← How I Invest with David Weisburd
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- [00:00]
A
So in your own words, what is a trustee and what is a trustee's role?
- [00:05]
B
You know, a trustee's role is to be a trusted advisor for the family, you know, a sounding board, a thought partner. It's someone who listens carefully, that really understands what the client's goals are, their objectives, their value system, and helps to translate those into good, sustainable decisions for the family. I have one situation where the clients council had put together this fantastic advisory team, a lot of structure around the organization and it wasn't running well. And we had an all hands advisory meeting. We're all in this big room together, team of 10 to 15 advisors. And he stood up and he said, I just built all of you a Ferrari. And they had spent hundreds and hundreds of thousands of dollars assembling all this structure. And what was missing was effective communication and accountability with the within the advisory team. That moment reminded me that the trustee actually lives at the intersection of all these interdisciplinaries, from tax to legal to investments. And so where a good trustee can help a family run the Ferrari as it was meant to be run is deliberately, with precision, with purpose in understanding how all of these different disciplines come together in helping enable accountability within structure. And sometimes that's just as simple as task management.
- [01:31]
A
So trustee sits in some ways outside of trust, almost like the qb. And I guess one of the, one of the questions should be for the trustee or the advisor should be do you even do a trust? And if you decide to do a trust, what kind of trust? So it's not just this functional person within the four corners of a legal entity, it's also as a thought partner.
- [01:50]
B
That's how we view it. I mean us at Blue sky, we very much see, seek to be a trusted advisor for families and a thought partner within the advisory team. I would say this is one of the issues that I see as becoming more systemic in trustee service offerings where it's become more commoditized. But the danger there for families is that you're putting yes man person or yes man entity in the legal decision making seat for the family. And that can produce really bad outcomes if they don't actually understand the strategy and they don't understand what the client's real goals and objectives are and their value system.
- [02:26]
A
When we last chatted, you mentioned that it was so critical for a trustee to be independent. What does that even mean? And two, why is it so important?
- [02:33]
B
So the independence matters, you know, for technical reasons, also philosophical reasons, and at times emotional reasons. Technically, independence is what makes a Lot of the tax planning work. And so both from an estate tax and a gift tax and an income tax perspective, when you're implementing these trust structures and these tax strategies, there's a direct correlation between the independence piece and how effective these tax strategies can be. Philosophically, independence keeps the trustee aligned. And so, you know, when you have a trustee that may be part of a larger institution and the trustee role perhaps has been morphed into more of a sales role because they do at times sit at the intersection of all these interdisciplinary planaries and really see where the plannings come together. It positions them to cross sell. It positions them to push clients into products. At Blue Sky Trust, we've been deliberate in establishing an independent model to avoid those conflicts from even being. There's no possibility because we don't compete for any of those other services like investment management and so forth. Our, or I should say a trustee that is truly independent lets them focus entirely on judgment, on being a client who, as Dan Sullivan said in his famous book who not how, like coming to them with ideas, thoughts, initiatives from investments to family dynamics, questions about their kids, long term legacy planning, new businesses that they want to start. I would also say, like on the independence piece, where an independent trustee can help is we can bring more credibility into those conversations. So if there's a conversation that needs to happen with one of the beneficiaries, that's one of the brothers or sisters and so forth, we don't bring that family baggage with us. We don't bring all the history of the holiday parties and who said what which can help us unlock for the family more effective communication to make decisions and maximize the pie for all.
- [04:40]
A
There's a question upstream of all this, which is who actually needs a trust? What are the common use cases? Obviously one use case is you want to give more than the federal exemption on gift tax to your kids. I think somewhere roughly 30 million, correct me if I'm wrong, for, for the husband and the wife, for the parents, what are some other practical use cases? Not theoretical ones, but ones that you deal with every day and who should really consider a trust?
- [05:05]
B
Yeah, great question, David. I, I would say most, more often than not, where conversations start is about a tax plan. And so clients oftentimes come to us because of the tax initiative. That's what they need and they really end up valuing us for, for every, I would say everything else that we do. You're correct that starting next year the exemption amount per spouse goes up to $15 million. So with, you know, pretty Simplistic planning, you can, you can maximize that at $30 million. That is for estate tax purposes. On the income tax side I would, I would say this is where we do the majority of our planning for clients is pre liquidity event planning is very common. The earlier that those conversations start with us and their tax advisory teams really creates the greater opportunity through valuation discounting and so forth before the, there's an IPO or there's going to be some other liquidity event or perhaps a full exit. That valuation discounting is what allows you to maximize the estate tax exemption or in aggregate $30 million. On the income tax side we do a lot of 1202 qualified small business stock stacking under the new big beautiful bill that's been maximized even more starting next year, longer whole periods, you know, reducing from five years to three years. And oftentimes for our clients in our space, which tend to be sent to millionaires and billionaires, it's around their second exit, bird exit where we can do more of that tax structuring on the income tax side because there's less emergency and less of a need for that first big liquidity event.
- [06:44]
A
And by income tax they mean capital gains from starting something.
- [06:48]
B
Correct. If parts of the portfolio allocation are going to have ordinary income then perhaps it might make sense to implement private placement life insurance or tpli. We work on that with partners as well where they're, there's a desire to have parts of the portfolio allocated to ordinary income producing assets. But the vast majority of what we do, you're correct on the income tax side is focused on capital gains.
- [07:18]
A
Tell me if I'm getting this directly correct. So somebody starts a company, let's say it becomes series B funded, it's worth $100 million. The 409A valuation may be low. They think that could be a $10 billion outcome if they wait until the IPO and they want to send that money, everything over that 30 million to, to a kid or to several kids, they need to pay a estate tax, I think which is something like 50%. So at a high level the trust strategy would be getting those shares into those kids names prior to that happen, which is itself a taxable event, but at a much lower basis. Is that basically the ARP that we're talking about correct?
- [07:56]
B
The tag, the estate tax rate is 40%. Uh, putting those shares directly into the kids hands is what terrifies clients. Um, you know, there's going to be a liquidity event. They potentially are going to have millions of dollars in their own bank account. Like, how can I wrap my head around that? This is where the trust structuring comes into play, where it not only for their generation, but in leveraging your GST, your generation skipping tax exemption, which is equally $30 million, you can fund a trust and not only insulated from your taxable state, but for taxable states throughout the generations in Nevada up to 365 years. And so that can be very powerful planning. I mean, often at times it's referred to as like the Rockefeller type of planning, where you're able to maintain assets outside of taxable states for multiple generations. But the other part to it, David, is the, the control piece of it, right? I mean, giving assets to children, whether they are minors or even adult children, can be hard at times for clients to wrap their heads around. And so this is where with proper trust structuring, there's an ability to further the tax planning and do the instructor things really tax efficiently, but doesn't give them unfettered access to the assets.
- [09:16]
A
And I don't know if you meant to phrase it this way, but you said actual children or adult children, which is something that found many, many times in these situations. And on, on that vein, what are some best practices? So that's kind of financial and tax, but in terms of, guess parenting, you've been on the inside of these families. What's best practices to raising kids that don't become adult children and become fully grown adults that contribute and benefit from society?
- [09:42]
B
Really important question, dude. And I would say in my work, it's the most important question. And I'm always asked this at the beginning of, you know, we're talking about tax strategy, we're talking about putting stocks into these different trust structures. And the client says, I don't know, Thomas. Like I, I'm worried about my kids becoming trust fund babies. I mean, there's a stigma there, right? Cause it's used very commonly and the trust actually if well managed and having a trusted partner as the trustee is what positions the kids best to not become trust fund babies. Because it's managed well, it's managed with, with thoughtfulness and intentionality that aligns with the family's vision for the wealth. The, but the, the, the thing that I, that I also say to my clients, which some appreciate more than others, is the number one thing that it comes back to is parenting. You know, there's no substitute for parenting. And you just kind of triggered me on, on one recent client conversation that I had. Very successful entrepreneur about to have his second Exit sell his company for well over a hundred million dollars. And under, you know, Trump's new big beautiful bill with bonus depreciation. He said, this is the perfect year for me to buy a jet. I'm going to buy a jet. In my experience in working with clients of our scale, there's very few situations where buying a jet actually pencils, you know, you're talking about an executive that is constantly on the road and so forth forth. Now, this entrepreneur does have his next venture planned and so forth, which does have geographic dispersion. And so his thought process behind buying a jet was this will, this will give me more time back with my family. This will allow me to get to where I need to be more effectively. And so his goals were aligned with his values. Which family first. But I tried to ask some thoughtful questions to pressure test this decision, which was, well, what are you going to use the jet for? Well, I'll use it for my business travel. And then, you know, whenever we're taking a family vacation, like that'll be able to fit into my schedule. I'm not subject to the airlines. We can get on a plane and we can go, great. Have your children ever flown private? No. You're talking about creating a, an expectation for them. They only fly private, and that's all they're going to know until they're an adult with a job going and buying their own ticket. Are you comfortable with that? You know, how do you feel about that? He's like, oh, I actually, I didn't think about it that way, Thomas. That, you know, I was thinking about it, that we'd all be together and spending more family time and this would be great. I wasn't thinking about setting an expectation with my kids that you just fly private. That's the, that's the way it's done. That night, at like three in the morning, my phone buzzes and I get a text from him and, and, and he says, thomas, he goes, I haven't been able to sleep all night. You don't have to reply to me right now. I've been thinking about what you said, and it didn't even occur to me that I may be setting this expectation for my children that based on the amount of wealth that I want to leave to them, flying private may not be sustainable. Maybe if they're entrepreneurs and successful business people themselves, it will be. But that, that's not the value system that I'm trying to further within my kids. And so I'm not going to buy a jet. I'm Going to do a jet share and do that for business travel only. But when it comes to traveling with the family, we're going to fly commercial.
- [13:07]
A
There's two sets of entrepreneurs, founders, private equity, you can call it sentimillionaires, billionaires that I see one is, I would categorize as an egotistical person that just wants their, wants kids to do exactly what they want. Did they did private equity finance, they have to do private equity finance even if they want to pursue the art. And then there's the other type which I like to associate with as much as possible. And these are the ones that want their kids to be happy and to pursue what drives them, what makes them happy. And to your point, the problem with a second set unless there is a substantial trust is if they think that having a jet or having a six bedroom place is middle class or just normal. There's very few things that are not private equity finance from this side that'll actually pay for that. So you're, you're actually creating this essentially fixed cost of living trusts. When I seen them used, the best is to allow kids to be more anti fragile. It's kind of like univers, universal basic income. You have some level of income coming in every month. So you could start the company, you could go volunteer at a nonprofit, you could go into politics, whatever you want to do. The only thing that's ever going to be at stake is your ego. It's never going to be your ability to put food on the table. I think that to me has been kind of the best from, from afar, the best use of trust. I know you're on the inside. You see these family dynamics. You talk to the patriarchs, you talk to the kids. What is the best case scenario? Not from a tax maximization or from estate planning, but from a raising healthy kids that end up having successful lives.
- [14:41]
B
Making sure that you're not disabling your children from not being able to lead lead live a purpose driven life. And this is one of the areas David, where I do see friction in families sometimes. You made me think of another situation. Multigenerational business. The family had all worked in it for, you know, that's what they knew, that's what they did. Kids grew up, they did, they worked where dad worked and so forth. It was absolutely the opportune time to sign to sell this business. And they did with a very successful result. The family had done a lot of effective trust planning. Some of the children, grown adult children that had worked at the business their whole Lives woke up the next day and didn't know what to do. Their purpose was working for this business their entire life. And as a result, for some it created friction within the family. I mean, they didn't, they didn't know what to do with themselves. And it led to, you know, behaviors that other family members didn't appreciate and cause friction and so forth. And we, we spent time and worked hard with the matriarch and the different family members to, to recognize what was going on that, to help them understand that the, the trust structures had enabled optionality for you to do a lot of different things. You can go start a new business. If you're more charitable interest, you can go do that. And then one of the things that, that we helped establish for this family were periodic family meetings where they would all get together with the goal of making decisions related to the big picture of family wealth very effectively. Because of some of this friction and lack of purpose that some of them were feeling. I was very intentional on having separate conversations with, you know, each of the children, the beneficiaries. And this brother is going to talk about this new charitable interest. I know you sister or brother might think it's silly. Give them space to talk about it. So that way it will enable us to focus on the decisions that we need to make and today at the meeting so that way we can move things forward and continue to maximize the pie for all of. And so I would say that's where some of like the family dynamics piece comes into play here. With good structuring, you can enable a lot of optionality. And back to the point that you started with David, where you have perhaps these P driven entrepreneurs that are huge wealth creators that are not the type that they have to do what mom or dad did, but more I want to provide them the flexibility to do whatever they want. It's having very intentional, thoughtful conversations with them about that's what this wealth represents for you. That you can go volunteer for your favorite charity in perpetuity, but you can live in a nice high rise in that city. You know, maybe not the best high rise. You're not going to be on billionaires row, but you don't have to live somewhere that someone that typically chooses those types of careers is, is unable to attain. And that's where it just unlocks a lot of optionality for the family. On the, on the entrepreneurship side as well.
- [17:55]
A
The way that I always look at this is it's almost like a midlife crisis, but as the child enters adulthood and I always look at this as almost like you brainstorm what you would want to do. And a lot of people actually stop at something because they say this will be hard. Well, I'd love to run for Congress, but it's impossible. This would be hard. At the same time, holding the idea that there's nothing they could do, that they have everything to them, and instead of really going towards this hardness. So picking your heart and going towards that hardness is, I think, where a lot of people, regardless of their situation and even their financial situation, could really find their new next passion. Pursuing that thing. Not necessarily because it's hard, but even though it's hard and knowing that you're going to really evolve and become better at that. That's when I started this podcast. It's extremely difficult to get from 0 to 50 episodes all this. I chose my heart. I knew that was going to be hard. I knew that there was compounding to it, and I chose to make that my heart because I knew what I wanted. I knew the end, the end goal. One of the biggest gifts that the patriarch could give to their children is explaining how pursuing the heart is the thing. That's actually what brings you passion as well.
- [19:00]
B
No, I agree with you. I mean, and that's where through a lot of this effective trust structuring, it can enable that and unlock that for the kids that you have this ability to pursue your heart. We were also intentional in structuring things where those opportunities exist along the way, you know, using different trust structures where they have access to a little and then a little bit more and a little bit more. So that way it gives them an opportunity to pursue their hard, perhaps fail, but they're failing with the smaller pieces. And so that way, when they do have access to the. To the larger pieces of the wealth, that you've got some lessons learned along the way, that not every business idea is a great idea and that maybe you need to have a business.
- [19:44]
A
When people want to invest in US class, I always say, start investing, get from zero, get off of zero as soon as quickly, but do really small checks. Just assume you're going to lose everything. But you can't play poker with fake money. You must play with real money.
- [19:57]
C
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- [21:21]
A
Is that, is that like a best practice for trust in terms of like life exploration as well, kind of segmenting those by certain age so that as the child becomes wiser, they have more capital and hopefully make less mistakes.
- [21:35]
B
So there's tax rules, right? I mean, you alluded to like the estate tax exemption, which next year will be $15 million for styles, $30 million in aggregate. You can couple that with your generation skipping tax exemption to get those assets into a legacy trust that can run for 360, 65 years in the vest. That type of structuring, I would say, is like, we often start conversations there and the client immediately is like, this is what is for my kids. The reality is, as we layer in the strategies with the client is that structure, that generation skipping tax exemption structure with legacy, well, is actually for the grandkids and the future generations. And there's other trust planning that you can do with grantor retained annuity trusts or other structures. If the client's philanthropically motivated, where they know they're going to give so much to charity, you can use charitable Lead Annuity Trust, where you're giving money to charity, but perhaps after 10 or 15 or 30 years, when the term ends, that those assets will then go to the children and they're includable in the child's taxable estate. But at those different intervals, it gives them access to a little bit more, a little bit more, a little bit more that helps to supplement their balance sheet to do some of these hard things. All the while you have the legacy trusts that are really intended for the multiple generations as a backstop that can supplement further if needed. But when we're showing a beneficiary, a child, a statement report, you know, a balance sheet, we are very intentional in showing, like, okay, like this is the piece that is for multiple generations. It's at the edge of the page for a reason. Like that's not what you should think about when you're talking about your own entrepreneurial endeavors and things you want to do. The next one over, this is where you should focus. And I think that helps it. Like you're doing it with real money, right? It's not just funny money, you're doing it with real money. But there, there it adds a psychology that it's, oh, wow, this is. Okay, there's this big thing here, but this is why I have to work with. And writing million dollar checks may not be the right way to, you know, start here. Maybe it's a hundred thousand dollars checks and maybe doing a little bit more diligence in some of these deals and fewer deals.
- [23:50]
A
You've alluded to this multiple times. Good structuring with optionality. What does that mean? And how could a trust be structured in a way to preserve optionality?
- [24:00]
B
So the simplest way is finding a trustee that you really trust. So I'm located in Nevada. Question I'm oftentimes asked is how does Nevada compare to the other trust jurisdictions you, Delaware, South Dakota, et cetera? I'm, even though I'm located in Nevada, I'm not a jurisdiction promoter. You pick a trustee that you trust and yeah, maybe there's some differences on the margin. Some might be better at longer term planning. 365 years versus infer pituity. What's the difference? Some might be better from a asset protection or credit protection standard. Put all that aside. You take a trustee that you trust and on an earlier episode you had Jay Hughes, who's very, who's very well known in our space and has spent a career, or I would say maybe the second part of his career really focused on family dynamics and so on and so forth. And this was one of the points that he made where one of the most important decisions a family or an individual can make is who is the trustee. Going back to your question of optionality, how you attain the most optionality is by picking a trustee that you trust and then giving them full discretion to use their judgment.
- [25:07]
A
Because legally that's also important. Right? That's the paradox in that you have to, the laws are written in such a way that you have to actually give up control to a non family member and that is almost the definition of somebody that you trust that is a not family member that will act in your interest.
- [25:22]
B
Correct. And so the trustee has legal ownership of the assets, they're responsible for them and are required being held to a fiduciary standard to manage them as if they're their own. Where the split is the trustee doesn't actually get the benefit from those assets. The beneficiaries do that. Separation of from property interests, of the beneficial interest and the legal decision making interest is what enables a lot or most of the tax planning under the tax code and utilization of trusts. Yes, there are certain jurisdictions that have better trust laws to enable more optionality than other state jurisdictions. The most critical piece of it in my view is selecting a trustee that you do view as a trusted advisor and then giving them the keys. You layer in a mechanism and we always lead with this with all new client relationships that you layer in a mechanism that gives the client the ability to hire and fire. One of my early experiences when I was back in Boston did I remember reviewing a trust instrument and it had a person named as the trustee when it was created who was a partner of this big law firm in Boston. And it said, you know, under the successor trustee provisions, any, anybody can be named the successor. But the people that get to make that decision is the management committee of the same law firm. And so they took that away from the family, they took that away from the client. And I think this is where historically trustees or larger institutional trustees have tried to like bear hug these assets. Oftentimes they're coupled with an investment advisory piece. It's you know, higher margin business, very successful for them. Uh, we lead with this is your mechanism to hire and fire us. So now that that is behind us and you know that you can get rid of us whenever you want. First of all, we resign first, but you can get rid of us whenever you want. Now let's talk about giving us as much of the discretion as you can possibly feel comfortable with because that is going to enable us to do what the family needs us to do when they need us to do it down the road. And, and the one thing that I can say unequivocally in my experience in this space is that family circumstances and dynamics evolve over time. People are different. You know, people are human. Like I think back just personally like decisions I made in my 20s versus decisions I made in my 30s and decisions I'm making now in my 40s. Some might call that wisdom. It may just be like my circumstances have changed. I didn't have kids. Now I do have kids that, that might, maybe I think about life insurance differently, but things like that, as, as.
- [27:51]
A
You were saying that I was just imagining this founder entrepreneur that has willed his way to a billion dollars. Giving the keys to somebody that, that's quite a conversation to have somebody that a lot of these founders and entrepreneurs have never given anyone control of anything. Now you're, you're asking for the keys. Keys to the kingdom. One, one of the things that always has perplexed me is I previously had the Dupont family. I think they're between their 8th and 10th generation.
- [28:16]
C
And I wonder how, how do you.
- [28:18]
A
Pick a trustee for so many generations? Or are you just creating a trust structure that has a governance mechanism from generation to generation? Tell me about how do you make a decision? Because presumably you will not live till 350 years old. Maybe you will with longevity, but assuming you don't, how does, how do you create a trust that outlives both the patriarch as well as trustee?
- [28:40]
B
Yeah, I'm not going to live the 350 years old. I have no interest to, to be clear, even, even, even if ever enabled. So at Blue sky we are an institutional trustee. We're institutional, I like to think in, in all the best ways in that we are not subject to mortality risk. We will continue on. This is one of the issues with choosing individuals as trustees and this happens a lot of times in the private equity space. To your point, like I just made this billion dollars and I'm going to give someone legal control. Well, the only person that I trust to do this is this person that I've known my entire life that is my best friend. And so now you're engaging what could be a very capable human. But when it comes to trusteeship, they're a hobbyist. It's not their full time job. It doesn't position them well to opportunity spot for you to maintain the governance structures. And this was another point that you had alluded to was baking in the governance structure into the trust document. This is critical. Number one, the tax planning works because of independence of a trustee. That's part of it. But the tax planning also works because you have these legal documents that have governance structures and must be respected. And so one of the things that we do for the families is the administration of all of that governance. It's never the fun part, it's not the sexy part. Like no one wants to do that work in navigating all of these legal documents. And so we, that that is part of the role of a trustee to administer that appropriately in compliance with the governance terms. Having that governance structure in place that allows the family to participate in the decision of who is the trustee is critical. And to circle back to my earlier point, families should never give that up. You have to have a mechanism in place that allows you to get rid of a trustee that is no longer a good fit.
- [30:25]
A
And you're saying those are commingled. So you pick the person that you trust 100% under any circumstances, which might be your best friend from third grade. They have no competence. And you're saying you should be independent and let them do what they need to do while they're trustee. But also you could replace them. So you have, you don't have control of the assets, you have control over who makes decisions.
- [30:44]
B
Yes. So that that trusted friend from the third grade, they could serve in what's commonly known in the trust world as a trust protector. They're the person that has the higher end firepower over us. And so. And you can create a succession plan for them. They do have mortality risk. And so in other situations we, we can create a separate entity that has a governance structure on, on how that hiring firepower, like who has the authority to make that throughout generations. But the trustee themselves or itself is the one that has the day to day decision making responsibility.
- [31:18]
A
A previous member of a very prominent family you'll know in us, which show, I mean nameless complained about this separation between tax, taxes and control. In other words, if you want full control, somebody to own all the assets, it needs to go to them basically directly through taxes. And if you're willing to give up control of the investments and assets, then there's tax structuring around that. Are those two things always in friction of each other? Yeah.
- [31:46]
B
I mean, again, I mean this goes back to property.
- [31:48]
A
What principle is this? Is this an IRS code?
- [31:51]
B
This is at the intersection of property law and taxation. Again, where, you know, people often think of a trust as an entity. From a tax perspective, it's viewed as an entity. But a trust actually isn't an entity. A trust is a relationship to property where again, you've taken a piece of property and you've split the legal ownership of it and the beneficial interest of it. And that is what enables all of these different tax opportunities because the one that's benefiting from the property is not legally able to make the decisions and control it. And so therefore it's not taxable to them, it's taxable to the trust and you've established the trust as an independent taxpayer. And maybe just to go through like one very quick example qualified small business stock IRC 1202. Very common planning now where you can stack the exemption which next year goes up to $15 million of capital gains. Huge. Well, the founder gets a $15 million exemption. The founder creates one trust, irrevocable independent taxpayer for their kids and gets a second exemption. What if they have two kids? Maybe instead of one trust for the kids, you create two trusts, one for each kid. Now instead of $15 million of capital gains exclusion, you're talking about $45 million of capital gains exclusion. This is very powerful, compelling pain planning on the income tax side which is some of the structuring that we do.
- [33:21]
A
For how complex are these are the filing on these trust structures? Because sometimes the complexity could be more. More juice worthless more. Sometimes the complexity itself could, could not be worth it. And founders trying to build a business, trying to create value. Now they have to spend 30 hours a year filing paperwork. How simplified and streamlined are these trust documents and filings?
- [33:44]
C
Right?
- [33:44]
B
Is the juice worth the squeeze? This, this is where again we come in as a trustee where we are managing all that. We are very involved in the day to day administration of it. I often say to our clients like when we're, when we start getting into some of the details of minutiae, I'll ask them what is the greatest and best use of your time. And on this type of. And that's usually where it's a little bit of a reset. It's like okay Thomas, you tell me the decision, you come back to me with the decisions that I need to make and we'll let Blue sky manage the day to day operations of this. And we collaborate and work well in partner with the other members of the advisory team, the investment advisors, the tax advisory team, the ones filing the returns, the legal team where we seek to be a partner in some cases. You had referred to this earlier. We are the quarterback in those financial relationships for the client. In other situations we're not the quarterback, we're just a supplemental player on that team. But we do work hard to make sure that all of the advisors are maintaining alignment in, in furtherance of clients goals. But that day to day, the frustrations, the paperwork and all that that goes back to like what I was saying, like these structures do not work David, unless you respect them. Unless you respect the governance of them and you execute it well and you document it. This is what I would say. This is the part that we do under the. You Know, there's. What is it? The duck on the pond you see, you know, going across. This is all the stuff under the water. You know, these are, these are the feet. Paddling, paddling, paddling, paddling. This is what our team here does day in and day out. I had one client, I remember they came to visit the office and we're walking them around and he said, thomas, everyone looks really busy. I said, well, what do you think we do here? And, and he's like, well, I don't like, you know, I mostly interact with you. And you're like, you're like tax guy and a lot of tax strategy. And then like, if there's a family dynamic stuff, we talk about that because like, I guess I didn't, I didn't really appreciate like all the behind the scenes stuff that needs to go to like keep these structures going and administered appropriately. And the one thing I would say, the commitment that we really seek to make for our clients is that we're deliberate in everything that we do. And in order to act deliberately, it takes a lot of hard work. You make the decision and then you execute it. And the, the design, the intended result before, where the decision is made at the end is the attained result.
- [36:03]
A
What's your favorite part of what you do?
- [36:05]
B
The people. Yeah, unequivocally, the people. Where I feel, I feel very fortunate in my career where working with very interesting clients, working with some of the best and brightest advisors and getting to learn from them. I've learned so much from my clients in how to hire people, how to manage teams. I'll give you one, one quick example. One family we work with that had a manufacturing operations all throughout the country. And he said for one of his, one of his plants, he hired this guy out of Chicago and he was an all star, worked at Ford or one of the big car companies. And first time he visits the plant, sees the guy upstairs in the office, you know, my clients walking the floor for a bit. Next time he goes back to visit the same plant again, sees the guy he hired up in the office. So he goes up there and he knocks on the door and he said, you know, I've been here twice and I haven't seen you down on the floor once. And he said, well, I don't need.
- [37:07]
A
To go down the floor.
- [37:08]
B
He's like, my job is to run this operation and I run it from, from here and. But I don't need to be in the minutia on the floor. And my client said to him, so when something happens on the floor and there's a disagreement on how to execute a process. And the two people in the disagreement come to you up here and they say, you know, person A says, I think we should go with option A. Person B says, I think we should go with option B. If you don't really understand and have seen what they're doing down there, you're going to make that decision based on political capital. Which one of them has a better relationship with you? And that was, that was a huge insight for me. And I've always tried to do a really good job throughout my career in one, walking through every corner of the organization, understanding what everyone does. Oftentimes people like Thomas, you're on the client advisory side, like why are you down in the tax department? They just like to prepare the returns. Why are you in the off team? So I understand what they're doing. But when he said it that way, it was a huge unlock for me and kind of double clicked on the importance of that type of stuff and making sure as a business leader that I'm not making decisions based on political capital, but making decisions based on I actually know what the hell's going on and can and can hopefully make a decision in the best interest of the company.
- [38:20]
A
Yeah, that's interesting. The opposite of ground truth is likability and politics. So the default is politics. And then if you have ground truth, I could override the politics.
- [38:30]
B
And you don't even, oftentimes you don't even know that you're doing it. These are the indirect influences on all of us. But anyway, my point is like, this is why I love doing what I do, David, in working with the people that I work with, because they're business owners, they run businesses, they're investors, they're tax advisors, lawyers. The opportunity to work with some of the brightest, most successful people in the entire world and learn a lot and then borrow from it and help other clients in other situations with that knowledge share.
- [38:59]
A
If you find yourself in the right rooms after a certain amount of time, you could just recycle everyone's best insights and you'll be considered. Welcome to my life. On that note, call it genius before.
- [39:10]
B
Where I definitely don't deserve it and I'm very transparent about that. But again, like opportunity spotting, you know, and I alluded to this before, like where the trustee is sitting sometimes, like you're seeing all the intersects and so you're well positioned to opportunity spot for a client. And having the very experience can help a lot.
- [39:31]
A
It's funny, when you Read a lot of business thinkers today. A lot of them will Warren Buffett, Charlie Munger, and then you would look up Warren Buffett.
- [39:40]
B
Who did he read?
- [39:40]
A
He read Ben Graham and Ben Graham read everybody else. So all of knowledge really is either experience firsthand, which is extremely painful and inefficient, or through your information diet, or who you're around. So the people that we think are some of the smartest people in the world, some of their skills is getting the right rooms. Well, Thomas is an absolute masterclass on trust. What would you like our audience to know about you and or anything else.
- [40:03]
B
You'D like to share? Well, maybe not about me, but I would say when you're talking about clients at the scale of wealth that we tend to work with, which are sent to millionaires and billionaires, sometimes pre liquidity, pre exit planning situation, really drill down and make sure that you're picking a true trusted advisor in your trustee that not only listens to you but hears you. That that advisor is what's going to unlock the most opportunities from a, from a tax planning perspective, from a wealth creation perspective, from a wealth maintenance perspective, not just for you, but future generations as well. And I've seen it all too much where I would say there's this movement towards a more commoditized trustee solution. And to go back to J. Hughes and his wisdom like this is the critical decision for families to make.
- [40:55]
A
Jay Hughes in our podcast together said that the trustee is the most important decision you'll ever make. And oftentimes it's done an hour before in the lawyer's office.
- [41:04]
B
Let's circle back to political capital. You know, if the lawyers aren't lawyers that have actually lived at a trust company or served in the trustee role and so forth, they're making those recommendations based on political capital and perhaps cost, not value, but cost. Well, I don't know. I have these two different trustee options. One one's going to cost half as much as the other. So, you know, what do you want to do? Well, if you're presented with any logical person that's presented with a decision to make in that way, well, you're telling me they're about the same, but one cost less. I'm going to go with the one that costs. I would, you know, again, like making that decision five minutes before. Make sure you have a good governance system in that document to change that trustee when you will need to, because you will need to.
- [41:43]
A
Well, Thomas, thanks so much for jumping on the podcast. Look forward to continuing this live.
- [41:47]
B
Thank you, David. Really appreciate it.
- [41:49]
C
That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person in your network who'd find it valuable or leave a.
- [41:58]
A
Short review wherever you listen.
- [42:00]
C
This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.