0:26

Hello and welcome to Skeptic's Guide

0:29

to Investing with Steve Davenport

0:31

and myself , clem Miller

0:33

. In this episode we welcome a special guest

0:36

, fraser Rice . Fraser

0:38

, welcome , thanks guys

0:40

.

0:40

Thanks for having me on .

0:42

Fraser Rice is Director of Family

0:44

Office Services at Next Capital

0:46

Management , a wealth management

0:49

firm in New York City . Like

0:51

Steve and I , fraser is an alumnus

0:53

of Wilmington Trust . Fraser

0:56

is also author of the book Wealth Actually

0:59

, which is available on Kindle

1:01

and in audiobook form . We

1:03

are going to discuss with Fraser the topic

1:06

of wealth management . We know that

1:08

some of our listeners may not be very familiar

1:10

with the topic , so we're going to keep

1:12

the discussion educational and

1:14

non-technical . But first

1:17

any tips for podcasters

1:19

. Starting out , fraser .

1:21

I think the biggest tip I can give is just

1:23

start Get some experience

1:26

getting in front of the microphone , make some mistakes and hear yourself talk

1:28

. I think maybe some experience getting in front of the microphone , uh , make some mistakes , uh , and

1:30

hear yourself talk . I think maybe

1:32

getting it out in front of some friends to

1:34

kind of get some other feedback is good . And

1:36

then I think having a discussion

1:38

format where you're talking to somebody else is

1:41

a good idea . So having guests on , like me

1:43

or uh other friends , other

1:45

experts , that type of thing , uh , you

1:47

get to have that good back and forth and it takes

1:49

a little bit of pressure off you the podcaster

1:52

to uh be Joe

1:54

Rogan or uh you know , some sort of

1:56

ultra charismatic light out there as

1:58

you try to uh carve your own niche into

2:00

this world . Yeah

2:02

, you're our first guest and as a reason , you

2:10

know we're glad to have you and we love the work you do with your podcast

2:12

. Well , I appreciate it . Unfortunately , if it's audio only , you can't see me with my jazz

2:14

hands . Uh , you know , tried to try to make it extra

2:16

special and bright how

2:21

would you describe wealth management versus

2:24

investment management or um

2:26

cash management ?

2:29

why is wealth management important

2:31

for individuals and families ?

2:34

Well , it's a good question because I think

2:36

it gets to the whole of you . Know what does the

2:38

financial industry do for

2:40

you ? I think that wealth

2:43

management in

2:45

particular is sorry about

2:47

the phone here , this will go off in just a second Wealth

2:50

management in particular is the

2:53

study of being able to

2:55

help a

2:57

client on all facets of

2:59

their wealth component , which is

3:01

not only the asset management but

3:03

understanding their spending , understanding

3:06

their estate planning and then really understanding

3:08

what happens as it relates to how

3:12

to sort of inculcate their values

3:15

and their functions of their

3:17

wealth so that they can raise good

3:19

kids , that they can achieve their goals

3:21

during their own lifetime and that they can have things

3:23

like a comfortable retirement or fund

3:26

their charitable endeavors that type of thing

3:28

.

3:37

So , fraser , for a wealth management firm to accept somebody as a client , how much wealth would

3:39

that person need ? We often hear the terms high net worth and ultra

3:41

high net worth . How would you distinguish

3:43

between clients in these two categories

3:45

, and maybe clients also

3:47

in mass affluent ?

3:57

Sure , it kind of depends what you as a firm decide you want to do or which subset that you're interested

3:59

in serving . I'll start sort of at the smaller end , the mass affluent

4:01

. I think of that as a

4:03

lot of income and capital gains tax planning

4:06

and cash flow

4:08

planning and building up an asset

4:10

reserve so that , let's say

4:12

, the spouses or generation one is

4:14

able to fund a retirement

4:17

, is able to fund the educational

4:20

spending for

4:22

their kids and other endeavors

4:24

along that line . And you're

4:26

not really dealing with the taxable

4:28

estate component with that , because you're probably

4:30

well under the different estate tax limits

4:32

. That's not to say that estate planning

4:34

isn't important and that that discussion isn't

4:37

had , but that's kind of where I think about

4:39

on the mass affluence side of things and I think

4:41

of that really in sort of the with

4:44

inflation these days , kind of in the 5 million

4:46

and below level , In

4:48

the high net worth level , you're starting to get

4:50

into the world where current

4:53

wealth , which is what I just described with the mass

4:55

affluent , where you're dealing with your own cashflow

4:58

, needs , spending et cetera at

5:01

that level is starting

5:03

to integrate a little bit more with what I would describe as the

5:05

legacy wealth discussion , where you're thinking

5:07

beyond your generation and thinking

5:09

about what happens at the next generation . So

5:11

the discussions around estate planning

5:13

get a little bit more developed

5:15

and things like

5:17

life insurance et cetera becomes a bigger

5:20

part of that discussion . I

5:22

would then sort of move the niche up from , say

5:25

, $5 million to , let's

5:28

call it , $30 million , which is where

5:30

I think you have significant taxable

5:32

estate issues , such that you're

5:34

probably in many cases you

5:36

have enough money that you aren't as worried

5:38

about funding your retirement or funding

5:40

the educational spending issues

5:43

and those types of things during your

5:45

lifetime . You're now starting to think about the taxable

5:47

implications and the structural implications

5:49

of moving wealth

5:52

down to the next generation and

5:55

so on . Anyway

5:58

, so the phone's going to ring for a second , but

6:00

we'll let that get away , and

6:03

so then I think at that 30 million level

6:05

, that's where you start having that discussion more

6:07

and more . Then I think at that 30 million level , that's where

6:09

you start having that discussion more and more . Then I think you go on to the next

6:11

world , which is what I would describe as the multifamily office

6:14

and family office side of things , where you

6:16

start having a lot of heft

6:19

built around the structuring , the

6:21

accounting , different

6:24

tax games you can play in order to minimize

6:26

your work on that front . That's really where we're

6:28

, that's how I would divide it . And

6:30

so firms to try to do all

6:33

things or be all things to all people , can

6:35

be difficult because , as you to to staff

6:37

, uh , what you need to staff

6:39

and build the structure around each of those different

6:42

functions , that can be expensive and

6:44

in many ways it requires a different thought

6:46

in terms of investment management . Uh

6:48

, you know , for a firm , I think it's usually

6:51

a good idea to kind of decide what they want to do and where

6:53

they want to hang their hat .

6:56

I think it's interesting . We talk about

6:58

family office , but really

7:00

isn't it the founder of the family who's

7:02

really the person that we're managing

7:04

and worried about ? I wish

7:07

we were more focused on the whole family

7:09

and how they all perceived money and how

7:11

they all thought about the long-term

7:13

plan and the charitable intention , but it

7:15

really feels like for most of the family

7:17

offices I've been associated

7:19

with , there's one prime individual

7:22

that is really the family wealth holder

7:24

. How do you deal with that ego

7:27

? Or a family office

7:29

seems like a very nebulous term

7:31

.

7:32

There's no no question . Yeah

7:35

, no question that it's a nebulous term and

7:37

the sort of bromide

7:39

that's out there is if you've seen one family office

7:42

, you've seen one family office . It's tough

7:44

to take the lessons learned

7:46

in dealing with one and

7:48

extrapolate it to another when you have

7:51

such idiosyncrasies with respect

7:53

to personality , with structure , with

7:55

just the types of wealth that

7:57

created the let's

7:59

call it the family office or the structure for the family

8:01

. To

8:05

me , dealing with people and egos and

8:07

so on really gets to the point

8:09

of communication , and communication

8:11

ultimately to me is the biggest threat to wealth

8:13

, oftentimes the investment management and

8:15

the tax planning and those types of things

8:18

. There are a lot of smart people that expend

8:20

a lot of calories doing the right things for clients

8:22

on that front and to me that's the most doable

8:25

aspect of what's happening . That's

8:31

the most doable aspect of what's happening . The bigger issue to me is making sure

8:33

that the why of the wealth management , either at the investment

8:35

management or structuring or estate

8:37

planning end of it , is communicated

8:39

and understood at the client

8:41

level and then , as you start talking about

8:43

multi-generational discussions , that that

8:45

why is then integrated into

8:48

the discussion in terms of moving

8:50

not only the value of the wealth

8:52

to the next generation , but the values that

8:54

created it . And so that

8:56

first of all involves

8:58

having some agreement as to what's going

9:01

on on that front and

9:03

then understanding what those principles are

9:05

and then designing a framework

9:08

in which those values

9:10

get down to the next generation , communication-wise

9:13

, either through education or through

9:15

just general discussions . But when you don't

9:17

have that , I think there's sort of a natural

9:19

law that the liabilities of a family

9:22

increase geometrically while the

9:24

assets in general increase linearly

9:26

, and so that delta between the two is

9:28

sort of a what's called a natural equation that

9:31

we're always fighting as we get wealth from one generation

9:33

to the next , and at

9:36

that point , if you have bad communication

9:38

, it just widens the delta . So

9:41

I think when I try to get involved

9:43

with it , I try to make sure that all parties

9:45

understand , have

9:47

a base knowledge of what's going on on the wealth

9:49

management front , and then , uh

9:52

, that there's a plan in place to

9:54

help , uh uh , sort of

9:56

not only the generation that

9:58

created the wealth but the further

10:00

generations on understand what's

10:02

happening and why , so that when life

10:05

intervenes and people get married or people

10:07

die , or people get sued or whatever

10:09

, that the structures

10:12

are flexible enough to deal

10:14

with those situations but durable enough

10:16

to protect the wealth over the

10:18

course of time .

10:20

So , Fraser , how do wealth managers typically

10:22

assess a client's financial

10:24

situation and goals ?

10:27

Well , I think step one you're

10:29

really flying in the clouds without

10:31

instruments if you don't have the full balance sheet

10:33

. I think if someone presents to

10:35

you a pool of money that you want to

10:38

manage and they don't give you much

10:40

other information beyond that , you are strictly

10:43

an asset manager and you develop an

10:45

investment policy statement over that pool of

10:47

money and you kind of move on and the

10:49

conversation stops there and you're evaluated

10:52

on whether you performed at or above

10:54

that benchmark . A good

10:56

wealth manager , in my opinion , starts

10:59

to look a little bit more like an accounting firm and

11:02

slash lawyer , in the sense

11:04

that in their intake process they try to get

11:06

a real good sense of the

11:08

total picture of what's going on

11:10

with the family . So that

11:12

starts with the balance sheet

11:15

. At a minimum it goes to the family

11:17

tree , then you start getting into

11:19

taking in the different structures

11:21

that exist or don't exist for the client

11:23

and you start understanding what's in place there

11:26

. That's sort of the minimal

11:28

route , I think . If you just sort of stick

11:30

at I have an LLC

11:32

with $10 million in it and I wanted

11:35

to invest it for growth you kind of stop at that

11:37

because that LLC

11:39

is probably part of a much larger

11:41

spiderweb of planning that's going on

11:43

, either intentional , hopefully , or unintentional

11:46

, and that's where a good

11:48

wealth manager goes in and tries to A

11:50

, spot the issues and then B figure

11:53

out what parts of the ecosystem need to be involved

11:56

to either maximize what they're trying

11:58

to do or fix a problem that's metastasized

12:01

over time .

12:03

Do you think , fraser , that when we try

12:05

to customize these asset allocations for

12:07

these various family structures of which , like

12:09

you said , there's no two that are alike it

12:13

feels like in this market where there's

12:15

so much uncertainty in terms

12:17

of what's going on with

12:20

AI , what's going on with some

12:22

of the things on the edge

12:24

here , with the wars in Ukraine and

12:26

Gaza , how

12:28

do you make sure that whatever

12:31

you're doing really does satisfy

12:33

those individual asset allocation

12:36

needs for clients ?

12:38

That's a tough question . It may be the million

12:40

or a billion dollar question that everybody tries

12:42

to solve . I think the

12:44

big thing it goes back to creating

12:47

a sort of understanding and

12:49

having a framework where you have a

12:52

way of thinking that is durable

12:55

enough so that you have long-term success

12:57

. And I think that starts with having an investment

13:00

policy statement that reflects what

13:02

each of the different pools of money

13:04

are tasked with doing . And so I

13:07

think not having that creates

13:09

longer

13:12

term let's call it spaciness around

13:15

what the purpose of the money is , and it allows

13:17

for just

13:21

the interjection of ideas that may or may

13:23

not make sense but don't have much of a process

13:25

around whether they're appropriate or not . So I'd

13:27

start with that and say you know , sort of an

13:29

investment policy statement , sort of start

13:32

to analyzing what the function

13:34

of a pool of money is and how it should be invested

13:36

, is where

13:39

I would begin

13:42

in your thinking that thou shalt be a

13:44

60-40 or else , because

13:47

that would ignore different

13:50

scenarios . And I look at what

13:52

we looked at in the fixed income world in

13:54

the past couple of years , where a spike

13:57

in interest rates probably

13:59

did a lot of damage to different portfolios

14:02

because there were people who had gotten

14:04

used to a let's call it a 30 or

14:06

40 year trend of declining

14:08

interest rates and kind of assumed

14:10

that fixed income was going

14:12

to behave in a certain way , and when

14:14

things spiked

14:17

, that ultimately

14:19

created some havoc

14:21

with sort of a framework

14:23

around fixed income that may have been

14:25

five or 10 years old . That wasn't

14:27

appropriate or nimble enough to deal with

14:30

what was going on at the time . I

14:32

think also you add onto that that

14:34

the thinking

14:37

these days around the appropriateness of alternative

14:39

assets whether it's private equity , private credit

14:41

, hedge strategies , options , real

14:45

assets , et cetera they're becoming

14:47

more available to more people , and so I

14:49

think the idea of being nimble

14:51

enough to accept the idea and

14:53

then analyze its appropriateness for that

14:55

particular pool of capital , I

14:57

think that's extremely appropriate , and I think

14:59

that's where wealth managers have

15:01

to be intelligent about things in

15:04

terms of again sort of balancing

15:06

durability and flexibility with respect

15:08

to the investment framework .

15:12

One thing I thought of when you started

15:14

talking about that is when I

15:16

was in this business . I noticed that we seem

15:19

to be always taking what

15:21

is sophisticated institutional

15:23

advice and transferring

15:25

it over to large families of

15:27

a similar size . So if I have a $30

15:29

million endowment and I have a $30

15:32

million family , that $30

15:34

million family assets start to

15:36

look like those institutional

15:38

assets which are wisely allocated

15:41

by these investment committees

15:43

. But then I look at

15:45

the whole question about alternatives whether these

15:47

alternatives illiquidity and pricing

15:50

and the way they do things are

15:52

really accurately reflecting

15:54

the returns they're generating . So I

15:57

look at all of the people in the institutional

15:59

space arguing for equity

16:01

and fixed income and the alternatives . Value

16:04

add really hasn't been there because there's too

16:06

much money chasing too few investments . Josh

16:08

Youngquist , phd .

16:08

Well , I'd also add onto that that institutions

16:12

are not people , and time

16:14

horizons of institutions are usually

16:17

different than they are for

16:19

families , depending

16:21

on what the pool of money is for families , et cetera

16:24

. The value for

16:26

liquidity , I think , in the strictly

16:29

human being family space is

16:31

my prejudice would be to say

16:33

that it is more or

16:36

at a higher level than it is at

16:38

the institutional level . Now there are a lot

16:40

of allocators that would say you don't

16:42

know what you're talking about . I

16:45

kind of think I do on that front , and so

16:47

I think that to translate

16:49

the Yale model or the New

16:51

Zealand Superfund model directly

16:53

to an individual because it's

16:55

worked for an extremely specific

16:58

institution , I think is

17:00

folly . That's

17:03

not to say that there aren't lessons that

17:06

those situations can't

17:08

teach us . Uh , they can , and I think

17:10

the the whole democratization of alts

17:12

trend is an outgrowth

17:15

of that . But that's taken 10

17:17

to 20 years and the evolution of the

17:19

investment vehicle itself in the alternative space

17:21

to be appropriate for the individual family

17:23

. Um , and so I think that's

17:26

where it's important for people

17:28

who engage with the financial

17:30

industrial complex to

17:33

have an ecosystem around them so

17:35

that they understand not just what's

17:37

out there and what's available but what's actually

17:39

being quote unquote , sold to them . It's

17:44

very easy to take that type of thing

17:46

and translate it over to the family

17:48

space , and

17:50

those time horizons may not be similar .

17:53

You used the term democratization . I

17:56

think that sounds wonderful , but

17:58

it feels a little bit too altruistic

18:01

. I'm not sure

18:03

that giving people the opportunity

18:05

, as you said , to be into some of these

18:07

investments so late in their cycle is

18:10

really a great opportunity , as

18:12

much as it is . Taking something

18:14

that they need to liquidate

18:16

and get out

18:18

of and offering it

18:20

to other people is not always as

18:23

kind and generous as we

18:26

should suspect , is it ?

18:31

Well that's why it's called the Skeptics Podcast because you're looking at it and saying where is

18:33

this coming from ? And , if I'm being

18:35

particularly curmudgeonly about

18:37

it , I'd say is this active management's

18:39

last gasp ? And

18:43

that's a huge overstatement

18:45

of where the industry is going

18:48

on things . Uh , the industry itself

18:50

would say look , there's a liquidity premium

18:52

. There is , uh , there's

18:54

an expected return in the alternative space

18:56

that is above what you can get in the uh

18:58

liquid markets , and that's something

19:01

that the uh , uh

19:03

, that the let's call it

19:05

the retail investor should let's

19:12

call it the retail investor should in air quotes have access to , and why

19:14

are we not doing that ? The broader thing here , though , is to say

19:16

look , the fact of the matter is that the

19:20

financial world is built on gathering

19:22

assets to manage and charging a fee on it

19:24

, and if the

19:26

index phenomenon has

19:28

driven the asset management fees in

19:30

the liquid space down to tens of basis

19:32

points or lower , those

19:34

margins have to exist somewhere

19:37

, and that's where we've naturally gone , and

19:39

it's up to good wealth managers to understand

19:42

where good active management takes

19:44

place and to translate those good concepts

19:46

of taking

19:50

advantage of the illiquidity premium such

19:52

that it exists and applying it to the family

19:54

.

19:55

So , fraser , sort of taking

19:57

off on that point about active management , do

20:00

you yourself build client

20:02

portfolios from individual stocks

20:05

or bonds , or do you actually

20:07

use these outside active

20:09

investment managers ? And also , what

20:11

kinds of vehicles do you use ? Do

20:14

you use mutual funds ? Do you use

20:16

ETFs ? Do you use separate accounts

20:18

? How do fees play a role

20:20

in that as well ?

20:21

Sure . So at Next we charge

20:25

an account level fee for our advice and

20:27

then the

20:29

implementation occurs on

20:31

all three of those vehicles you just described

20:34

, depending on what's appropriate for the clients . So

20:36

, especially in the liquid markets

20:38

, we're probably not going to be putting

20:40

people into expensive

20:43

, actively managed large cap

20:45

mutual funds because we don't think there's a lot

20:47

of value added there . So

20:50

maybe a lower cost ETF or a lower cost

20:52

mutual

20:55

fund is appropriate on that front , depending

20:57

on what tax attributes need to take place

20:59

. Separate accounts are definitely within

21:02

our capability and so

21:04

you know , especially for those folks who see

21:08

value in having the individual names in their portfolio

21:11

and maybe a little

21:13

extra control around that front

21:15

, we use all those different

21:17

vehicles depending on what

21:20

the client needs and if we're getting different

21:22

advice from their tax

21:25

advisors , et cetera , as to how things should be set up

21:27

getting different

21:29

advice from their tax advisors , et cetera

21:31

, as to how things should be set up .

21:35

So I'm sure your clients are concerned about some of the talk of

21:37

a recession this year . Slow down , whatever we want , and the

21:39

election . Do your clients consider using

21:42

options for downside risks or

21:44

other option strategies to

21:46

try to hedge their portfolios , or

21:48

are they all long-term investors

21:51

who can live through the downturns ?

21:54

So certainly we

21:57

preach the idea of having the long-term investment

21:59

horizon . So we aren't , I would say , aggressive

22:02

in terms of using options to hedge

22:04

sort of the broader indices of

22:07

the markets . But

22:09

people come to us with large single positions

22:11

and so to that extent

22:14

, yes , options are a tool in

22:16

our pocket

22:19

to make sure that we understand

22:21

not only so

22:25

that we manage the downside risk

22:27

as we think about longer term investment

22:29

implementation for those types of clients

22:31

as it relates

22:33

to specific options around themes

22:35

, in a way that you're not taking outsized

22:38

risk for having some

22:40

sort of weird event happening in the next year or two

22:42

that could cause a large drawdown . That

22:58

would be kind of a bad footfall , I'd think .

23:02

Yeah , we're in the month of April

23:04

and we're all very honored to be able

23:06

to send some money to the government

23:08

I haven't sent it already and

23:11

I know that taxes are a

23:13

huge concern for ultra high net worth

23:15

and high net worth families . They're a concern

23:18

for everyone's families , I

23:21

think the one thing that makes us all . You

23:24

know that we can all count on death and taxes

23:26

us

23:31

all . You know that we can all count on death and taxes . So what role if I were to put a circle and say

23:33

you know , ultra high net worth planning and wealth management

23:35

, how much is taxes a

23:38

part of that discussion ? Or is

23:40

it becoming so hard

23:42

to judge in the future what the tax

23:44

rates will be for these people if they

23:47

were in the past , that we

23:49

start to wonder , um , whether

23:51

we're really adding as much value as we think

23:53

. If we can't , really , I

23:56

have a clear vision of where we're going

23:58

tax-wise . Do you guys have so

24:00

?

24:01

uh , sort of two parts

24:03

of that question . The first one , which is how

24:05

important is tax planning in sort of

24:07

the wealth management discussion , and I would say

24:09

it's central to it for a couple of

24:11

reasons . Number one , clients are interested in it

24:13

. And number two , that is a large

24:16

source of value that can be

24:18

added above and beyond the investment return

24:20

that people can see

24:23

. An example of that would be if

24:25

someone is selling a company and you're

24:27

able to reduce their tax rate , either

24:30

at the income or capital gains tax rate or

24:32

at the estate tax rate , by 10%

24:34

in one way

24:36

, shape or form , that's a big chunk

24:38

of money that the investment return

24:41

would take a long time to get to in order to

24:43

achieve that same type of result

24:45

. So add on

24:47

to that , you know heirs

24:49

are always very interested in what they

24:51

receive from the previous generation

24:54

and if you're able to do some work on the estate

24:56

planning front that gets a couple extra million

24:58

into their domain , you're going

25:00

to have some interested people in that conversation

25:03

to see what you can do on that front . The

25:05

second question , which is do

25:07

we have a crystal ball vis-a-vis taxes

25:10

? The answer is decidedly

25:12

not . Now

25:14

we're based in New York , I live

25:16

in New York and so I assume that

25:19

I have a target on my back personally

25:21

and with clients . We

25:23

have a national practice . But I

25:26

mean , the world is such that

25:28

when you look at the different deficits that are out there

25:30

and you know whether you're a MMT

25:33

, stephanie Kelton fan or not , at the end of the day

25:35

, politically there's going to be something that requires

25:38

a gesture towards funding the

25:40

deficits that have been created over time . That

25:42

would indicate to me that tax rates

25:44

are not in a hurry to go down . Now

25:47

you go into an election cycle where

25:49

you have you know

25:52

potential of Trump , you have , you know Republicans

25:54

here or there that may , that may , take

25:56

over at the Senate or Republican level

25:58

. Those prognostications

26:01

are razor thin and 50 , 50

26:03

at the moment , so all three

26:05

branches of government . So

26:09

it's difficult to make a full

26:11

, strident move on the tax front based

26:13

on where we are today politically and with the polling

26:16

. I think that's not a great idea because

26:18

lots of things could happen between now and then

26:20

, not least of which either of the major

26:22

presidential candidates may not be the presidential

26:24

candidate by the time . November kicks around

26:26

, one for health reasons , the other

26:29

for legal reasons , and

26:31

you know that changes the dynamic instantly

26:34

and in a way that requires a lot of different

26:36

analysis . So the

26:39

second question is you know , with

26:42

all of this uncertainty , what

26:46

do you do to tell clients to sort

26:49

of think about their tax ramifications ? I

26:53

would say the major thing is to

26:55

sort of understand that , as a larger

26:57

trend , tax rates are likely

26:59

not going down just

27:01

as a theme . They may in the short

27:03

term , just on a short-term political spasm

27:06

, but as a longer-term component , social

27:08

Security needs to be funded . We need a big military

27:11

, healthcare , et cetera . These

27:13

are big costs that have to be funded in

27:16

one way , shape or form politically and that

27:18

comes from a larger tax

27:21

base , larger tax increase , et cetera

27:23

, increase

27:28

, et cetera . All of that would sort of lead

27:30

me to the advice saying if you've got things that you can lock in or

27:32

take advantage of now , that would be my prejudice in

27:34

terms of the advice to tell people . And so , as

27:37

an example , in the estate tax

27:39

world in 2026 , the

27:41

estate tax exemption

28:00

is going to go from about 14 million per

28:02

person down to 7 million per person , and

28:04

so there is a tidal wave of planning

28:06

that's going on between now and then to lock

28:09

in that 14 million exemption , because

28:12

not

28:14

doing it runs the risk of getting that exemption

28:16

cut in half . And why

28:19

would you do that to yourself if you've got

28:21

the means and the ability to fund that ?

28:22

if you've got the means and the ability

28:25

to fund that . So , fraser , just sort of taking

28:27

this tax and elections theme a little bit into

28:30

more detail , do

28:38

you have any clients who actually ask you to run out some what

28:40

if scenarios on Trump and Biden in Congress and ask you what you would do during as a result

28:42

of these , uh , what if scenarios ? You know what ? What

28:44

would your firm recommend if

28:47

you know scenario a

28:49

happens , or what do you ? What

28:51

would you recommend differently if scenario B happens

28:53

?

28:55

So , uh , the short answer is no , we

28:57

don't . We haven't . No one's asked me to do that

28:59

yet . What they've asked me to do is to say

29:01

what does the world look like if , certainly

29:05

on the estate tax front , if things

29:07

are cut in half , and so we'll run

29:09

those projections out ? We'll run out what

29:12

the asset

29:14

base looks like 10 years , 20 years from now

29:16

, assuming a rate of growth and assuming you

29:19

did nothing and assuming you did something

29:21

that type of thing On

29:23

the income tax front and the capital gains tax

29:25

front . The

29:28

fact of the matter is that it's so difficult

29:31

to predict what would or wouldn't

29:33

happen congressionally , even if a

29:36

Trump gets elected , because

29:38

the horse trading that goes on on that

29:40

front no

29:44

one knows . Anyone who says they know is

29:46

, I think , inaccurate . I

29:48

try to deal with the law that's in front of me and

29:51

the facts that I have , and so I've

29:53

got enough of that in many ways . With this 2026

29:56

component , where the law

29:58

sunsets , I can see that as

30:01

clear as day with the legislation

30:03

, and

30:19

I can see that as clear as day with the legislation . It doesn't take any congressional

30:21

action to have that happen . So that's sort of the X and Y axis that

30:23

I deal with in terms of that sort of analysis , and then I assume , sort of

30:25

assume , that that's going to be in place and so

30:27

any of the other you know sort of tips

30:30

and tricks that we think about on that front . We

30:32

go along with it on that side of things

30:34

. And then you know , at the

30:36

state level , we kind of assume that things aren't going

30:39

down at any state in

30:42

terms of being

30:44

able to fund their different commitments .

30:47

Okay .

30:49

When you think about your biggest

30:51

role , fraser , is

30:53

it the idea of making sure

30:55

that the assets and the values are translated

30:58

to that next generation for ultra

31:00

high net worth , and high net worth through the estate

31:02

planning ? What

31:04

are some of the most important considerations

31:07

when you start to think about the

31:09

estate plans for these families

31:12

? Is it in terms of

31:14

avoiding the pitfalls of

31:16

the past ? Is it to try

31:18

to prepare them for the opportunity of the future

31:20

? How do you weigh

31:22

the characteristics of the

31:24

group and how

31:27

to come up with that estate plan ?

31:29

Well , that's a great question . I

31:31

think so on the technical sort

31:34

of number side of things like

31:36

taxes , to be sure , but other creditors

31:39

, that

31:56

whether it's soon

31:58

to be ex-spouses or lawsuits

32:03

, things of that nature . That's

32:06

sort of the technical aspect of it . But

32:08

then you know , as I said before , the

32:10

family dynamic , slash , communication , end

32:12

of things , the overspending , the protecting

32:15

the heirs from themselves discussion

32:17

becomes very central

32:19

as well , because that's a definitive threat to

32:21

wealth . And what

32:23

I try to do here at

32:25

Next and Beyond is really

32:27

operated as sort of on two

32:29

levels . The first one is half chief

32:32

operating officer , which means that

32:34

I'm there side by side with the client

32:36

, helping to make sure that things get done

32:38

. That , to me , is the pure

32:40

function of a family office , is to know

32:43

what you have , spot

32:45

the issues , execute on that

32:47

and make sure over time that

32:49

the understanding of what's in place

32:51

continues to be understood and that it

32:53

eventually gets translated to the constituencies

32:56

that need to know about it and that you build

32:58

the framework for communications

33:00

amongst and between the generations

33:02

and the broader ecosystem so

33:05

that the wealth can persist over time

33:07

. Uh , the half

33:09

, the other half of it is that wealth strategist

33:12

front which is me sort of uh

33:15

, you know , in conjunction with the ecosystem

33:17

sort of understanding what's

33:20

out there in terms of estate planning and tax planning

33:22

.

33:23

So , fraser , just sort of taking that last

33:26

point forward a bit , I

33:28

imagine there are sometimes disagreements

33:30

among family members regarding the

33:33

estate planning . Do you sometimes get pulled

33:35

into these disputes ? How do you

33:37

actually handle these disputes

33:39

, being sort of an outside advisor ?

33:44

Is everyone always glad to see Fraser come

33:46

into the meeting ? Or what

33:49

it's going to lead to in the ultimate responsibilities

33:52

and control ?

33:53

It's my ultimate superpower . I think I

33:55

like to consider myself to be a golden retriever

33:57

with a German shepherd mind , and not the other

33:59

way around . So

34:02

the idea that

34:04

the world is seamless and that everyone communicates

34:07

perfectly just doesn't exist . Even

34:09

in the most perfectly functioning

34:12

family environments

34:14

, there are going to be

34:16

different income needs , different needs for

34:18

the investments , and that will act in conflict

34:21

, even if everyone gets together well at

34:23

the Thanksgiving table and so on . The

34:25

broader question is how do you

34:29

, as an advisor , manage that conflict

34:31

or act as a bridge or get

34:33

you from A to Z in terms of the planning

34:35

? And the answer is you try to communicate

34:38

A , you understand

34:40

fully who your client is and

34:44

you over-communicate what the issues

34:46

are so that the clients can make good

34:48

decisions as to how information

34:50

and tactics and things like that

34:53

get communicated to the different constituencies

34:55

. Do I get pulled into

34:57

these discussions all the time ? Do I get excluded

34:59

from these discussions ? Sure , that

35:02

is in many ways the client's choice . I

35:05

like to think of myself as a resource to help

35:07

provide the technical knowledge and then

35:09

a decades of experience around

35:12

uh uh issues

35:14

that that families have faced going forward

35:16

and hopefully , uh

35:18

, an additional resource to help

35:20

educate people , to help them graduate

35:23

, to having adult level discussions around big

35:25

sums of money ? Um

35:27

, so the larger answer on all

35:29

of that is uh , I think

35:31

the good framework is understand who your client

35:33

is , uh , communicate

35:35

, over-communicate on that front so that

35:38

you understand and have a plan of attack , communication

35:40

wise , and then be available as

35:42

the different decisions are made as to how

35:45

that information is communicated and when .

35:47

Yeah , it must

35:49

be , very difficult because I look at families and

35:51

say , you know , okay , I have a founder or

35:53

a family head who is 60

35:55

years old . I mean , you

35:57

still have a very long

35:59

period before you're

36:01

going to be worried about how the children

36:04

get those assets , because that

36:06

person's got a lifespan . You know an additional

36:08

25 , 30 years , 35

36:10

, 30 years and then with a younger wife you could be

36:12

talking 35

36:15

years before the children see the

36:17

majority of those assets . So

36:21

it feels like it's clear who

36:24

your client is , but then if an individual

36:26

dies suddenly and

36:28

the people haven't been prepared , it

36:30

feels like the things

36:33

are going to spiral down very

36:35

quickly . One

36:39

of the hardest issues I have discussing with

36:41

some clients is charitable contributions

36:44

, because charitable contributions you think

36:46

are part of their legacy and part of what they want

36:48

to do , but they're just not

36:50

necessarily . The

36:52

question is do I focus on growing

36:55

my existing assets and keeping

36:57

that going so I'll have more

36:59

assets to be charitable with later

37:01

, or do I give some to

37:03

charities now where I can see the impact

37:06

and see how it affects things ? I've

37:08

talked to various families and no one seems

37:10

to everybody believes that they're holding

37:13

onto the assets is going to generate better returns

37:15

than the charitable entity

37:17

or vehicle . Do you have some

37:20

insights as to how some of the larger

37:23

families look at this trade-off ?

37:26

Sure . So from a charitable standpoint

37:28

, you have sort of two components of your question

37:32

there . The first one is sort

37:34

of touchy-feely-wise Do you

37:36

give the assets away currently so that you

37:38

see the benefit of them , versus put

37:41

a lot of different structure around it so

37:43

that the charitable

37:45

impulse that's being harnessed

37:48

here can persist over a

37:50

period of time and have a different kind of impact

37:53

than maybe the actual dollars to the actual

37:55

charity impact . That

37:57

is a family decision . There's lots

38:00

of taxable ways

38:02

to do both . It's

38:05

as simple as taking a highly appreciated

38:07

stock and donating it directly to something

38:09

, and it's as's

38:11

as complicated as uh starting

38:13

your own foundation and having uh

38:15

a governance structure in place to make

38:17

sure it works and that you've got uh

38:20

backup people to help administer

38:22

and that the the mission of the uh

38:24

charity uh persists

38:27

and you can make it complicated

38:29

enough to take in outside money and do those

38:31

types of things , get

38:35

complicated enough to take in outside money and do those types of things . And so I would

38:37

say that all of those components are part of the blend of sort of describing

38:40

what happens , with sort

38:44

of describing what a family wants to do

38:46

and sort of helping them do it .

38:49

Great Fraser . What factors should individuals

38:51

consider when selecting a

38:53

wealth management firm , including a family

38:55

office ?

39:04

So from a wealth

39:06

management firm perspective , I

39:09

think among the things that I

39:13

would look , colored by side

39:17

deals or conflicts of interest

39:19

, that type of thing , that's something I'm not particularly

39:21

interested in . That's not to say that

39:23

good advice doesn't come from firms that have

39:26

conflicts of interest to them , but I

39:28

would be very certain I understood what

39:30

those conflicts were and that I understood

39:32

how they got paid . That

39:34

would be job one . On the wealth management

39:37

front , I

39:39

personally would want not only sort of a

39:41

good track record of logical

39:44

investment advice , but I would want some capability

39:46

to understand my broader balance sheet and

39:49

structuring slash , estate planning

39:51

components , so that I had an extra sounding

39:53

board as I thought about structuring

39:55

my affairs . From a family

39:57

office side of things , to me

40:00

the best family offices and I'm thinking

40:02

single family offices where they bring

40:04

a lot of things in-house to me

40:06

the best ones of those look initially

40:09

like accounting firms , because

40:11

job one is to understand

40:13

what you have and what the impacts of

40:15

distributing assets to people have

40:17

from a taxable component . So

40:20

that accounting spine , I think , is what

40:22

. That would be my predilection as to how

40:24

to build a family office where

40:26

you're then using outside vendors

40:28

to fill in other gaps like investment

40:31

management and concierge services

40:33

and trust companies and all that stuff . If you

40:35

don't know what you have and how people

40:37

own it and that really happens best

40:39

at an accounting firm level , in my opinion and

40:41

from a reporting standpoint I think you start

40:43

ending up making tactical decisions without

40:46

any strategy attached to them and you can

40:48

get into something five or 10 years down

40:50

the line that looks like a real mess .

40:53

Thanks , fraser . One of the items we have in our

40:55

podcast is called the mailbag , and

40:57

I'm going to reach into the mailbag and

41:00

pull out a question . And it

41:02

looks like this is somebody

41:04

who wants to talk about the future , and since our

41:06

futures are gone , we

41:08

can talk a little bit about our past .

41:10

Talk for yourself , Steve . We can talk a little bit about our past . Talk for yourself

41:12

, Steve .

41:13

The younger people who

41:15

are going into this industry , when

41:18

you think about what the future will hold

41:20

with AI , with how

41:24

individuals will use crypto and

41:26

other various currencies

41:28

. So what do you think are

41:30

the tools or the certifications

41:33

that individuals should try

41:35

to get in order for them to be

41:37

fully able to contribute

41:39

in this wealth management industry

41:41

? Do you have a ? I mean , I think

41:43

everybody has a perspective , but I'd like to

41:45

start with Fraser , then Clem , then I'll

41:48

end with mine .

41:49

Sure , sure

42:23

. So at the college level , if you're committed to being in the wealth management space , I would

42:25

say the course of study that I would follow of scenarios , I think you're going to be better equipped

42:27

to provide advice later . On the technical aspects , whether you have a law degree or CFP or CFA , those can

42:29

be built on later I'm a lawyer by background

42:31

can

42:37

be built on later I'm a lawyer by background . I am very happy to have my law degree and have

42:39

practiced a little bit before I got into the wealth space , because I think it gives

42:41

me , a a different perspective , b certain

42:45

confidence in front of other individuals

42:47

and a really sharp sense

42:49

of issue spotting . That I think in other

42:51

fields takes a much

42:53

longer time to develop . Now

42:55

, that's an expensive way to get into the wealth

42:58

management space , but I

43:00

think anything where a CFP

43:03

or a CFA gives you some exposure

43:05

into the issues that wealth

43:08

situations get

43:12

in front of your desk , I think that that's always

43:14

going to be helpful .

43:16

So , as for me , um , so

43:18

I've got a CFA , which has been

43:21

, I would say , extremely helpful

43:23

in being able to understand investment

43:25

markets . Uh , I have

43:27

an MBA uh , which

43:30

actually , uh I

43:32

think is complimentary to a

43:34

CFA in terms of

43:36

providing information about management

43:40

and marketing and

43:42

other things you don't get in a

43:45

CFA program . But I also

43:47

want to talk , and then I

43:49

have a bachelor's degree from

43:51

Georgetown School of Foreign Service in

43:53

International Economics , and

43:56

I think that's been

43:58

extremely helpful throughout my career as well

44:00

, because if you look throughout my

44:02

career , there's been a sort of a theme

44:04

of international whether that

44:06

be international economics or international

44:09

banking , international trade , finance

44:12

, international investments

44:14

. So you have this theme

44:16

. That really began back when I

44:18

got my bachelor's degree from

44:22

Georgetown School of Foreign Service and

44:24

I'll emphasize Georgetown School

44:26

of Foreign Service once again because

44:28

I'm once again teaching

44:30

there . So I'm

44:33

sort of come full circle from having

44:35

been a student there to now

44:38

teaching a class there geopolitical

44:40

risks in international

44:42

business . So that was good

44:45

. I would just add one more thing

44:47

too , which is that I think

44:49

it's been helpful to my career

44:52

that I had an inflection

44:54

point , I would say , in the middle of my career . So

44:57

I was doing international

44:59

economics , slash banking

45:02

, slash trade finance during

45:05

sort of transactions , relationship

45:07

management , et cetera during the early

45:09

part of my career during

45:15

the early part of my career . And then I made a switch over into

45:17

the asset management world in terms of looking at international

45:20

firms , asset

45:22

management firms in terms of running

45:24

an international mutual fund . So

45:27

I think that inflection point

45:29

and having a career that's been sort of multifaceted

45:32

has really helped me be

45:34

able to analyze

45:37

and interpret the world . And

45:39

at the risk of extending this a little more , I'll

45:41

say that I totally

45:43

agree with Fraser on his

45:45

comments about psychology . I've

45:48

talked to a number of investment management

45:51

firms over the years and

45:53

a lot of them talk about how

45:55

they actually prefer to have

45:57

liberal arts people , those

46:01

who have studied and have gotten

46:04

degrees in the liberal arts or in social

46:06

sciences , because

46:09

they of more open minds

46:11

, they'll say , than

46:14

maybe some who have just focused more narrowly

46:16

on accounting or even

46:20

narrowly on finance . So I

46:23

would give a shout out for

46:25

social sciences and liberal arts . I think

46:28

many investment managers look

46:30

at that as a good criterion

46:33

for hiring . Thanks

46:35

, guys .

46:36

My perspective as an engineer

46:39

in the field of finance is

46:41

that I think you just

46:43

have to keep learning throughout your career

46:45

. I don't think you need to think

46:48

about it as a prescription that everyone has

46:50

to go get an MBA and then everyone has to go get a certification , and then everyone

46:52

has to go get an MBA , and then everyone has to go get a certification , and then everyone

46:54

has to . You know , I

46:57

like the idea of go

46:59

where you're challenged , go where you're learning

47:01

, go where you have a process in

47:03

place to support your learning . Does

47:06

your organization fund and pay

47:08

for some of the , you know , degrees

47:10

and certifications

47:13

? Go to that firm , not because you want a CFP

47:15

, but because you just want to have options

47:17

. You want to have the capability

47:19

of taking advantage of your human capital

47:21

and enhancing it as you go through your

47:24

life . I look at us doing

47:26

this podcast and say there's

47:28

an opportunity here for us to

47:30

boil down some of these concepts

47:33

into more finite and understandable

47:35

terms , and when we do that

47:37

, we become better , and I think

47:40

that that's the goal

47:42

is really just try to keep

47:44

learning , and I don't think there

47:46

is a . You know , I think that's

47:48

going to change . I think the risk management

47:50

is going to become bigger . I think that I

47:52

agree that the legal aspect is

47:54

important . I agree the international

47:57

aspect is important , but I guess

47:59

what I'd say is whatever excites you

48:01

is where you should go , and

48:03

I think that careers

48:05

are really about making

48:09

sure your journey is through an interesting

48:11

path and through an interesting

48:13

valley , not necessarily what

48:15

valley it should be through

48:19

.

48:19

One thing to add , as I thought about

48:21

it for people who are in the intermediate components

48:23

of their career , something that I've found valuable

48:25

is if you can get for-profit

48:28

board experience , to

48:30

me you are then really understanding

48:33

what worries wealthy people , because

48:35

, especially when they have their own family

48:37

businesses or illiquid situations

48:39

, if you're able to be in that discussion

48:42

at that level , you

48:44

are able to add value immediately

48:46

. You are really learning a lot fast

48:49

and the ecosystem around those

48:51

decisions I think turbocharges

48:53

a wealth management career . So for-profit

48:56

board experience I would add

48:58

on to that and I distinguish that from non-profit

49:01

because I think that that's a different animal

49:03

. That isn't quite the same thing . You

49:06

really learn what being a fiduciary is

49:08

with a capital F if you're in that environment

49:10

.

49:12

Thanks , roger , thanks for joining us today . I really

49:14

appreciate your insights and , as

49:17

always , let's keep in touch and

49:19

keep communicating .

49:20

Thanks , fraser , loved being

49:22

on . It's fun to catch up with you guys and

49:26

if I can help out later and we can talk

49:28

about other stuff , I'd be happy to do it .

49:31

Thank you , thank you . Thanks for

49:33

listening .