdown in markets has happened, like the NASDAQ happened, in the Dow, in the, you know, 1929 era. And so, yeah, you should be aware. These are very long lived assets.

[01:09:00]Homer Smith: Well, my foray into this world, how I found you all in the beginning was I read Chris Cole’s paper, Allegory of a Hawk and Serpent. And the whole theory or theme behind that was if you had a hundred year portfolio and you couldn’t change the components, you could rebalance them, but you couldn’t change the general structure, how would you build a portfolio? And obviously we don’t have, I can’t do 3X leverage like he would, but you know, it was basically, you have to have these pieces. And that’s what, that would, got me into the rabbit hole of, of All Weather and ultimately Return Stacking was that paper. And that was exactly, that theme is.

And then it was the same time as I was getting really into this ultra high net worth world of multifamily generational planning. And that, just that concept of, well, what if, you know, there’s something like 70 or 80 percent of assets leave the advisor they’re with when dollars are inherited. And, and I was like, gosh, how can we build a portfolio and relationships with families where they don’t ever have to change the investments? That we can actually have a family conversation about this kind of portfolio construction. And they, all generations understand the benefit of investing this way. And yes, there’ll be satellites and there’ll be, you know, certain families that are, you know, more philanthropic, there’s going to be their foundation.

And maybe even inside of there, it’s invested slightly different, or if they were more equity, there’ll be components that might be different around it. But at the core, you should have this All Weather approach, right. And so that’s, that really spoke to me and that’s really what led me down the path to build it this way. It was really that, that concept. Yeah. I mean, so we, I read that paper and it was also right as COVID was hitting and I was like, god, things are getting weird. And I just kept reading it. I found Corey and I think I read The Cascade paper, that I forget the name of it.

[01:13:28]Mike Philbrick: Liquidity Cascades.

[01:13:29]Homer Smith: Liquidity Cascades. Okay. That makes sense too. And all these things seem to be happening and the underlying mechanics and plumbing of the investment world is changing and we need a better solution.

And so, that’s where, so we’ve made a shift. Like we literally changed our entire business at the end of 2021. We probably moved 60, 70 percent of our overall client assets into this kind of a framework, whether it’s a more conservative All Weather or more of the little bit more aggressive Return Stacking model.

And I mean, timing, I mean, a little bit of timing luck there. I mean, literally. I mean, the last quarter, one was good and actually the All Weather and everything actually performed well in that environment as well. We kept up with a 60/40, and then 2022 hit. And like, as the Ukraine war was breaking out, our portfolio was going up and everybody, I mean, we created this huge. divergence, right? And so clients were just very thankful, from there. And so, it’s allowed us to have these conversations this year when we haven’t been doing as well versus the market. You know, we remind our clients often, our number one, our benchmark isn’t the market. It’s what you individually need to achieve.

But of course, it’s hard to convince them to not pay attention to that. But we have a lot of grace because we saved them so much last year. And then when we show them the more longer-term view of the portfolio, like. We’re actually the same or better off still, even after the market had that big run up this year.

And I think, you know, big philosophy or a big thing that I, you know, I read a lot and I look from a lot of different angles and you know, familiar with the concept of The Fourth Turning, yeah. So, I am a huge believer that we’re going through that time, right? And I’ve handed that book out to so many clients and the new version of it that just came out.

And, I believe it’s going to get really weird for a while. And I don’t think we’re going to see a period like the 20 years previous, where 60/40 is going to have a smooth sailing, and I’m wanting to prepare clients for that. And however, if I’m wrong, which I absolutely could be, I want to have a portfolio that can still do well in that environment too. And you know, the beauty of Return Stacking is you get to do both, right. And then it should do both, right. Obviously you can’t know for sure, but the idea…

[01:15:49]Adam Butler: 50…

[01:16:15]Homer Smith: I didn’t read the article yet, but I saw that kind of his, his headline to it. Yeah.

[01:16:21]Adam Butler: …percent chance, he said, yeah.

[01:16:24]Homer Smith: Yeah. Well, I can’t remember, I can’t remember if Bill Gross admitted, or somebody else pointed out to him about it, but basically, I think he admitted that he basically, it called him The Bond King, but he just admitted it was, it’s interest rates declining for the 30 years, forty years of his career. Like, you know, he just…

[01:17:35]Mike Philbrick: Started in 1982.

[01:17:37]Homer Smith: …yeah, right place, right time, you know, so…

[01:17:41]Mike Philbrick: Because no one wanted a bond manager job.

[01:17:48]Homer Smith: So…

[01:17:48]Adam Butler: Right.

[01:17:49]Homer Smith: So yeah.

[01:17:49]Adam Butler: …got those jobs in 1980, right?

[01:17:55]Mike Philbrick: Well, he started financial planning in Florida. Yeah. Yeah. He’s like, every day they’re going to go down to Florida and retire, get in front of that wave. So what do you think, gentlemen? We’ve been on for an hour and 20.

[01:18:08]Adam Butler: We covered a lot of ground actually. Homer, this is really interesting. And I know we just scratched the surface of what you cover in the book. So looking forward to plowing all the way through it. I got through a little bit of it in preparation, but there’s a lot there.

[01:18:22]Homer Smith: Yeah. And at the end, I think that the title, you know, really is what, at the end of the day, we kind of described it as what we do. So, you know, our role, the way we see our role for clients, is to distill down all of the complexity and craziness that’s out there, to put information in front of them, pros and cons, so they can make smart decisions.

And we’re, we often get asked, well, what would you do if you were us? And we say, we, we can’t do that. We’re not you. But what we can do is, we can tell you what other smart families and wealthy families are doing and give you the outcomes that they’ve created. And that will help you identify which of those really makes sense for you. And so that’s really what, what that’s all about.

[01:19:01]Adam Butler: Well, I have the…

[01:19:01]Homer Smith: I’ll,…

[01:19:03]Adam Butler: My gift is…

[01:19:04]Homer Smith: What’s that?

[01:19:04]Adam Butler: …so simple, that I can’t complicate it. So…

[01:19:11]Homer Smith: Yeah, that’s a good one.

[01:19:12]Adam Butler:

[01:19:17]Mike Philbrick: I remember being, a buddy of mine, this is in Toronto, and he’s like an HVAC guy. He’s like a good friend and, you know, talking about the wine fridge and he’s like, and I grew up on a farm. I’m a farmer. I, mechanically inclined and I, I know, I know enough, but I also know, I don’t know a lot and he comes, Mike, come on downstairs. You got to see the furnace. And he says, look, I look at it and I go, it looks like a furnace. Was it, well, you see that there? Yeah, sure. That’s a crack. I’m like. Looks perfectly workable to me. I don’t, I mean, is the crack not supposed to be there? Oh, it’s a very dangerous crack. I’m like, dude, I don’t even know what to tell you.

You know, when we talk about investing things and you’re talking about furnace things right now. I have no idea. You need a little extra commission. You want to put a new furnace in my house? Is that what you’re saying?

[01:20:11]Homer Smith: Well, I, on a separate note, I know you guys usually, because of wine, the wine conversation made me think that you guys are usually drinking, I think, on the show, we didn’t really talk much about that today. I was under the weather, so I, but I, uh, I was preparing. So I have this wine. I don’t know if you can really see it very well, but.

[01:20:27]Mike Philbrick: Yeah. Kukkula.

[01:20:29]Homer Smith: So it’s a friend of mine in Paso Robles. Great. He was from our industry. He’s a wealth manager, and so his first, one of his first wines was called IPO. And so it’s, it’s been great for me. I basically bought all the cases of his I can, because whenever a client of mine sells their business now, I’ll send them a case of that, or some of the, or six bottles, whatever. And I’ll go over there, go over there with them, drink some wine and celebrate, celebrate the, I mean, we often become so close in that process. You know, it’s such a relief. And, so yeah, it’s fine. It’s a little bit of fun, to have with them, with that. So I would have been…

[01:21:07]Mike Philbrick: A little fun along the way.

[01:21:09]Homer Smith: Yeah, if I was feeling better, I would have been drinking some of that to celebrate. Yeah.

[01:21:36]Mike Philbrick: I thought it got really good at the end. Actually, most people were like, God, we should have started drinking before we were on. Anyway, also, so we, we, we plugged the book Konvergent Wealth with a K.

[01:21:51]Homer Smith: Yes. C was taken when I started.

[01:21:54]Mike Philbrick: I like the K. I mean, the

[01:21:55]Homer Smith: I didn’t see…

[01:21:56]Mike Philbrick: Magic.

[01:21:57]Homer Smith: …out for our logo too. We had little mountains and some stuff. I mean, yeah, it worked out well.

[01:22:01]Mike Philbrick: And @HomerSmith_KWP is where they can find you on Twitter, I’m assuming.

[01:22:07]Homer Smith: Yes,

[01:22:08]Mike Philbrick: Excellent. Yes, on X. My apologies. I’m such a boomer. Embracing the boomer coming and, yeah, what else is there? www.investresolve.com. There we got that. We talked about the ReSolve Masterclass that’s available for download on podcasters. We’ve talked about, uh, Return Stacking. So it’s been, it’s been great. Adaptive Asset Allocation is also a phrase that we’ve coined and propagated around the world. So yeah, have a look at those things.

[01:23:21]Homer Smith: I wouldn’t know you guys if I didn’t know Jason first, so I…

[01:23:24]Mike Philbrick: I love it. love it.

[01:23:25]Homer Smith: …love the work that he’s doing.

[01:23:27]Mike Philbrick: And always remember is always Like, and Share this content so that we can continue to bring awesome people to have great discussions on Friday afternoons. Any comment is fine. Yep. Sounds good. Beautiful. I’ll see you at Cue the Music.

[01:23:55]Adam Butler: ,…all.

[01:23:56]Homer Smith: Thank you guys.

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*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.