Jeffrey Gold is President of Goldmark Advisers, Inc., the boutique investment banking firm he founded in 1985. In early 2017, Goldmark became an affiliated company of Young America Capital LLC, where Jeffrey is continuing to practice his successful consultative approach to mergers and acquisitions, as well as assisting mid-sized companies and promising new ventures in capital formation.
Jeffrey’s M&A and funding expertise – reflected in his track record of nearly 100 transactions – focuses primarily on publishing, media, food, beverage and health care businesses. Simultaneous with his leadership of Goldmark Advisers, Jeffrey served for 20 years, through 2012, as Chairman of the U.S. subsidiary of The Quarto Group, Inc., a publicly held international illustrated book-publishing company, helping the London-based company to grow through several significant acquisitions.
Before establishing the Goldmark firm, Jeffrey was Executive Vice President & Chief Financial Officer of Esquire, Inc., a NYSE-listed publishing, technology and communications company. In that role, he also served as the company’s principal negotiator when it was sold to Paramount Communications. After the acquisition, he was named Executive Vice President in charge of corporate development & strategic planning for its Simon & Schuster Division. While at Paramount, Jeffrey initiated the contact that led to the acquisition of Prentice-Hall, the well-regarded textbook and professional publishing company. Earlier in his career,
Jeffrey was Vice President and Corporate Controller of National Patent Development Corporation (now known as Wright Investors’ Service Holdings), which, among other activities, pioneered the development of the soft contact lenses. He began his career at Main Hurdman, which is now part of KPMG, the Big Four accounting and professional services firm. A graduate of Pace University with a degree in business administration, Jeffrey has guest-lectured on corporate and financial subjects at the Columbia University Graduate School of Business, and served on the Board of Directors of Lighthouse International.
He holds Series 79 and Series 63 licenses.
Listen to this episode as Seth and Jeff discuss:
Identifying the ideal client.
Some of the biggest mistakes middle market firms are making when it comes to thinking about their acquisition and exit strategies.
How the landscape of the industry change since the COVID pandemic.
Joel S. Isaacson, Founder and Chairman Joel Isaacson & Co
Founder and Chairman, Joel Isaacson, is considered by many to be a leader in the industry, helping clients and their families achieve their goals and sharing his knowledge with colleagues and the next generation of industry leaders. As a teacher as well as a practitioner,
Joel is active in many industry organizations, having served on numerous boards and speaking on topics to share his insights, including: the New York Chapter of the International Association for Financial Planning, now FPA; Chairman of the Personal Financial Planning Committee of the New York State Society of Certified Public Accountants; the American Institute of Certified Public Accountants and the Estate Planning Council. He has taught financial and tax planning at New York University, The New School in New York City, and Iona College.
He holds a BS in accounting from Lehigh University and a MBA in financial planning from Golden Gate University in San Francisco, where he was recently honored as their ‘man of the year’.
Frequently named one of America’s Top Financial Advisors by Worth magazine, Joel is often quoted in financial publications such as the Wall Street Journal, New York Times, Business Week and Fortune, as well as on radio and television.
Listen to this episode as Seth and Joel discuss:
The key factors that lead to the unprecedented growth of Joel’s firm.
Getting recognitions and accolades in press.
Post Covid challenges in the financial advisor industry.
Team Building and getting the most out of your staff.
The most common challenges that the industry faces now.
Seth Greene: 1:14 Let’s go back in time, how did you get started in the business?
Joel Isaacson 1:32 Wow, it was a different kind of a business back then. But I was I was working in San Francisco for an accounting firm. And one day I looked in the paper and there was a MBA in financial planning at a school in San Francisco Golden Gate University. At the time, it was the only one in the country offering financial planning as a degree. Back then I think the CFP, you could take, I don’t even think you had to take an exam. I don’t I think it was sort of like, you know, pretty straightforward. So I wanted to get the education. And I left my job with a big eight accounting firm, went through the grad school, and then came back to New York and, you know, took a job as an entry level position there.
Seth Greene 2:14 And then I’m sure the longer version is in some of those articles or the books, but then how did you get from there to where you are now.
Joel Isaacson 2:22 So when I came back to New York, I worked for so and I took a 50% salary cut, you know, because again, it was an entry level position. And you know, and I probably learned more in that year of what not to do, it was someone who was one of these people that charges a lot for the plan, and then didn’t have the ongoing revenues to you know, keep it going. And these were the days, it’s a little embarrassed to say we used to do plans by modem used to cost us 1500 hours each plan to do by modem to get them done. And so I started with this person. And while I was there, I got recruited. My background was accounting firms, I got recruited by one of the top accounting firms in New York to start their practice. And I believe we were the first one to register as an investment advisor was in 1985. And, and that was great, it was really good chance to, you know, kind of use the NBA use the opportunity to start a practice and I was only 26 at the time.
Seth Greene 3:24 And then how did you get from there to the you know, I mean, you’re a leader in the industry, how did that transition? How did that growth curve happen?
Joel Isaacson 3:35 Again, yeah, so you know, when, again, it was a, it was a great chance, because you know, as well as things where I started bringing in clients, but you know, when you’re an accounting firm, one of the things you you know, you always get promised by all your partners is they’re gonna keep bringing you clients and bringing your clients. One thing I really learned and I also started teaching back then I started teaching the CFP. But one thing I learned was don’t depend on your partners for business. So I started, you know, being able to bring in business. And then at the accounting firm, where they made me a partner after 10 years, I also saw how much the managing partners were making. And I said, there’s something wrong here. So I went out on a we went on my own with two of the people from the firm, you know, as partners, we started, and it started with three people and it just built up, you know, slowly by surely by always, you know, putting the client first. You know, we would never on the sales side, you know, always the planning side. And, you know, again, just a lot of hard work client by client building up, you know, to the point where now we have I think over $6 billion in assets under management.
Seth Greene 4:38 That is absolutely incredible. How have What do you think, have been some of the biggest factors responsible for such amazing growth?
Joel Isaacson 4:47 Yeah, I mean, I think, you know, again, also is like sort of was, to a certain extent, some of it being early, you know, back then I think it and I’m not sure I would say we’re a full profession yet. You know, I think that we still have to do more at the college. levels to get education into the schools for financial planning. But I think it was being early, I think it was also having a CPA and, you know, experience back then. And I also got involved with, you know, with teaching at schools, I got involved with the FPA back then it was called the ISP, I was present in the New York chapter. So it’s constantly hustling and networking, we didn’t do any marketing. But it was just really an opportunity to, you know, develop clients in New York, you know, and again, it was really one at a time, a couple things where we got into when I was teaching, I got introduced to some people that worked in the Benefits Office at IBM. So we got an opportunity to, you know, go off to some corporate programs, and some of my students did there. And through contact, we also got involved with equitable life insurance, which at one point, we probably had 20 executives from there, and they used to have a financial planning program. So you know, those type of relationships, and that’s really what it was, it was all relationships or referrals from, you know, people we met in the business, and they looked at us as a firm that was, again, fee only, you know, high quality. And, and I think also having the tax practice gave us a, you know, an edge also in being able to kind of be more of the one stop shop for individuals.
Seth Greene 6:18 That makes a lot of sense, how you’ve garnered a lot of press accolades over the years, how have you been able to get that recognition?
Joel Isaacson 6:28 Yeah, you know, again, nowadays is a lot tougher. But in the beginning, you know, part of one of the people got involved with was involved with the New York Times. And so back in the 80s, you know, and, and the journal, you know, we knew some of the people there also, but it was really just, you know, a lot of networking opportunities. So one that the times took a, you know, liking to me, and he used to write a column every Saturday on your money. And back, then it meant a lot to be in the press. Now, there’s so much press, and so much out there, PR wise was there. But if you got involved with the times, and you got that kind of prospect, then it became a good catalyst to other press and different things. And then I think, you know, again, a lot of the organizations were involved with with the right ones, you know, we were early, involved with nappo, with the FPA. And, you know, and again, it’s, you know, is always one of those things like we weren’t in this for the short run, we weren’t looking to make a big hit, we were in this for the long run. And we always felt if we took care of clients, that the rest would come there. And that’s also I think, part of the way is every time we got involved, like, we also didn’t find fire, the brokers we didn’t, you know, bring in new lawyers, we got to know the lawyers, we got to know the brokers. And some of those people that we met through clients actually became great referral sources to us over time.
Seth Greene 7:45 How has the COVID pandemic affected your clients in your business?
Joel Isaacson 7:52 So I think, you know, it’s, well, I think it’s changed our business fundamentally, as to how we deliver it, I think, you know, for a lot of our clients, you know, the zoom feature is something that I think they like, so, you know, that’s there, we also have a lot of young staff that are having babies. So we had been trying to, before the pandemic, figure out how to do remote work, and for people to be accountable for it and different things. And obviously, we get thrown into the fire with that. So it’s worked out? Well. Our business has been okay, you know, is, I mean, as the, you know, I would say the third big, black swan event in the last 20 years, it’s, I think it was more taxing this time, you know, from some of the other ones. And, you know, especially around New York last March and April, the kind of that dread and the you know, that it felt like the black cloud over the city in the whole country and different things, was a tough one. So I think we’ve, you know, we’re more valuable to our clients in tough markets than we are in a good market. 2019. You know, the market did amazing clients were happy, you know, no big deal. I think getting through clients through the tough times, these black swan events are, are the key for what we do, and to have had a build lasting relationship. And probably, I would say, this pandemic, for some reason, because I think, you know, it just hit people so close to home net, probably more people panicked a little bit this time than in the past. and stuff, but, you know, businesses, again, is we grow our top line, probably seven to 10% a year. So last year was a little bit different in, you know, the new business part, you know, we still, we still grew nicely, but I would say, you know, not necessarily referrals, but new business slowed down a little bit only from a standpoint of, you know, all the lunches that you have, and seeing people that I think, are a good catalyst from that stuff, but we’re starting to see it pick up again, and I think, you know, for our clients, a lot of it became is figuring out life, you know, do they stay in the city, do they, you know, they move the Hamptons, I’ve always spent a lot of time we deal with tax issues in New York and everybody thinks it’s easy to get out of New York. taxes because they’re living in Connecticut for a year or, you know, upstate New York or things like that. So, you know, sometimes we have to be the bearer of bad news on certain situations, but our clients been amazing, you know, they, they are our greatest resource. And, you know, I would say, you know, again, we got them all through good, I don’t think at the, you know, the middle of the pandemic, you know, back last March, April, I don’t think anyone would have felt that it would finish the year up like they did, it was a, you know, crazy year overall,
Seth Greene 10:31 absolutely, who’s an ideal client for your firm?
Joel Isaacson 10:36 You know, we, you know, it’s a, you know, for us somewhere, just someone that really could use kind of that one stop shop of, you know, having, you know, things all in one place, so, from corporate executives, to doctors, to lawyers, to anyone in the five to 25 million ranges, that kind of our bread and butter, and then probably 20% of our clients are in the 25 and up category. So, again, it’s, you know, for us, we also try and do sets a little different is, you know, fair fees for clients. So in that in a you m shop, generally, you know, so we try and do fair fee. So wherever we can add value for the money, that’s the most important thing, because, you know, what we find is with that kind of relationship where it’s more retainer based, that, you know, clients look at your as their advocate, and and, and that is an adversary, which I think sometimes with the IOM, you know, you’re always trying to take assets away from someone else with us, we don’t care what the assets are, as long as it’s the right thing for clients and the people that are handling money and doing the right thing. And again, you know, it’s, it’s, it’s nice sometimes to have co pilots on things,
Seth Greene 11:44 you’ve achieved so much success over the decades, what’s your biggest challenge now?
Joel Isaacson 11:50 Um, you know, I think part of this, Seth is, you know, and for some of those on the back nine, I think, you know, it’s, you know, like, right now, we are transitioning, like, I turned over a CEO role last year to one of my younger partners, because I think it was necessary on some of the technology and different things. And for me, to kind of get back into the, you know, into the area of just, you know, dealing with clients and mentoring staff and things like that, I think the biggest challenge going forward for the industry is finding good professionals, you know, people that, you know, want to make this into a profession want to have a career with this thing, and go forward. And then I think, you know, what we saw also is like, I don’t know, probably in the last few months, just the whole Bitcoin, you know, Reddit rally, you know, just dealing with clients who all sudden their kids are geniuses, you know, that a buying GameStop and different things. And everybody all sudden became a risk taker, you know, with the, you know, the Tesla’s of the world and all the, you know, all the crypto currency and everything like that. So, you know, it’s really, I think the challenging point now is just to really for clients to understand fundamentals, and that valuations matter, and investment fundamentals will be a sense, to me, part of it is, you know, whether, you know, on the investment side, you know, things change radically and every time you think that they do they kind of tend to you know, revert back to the old ways of doing things.
Seth Greene 13:14 Your Passion is obvious, what do you like best about what you do?
Joel Isaacson 13:19 You know, it’s, it’s, it’s an interesting one, because you kind of think about stuff in life and say, like, did you do you make a difference on things? You know, I’ve been doing this for 40 years. And, you know, you, you know, you see all these people that are doing things in the military or in science, you know, Dr. Fauci and everyone fighting this virus, and you say, you know, are we just making rich people richer? But, you know, I think part of that I would say, Seth, is our relationship with our clients is that type is like, you know, like, I’m in the middle one of my clients died three weeks ago, where I’m the trustee, I’m the executor and now dealing with her, you know, her nieces and sister in law in different things. And it’s that kind of trust that people have in us in the relationships we have that are there. I mean, sometimes it’s, you know, it’s above and beyond certain things, like, you know, just dealing with having to watch someone, you know, slowly die is not an easy thing. But, you know, the intimacy of our relationship is is hard to, it’s hard to be, you know, it’s just that and I think that part of being, like being the client advocate and being on that side, I think, is the part that really is the driving force. And I you know, I think the pandemic for me set it up so that I look at this and say like, my dad retired, never really retired. He, he liked working, I mean, his clients started retiring, and dying off and different things, but I really like working with people and helping them and and i think that part of, you know, just seeing, you know, the family relationship and kind of working with people to get them like, again, another one my favorite clients was from publicity. In the 80s we were in the Daily News and someone that probably never made $60,000 or more than 60,000 our life she was a secretary of the firm and I don’t know I helped her with a, you know, project last week, she got very emotional about and stuff. But you know, someone that was just, you know, save scraps and you know, little bit in the 401k. And she’s, you know, she’s probably worth three or $4 million. Now, I’m not sure we would have taken her on as a client, like we did in the 80s. Now you know, where we started with it, but to see where she is, and be able to tell us go buy a car, don’t worry about it, you know, you don’t have to worry about money and different things and to see, you know, how smoothly we made her life has been very rewarding overall,
Seth Greene 15:30 that’s beautiful. You’ve also built an incredible team, how do you get everyone doing what they’re supposed to do at the right time? in the right way? How do you how do you develop yourself as a leader, because I know, you are always improving, you’re kind of committed to learning and committed to growing talk a little bit about that aspect of the business. You know, I
Joel Isaacson 15:54 and thank you for all the nice things you’re saying. So that’s, I think the part of, you know, for, you know, IT staff is, I think, for staff, a lot of it is that, you know, the on the job training, you know, that there’s not a lot of the people that came to us that necessarily thought of financial planning as career but through friends or, you know, relationships, they still work for us. And then I think the way they saw us treat clients and their relationships for clients was, I think that, you know, that’s our, that’s our greater resources, those relationships with clients. So it was always you know, was it you know, like, you see in some of the boiler room stuff, you know, where they treat him, like, you know, this is just way to get money and take money from people. In ours, it’s really the respect, that’s client in that part. And now, you know, I see the next generation is the relationship, our staff is having babies, and the clients are sending them gifts, and, you know, it’s like, it’s just a nice family relationship there. So I always treated you know, I think staff to learn, brought them into client relationships, I’ve had some people like, you know, within the first six months to sitting in meetings, and it’s just a, I think, a chance, and then, you know, they see these very high level executives and doctors and, you know, hospital, people that are running companies, and they, they see their reliance on us, and it’s a it’s a very heady thing, and it’s, it’s intoxicating, to, you know, to work with people and for them to listen. And, and again, we also learn from clients, I’ve, I had my anniversary, I actually thank my clients, because, you know, over time, I just seen their ethics and, and the treatment and the way they handle things in business, and they’ve inspired me.
Seth Greene 17:35 What else do you want to share that we didn’t think to ask you?
Joel Isaacson 17:39 Um, I would just say, you know, again, from a standpoint of the field, I do think that, you know, aspects of the field that there’s still more to be done with the schools, I don’t think the professional organizations necessarily do as much with the schools, but I do feel like with accounting, you know, the big thing will be is more and more of the undergraduate programs, and then, you know, kind of the job placement. So I think they try, like, again, there’s programs here, but it’s always kind of like dependent on who’s running the program and who they have relationships with. But I do feel like for the field, that is more and more that at the undergraduate level be helpful. And I think for people in school, you know, if they saw it that way, I think it kind of goes in a cycle to take it to that next level is profession. To me, the CFP is nice, but I don’t I don’t consider passing exam as really the thing that’s there. I think people need to learn more. And I’ve taught, and I remember when I used to teach, and I’d get off the curriculum a little bit, try and give practical knowledge. People didn’t really want to learn that way. They just really wanted to pass the test.
John M. Jennings is President and Chief Strategist of The St. Louis Trust Company. In these roles, he leads the client service practice and is responsible for developing and implementing strategic initiatives. John is a member of the firm’s Management Committee, on its Board of Directors, and also serves on the Investment, Risk Management and Trust Committees.
John works closely with client families, advising them in all areas of wealth management. Prior to joining The St. Louis Trust Company as a founding principal, John gained varied professional experience in investments, tax, estate planning and trusts in the Private Client Service group at Arthur Andersen LLP and in the Estate Planning and Tax practices at the St. Louis-based law firm, Armstrong Teasdale LLP. John earned both his Bachelor of Science in Finance and Banking (cum laude) and JD degrees from the University of Missouri.
A past St. Louis Business Journal “40 under 40” honoree, John is a frequent speaker on investment, trust and various other family office topics. Personally, John is married, the father of two teenage daughters and an avid reader, skier, music lover and is vegan. He serves on the Boards of Logos School and the St. Louis Community Foundation, where he chairs its investment committee. He is also a trustee of The Saint Louis Symphony Orchestra Endowment Trust. He is an instructor at the Olin Business School at Washington University in St. Louis. Daily he produces an “interesting fact of the day” which can be found at http://www.theifod.com.
Seth Greene 0:00 Welcome to the podcast. This is your co host, Seth Green. Today I have the good fortune to be joined by john Jennings president and chief strategist of the St. Louis Trust Company. JOHN, thanks so much for joining us. I’m super happy to be here. So, all right, so for our folks watching and listening and tell us about the St. Louis company, St. Louis Trust Company, what do you guys do and who do you serve?
Unknown Speaker 0:21 Yeah, so we our multifamily office started about 19 years ago out of the ashes of Arthur Andersen. So, you know, I worked at Arthur Andersen for about four years. And when it was imploding in the wake of the Enron scandal, I was like, Oh, this is horrible. But looking back, selfishly, you know, personally for us, and I think other people that were there, it worked out really well. So. So being a multifamily office, we work with 60 client families, and we have 55 employees, so nearly a one to one ratio.
Seth Greene 0:51 That is awesome. That’s it? Yeah, that’s a great ratio. And so what is it that you think makes the St. Louis Trust Company other than the ratio obviously, stand out? And how do you differentiate yourself?
Unknown Speaker 1:04 Yeah, so I’m kind of to borrow from Peter Thiel, the venture capitalist, you know, he had this great book, zero to one and other venture capitals have talked about this, like, truly successful companies need to have a secret. And the definition of a secret in their parlance is what do you believe that most other people or businesses don’t believe? And if you told them that, you’d think that a sort of crazy so and pretty much every business, but especially financial services, there’s a trade off between customization and scalability. And the goal for most businesses, almost all of in the financial services industry is to increase scale. So for instance, we work with 60 client families and oversee and advise on about $13 billion of assets with 55 employees. So imagine just the profits, if we double that to 120 and 26 billion with the same 55 employees, we’d be like, where do we stack all our Benjamins? Right? What our secret is, is, we believe that if you are as customized as possible, and you don’t scale, that that’s a great business. And you can be profitable, and you can really be among the best in the entire country, or entire world, which would mean the entire solar system. And I don’t go further than that, because who knows what else is out there? Right. So
Seth Greene 2:35 that is an excellent point.
Unknown Speaker 2:37 So we want to be as close as possible for our client families to a single family office. And we’re able to do that, because we’re 60% owned by clients. So the main, you know, our main ownership group, you know what, it’s kind of nice when you know, they get a nice dividend. The number one thing is they want us to be customized and serve their families well.
Seth Greene 3:01 Alright, so that could that that’s very interesting, talked a little bit more about the and that’s probably another thing that differentiates you talk a little bit about the ownership structure.
Unknown Speaker 3:11 Yeah. So when we started, we decided to be a Trust Company, and we needed working capital, but we also needed capital to be a Trust Company. And so we turned to, you know, we turned our initial set of clients. So they were, they were early investors in the company. And as we’ve grown, we’ve had some other clients that have bought in and we are overseen by a board that is all, you know, all but two of us are, you know, clients on our board. And so, you know, clients that are on our board, buy in, and and it’s really, it’s really great. The other 40% is owned by, you know, our primary founder owns a chuck chunk, who’s now retired, and the rest is principals of our firm. So
Seth Greene 4:02 and, obviously, we’re not asking you to break confidentiality to, quote, disclose any names, but what types of families do you work with? Yeah, so who is an ideal client for you?
Unknown Speaker 4:14 So it’s interesting. So if you look at the size of our clients, you know, I don’t believe we have anyone that just made a lot of income, like we don’t have any wealth generators that are doctors or lawyers. And we don’t really have anybody that just saved money and invested in the stock market really, really to create great wealth. You have to have equity in a single company usually. So you put together your you know, you’ve taken a big risk, you’ve been concentrated, you put your own sweat equity into it, and you get lucky. So our client families, somebody did that. Whether we’re working with a first generation or you know, we’ve worked with we have sixth and seventh generation. We will So they, they either started a company, and then over time it was was sold, and sometimes they start multiple, or they were an executive at a public company and and was able to buy in or be granted a lot of equity. So that’s who our clients are, or their descendants.
Seth Greene 5:17 What are you finding some of the biggest mistakes they’re making are that they’re coming to you to help fix, or that they want to help your help to avoid?
Unknown Speaker 5:28 Yeah, you know, we get, we get a quite a few client families interested in us that realize that they need a higher level of customization and service. And really, at this sort of wealth, the wealthy families that kind of the waters we’re swimming in, kind of use a shark reference. So yeah, it’s, there’s a lot of, there’s a lot of sharks out there. But the level of wealth we’re dealing with, there’s no real just platform they can be on. So if you go to a lot of investment firms, they’re like, okay, here’s the way we do things. And the family needs to fit into how we do things. And we flip that on its head, we say, you know, we’re going to help you invest and do everything else in your lives, the way that fits your values and your goals. Right. So that’s, that’s number one. And number two, we see a lot of client families have just really been burned in the financial industry, even if they’re working with, you know, some of the really big name, you know, kind of gold standard firms, they just feel like, you know, the desire is the firm, the investment firm, just throwing things at them, just trying to sell them. And it’s all about their profitability, the investment firm, rather than what the family needs. And so we were having come in, they may still work with that firm, but they’re like, okay, we need somebody to help us to look at all this stuff and say, Okay, this makes sense that doesn’t, and we really start focusing on fees and taxes and things that the investment industry really doesn’t like to talk about.
Seth Greene 6:53 Okay, so you say you segued into the next question perfectly. So what are the services that you offer beyond the traditional investment management that they’re attracted to? They go beyond that Main Street offering, right.
Unknown Speaker 7:09 So you know, one of the we have three main lines, one of the three is, you know, investment management. And, you know, we do a nice job of investment management, but you can find good investment managers all over the place. The second thing we do is family office, and I think a great thing. And we sort of, you know, we started in 2002, we rode this wave, where, you know, people didn’t know what a family office or multifamily office was, you know, nearly 20 years ago. And so we really wrote this way we were, we were sort of early. And I think what’s great for investors is pretty much every, you know, financial advisory firm or investment firm out there says, Okay, we’re going to provide some family officers, I think that’s great. But it’s hard to do, if you have 100, you know, every advisor works on 100, or 250 200 200. accounts. So the way we do family office, is each of our professionals only works with, you know, five to seven families. So it really allows you to dig in and do bill pay and cash flow and help with charitable planning and educate kids, you know, the next generations about wealth and put together a strategy, and on and on and on and on. I mean, there’s just all these these ones off, you know, private jet charter, and, you know, should I lease or buy my car, or, you know, the next generation, I’m starting a business, can you help me on that, and we do all that. The third line of business is we can either be trustee, which is a really a convenience for our clients, there’s different reasons, they may need a trustee, or they had it, have a corporate trustee, that’s, you know, some big institution that they don’t feel like they’re a fit with anymore, and they can move to us. But probably a bigger thing is a lot of family members serve as trustee for trusts, and, you know, partnerships and things like that. And we help them be good trustees or, you know, managers of their LLC and do all the legwork behind the scenes. And, and there’s liability, you know, I, you know, there’s, there’s all these cases you hear, you know, both around where I live and nationwide about, you know, families Sue each other, and there’s, there’s real liability when you’re trustee of a family, family trust, so we help them with with that. And by the way, real quick, you know, even though our name is St. Louis trust, and we’re actually in the middle of rebranding to St. Louis trust and family office. So it hasn’t really been released yet. But we have clients in 33 states and some some, you know, family members live out of out of the US and, you know, our biggest growth areas have actually been on the coast. So, notwithstanding our name, we are not a local organization. We are nationwide.
Seth Greene 9:38 Understood. Now, you talked about a lot of the majority of the families be having a at some point in their history. There was a business that was started perhaps there’s some liquidity event or something that qualifies them to have the cash to work with a fat multifamily office like yours. How are you helping them because I mean, there’s a stereotypes and cliches of shirt sleeves to shirt sleeves in three generations, and how many businesses don’t make it past generation three? How are you helping them bridge that gap?
Unknown Speaker 10:09 Yeah, that is that is a real issue. And really what drives shirt sleeves to shirt sleeves, and you know, three, or four or five up here, stated different ways, is is a big part of that as math. So I’ll give you an example. So there’s a CLI family we’re with its, I think the main, the main ones we work with are depending on how you count fifth or sixth generation. And if you look at their, you know, this, this generations grandmother, so the grandmother and the grandfather, so they had a big chunk of wealth. And then they had six kids, and they paid a state tax. So the six kids then had one six of the wealth, less tax. And so the grant, the grandparents lived amazingly well, like they had just money just flowing it, the six kids, also very wealthy lived well, but it was a step down, right. And then those six kids, it varies between having two to six kids for each of those six kids. And then that drops down and there was a state tax. So a lot of it is math, that you know, even even if you invest well, and you control your spending, you know, some of it’s just math, and where we see some families not go shirt sleeve shirt sleeve, some of it is just because they don’t have as many descendants. So if the grandparents had one child who turned out had two children, you know, you can out earn that math, so part of it is just looking at the math and setting expectations, and just telling a lower generation, by the way, you know, even when all the money flows down to you, just because of the math, you probably can’t live as your parents did. And you definitely can’t live as your grandparents did. So that’s the first thing. So some of us just, it is what it is. The second thing is, is fees, and taxes are huge. So limiting fees, and taxes is is is really important. Investing well. And investing well isn’t just always, okay, I’m going to go out and you know, I’m going to find the next Facebook while it’s private or beyond meat or whatever, you know, Tesla and SpaceX is gonna be all this, this growth. I mean, that’s great. But that’s really hard to do. Part of it is just not making big investment mistakes. That’s, that’s, that’s a big deal. And then a state planning. So the way the estate tax laws are in wealth transfer tax laws are now you know, paying a state tax is largely optional, if you plan it early, and often, and you’re willing to do what it takes. And we’ve seen this time and time again, people that have 10s of millions of projected estate tax liability, and 10 or 20, late years later, it’s it’s zero. So, you know, we’ll see what the future tax laws hold. But it it really is optional. And all the time we see people that wait till they’re their 60s or 70s, or have a family owned business, and they’ve done little estate planning, and it can just be devastating, again, in terms of the math, and how that that passes down. So that was a long answer. I could talk more on it. But I think that’s it’s probably pretty good.
Seth Greene 13:16 How has the COVID pandemic affected your business and your clients?
Unknown Speaker 13:25 If you would have told me 18 months ago that this was gonna happen, you’re gonna have this pandemic, and we’re going to work virtually and we couldn’t visit, even our clients live locally because of, of health concerns, I would have been like, Okay, this is good, it’s gonna be devastating. And what has been surprising is how well it’s gone. So we’ve been able to, we transition remotely, you know, over a three day period last March. And our people just done a great job. You know, meeting with our clients virtually, and staying in contact with them, you know, we call them a lot. They didn’t call, it’s gone really well. Now, I will tell you that my analogy I use is both in terms of our company culture and working together and client relationships. I felt like we were running on battery power. So it was working. But I felt like the battery was degrading and training over time, right? And I wouldn’t want to do this for you know, two years or five years. And we are, you know, with the vaccines and almost everybody in our company is vaccinated, more people are coming back to the office. We’re bringing them, you know, everybody’s gonna start coming back to the office more The day after summer solstice. So he didn’t want to interfere with summer solstice celebrations, but it’s going to be the day after the summer solstice. We’re traveling to meet clients, we’re meeting him in person. It’s really fantastic to see everybody again, but again, I was just stunned that there wasn’t more of a disruption and how well it went. And I just think about him. What if this was, you know, even 10 or 15 years ago? And we didn’t have all the technology we do, it would just be a far different situation.
Seth Greene 15:06 Absolutely. How has it changed the investment advice you’re giving your clients?
Unknown Speaker 15:11 I don’t, it really hasn’t really hasn’t, you know, going in even going into the pandemic, you know, we’re big on on the belief that, you know, the financial industry, models risk and returns using the standard bell curve, or the normal distribution, the Gaussian distribution, that doesn’t work, that math does not work, you cannot take projections and and say, Oh, well, this is your downside risk, or this is what’s going to happen. So we’re very big on investing. Acknowledging the uncertainty of the future, part of that means having an adequate margin of safety. And so when we hit the nearly 35% doubt, and just over 30 days, so, you know, the the, the 30% down that occurred in it was the fastest drop in the stock market ever, even faster than some of the times in 1929 1930. So, really, No, none of our clients panicked. And some of them rebalanced and really rode the, you know, sold high and our, you know, take to liquidity and bought low thing. So, you know, they really did quite well, or did fine through it. Now, if it had gone instead of 34% down, if it had gone 70% down. Yeah, that would have been, you know, it would have been, it would have been more difficult, but it just really reminds you just the folly of trying to forecast when investment returns are. And a lot of the industry says okay, well, you know, and I did it. I am also a contributor for Forbes, I wrote an article wrote a few hours, I’ve written a few articles kind of lambasted this idea that you can predict and a common excuse that people give when they predict is, well, I couldn’t have foreseen that, I could, I didn’t know that there was gonna be a pandemic, or that, you know, going back that you know, 4% of the mortgage market of some Prime’s would be one of the main things that led to, you know, unraveled the, you know, the entire financial system, almost or, you know, who had on their, their, their scorecard for 2021, that a boat, we get stuck in the Suez Canal and further disrupt global supply chains, or that a tsunami would take down the, the reactor in Japan, you know, and these things happen. And it just reminds again, with a pandemic, you, you should invest in a way that’s robust to the unexpected. So it’s just, it’s really been a great lesson. And if you don’t mind me saying another lesson that just says home again. So the stock market and economy are not correlated, you can’t look at what’s going on in the world or the economy or even geopolitically and say, now I’m going to make investment decisions. And three days after, in retrospect, what was the bottom, I wrote an article in Forbes, and it was advice we were giving their clients and reiterate with the clients, that they’re just not correlated. And the point of the article was, we’re heading into a really bad recession, unemployment was spiking. The stock market was dropping, everything just seemed horrible. But the point was, is you shouldn’t sell out of your portfolio, just because the news is bad is going to get worse. Because they’re not correlated. And then what happened is, you know, turned around and had a, you know, 70 some odd percent gain from about the time that I wrote that article, and what people have said to me is, Jennings, how did you know, we had bottom? And I said, No, you don’t understand the point of the article is, I didn’t know and that nobody knows. And you should invest, like you don’t know. And a challenge we have sometimes is talking to prospective client families that want us to give them the certainty of, we know what’s gonna happen. Instead, we say, we don’t know what’s going to happen. And we’re going to invest that way. And we find that our clients that are very sophisticated investment wise, love that. And some investors that are less sophisticated, you know, don’t choose us, they want to go to the big bank or investment firm that says, you know, here’s our chief strategist, and you know, the s&p is going to be up 14% this year, and blah, blah, blah, blah. And they like that certainty. Because as humans, we don’t like uncertainty. If somebody says, I know what the future is going to be, we get this dopamine rush or like, we feel good. So, again, I’m just like, sorry,
Seth Greene 19:30 that’s quite a fascinating answer. When you are not serving as president, what do you I know that you are an avid reader? What are a couple of the best books you’ve ever read that had the biggest impact on your career?
Unknown Speaker 19:44 So, you know, the Black Swan by Nassim Taleb had a huge effect. I read that shortly after it came out in in 2007. I’d like to say that I read it was like, Oh my gosh, I see you know, 2008 coming, but let’s, let’s at least open my eyes to it. And it really last few years, one of the books that has, you know, just, I was just like, wow, just really, you know, knocked me as like I’ve learned so much and really caused me to see the world a bit differently. There’s a book called scale, by Geoffrey West, who was a physicist at Los Alamos, and then went over to the Santa Fe Institute, and was the head of the Santa Fe Institute, if you don’t want the Santa Fe Institute is it’s a academic think tank and their, their main area of research is complex adaptive systems. It’s how things interact, when you have intelligent agents and feedback loops and everything, which is really how the stock market works, by the way, why we that’s why we can’t predict it. But this book is all about scale, like power laws, it’s on about organisms and businesses and things and what a power law really is, is, I’ll use an example of let’s let’s use the example of book sales, you can look and say the, you know, that there’s, you know, how many ever books published in the USA, every year, it’s, you know, hundreds of 1000s. And you can say, the average book, you know, sales 10,000 copies. And if you think in terms of a bell curve, you’re thinking, Oh, you know, there’s, you know, kind of, if you’re listening, I’m sorry, I’m like drawing a bell curve with my hands, high in some low, but a lot around the $10. That’s not how it works. You have people like Stephen King, and JK Rowling, you know, you have this very small percentage of authors that sell a ton of books, and then drops off immensely, we have this very long tail of most books selling, you know, less than 2000 copies, less than 1000 copies. So that’s a that’s a power law distribution, or think about wealth. So, you know, if you take a, you know, you go to a concert venue that has like, 2000 people, and you go, okay, the average income of these are that, let’s say, the average wealth of these people is, you know, $250,000, if you average it, right body, and if you think bell curve, you’re like, oh, okay, but imagine if, you know, Bill Gates walks into the room, okay, the average just skyrocketed. And it doesn’t tell you anything about what everybody else has. And, and that’s the way wealth works in America, too, is at every stage, you know, you look at the top 50 versus the low 50. And then the top 10%, the top 1%. At every stage, there’s a few number of people that are massively out of range that that affect everything else. So this book is all about that is a little technical. Like I’ve, I’ve talked before about how much I liked this book, I’ve had people that have like I couldn’t get through it. So if you want to just really expand your mind, but it’s work scale by Geoffrey West.
Seth Greene 22:40 Great recommended patients fascinating interview, and anything else want to share that we didn’t think to ask you yet.
Unknown Speaker 22:46 Well, I would just like to, if I could plug my blog, of course, please. So I write a blog a few days a week, it’s called the interesting fact of the day, it really should be called what Jenny’s thinks is interesting, but I get a you know, it’s very well received. And it’s just all sorts of different things. Some some times as things on leadership, sometimes it’s as simple as its national Grilled Cheese Day, you should go eat grilled cheese, and, you know, today’s sent out as a rerun because my daughter guys, graduates from college tomorrow, and it’s on the five best commencement speeches. So it’s just a lot of different eclectic thing you can think you can find it
Seth Greene 23:22 at V th e.
Unknown Speaker 23:25 iPod, which stands for interesting fact of the day. So th e, i fo D calm, feel free to subscribe, feel free to unsubscribe. But just me, I find that people say that it kind of kind of tickles their interest in things. So.
Seth Greene 23:39 All right, well, this has been Seth Green with john Jennings of the St. Louis Trust Company. JOHN, thanks so much for joining us. Thank you so much. Thanks, everybody for watching or listening. We’ll see you next time.