Touchstone Talks: Ep 3 - What's Your Number?

I've been
doing this, going on 15 years now.

Started in 2010, right out of school.

Actually, the summer of.

After I graduated,
I taught tennis in the Hamptons, and,

ran into a one of my clients.

I'll see you in tennis, too.

He was, Marilyn's financial advisor.

And at the end of the summer, you know,
he said to me,

hey, what are you gonna be doing
for the rest of your life?

You know, after the summer.

You know, you just want to be, to do
tennis for the rest of your life, so I.

You know, I said, hey,
I wanna do what you do.

I didn't know exactly what he did.

That made me do under $50 an hour
to teach tennis,

his wife and his kids, and nice car and,
you know, amazing house in the Hamptons.

I said, I want that.

So, I knew he worked at Marilyn's.

So I had a vague idea
of what he did for a living.

But long story short, he,
went off to the court and came back,

slapped two grand, my hands and a glass.

You come to the office on Monday?

Yeah.
That's how I got my foot in the door.

Marilyn, say, walk me in. And I was.

I introduced to the office manager,
and he said, hey, this is a slow hiring.

And that's
kind of how the interview started.

That's crazy.

That's a crazy inspirational story.

Do you still talk to him at all?

Every now and then.

You know, it's, he's a busy guy.

So, yes, he I and, so my so, you know, a

we've that's gone our different ways, but,

you know, we just kind of lost
touch over the years. Yeah.

So it's such an inspirational beginning
though.

Yeah. Right.

It's it's really cool.

Interesting because I didn't have
a traditional background.

I mean, I studied communications
and economics in school.

I went to Wake Forest,
but I had a tennis player. And.

Do you want an athlete?

Sports is a full time job, right?

Right. To the summers.

You're not doing internships
and what have you.

And really training to come back
and continue to play the next year.

So, once I went into the real world,

you know, it's a little different
for a little bit, but.

Yeah.

for those of you
just joining us with Touchstone Talks.

I'm here with Carlos.

He's with Worcester Square as a partner
and wealth manager, and he's going to talk

to us a little bit about what he does
and how he works with his clients today.

May be.

I'm excited to be here.

Thank you for inviting me. Of course,
of course.

Carlos and I kind of have worked together
on exp for quite a while now.

Gotten to know each other.

Excellent resource.

Good person to call.

So what I hear a lot, though, with,

talking to our clients
is they have their guy.

They have their person.

So what makes somebody go

call you instead of their person?

Yeah. Great question.

It's a long one. It's going to be a long.

That's okay. It's okay.

It's funny
because I read a McKinsey article

this morning about just about to me,
it was highlighting two of the,

like, real big important issues in the
wealth management industry going on today.

The first

being that there's an aging,
advisor population.

Right.

So the average advisor in America
is a 63 year old white male.

Right.

Living a comfortable life

right after, business
in the wealth management space.

Nearing retirement and,

you know, quite more often
than not juggling too many relationships

to really give a high touch service
that clients or to every single client

right outside of their top, top clients
or so.

The second thing that they had mentioned
was, the fact that there's been a

since there is a higher reliance on,

personal savings for retirement and,
you know, not to mention

the proliferation of more complex
and sophisticated investment options.

Folks today are looking for

there's a growing need for greater,

advice and guidance that is more holistic
and more comprehensive.

Right.

So, those two factors

are leading to folks
that are leading to folks basically

being unhappy
or having some level of ambivalence

with their existing advisor, primarily

because of the fact that they feel like
they're being underserved.

Okay.

One of the things that we're

that was also saying is in the in
the industry, in that in McKinsey article,

was that over the next seven years,
a third of the financial advisors

that are in the business
today will not be will have retired.

Right.

So, that in the backdrop, in
and of itself,

the main reason why people leave

one advisor to the next is service

makes sense, feel that they're getting
the value of what they're paying for.

They don't feel like they're they're
they're they're they're being underserved.

Right?

They there's some level of them under
they're being underserved.

I could say about 90% of my clients today

had a financial advisor
before deciding to work with me.

So it's very few and far between that I am

the very first financial advisor
that somebody is working with more,

more often than not,
it's it's we've had a conversation.

There was an issue
at the time that they weren't happy with,

and they started to look elsewhere. Okay.

And once they start to see somebody
that has a more, tailored approach

to their specific need, then that's
usually the catalyst for change.

Okay. It does, it does.

I actually I'm just
sitting here thinking that

I don't know that I ever thought about

when I got a financial advisor,

right.

Like, I just got one. Yeah.

But I don't know that it was a market
experience of the first financial advisor.

How how often do you run into somebody
where you're the first financial advisor?

It's very rarely. It's very rare.

You know, the the two

main, client demographics are niches.

Each niche, niche.

The two primary client is clients
that I work

with are, business owners and minority
physicians.

Folks that are okay.

You, even even folks

that are coming
or fresh out of residency and fellowship.

They have had some interaction
with a financial advisor.

Right? Yeah.

Tip or somebody,
I should say that considers himself

to be a financial advisor,
whether that's, their insurance

person that's selling them
disability and life insurance.

They've had some interaction
before in the past, and that's that is,

that's usually the

case is that it's I'm
not the first person.

Yeah.

And very rarely to I mean, we're talking
about exit planning and exit exit.

You know, business owners

that are exiting, any business owner
with some stature of wealth

and obviously success has an advisor.

Yeah.

Well, and now you have,
at least in the state of Connecticut,

they have, you know, ready made plans
that you can send your people to

to go get the equivalent of a 401
K from the state.

Yeah. My CT saves.

So, so they've got at least
that in place.

They've got something in place.

I can be better. But yeah.

Correct.

So talk to me.

I work with business owners.
You work with business owners?

Tell me how you work with a business
owner.

Well, it really depends on where they are
in their journey, right?

If they're five years
or more away from their exit.

We are really

focusing on what I like to call owner
based financial planning.

You know, take a step back.

I'm a wealth manager, so investing money,
managing investments

is what I do as a core.

What I do all day every day. Right.

So for function,

an equally important function of,
of what we do is financial planning.

And specifically for business owners.

Owner based financial planning.

So if they're five years away or more from
from from exiting, we're really focusing

on, de-risking their finances,
improving cash flows.

And, and growth, both for the value.

And again, I'm doing the planning.

I'm coming to folks
like you to do the execution.

Right.

So, that's the core function there.

And then, you know, the third component
of, of when they're that far away from,

from an exit is really focusing on how
can we set them up for a successful exit.

What are the strategies that we need
to put in place, or can we put in place

and start to, you know, which partners
can we start to.

On to to get involved.

If they're within that five year time
frame that's go time.

Right. Right.

You really need to be working
with a strong team of advisors

that have had experience doing this right.

This is going to be has the potential
to be one of the most single,

you know, the most critically important
financial event of their life.

Do you find that when you're looking
at their financial plan,

is most of their retirement
coming from exiting their business?

Absolutely.

The vast majority of their wealth
is tied up in their business.

And again, it's, you know,
going back to what I was saying before

about the busy average
financial advisor, right, in America.

A lot of business owners will have
a couple hundred thousand dollars,

maybe half a million bucks,
a little bit under a million maybe.

I mean, in a brokerage account.

Maybe a little bit IRA here and there or
if they're, you know, if they're advisors

good enough and they work with them,
they maybe have set up A41K plan for them.

But that's it. Right.

And that successful financial advisor
that's been in the business for

2530 plus years.

What's the likelihood of that individual
that that business owner

of being one of their top clients
and getting that white glove service

that they need, that
they that they need and want and deserve?

Probably not there. Right.

So what we found is that, you know, folks

sell their business, you know, for five,
ten, $15 million.

It happens more often than not.

So the majority of their wealth is tied up
in their business and rightfully so.

That's that's where they've reinvested
all their time effort.

You know blood sweat and tears.

And that's kind of
what ends up happening. Right.

So if there is not a strong alignment
between

their long term personal financial goals
and the value of their business,

maximizing the value
and minimizing tax surprises,

if that's not part of the process,
you're not really getting what you need.

Make sense?

Make sense? We hear it all the time.

Business owners don't typically love

to pay out the taxes
on what they just took in.

They want options.

Options don't get set up instantaneously.

It takes time.

You've got to set them up over
time. Exactly.

I mean, there's there's you.

And I think you know about this,
too, right?

I mean, obviously there's
emergency planning, right?

If you get somebody you oh I, I, I,
you know I got a,

I got an unsolicited offer yesterday
I said no why I like let's, let's move.

Let's move, let's move.

You have options
certain things you can do.

But the more time you have to plan,
the more arrows

you have in your quiver,
the more options you have, right?

Your disposal.

Right.

The more time you have to implement
those value drivers

to enhance your business value.

And, and, and, and make your business
more attractive to buyers.

Right. Right.

You know it's more time is better.

But you know depending upon
where like I said, depending upon

where the client is in their journey,

we can, we, we

can work together in a variety of ways.

Early on in that red zone crunch time
and then also

setting them up in the future
if it's post-sale.

Right.

Investing smarter,
optimizing income and reducing taxes.

Those are the three core components
for people that are post-sale.

Yeah.

I'm amazed at,
you know, we we talk to people

at the beginning right
when we do our estimate of value

and we say, now
go talk to your wealth manager.

Go talk to your accountant,
go talk to plan for this here

while we've told you what you're expecting
before we get

and and and inadvertently people get busy.

Life happens.

Exiting a business is not without work.

And you're still running your company.

The conversations

prior to the EOF would be fabulous.

Have them have that set up before
come to me and say, I have this trust.

Here's my plan.

That's fabulous.

Because once you start hitting the gas,
so to speak, once you've got the Loi, once

due diligence is going to suck
every minute of your time.

And there's absolutely no way around that.

If you want to get across the finish line.

But I will remember very early on
I was working with a client,

and he did not sit down
with his wealth manager until

three days before close.

And that's unfortunate.

And it was.

I'm expecting a very large check.

And it was the first
the guy I'd ever heard of.

A very large check.

Well, you know, and that's the thing that
that's that's my point.

Exactly. Right.

The advisor should know what's going on.

Should know where where is,

you know,
how close are you to exiting the business?

What have you done so far?

Who have you been talking to.

What what's your team look like?

Exit planning
is a interdisciplinary approach right?

Right. Requires that. Yeah.

You need there's coordination
from all aspects because there's

everything is, is is tied in together.

Right?

Everything that I do,
everything that you do,

everything that accountants do, everything
the attorneys do.

Right. It's it's all important.

And it all plays together.

And if the left hand is not aware
of what the right hand is doing.

That's becomes difficult.

It becomes difficult.

We can still get you there,

but it may not be the same way
that we would have recommended.

Exactly.

You know, you, you know, you bring up
a lot of really great points about,

what needs to happen early on.

The sooner the earlier, the better.

Right. Yeah.

And that's the way, you know, a
lot of what we do when we engage with

folks is really, you know, just start

getting started of saying, okay, let's,
let's figure out what's going on.

Right.

Let's, let's take a, let's do a, a deep

dive of kind of where you are right now
where you're trying to get to.

What are your expectations of the future.

Right.

And both for you, me personally
and also for the business.

I can't really do a good job
of extrapolating out

what your personal financial plan
looks like.

We don't know if you don't have clear
financials and projections of what your

right look like,

because then you can't get an accurate

representation
of what right is going to be.

And we can't get the

we can't, you know, get a proper
estimate of values for the different.

Right. Right. Right.

When 7,080% of your value of your wealth,
your wealth,

your net worth
is tied up in your business.

And we don't know what that is.

Yeah,
that makes my job extremely difficult.

That's fair.

That's fair.

To really be able to present you
with clear options.

Right. Right.

And like you said, when that when that
retirement red zone hits, it's game on.

You know you can't. Right. Right.

You can't get it wrong. You. No.
This time.

No. Nobody wants to exit their business
to go work at Walmart.

Well, being a greeter
sounds actually relaxing.

It does. Right?

It could, it could. You know, it's funny.

I have a client that, retired,

to become a, blackjack dealer.

Oh, okay.

That's interesting.

And it was awesome.

That's what I was like.

That's why. That's it.

Yeah. Yeah. If you love it.

Right.

Like, that's that's the ultimate goal
is to end up doing what you love.

Just go hang out, do your cards.

That's okay.

I mean, at least you're not sitting at
the table the whole time spending money.

So it's definitely a better investment.

So I like the way you think.

So you have a special certification.

Tell us about that.

Yeah.

So like I said, you know,

exit planning is an was interdisciplinary,
approach requires that.

And there is a ton of different

designations and

certifications having that

people can go for and look at

when I, when I was looking at,
I'm a certified financial planner,

a certified investment manager analyst,
and a certified private wealth advisor.

Those are the three core planning,
and investment,

certification that I have

a couple of years ago.

I decided to progress further down
into specialization in the world of exit

planning and looking at a variety
of different, options.

I chose a certified exit planner Exp

designation
from the Business Enterprise Institute by,

that one stood out

most to me above the certified Exit
Planning Advisor, the CPA,

and is another one
the CPC Certified Business Exec.

Coach I think it's coach.

And then

the CMA Certified Acquisition advisor.

Those are really focused on last year.

Definitely focused primarily
on the transaction side.

CPA is more focus

on, you know, implementing the value
acceleration method or value.

Yeah. So growing the business,

but the CFP really mimicked

the certified financial planner
designation of the CPA, the CFP.

So it was it
was, defined the repeatable process,

that tied personal about,
the, the, the value of your business

to your,
a merge, the value of your business thing,

the growth, the value of the business
with your personal financial plans.

And it looked at all of the things
combined.

So tax estate
value valuation for your business,

obviously personal finances
and, interests.

Okay. Looking at everything combined and

I really looked at that as saying

is that mimics taking elements from that

methodology.

And merging it into the certified
Financial Planner methodology

which would enhance
what I'm doing right now.

I'm not I'm not doing valuations.

You don't want me doing valuations right.

I manage I'll do valuations right.

So I'm not doing valuations.

I, I am I don't know how to do it
but I'm doing it.

I got great partners like you for that.

Exactly.

We have the value drivers.

You talked about that a little bit.

Those are the the elements,
the core elements of the business

and financial levers that you can pull on
and adjust to

to enhance the value of the business
and make it more attractive to buyers.

Right.

Cleaning up financials was you know, and
then enhancing operational efficiency.

Things like that.

The metrics
that get you a better multiple.

That take time to put in place.

Those are value drivers right.

I'm not going to be sitting in your
in your office

and you know talking to your managers
about this.

But you can. Right.

I can you know that's what what

exit advantage.

Right. Exactly.

But the,
the fact of the matter is of that me

having the expert experience
in, and knowledge and certification

of understanding exactly what it is
that you're doing and how you do it,

so that I can make sure that when clients
are having the conversation

and having conversations with clients,

these are the things that you need
to really be focusing on.

I know it makes sense right now,
but these are the things that are going

to drive the value
and prove the value of your business

to bot potential buyers in the future.

Here's what we need to work
on. Let's get some.

Let me make some introductions
for you. Right.

These are when we need to start

making the introductions
and formulating your team around you.

Right.

So that's, that's what this is all about.

You know and you know not for nothing
the other designations

and I is no, no slide any of the anybody
where the other designations.

I've actually been thinking
about getting these CPA as a follow on.

But,

we studied a couple of months,
and you go to a conference

for a couple days,
and you have your designation.

This exp

took about a year and a year,
almost a year

and a half,
to go through the entire process.

Okay.

It is a is a very lengthy,
very time intensive, discipline.

And I felt aligned more

with my planning process.

Okay.

Sounds like you approach things
very holistically.

I know we're slightly limited
on, on investment strategy

conversations, because we don't want
to give unsolicited advice,

but, give us kind of an overview on
if I'm going to work with you.

What is
what am I going to feel is your focus?

So I think it's important to distinguish
before between,

investment philosophy and investment
framework.

Okay. Right.

So the investment philosophy is sort of
your core beliefs and your and your

driving force.

So how do you how do you what do you do?

What you what are your what
your thought process around investing?

The framework is thinking is a structured

due process that you put in place
to implement those beliefs.

Okay.

You know,
you're a you're a sports mom, right? Yep.

This analogy.

The philosophy,

the investment philosophy is like
your coaching style, right?

Whereas the.

The your investment for your investment
philosophy is like your coaching style,

whereas your investment
framework is more along

the lines of your practice regimen
and your workouts.

Right. Okay.

What's your what's your playbook and
what's your practice workouts look like.

All right for the team. Okay.

So those two things combined.

So my philosophy is that you have to
have a idea before you have clarity.

Clarity before you actually do
anything, clarity before action.

And what that means is basically
you need to have a plan of what you're

trying to accomplish. Right.

You don't set out
to, to go on a road trip

without planning out
what you're going to be going.

Where are you going?

How are you going to get
there? Will brown sugar intake?

Because that way, you know,
if you're going to be on time

or not to where you're trying to get to

the actual implementation method?

Now for me, I use this.

I use what we call advanced time
segmentation,

which is where we it's
very similar to the old bucket

theory, the original bucket theory
that you think of.

But this is where we have five
separate time segments

that are broken out for median income,

income over the next seven years,
a balanced bucket

managing between balancing
between income and long term growth.

And then that fourth, fourth
and fifth bucket are pure long term growth

and then diversified
and alternatives, for durable income.

Okay.

So the strategy once it's once
it's implemented

after the planning has been done
and the strategy is built,

it's all about making sure that the client
has the right money in the right

buckets at the right time.

Makes sense.

So each of those buckets
have a specific place

and time again,
if a client's way away from retirement,

the majority of their assets
are probably going to be in a

in the long term growth
or balanced buckets.

Once they are sold their business
and they're living in retirement,

that's when we reallocate
amongst the different buckets.

The different segments
if you will, to then create

lifetime income income over the next
seven years, which again for to replenish

a balance again between the down

the income bucket
and then the long term growth bucket.

And then in that when those
those are two other two, it's like I like

I said, pure focus on on on growth versus

providing durable income through
different market trends and conditions.

So that's the framework.

Again, a long winded answer.

That's okay.

The portfolio construction.

Now I'm a I'm a firm believer that,

the of asset
allocation and diversification.

So what we do is we use low cost
ETFs and funds

to build the baseline of the portfolio.

And then we layer on top of that high
conviction,

active managers typically utilizing
separately managed accounts.

And then we put a moat around
that if you will, using Diversifier and

alternatives investments to really reduce
volatility in the portfolio.

Excellent.

It's it's a, it's a build up of starting

from the beginning of
what are you trying to accomplish?

Okay.

How which, you know,
time segments or buckets if you will.

We're going to allocate to.

And then how are those
each of those buckets built and developed.

And that's again through like I said
the portfolio construction methodology.

Excellent.

And you go through these steps
with each of your clients.

It's the same thing. As soon

it's an issue you
have a lot of time on your hands or none.

That's the case.

Maybe everybody gets,
everybody gets the same process.

For some it's, it's a little bit,
it's more, the more intensive than others.

Right.

It really just depends on kind
of what they're trying to accomplish.

Again, like I said, if someone's

ten, 15 years away from when they're going
to sell their business or transact.

Okay.

That's most likely going to be
the majority of that's going to be in

long term growth. Right.

So that's it's
kind of easy at that point really.

Once you're about five years out

that's when you're looking at building
a retirement income plan.

And you can't do that
without having a firm understanding

of what you're going to have
after you exit through.

That's where that go.
Time really starts to come in. Yeah.

And that's where, that's
where the heavy lifting starts.

That come up again with making sure
that we have a firm understanding of what

the value of the business is. Right.

And where are you trying to get it to
so that you can retire,

sell a business, retire
and then not run out of money?

Right. Let's say
and live the whole time. Exactly.

You know, in terms of we've been talking
a little bit in these about retirement,

and being able to make the choices
on what you have time to do,

whether it's support
a theater group, play in a band, you know,

go to play blackjack,
or deal blackjack, actually.

So if you were not doing

this because you kind of got into it
in a very roundabout way,

if you hadn't done wealth management,
what would you be doing?

Great question.

So if I were to go back
and do it all over again

and this route was not an option.

That's
how I, that's why I hear that question.

I would be

I think I probably would
either end up as a

surgeon in private practice

or a chef.

Very different choices.

Although both use your hands.

Very good voice.

Very very use my hands.

I mean, the thing
I'm an entrepreneur through and through.

That's my family background.

Growing up we had, you know, businesses.

So it'd be something that's going to be
where I'm still a in in business.

Some of you will.

Hence the private practice.

Right.

But you know I, I look at and see what

a lot of my other types of clients do.

And it's fascinating to me.

And I think that's part
of all part of the reason why it, it's

I gravitated to those individuals as well.

And then the flip side of it,
I love to cook.

So I would say that, like I said,
if I were, if I were to do this,

do it all over again, and this wasn't
an avenue, I'd probably end up as a chef.

So there's your retirement plan?

Yeah.

Let's say you you can hang up the wealth
manager hat and go to culinary school.

Well, I'm not I'm
not the average right advisor.

Thank you.

I'm not I don't I'm not a 65. I'm not 63.

No, you're not average.

I'm not a white man. So?

So I got plenty.

And that's okay.

And I know I retire, so, you know, that's
that's the thing.

Yeah, I would, I would I really, really.

I think I might even do that.

Just sort of,
you know, it would be fun to just

be formally trained, I guess, as a chef.

It's on my bucket list.

Yeah, I think that'd be pretty cool.

That's what I would definitely do.

Excellent.

I'll see you there.

Yeah, we'll go to culinary school
together.

Fantastic.

Great. Well, thank you so much for coming.

It's been good
getting to know your practice more.

And,
everybody should give you a call for.

Need you.

Thanks for having me.

This is awesome. You're welcome.

Meet. Him.

Maybe it.

Means we.