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

I didn't have a traditional background.

I mean, I studied communications
and economics, and in school

I went to Wake Forest.

But as a tennis player and do an athlete,

sports is a full time job, right?

You know, you don't have time to

of the summers,
you're not doing internships and

what have you really training to come back
and continue to play the next year.

So, once I went into the real world,
you know, things changed.

It's a little different.

It's a little different. 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.

B b b b b b b b b.

Yeah.

Excited
to be here. Thank you for inviting me.

Of course, of course.

Carlos and I kind of have worked together
on XP 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 it's
going to be a long way to the end.

That's okay.

It's okay.

But, it's funny because I read a McKinsey

article this morning about just about to
and 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 running a successful 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 are in

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, the 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 are 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. Right.

One of the things that were

that was also saying
is the 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 as in
a backdrop in and of itself,

the main reason why people

leave one
advisor to the next is service, right?

They don't 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 feel like there's
some level of them are 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. Right.

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.

Does that make sense? 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 marked
experience of the first financial advisor.

Yeah. No.

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

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

You know, the, the two

main, client demographics are niches.

Niche, niche, niche.

The two primary Clovis clients that I work

with are, business owners and minority
physicians.

Folks that are in the medical field.

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 him
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.

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 some success has an advisor.

Yeah, right.

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 save.

Yeah.

My CT one one.

So so they've got at least that.

I've got. Something.
So I've got some thing someplace.

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. Yeah.

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 is a core of what I do
all day, every day.

Right. It's a core 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 or really focusing

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

And in 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 pull the levers
on to, to get involved?

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

Right, right.

You know, 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 he 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,

as 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, right?

Maybe a little bit IRA here
and there or that there.

You know, if they're advisors good enough
and they worked with them,

they maybe have set up a
for one K plan for them, but that's it.

Right.

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

25, 30 plus years.

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

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

that they need that they
that they need and want in reserve?

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, right?

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

That's that's where they've reinvested

all of our time, effort and,
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.

Makes sense.

Makes 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.

Takes time.

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

I mean, there's there's.

And I think you know about this
too, right?

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

If you get it,
if you get somebody that says you.

Oh, I got a, you know, I got a, I

got an unsolicited offer yesterday,
I said no, 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 in your at 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.

So 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.

You know, we we talked 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.

Yeah.

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.

Yeah.

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.
Yeah.

But I 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 thing
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 the team look like.

Right.

Exit planning
is a interdisciplinary approach right.

And it requires that.

Yeah.

It needs 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.

And becomes. Difficult. It's difficult.
It's a good way to put it.

We can still get you there.

We can get you there.

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

Exactly. Exactly.

Yeah.

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.

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 off 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 personally
and also for the business.

Right.

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

what your personal financial plan
looks like.

If we don't know, if you don't have clear

financials and projections of what
your revenues will look like, because then

you can't get an accurate representation
of what your value is going to be.

And we can't get the we can't, you know,

get a proper estimate of values
for the different types of sale, right?

So when 70, 80% 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, it makes my job extremely difficult
as a, as a manager to,

to really be able to present you
with clear options.

Right. Right.

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

You know, you can't get it right.

You can't get it wrong.
You you only have this time.

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

Well, being a greeter
sounds actually kind of relaxing.

It does. It does. Right?
It could. It does.

Actually, 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.

When I heard that story, I was like,
that's right.

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 just go hang out and.

Do your cards with your cards.

Okay.

I mean,
at least you're not sitting at the table

the whole time spending money to.

Show, to show.

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 interdisciplinary,
approach requires that.

And there is a ton of different,

designations and methodologies,
certifications, what have you,

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 certifications 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 the variety of different, options.

I chose a certified exit planner
c exp designations from the Business

Enterprise Institute.

By that one

stood out most to me
above the Certified Exit Planning Advisor.

The CPA, then is another one, the CBC
Certified Business Exit Coach counselor.

I think it's a coach.

And then the CMA, a certified merger
and acquisition advisor.

Those are really focused on the 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 CPP really mimicked

the certified financial planner
designation, the CPP, the CFP.

So it was a
it was a defined the repeatable process

that tied personal,

the, the the value of your business

to your, a

it merged
the value of your business thing,

the growth, the value of your 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
and looking at everything combined and

I really looked at that as saying

is that mimics and taking elements
from that

methodology and merging it
into the certified Financial Planner

methodology 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 manage money value.

You do valuations right.
So I'm not doing valuations.

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

I got great partners like you for that.

Exactly.

We have the value drivers.

We 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, you know, and,
enhancing operational efficiencies,

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.

You know can you know that's what
what exit advantage is all about.

Right.

So but the, the,
the fact of the matter is of that me

having the expert experience
in, and knowledge and certification

of, 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 you're not thinking
about acting right now, but

these are the things that are going
to drive the value

and prove the value of your business
to potential buyers in the future is.

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 Exp is all about.

You know, and, you know, not for nothing.

The other designations
and that is no, no slide at any of that.

Anybody with the other designations?

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

But,

you study a couple months and

you go to a conference for a couple days
and you have your designation.

The Exp took about a year and a year,

almost a year and a half,
to go through the entire process.

Okay.

It is a very lengthy,
very time intensive,

discipline that I felt aligned more

with my planning process,
if that makes sense.

Sounds like you approach things
very holistically.

I do, 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?

Gotcha.

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
how do you do what you what are your

what are your thought
process around investing?

The framework is

is a structured process that you
put in place to implement those beliefs.

Right.

So you know, you're a sports mom, right?

So you can understand this analogy.

The philosophy,

the investment
philosophy is like your coaching style.

Right.

Whereas the,

the you 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.

How do you how do you,
what's your what's your playbook

and what's your practice workouts
look like right.

For the team okay.

So those two things combined.

So my philosophy is that you have to
have a idea before you have clear

any 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?

What route you're going to take?

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, why 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 immediate income,

income over the next seven years,
a balanced bucket,

managing between balancing
between income and long term growth.

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

And then diversified in, alternatives,
for durable income.

Right. 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 balance buckets,

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

that's when we reallocate
amongst the different buckets

or the different segments,
if you will, to then create

lifetime income income over the next
seven years, which again gets replenished,

a balance again between the about
the income bucket and then the long

term growth bucket and then and that
then those those are two other two.

It's again 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, long winded answer.

That's okay.

The the portfolio construction.

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

of 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 diverse of IRAs and

alternatives investments to really reduce
volatility in the portfolio.

So 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.

Or are we 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

the the portfolio construction
methodology.

Excellent.

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

Everybody gets the
same thing. That scalability.

It's an issue.

You have
a lot of time on your hands or none.

The case may be.

Is that everybody gets a
everybody gets the same process.

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

Right.

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

Again, like I said, if someone's 10

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

again, 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 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. Right.

So that's where that go. Time
really starts to come into play.

And that's where that's where the heavy
lifting starts to come up again

with making sure that we have a firm
understanding of what

the value of the business is today

and where you trying to get it to
so that you can retire

Selby 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 on this 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 play blackjack, or deal blackjack.

Yeah.

Actually, so if you were not doing this

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

Yeah.

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.

Right. 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.
Two very different choices.

Both use your. Hands.

Very good voice. Very very use my hands.

I mean, here's the thing.

I'm an entrepreneur through and through.
That's my family background.

That's our family business. Growing up
we had, you know, businesses.

So it'd be something that's going to be
where we're I'm still a

in business for myself, if you will.

Hence the private practice component.

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 our part of the reason

why it, it's I've gravitated
to those individuals as well.

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

So I,

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.

There's my free time line.

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 in the country.

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

Old, not average.

And I'm not and I'm not a white male.

So, so so I got plenty of time until
I retire and I got plans and or I retire.

So, you know, that's that's the thing.

Yeah, I would, I would, I'd really, really
I see I think I might even do that

just sort of, you know, it would be fun
to just be formally trained, I guess.

And as a chef.

It's on my bucket list. Yeah.

I think that'd be pretty cool.

That's what I would definitely do. And.

Excellent. I'll see you there.

Yeah, I love it.

We'll go to culinary
school together and test.

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.

Yeah. Thanks for having me.
This is awesome.

You're welcome.

Been.

Keeping me.