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- [00:00]
Greg
A lot of the first and second gen families are very much like $in, $out in at least what I've come across where they get simple concepts. They've been laser focused on a business for 10 to 35 years. They know that industry inside and out. But if you can't explain to them in very simple terms what you're doing, your business transaction, they get turned off pretty quickly because they tend to think that you're not a professional because they can explain their industry like you would to a 4 year old child, the child would get it. And if you can't do that where you're supposed to be an expert, well then you're not on the same playing field. Right. And I think that's a big thing. So just throwing around IRRs and DPIs and things like that, they don't get the lingo. But if, you know, they do get the idea of moic, I think very quickly because it's just your multiple on capital.
- [00:54]
Joel Palo Thinkle
Welcome to the Investor, a podcast where I, Joel Palo Thinkle, your host, dives deep into the minds of the world's most influential institutional investors. In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights. All right, so we are live today with a good buddy of mine, Greg. Got to catch up with him over dinner a few weeks ago and really got to, you know, know about his story. And it was just a really interesting story about career pivots. You know, a lot of us get into this space one way or the other and it's oftentimes not one clear path. You know, you could, you know, become an attorney, you could, you know, go to business school, you could be a rocket scientist and you know, really pivot your career into any industry that you want to, to get into. So, you know, spend some time with Greg and you know, what's really interesting about his story is he's pivoted his career a couple times similar to how I have. Right. He started in the legal industry and then kind of pivoted into private equity and now he's working with, you know, ultra high net worth individuals and you know, collaborating with them and building communities and building networks. And you know, that's how we met. We met through another close friend that just has been able to curate amazing communities of institutional investors. So Greg, you know, number one, welcome to the show. Number two, excited to see you again later tonight to talk, talk more, more about this. So I'm really, really privileged to have a seasoned private equity professional like Greg come in and share his story. So, Greg, why don't you kind of tell us a little more? We got plenty of time. So tell us a little more about your career, your background. You know, you got pretty much got a free ride, you know, to law school. So that was a unique story as well. But why don't we start with, you know, your early childhood, what you thought you wanted to do, and how that evolved over time and how that complemented your ambition to just kind of continue growing in your career.
- [03:06]
Greg
Well, geez, we're going back deep, though. Okay, So a story that probably doesn't get shared too often, but I think my first foray into private equity and private finance was I was in a club was called FBLA as Future business leaders of America, which, oddly, was the, like, you know, smaller group of what was called deca, which is very big for. For marketing, if some of your people in your audience are familiar with that. And that really kind of gave me, like, the entrepreneur bug. I came in second, actually, for new jerseys, like, Mr. FBLA. And I didn't really understand how. But it was cool. Got involved. It was kind of helping, like, do small businesses involved with the community. One of the things I actually started when I was 15, 16, was actually doing basically, like, you know, computer repair work. Right back in the day when Geek squad, for everybody who remembers that, was just kind of starting off. I was kind of like a competitor for them locally. I mean, it was just kind of, you know, helping friends and, you know, friends, families fix their computers and stuff, their I. T. Stuff. Really didn't think there was much of a business before. Before just kind of helping add value, which would be a theme of my. My career. But one of my friend's mothers gave me, like, 200 bucks for like, an hour and a half worth of work, which, you know, when you're in high school, is a ton of money.
- [04:36]
Joel Palo Thinkle
Oh, yeah.
- [04:36]
Greg
And then. And then I went and did work for somebody else. Wasn't even expecting anything. It was more a favor. And she gave me, like, another 150, 200 bucks. And I'm like, I think I've got, like, a business here. Like, it was just very weird. And, you know, I asked two of my friends to help me because I was basically getting a little bit of a following within the local community. And one of my friends, who was a really good programmer, was almost laughing at it because he was like, there's no way people are paying us for this, because he Was very advanced, far beyond me. Didn't have a lot of great human social skills. But he's like, there's no way somebody's paying us a couple hundred dollars an hour just to get this stuff done. And I'm like, well, that's the going rate. I mean, I never really set the price. This is what they offered and we're solving a need and they don't know how to fix it. So that kind of really stuck with me. You know, I probably didn't know how prescient that comment was back in the day, but that really got me into focusing on that. I tried to do a couple tech ventures, which I wasn't so great at. But I mean, I think that was kind of the first step in entrepreneurship. I went to Monmouth University and got an undergraduate degree in business and finance. Didn't really know a whole heck of a lot about finance, but was able to sync up with an individual who took a number of companies public for a couple billion dollars back in the early 90s. Really true venture capitalist, other runner at mama. The sports injury kind of got me into this, this weird world of private equity and venture capital. But I was fortunate to just really kind of learn through osmosis, through some really big guys who made a lot of money back in the 80s and 90s and created a lot of value for their shareholders. And that kind of really started me into that venture capital space, working with some medical device, software technology, telecom businesses, you know, just kind of really learning the industry. Getting very fortunate that I got to work on some projects that probably at the time a 27, 28 year old who's gone to business school should have been working on. And then I mentioned to you when I was working on a couple of larger transactions and we were looking for some institutional capital for some venture capital funds, I started to realize that a lot of the managing partners had law degrees. They weren't lawyers, but they had law degrees. And thinking I was already working on some high finance business, I didn't really think an MBA would be the most prudent use of my time. I didn't really come from a financial family per se. My mom was an aid for special needs kids, my dad was military. And I was just kind of like, I had to figure out what more of this is about. And you know, long story short, I applied to about 30 different law schools. I figured, you know, getting a law degree would really help me evaluate deals and know how to structure transactions. I was also working with a number of family offices at the Time who were allocating and they were asking me very technical questions. So much like how curating this community that we're talking about. I would ask my friends who are CPAs and attorneys and say, hey, can you give me some advice here and make me look good and then maybe you can get a new client for, for your practice. Sometimes it works, sometimes it didn't. But you know, just trying to build the ecosystem. But yeah, went to end up going to law school really focusing on taxation and partnerships, entity structuring things that were kind of near and dear to the ultra high net worth and deal making community. And that kind of really put me on a different trajectory, so to speak, where I just came a little bit more than a deal raiser or deal maker and a capital raiser, but also just trying to help, you know, deal guys and family offices make sense of their, their life. And you know, that's kind of what I've been doing, for lack of a better word for the last five to six years. I can kind of get some other iterations, but that I guess it took me from 16 to 24, so to speak. I'm happy to drill down into anything there.
- [08:45]
Joel Palo Thinkle
Sure. I mean one thing that I would maybe hammer down on is just the mistakes that connectors make. So when you're trying to connect deal makers to allocators, a big mistake. I, I see and you know, I always like this phrase, but you don't want to feed a steak to a vegan. Right. If somebody likes climate, you know, they may not be looking at AI deals. So kind of curating and personalizing opportunities to appropriate people that are looking for those opportunities. I feel like that's a common mistake that, you know, community builders are making where they're just not kind of appropriately connecting people to what they're really interested in. And then people just actually drop off because they're not interested. But I don't know if you have any other examples of just kind of.
- [09:35]
Greg
I would say though the worst would be, and this is going to be a little bit of a terse analogy, but feeding a filet mignon to a starving hyena.
- [09:45]
Joel Palo Thinkle
Sure.
- [09:46]
Greg
And what I mean by that is I had a situation where very wealthy family had a very certain look for what they wanted. Got introduced to a sponsor through a friend, didn't particularly like the vertical that they were in, but he actually had something that this one family wanted. I gave the sponsor ample time to tell them how to address the family, what their pain points were, how this could, you know, in more Ways than one be a really good rifle shock slam dunk. I mean, it was just kind of. They had what the family was, was looking for, Right?
- [10:27]
Joel Palo Thinkle
Sure.
- [10:28]
Greg
Sponsor couldn't get out of their own way by simple deal structures. Family, despite amassing a significant amount of wealth, not very up and up on the typical private equity lingo. Which common theme is if families don't understand things, they won't tell you that they're just going to get shy and just lose interest. So you have the sponsor coming in with these high technical terms. It wasn't that the family was unsophisticated. They just didn't know the lingo. It's not their world.
- [10:58]
Joel Palo Thinkle
Yeah.
- [10:58]
Greg
So that kind of turned them off. And then when the sponsor realized that they weren't going to get this particular deal done with them, which in all intents and purposes they really should have been able to do, so they pivoted to four other deals that had zero interest to the family. The sponsor just thinking, well, the family had a lot of money and clearly they'll just take a look at anything they want to do. Sponsor not really recognizing that they, one, couldn't deliver on the first thing that they wanted. And then two, you know, really never had the trust built up with the family.
- [11:30]
Joel Palo Thinkle
Sure.
- [11:30]
Greg
So then the family comes back to me and is basically in no uncertain words, like, what's up with this guy? You know, why is he still contacting me? Which in turn, as a connector, as somebody who's just trying to be a facilitator, as somebody who's already gained the trust, it tends to make you look not so valuable. Now.
- [11:47]
Joel Palo Thinkle
Yeah.
- [11:48]
Greg
In this situation, I did things for the family that provided tremendous value. So I wasn't too aware of it. But if it was a family who I had not a solid foundation with, you can quickly burn a bridge there too. Right. Because then all of a sudden you become, you know, unreliable or.
- [12:04]
Joel Palo Thinkle
Yeah.
- [12:04]
Greg
Just not valuable to them anymore. So that's something I think everybody needs to be cognizant of, even people with the best intentions. And listen, the sponsor is a great individual, but at the same point wasn't very coachable, I think is ultimately what it came down to. Or for whatever reason didn't think what I was telling them was true. And you'll see a common theme when you're working with family offices. Some people tell you they work with family offices. Oh, I've done deals with this family, that family. We've looked at this stuff together. And then the talk track, you kind of realize that They've never actually done a deal with the family office because they don't know how to approach them, they don't know how to make the alignment properly. And quite candidly they don't know when to say, listen, this deal isn't a fit for you. Right. Like I'm working on this, it's a great opportunity, but it doesn't align with anything that you want. And you pick that up. Right. And then I think you want to make sure you're working with individuals who get that too when you're making those introductions.
- [13:04]
Joel Palo Thinkle
I would say too. You know, a big tool that I've seen sponsors and managers use is just, just the concept of education. So if there's these very sophisticated terms, you know, just kind of integrate in some of that education around those terms within the presentation. That way the family kind of gets that knowledge or that knowledge transfer, you know, throughout the process. So do you feel like that, I mean obviously this person wasn't coachable at all, but have you seen managers and sponsors kind of use that to kind of break the ice and you know, help, help LPS and allocators just kind of learn about sectors. The good ones haven't have them. Yeah, I mean, right.
- [13:45]
Greg
I mean the good ones really. I mean, but it's funny. So when I see different, you know, presentations or pitches or however you want to look at it, there's such an institutionalized process around what, what information is out there. It's like oh, you have to show, you know, what the IRR is and sensitivity analysis. And I do think if you're talking about specifically going to family office capital and allocators, there is a much different approach to a fifth or sixth gen family versus a first or second gen family.
- [14:12]
Joel Palo Thinkle
Sure.
- [14:12]
Greg
A lot of the first and second gen families are very much like $in, $out in at least what I've come across where they get simple concepts. They've been laser focused on a business for 10 to 35 years. They know that industry inside and out. But if you can't explain to them in very simple terms what you're doing, your business transaction, they get turned off pretty quickly because they're, they, they tend to think that you're not a professional because they can explain their industry like you would to a 4 year old child and child would get it. And if you can't do that where you're supposed to be an expert, well then you're not on the same playing field. Right. And I think that's a big thing. So just throwing around IRRs and DPIs and things like that. They don't get the lingo but you know, they do get the idea of moic, I think very quickly because it's just your multiple on capital, you put a dollar, get three out. But I do think when you're getting into things that are more nuanced, I mean, I have a, I've been work, I've been working with a friendship with a gentleman who's a music royalty expert and he's done a tremendous amount of work there as an operator and sponsor. But I constantly have had to stress to him, they don't know what you know. So educate the families on what they need to know and why. This makes a lot of sense. Otherwise they're just taking a look at what everything like BlackRock and you know, Blackstone, KKR and the larger institutions are in the headlines. Do you know, show them that you know what you know really well by walking them through case studies or you know, giving a good anecdote or making a comparison to something that they're comfortable with. Make it, make it real intangible. The sponsors and operators who take the time to really lay that out in a clear and concise way, they forge long lasting relationships that maybe won't result into a, an allocation in the first month. It never does that quickly, but it will over time. Right. And again, I think it's just a paramount point. Most family offices want to invest with very sharp people.
- [16:22]
Joel Palo Thinkle
Sure.
- [16:22]
Greg
And you need to show that. Right. You can't just say, hey, here's my teaser, you know, show me why you're sharp. You know that that's the whole idea.
- [16:29]
Joel Palo Thinkle
Yeah, we'd love to double click on what you've seen with 6gen, you know, maybe, maybe even third, third to 6 gens. In terms of how that's differed. There's been a pretty large real estate family office that came on our podcast a few, you know, I think maybe a month ago and they hired somebody specifically to build a venture and alternatives portfolio. So that person was tasked with building out a program. So that one, that person was I think just kind of hired externally.
- [17:02]
Greg
Sure.
- [17:03]
Joel Palo Thinkle
But essentially an extension of the family. And you know, maybe the family or the principals were 100 focused on just the real estate and the family business. But you know, they, they have interest in getting into other sectors because there's just other interesting opportunities and sometimes you have to do that to kind of mitigate risk of the markets when it comes to your family's business. So, you know, what I've seen is Managers is if you're a manager focused on AI or if you're focused on cybersecurity, that family may not have any understanding of that industry and they may not even be interested in it. But if it's interesting, you might pique the interest of that family. Maybe the family will eventually allocate not only because they have a slight interest in the industry, but they might just like you as a person and they may just see that entrepreneurial spirit in you kind of similar to how they were right when they were building their business or their enterprise. So they just may take a chance and back you. So I've seen that a few times where people have, you know, built master classes or they've had webinars or people come in and you know, they see interesting people sign up. And then I've also seen some MFOs do some pretty interesting webinars to kind of, you know, gain the interest of families through some type of tax strategy web. I've signed up for a few of those too. I thought it was pretty interesting. How do you think about, you know, tax efficient, you know, holding companies and instructors. So there's been things that I've nerded, nerded out about that I typically don't allocate my time to, but I'm like, hey, I saw this in my feed. And then now we're, you know, we have programming and podcasts and short form content that can stay on, on the top of people's news feeds. So how is kind of maybe Gen 2 to Gen 6 kind of reacting to that differently versus the, you know, the gen ones?
- [18:54]
Greg
Yeah, there's a lot, there's a lot to unpack. There a couple things that you said. So I would say on the pure investing side and getting into new asset classes, I mean, listen, I probably, you know, in our age range probably identify more fundamentally with, you know, a Gen 3 or a Gen 4, you know, what I would call the rising family office members where sure, they've grown up around this technology. They've seen things like bitcoin and crypto and all this different new wave, you know, asset classes or quasi asset classes and they think that's exciting. You know, the gen 2, the gen ones who have made the money, have shepherded the, the capital through different storms, so to speak, they tend to have a realization that if they still have the operating company or a lot of the core assets, they think cash is king. Realistically, cash is always king because if you don't have that, you can't make investments. Right. And you know, you do sometimes have this, this difference of opinions between a certain age group of the gen 3 through 6 that they want to do things that are a little bit flashier. Doesn't mean that they're not great investment ideas, but it may not necessarily have an eye on, well, what is the, the realization of some of these gains actually? And what does that timeline look like? Because we might own, you know, six or seven different real estate assets that are covering the bills, but if we're not reinvesting those proceeds effectively, you know, we can't necessarily do seven venture deals with big checks that we're not going to monetize one, if at all, just the realisticness of a venture. But then also, you know, maybe in 10 years. Right. And I think being disconnected from that initial liquidity event can sometimes cause a little bit of a haze on how the ultimate assets work together. Right. Then I can go into a different part where, you know, there's some families that they get calls all the time. They don't allocate at all. I think sometimes sponsors forget that family offices are not just set up to make investments. Family offices are set up to manage the affairs of the family. Sometimes they make investments, sometimes they don't. Sometimes all they do is make investments.
- [21:15]
Joel Palo Thinkle
Sure.
- [21:16]
Greg
So definitely, you know, for an individual like myself, where my background is definitely migrated to extensive tax exit, legal planning, showing families where you can create extra value beyond the investments, you know, freeing up liquidity in ways that have never been properly explained to them, showing them what other families have done in similar situations to extract extra value out of their holdings. That's always helpful. You know, to the degree that, you know, an advisor or a consultant can actually drill down to actual holdings or OPCOs that they have to show how they can generate more cash or more earnings, I think is always helpful. But you need to really have a good understanding whether you're a family member or inside the family or outside the family. As a consultant, just have a great understanding of what they're trying to achieve as the family dynamic. And then I think you can really start to build into like that one family you mentioned. Like they want to build a venture arm. Why are they building a venture arm if they have big real estate holdings? Are they trying to focus their venture on technology that helps improve the operational efficiencies of their real estate? I have one family that I've known for over a decade. They're in a technology space and they never did venture until somebody pitched them something for their opco and they're like, oh, you're taking it? Are you taking angel money? And it was a vendor and they're like, oh, never thought about it. He's like, I'm gonna give you a couple million dollars because if I need this product in my, my company and I believe in it and all my competitors need it, and that's just smart money. Right? At the end of the day, he was already sold on the vendor relationship, but then he saw the bigger picture, that everybody else in my industry is going to need this, so they're going to buy it. Why not make money off of that and help this guy scale too? So it really just kind of comes down to understanding what the family's end goal is. I mean, yes, obviously everyone's always trying to make great returns, but what do they define great returns as? And sometimes that great return could just be adding more value to the Holdco. So that's one thing to kind of be cognizant of too.
- [23:34]
Joel Palo Thinkle
Sure. Taking a step back on your career because I think it's walked us up to like the age of 24. Would love to continue the story and learn a little more about, you know, your career in the legal industry. And then kind of how. And it looked like you were doing a lot of private equity transactional work. How did you pivot into kind of, you know, much more private equity focused, you know, opportunities? I, you know, we started talking really deep on, on just financials of companies and we, you know, get companies to enterprise value when we were, when we were chatting. So we'd love to hear kind of a little deeper, you know, take on just kind of your career and then kind of what you're doing now at your current firm and you know, how you're helping your clients.
- [24:18]
Greg
Yeah, definitely. So, you know, that inflection point, I was probably killing myself. I was working for a real estate fund manager. I was tasked with basically building out a single family office distribution capital markets group. I mean, some really cool families. I was going to law school at night. Really no time for any kind of social life. But that was kind of my, my hustle. Right. I knew it would kind of make sense at the of the day. Ultimately ended up leaving that firm. Just, you know, kind of ran course and had an opportunity to work with one of my families who didn't really have any boots on the ground in a certain location they were at, and helped him with a, a workout. Really kind of knew nothing about the workout space. I just kind of knew that, you know, I had the relationship with the family, they asked me who did we know that we could help? And then it kind of came down to the point was, well, can't you just do this? And I'm like, well, you know, I can if you really want me to, is really what it came down to. It was like, I can do attitude. And, you know, we put together a solution with me and a couple of my partners, and we basically took something that would have been a complete negative on their balance sheet and made him a little bit of a profit, which at the end of the day probably looked like 100x to them because people really don't like to lose money, right? They already kind of knew it was a sun call, so they threw a couple of dollars at this and said, let's see if we can figure it out, right? And that ultimately kind of launched me into more of the lbo, you know, workout arena. That then kind of got me a couple referrals to some family offices who they wanted me to kind of come internally and build out, you know, their stuff, for bat lack of a better word. You know, we're having a big liquidity event. What do you, you know, we've heard you're a solution oriented guy and you've got some really good ideas. You know, here's what we're trying to do, which was some really cool learning experience as well too, because getting inside of a family office finally showed me how the true family dynamics worked. I mean, we were developing really cool luxury assets and I think we mentioned one of the things we were working on was, was car washes. But we were using that at a time where it was very innovative in our structure for some tax depreciation strategies, not stuff that would necessarily pitch to anyone, but when you kind of looked at the holistic portfolio of the family's development, their rental income, and then what the bonus depreciation was doing through the car wash that they were putting into service, the net gain on the, you know, on the profits kept in the pocket year over year was probably better than anything any investment manager could have done in their heyday. So. And understanding that sometimes it can be incredibly frustrating from like a fund manager to try to raise capital because, you know, you're saying, oh, our, our returns are whatever, 15, 18, 23%. And then you see the family where they're like, right, but our return net tax or our holdco is double that, you know, not to even embellish like when you take into tax consideration. So it does get hard to kind of compare apples and oranges. You know, just because two completely different things and people are trying to maximize their, their profits. So after I did that, I took a brief stint of also managing some public money, kind of doing some fixed income asset management, some public equity value dividend investing, working with a number of my single family offices. I'm just kind of building out bespoke products for them and then really kind of, you know what, you know, that kind of migrated and shifted into what I would call my, my slant on the multifamily office where we're working with our clients essentially as their, their full on C suite, doing things that are very near and dear to them outside of investments. It's structuring their holding companies, it's helping them put in the right taxable entities, it's helping them transfer legacy wealth, it's helping them think about their assets differently. You know, we work with some, some athletes where, you know, they're always, you know, for lack of a better word, hit up for money from their friends. It's like, well, what can we do with your money and your brand and your reputation? So, yeah, we can always allocate, but you know, we also know a couple other people that can increase the revenues of this business tenfold. So let's, let's be smart about this. So that's a big thing when we're looking for partners to work with, how to really just put our resources together properly. And you know, resources comes to, you know, much more than just money. But really the core competencies are, you know, at the truest sense, super advanced. Tax planning, restructuring, recalibrating, generating wealth, but not managing it, but necessarily just making sure everybody knows what they have and how to optimize those values. Right? And I think deals always come along, you know, the right deals always get funded, I think. But the real reality is, you know, providing clarity to a lot of the families that we work with because they just don't know what's going on. I mean, I could go on for some different horror stories where some families thought that they were making money in companies, but it just looked like they were making money. You know, when you kind of sit down and say, okay, here's how we put the whole picture together, then it starts to make a lot more sense. Then you uncover some problems and you're like, well, the problems are really just temporary. You know, now we know what solutions to put in place and pretty soon you are making a lot more money. It just had to be structured properly. So there's a lot I could dive into. But the Reality, it's really just kind of advanced tax planning, cash flow management, deal screening, deal structuring, you know, quietly disposing of assets. Just things that are very near and dear to the, the entrepreneur at the end of the day. And I work with a lot of first and second gen families. Right. So it's a much different, let's call it, service offering than if you were, you know, a six generation family who's been with, you know, one of the larger, you know, banking relationships for the last, you know, 50, 60 years. Right. And they need to be treated differently too. So. Sure. It's not a one size fits all type of situation.
- [30:43]
Joel Palo Thinkle
Absolutely, yeah. And for the audience, you know, workout is essentially just a process of restructuring, distrust, companies, debt and operations. So some of the things that, you know, I'm familiar with is just, you know, just doing the whole debt restructuring, operational restructuring, you know, whether it's cutting costs or you know, obviously increasing sales, but like you said, and then, you know, possibly you could alongside the debt restructure, maybe get some equity as well or kind of do some negotiation with the creditors and you know, essentially just trying to avoid bankruptcy so that hopefully they're, they're in the green and they could, you know, have some type of liquidity event where they can sell to, you know, a larger conglomerate or you know, just a bigger PE shop that's just trying to add to their balance sheet. So I think those are some of my thoughts. But any, any other scenarios with essentially like a turnaround that, that a workout would be relevant or just. Did I miss anything else in terms of.
- [31:37]
Greg
I think the other thing I would say too is, you know, I think there is a, a misconception that family offices have all their, their stuff together, their ducks in row. So outside of the workout, restructuring is also something that's very important. Right. So there was a situation where family was looking to sell a business and they really didn't have what I would call any type of formal tax council. And we're just sitting there, we're like, you know, if you do X, Y and Z, you're going to save X millions of dollars. And they're like, well, can we just do this as is? And the answer was yes, we can. But if you take 30 to 60 days and do this, you save this much more money. And involved doing a couple different entity switches and all stuff that, you know, is very pretty standard, but they didn't have what I think is being, you know, colloquially thrown around now. It's like that expert generalist in House, who could say this needs to be done a little bit differently to optimize family assets. Right. And I guess to a degree, that is what we do here. But I think that's a big thing where you can provide, again, a lot of extra value for the same transaction that needs to happen or wants to happen. But just by doing the right thing, I mean, it's not saying anything. It would be done wrong. It's just being smarter about it. That's really what it comes down to.
- [33:01]
Joel Palo Thinkle
Yeah, And I think you make a good point. I mean, I think some people are just looking for a bigger picture of how to think about their strategy and just kind of a holistic plan. So I'd love to just kind of workshop a couple permutations of that. Right. So we've seen, especially in my community, we have successful business families, families that have operating companies, but they're also allocating to. To venture. Maybe that's like a separate llc, you know, so I've seen that, and then I've seen people set up a formal single family office and kind of allocate out of that structure and they'll build new strategies as they kind of evolve their knowledge of those sectors. But if you got a couple. And again, these could just be generic examples of just kind of a family. Hey, they've got, you know, the principals that are kind of thinking about their holdings and how they're gonna. Maybe they're investing in some real estate, they're investing in some public markets, private markets. And then there's Some families are like, look, we don't. We don't really know how to hire this stuff. And we also don't have the budget. So we're gonna go out and get like an ocio, right. Someone coming out externally, connecting all their accounts, coming up with like an aggregate plan and. And developing some type of holistic strategy. So again, you know, you talk to one family, you've talked to one family. So everybody's got different problems and different goals, but maybe just Personas. I figured that'd be kind of fun to kind of workshop in terms of like a couple different sizes of families, couple families that come from different backgrounds or businesses. And again, these don't have to be real clients, but maybe just Persona types.
- [34:38]
Greg
Yeah, I mean, there's a, you know, you've kind of got. Why would say, like the first example, which is like the embedded family office, right, where it's a family that they've got their operating company, they're making, you know, 10 to $30 million a year, if you will. They know they're eventually going to sell that business for a couple hundred million. But they've got their internal controls all kind of share like their bookkeeper for the OPCO is also doing the bookkeeping for, you know, the family office. The CFO for the OPCO is also doing the financial analysis for their real estate acquisition. If this sounds sloppy to you and the audience, it sounds, because it is. But it is also very common in the single family first generation space that sometimes can be a difficult dynamic because of the family of business has been business for a number of decades. Transferring them to a better entity structure is challenging because you're going up against, well, this is how we've always done it. Let's not do it this way, right? But again, the value proposition would kind of be okay. Well, you know, you wouldn't, you know, you wouldn't put a Hyundai in a garage where you keep your Ferraris, right? Like that's kind of ultimately, I think, a very simple anecdote and you know, kind of saying, well, if you're going to make a lot of real estate investments, let's start off a real estate hold code because then you can kind of set up a legitimate property management company if that's something that you want to do. Otherwise you can outsource it just fine with the best of them. But understand you need to have a certain amount of mass to get access to the better ones and make it worthwhile if you want to do some venture investing. You know, let's make sure that we've got the right entities, again structured so you're not paying a stupid amount of capital gains in certain situations. You know, we talk with them through, you know, the qualified small business stock and how to maybe set that up across different individuals within the family, if we can do that in a series. So there's a lot of just different strategies that you can put together that can create a lot of value. And sometimes it's just saying like, listen, here's what happens in your best case scenario. You sell something for a hundred million dollars. Here's your tax situation. If you do it in this situation, here's a hundred million dollars and here's how much more you make. That resonates a lot, right? So then all of a sudden they're like, oh, we don't, it's not really a problem. But I would like to keep more money, right? And I would like to basically keep those after tax returns. I think that's a really good example when you're dealing with those first families. The second one is kind of like the newly, the newly liquid, right? I mean they've just sold their business for a couple hundred million dollars, you know, maybe a billion dollars. They never, they maybe did the right planning with like an estate and a trust account team, but they never really took the time to build out the infrastructure. And family offices have become very popular and mainstream in some kind of idea with my sales five to 10 years, you know, been around since like the 1600s. But they want to have a family office. Like you know, they just sold their big business and now they want to be the new shiny new toy on, you know, wherever they are. But educating them through what that actually means, right? And again, in some ways if they've been allocating certain private deals, they're used to one exception and what their cost of capital is for investing. And now all of a sudden you're saying, well do you want to do this with a full on team? It's going to cost anywhere from 2 to 5 million dollars for a typical SGNA, right? Then they have a heart attack because they're not making $25 million a year in EBITDA with their OPCO. They're like, I can't do that. Like, well then you have to go this OCI OCIO model right now. Then you get into what I would call the hybrid where some people are well, can I just do the OCIO model for some stuff that I don't want to be as hands on because I really want to get involved in real estate. Of course. But you need to have a plan. And it's just like anything where I think a lot of newer families forget that when they first started off they had a strategic plan for building their business and scaling wealth growing. You kind of need to do that again from the beginning. You know what your, what is your vision for your family office? Do you want to leave a legacy? Do you want to maximize wealth? You just want to buy iconic assets? You need to kind of set and then who's going to be the people to do that? Do you have the talented resources in house? If you do, how do you augment it with an OCIO or other external advisors? And the other big issue is too, and I kind of counsel a lot of the families that I've worked with in the past. Do you, how much of that individual's time do you need and is there good alignment there? Because you might say, oh, I'm working with the best lawyer in New York City or Los Angeles and they've done everything for 40 years, like, fantastic. But you're not their only client. It's just a reality now. You may not be able to afford them full time, but if you want somebody like them, let's have a conversation about getting somebody in house on a manageable budget so you can get that full time dedication if that's what you're desiring for the next 12, 24, 36 months. And that's not too dissimilar what you see in the CFO community. Right. I've explained to people where there's different types of CFOs or CFOs who you're bootstrapping, their CFOs who are helping you through your series A and B rounds, or CFOs who prepare you to go public and then they're gone. And there's nothing wrong with that, it's just, it's a certain skill set. So those I think are the two archetypes that I deal with a lot. You know, the other than side is, you know, that fourth, fifth, sixth generation family, it's been established. You know, I know one good, one of my great friends, they basically just manage the affairs. You know, it's a large family, they've been an industrial family for generations and they've got some cool dynamics. I mean, you know, stuff that, you know, if some of the younger generations want to buy a house, they don't give them the money but they go through the process of getting what like a pre qualification letter for their home and then the family funds the loan based on those dynamics. Right. Because the family ideas like we want to be able to assist but we want to keep the money in house. You know, one of the big things that they also do is, you know, they do their annual family meeting which is very akin to a public company's, you know, shareholder, annual shareholder meeting. Some things that, you know, sponsors and operators may not realize but you know, some of these families are quite large, 3, 4, 500 people. So they rent out a hotel in a really nice place and they talk about what's going on with the family holdings and it's different but for them it's very normal because they've been doing it for, for generations. Guys like that though, or families like that, I mean they've got much different processes, much more institutional controls and harder to access, harder to work with, maybe sometimes impossible to work with because they are been working with the same managers for the last, you know, 30, 40, 50 years or they don't really want to take any more Risk. So they just give capital to, you know, the bigger banks of the world. And there's nothing wrong with that, but it's just like sometimes these families have amassed so much money that there's not really a need to take any more risk, you know, so that becomes challenging, too. So those are, I guess, probably like the three out there. That would say kind of when you're thinking about the family office community. Sure. Are the different types of. Kind of be aware of.
- [42:21]
Joel Palo Thinkle
Yeah, no, that's really helpful. There's. There's one more point I want to discuss as well. So, you know, I just finished the book which I highly recommend, really enjoyed reading. It's called Die with Zero. It's by Bill Perkins. I think he's a hedge fund manager in Austin. And he talks about. Just thinking about how many more decades you have. He uses this app. I think the app is called the Countdown app, and it actually visualizes how many days you have left. And what's interesting about that point is, if you're giving away your money, the best time to give that inheritance to your kids is the prime time to use that money is in your 30s, right? They're not gonna. They're not gonna use that money and enjoy it the most when they're in their 60s or 70s, right. So they're starting to come into their career, they're starting to think about their kids, are building a family. So I thought that was a pretty interesting point that, you know, the. The prime time to kind of use that inheritance is probably in your 30s to maybe, you know, late. Late 40s to early 50s. But after that, you know, it's just not the most desirable time to make use of that. And then his whole concept is, you know, after you've taken care of all of your affairs, you know, kind of made sure that everything is set up with your trust, and you've given away all of the money to your kids and taken care of everything. There's a. There's an amount of money that you actually need to retire. And what the book is saying is that it's actually lower than you really expect, you know, in terms of your. Your Runway, to be able to cover most of your expenses, you know, and you want to be able to spend the most of that as you can, you know, so that you can enjoy, you know, life experiences. So just wanted to hear your reaction to that and just maybe tie in a few examples that you have with just families and how they think about their second gens and kind of thinking about their planning, because That's a huge theme that, you know, we're. We're cascading in this conversation just having a plan. You know, if you're in your 50s, you got maybe, what, like, another 25, 30 years left to kind of really think about your legacy. So how, you know, how have you kind of tied in some of those conversations with planning around that?
- [44:30]
Greg
So I love the Perkins comment, and I'm gonna butcher it, but Warren Buffett had a kind of similar slang, but it was basically like, it's nice to have a lot of money, but, you know, you don't want to keep it around forever. It's basically like, you know, waiting until you're 80 to start having sex. Sorry, that's a little callous. But Warren said it, not me. And the reality is, it's like, yeah, I mean, what is it? Pick a dollar. You know, I mean, what. What is the point of leaving $50 million to your grandkids when they're 65, when it could have helped them when they're 25 or 30 or 35 or what have you? I think the more intentional families realize how to kind of transfer that wealth for operative points. So funding college in its entirety, maybe doing a year abroad to fund that, if they want to go experience the world, there's some unique things there. You know, I have a family friend who I wouldn't necessarily call like, a family office, or they probably are. The family basically allows the kids to borrow a certain amount of money to start a business, but they actually have to go through the process of giving the grandparents, like, a business plan and be like, they get the money as long as it's not crazy, but, like, they want them to go through that process. So I think, you know, just being very intentional about what you're trying to do. I mean, I think that the big thing is also kind of like, you know, now everybody's like, oh, like, build your legacy and make sure you have your legacy. It doesn't. Your legacy as a family office doesn't necessarily have to be like, oh, like, I want to own an iconic building, or, you know, I want to build this. It could just be, like, doing well by your individual family members and making sure that they have the start that you didn't have. Right. I mean, not everybody's built for the struggle of entrepreneurship. We could read as many of these books as, I mean, whatever the Vanderbilts and the Rockefellers did, you know, back in the 1800s. Like, I don't think anybody, you know, wants to do that stuff nowadays, right? And you can only imagine. But I mean, you know, I think the reality is, you know, regardless of the wealth, it's just we are very human still. Like a lot of these families just want to do well by their, their family members and make sure that they're taken care of. So I think that's, that's ultimately the planning purpose where it's like, what do we, what are we doing here? I've, I've worked with one family and they're like, well I'm like, who Day one, who are we planning for? Who are the key members? Who, what, what do we need to think about? And the patriarch was just flat out like, you know, my kids have already gotten X, Y and Z. They've got enough like, okay, so what's now, he didn't, he didn't know what he wanted to do with it afterwards. But the reality was he's like, they're good, you know, by all counts the kids are going to be fine. But, but you know, you still have to define what do you want to do with the rest of that capital. Whether it is donating to charity, setting up a foundation. So it's a lot of interesting other potential problems that come up. But you know, I think also helping those family members define what it is and why and what that vision is, is every bit is just as important as when you go to start out a company too. Right. So it's like now you've got this wealth, what's the end result? It's not the worst thing dying with extra money. Right. I mean it's still going to somebody, but being able to kind of utilize that to get to what goals you want to see for yourself and your family members. I mean, I, I always say use it now. Why wait? You know, you kind of get the whole argument about, you know, I'm not saying don't save for retirement. Right. For normal, under ultra high net worth folks. But the reality is like the dollar now is always going to be worth more today than it's going to be worth in 10 years.
- [48:27]
Joel Palo Thinkle
Sure.
- [48:28]
Greg
So even if you're like putting it away and putting all these like tax advantage retirement accounts, it's like, well, in theory, if taxes keep going up, you're actually hurting yourself by saving in a 401k. Like I don't care what your tax deferral rate is, like, you're not going to make that money back up.
- [48:43]
Joel Palo Thinkle
Sure.
- [48:43]
Greg
Unless you invested in something really good now or started a pet project or began a charity event. So I think that's Just showing, like, how that money today can really spur what you want to do in the next five to 10 years. As long as you have a plan, it's, you know, you can't beat that.
- [49:01]
Joel Palo Thinkle
Sure. Well, hey, this was amazing. Really appreciate all the wisdom. I'd love one final piece of advice. This could be from a mentor. It could be from a past experience that you had in your career. But, you know, if you were to give us a piece of wisdom, what would you leave us with?
- [49:23]
Greg
I would say in my younger years, I was working with. On a deal with a banker who was very prominent, and he just kind of looked at me and was like, you are at such an inflection point that you were so worried about doing the perfect deal that you forgot that you just needed to get a deal done.
- [49:45]
Joel Palo Thinkle
Sure.
- [49:46]
Greg
And then you were good. And I never really kind of clicked until maybe about four or five years after the point. But the reality was kind of just in simple terms, like, don't wait for the stars to align, because they're never going to. The reality is get going, because you as an individual, if you're 25 or 35 or even 45, you've got a lot of compounding interest in terms of time in years, right?
- [50:08]
Joel Palo Thinkle
Yeah.
- [50:08]
Greg
Not just as an investment. So the sooner you can get started doing what you love or what your ambition is, doesn't have to be perfect. Just get out and go.
- [50:19]
Joel Palo Thinkle
Yeah.
- [50:20]
Greg
You know, that. That, I think, was something that always kind of stuck with me.
- [50:24]
Joel Palo Thinkle
No, I totally agree with that. I think there's people that synthesize and analyze and they're paralyzed. Right.
- [50:30]
Greg
And the analysis by paralysis.
- [50:32]
Joel Palo Thinkle
Yeah. And then just the deal never happens because it needs to be perfect. And then I think the other fork in that is people just believe in overnight success. But like, in reality, everything is like going to the gym. Right. I mean, you gotta to. To get those muscles to where they need to be. You know, you gotta go in the gym every day. And it might, you know, an overnight success for many of these successful entrepreneurs is like 10 years, you know, and, you know, people. People think that they just became successful immediately, but it's. It's several years of time and, and refining that craft and whatever it is. So. But you go. But you got to go out there and do it. If you don't do it, then it never, you know, the first steps happen. Never happen.
- [51:13]
Greg
Yeah. I mean, listen to your point. A lot of people, I think, always kind of see the end result. They never witness the struggle because they try to distance themselves from the struggle.
- [51:20]
Joel Palo Thinkle
Sure.
- [51:21]
Greg
You know, so. But again, you gotta put in the hours. That's it.
- [51:25]
Joel Palo Thinkle
Yeah. So, absolutely.
- [51:28]
Greg
I really appreciate you having me.
- [51:30]
Joel Palo Thinkle
Yeah, absolutely. This is fun. Well, thank you so much, Greg, and thanks for everybody else, and have a. Have an amazing day.
- [51:37]
Greg
Yeah, thanks so much.
- [51:38]
Joel Palo Thinkle
All right, take care.