- 11 minutes ago
Category
🗞
NewsTranscript
00:00This is your first future proof. It is my first. You've been to your share of investment conferences, though.
00:04And not one like this. I was just going to say, not one that's literally on the beach.
00:09I want to talk to you about markets and about what you see as a strategy moving forward.
00:13But you come at this at a unique angle, given your family history, the industrialist side of things in the
00:19way that, you know, for five generations,
00:21you and the family have nurtured that fortune and also sort of built it into this family office that has
00:28more than $12 billion in assets
00:29under management. Give us the give us a little bit of the history here.
00:32Well, everything you said was correct, except for it's seven generations.
00:36But who's counting? Oh, my God. But who's counting?
00:38So we had really my great grandfather was the equivalent of a private equity investor and built a lot of
00:45businesses.
00:46One of them publicly traded business called PPG Industries, which was glass and chemicals because now publicly traded.
00:52Right. Then and the private equity of the day was Carnegie and steel and my great grandfather in glass and
00:59paint.
00:59And Rockefeller in oil. And they were the ones that were 31 years old and making those fortunes.
01:05And he came over and passed, moved to Philadelphia, passed away, left three brothers who my grandfather was 21 at
01:13the time.
01:14So think like the Waltons. They were each independently wealthy, but quite young.
01:19The oldest was 29, I think. So they decided under the leadership of my great uncle that we'd keep all
01:25the money together
01:26and have the same advisors, the same tax advisors, investment advisors, so that they wouldn't sort of separate and get
01:33picked off,
01:33I think is what they were thinking. They'd keep their financial power together.
01:37And that was the start of our business 103 years ago.
01:42And later on, like in the 80s, we started to serve other families.
01:45And now the majority of our business is serving other families, though the Pitcairn family wealth is still a big
01:50part of what we do.
01:51What do families do today? Are they so inclined to kind of all stay together or does everybody kind of
01:56want to separate and go their own ways?
01:57It's a mix. You know, we're lucky enough to have some clients that have had structures in place a long,
02:03long time.
02:03And many of those structures sort of incentivize the family to stay together.
02:08So you might have a trust structure that was built in the 40s or the 50s, and the family needs
02:13a lot of help to navigate that structure.
02:15And that's sort of incentivization to stay together.
02:19My experience, my professional experience, is it's really healthy for families to figure out ways to give families a fair
02:26door and way out if they don't want to play.
02:28So whether that's in terms of the valuation of illiquid stock or how you would separate a trust, but to
02:35do that fairly rather than say, you know, sort of if you go, you get book value, which is unfair,
02:40you know.
02:41And then because if the family members stay in and they don't want to be in, they're actually quite detrimental
02:46to what the core of the family is trying to achieve.
02:49You know, there's that old adage about shirt sleeves to shirt sleeves in three generations, which obviously did not apply
02:55to your family.
02:56And I'm curious if you have seen that happen, how you avoid that and sort of where that comes from.
03:02I really think families come to us so that doesn't happen to them.
03:06We try to build in structures to where you don't run into that cycle, to where you have this perpetuity
03:12to the wealth.
03:13And I think that's why they come.
03:15And in fact, one of the coolest things I've seen in my career is when that really gets broken.
03:20Like you have a second gen or a third gen who comes along to what the first gen built and
03:25like puts an exponent on it.
03:26It was worth $400 million when the first gen was retiring and get done.
03:31And they take that thing and they're just as entrepreneurial and they make it worth $4 billion.
03:34And I think that's so cool because it's, you know, goes against the idea that it's just this slow drain
03:40of the wealth from a big pile to a little pile.
03:42I really try to help families not do that.
03:45What do you help families do in terms of how to allocate some of their investments or their wealth in
03:52particular?
03:52You've got $12 billion in assets under management among these families in your own.
03:56But I'm just curious what's interesting.
03:58There's basic things like the AI trade.
04:00We're looking at higher yields.
04:01What is it that's interesting, private markets versus public?
04:04I continue to be astounded at the demand for private investments by the wealthiest segments.
04:11I think sometimes that even comes at the detriment to their own investments.
04:15They think that they adjudicate the entire investment offering through the private investment spectrum rather than realizing.
04:24Private equity, private credit, all of it.
04:26All of it, but primarily private.
04:28They all want SpaceX.
04:29They all want to be in Peter Thiel's latest fund.
04:31They all want access that is hard to get.
04:33And they actually buy some intermediate stuff a lot of the time that doesn't perform near as well as the
04:39shiny star that they're looking at.
04:41And I think our job is really to be, I mean, it's, I guess, a bad word, but a disciplinarian
04:47in that, yeah, there's a role for private equity.
04:49There's a role for private credit.
04:50But let's do it inside a diverse portfolio where we aren't chasing the hot trade and we're built for any
04:57kind of downturn that might come.
04:58So you want to get in their way so then to create some friction to keep them out of trouble.
05:06Correct.
05:07I mean, I always say, you know, my families are in the end zone.
05:10My job is to help them spike the ball, not drag them out on the field where they can get
05:13hit.
05:13And so if they want, you know, 100% hedge funds in 2006, I say that's maybe not such a
05:19good idea.
05:21So I want to build on what Carol was asking because you are now a global strategist.
05:26You used to be chief investment officer of the firm.
05:29You're watching this stuff closely.
05:30Your job now is to look at opportunities that are out there and really scour the globe for these opportunities.
05:36You mentioned private markets.
05:38Where else are the opportunities?
05:39I think, you know, what we're seeing a lot of right now, and you see it all over this conference,
05:44is a lot of focus on the tax impact to U.S. clients.
05:50What's that after-tax dollar versus the pre-tax dollar, which you didn't see a lot.
05:54So we started thinking about this in one of the...
05:57You know he's in a family office when he talks about taxes.
06:00Death, divorce, and taxes.
06:01But I do feel like there's been a shift in the narrative of people talking a lot more about tax
06:05implications.
06:06Walk up and down.
06:07Walk up and down right here.
06:08And we started working on this in 2007.
06:11It was one of the better things I did in my career was seeing how some of this could work
06:15for families.
06:16You're seeing a lot of people work on these levered strategies right now where you're putting like $145,000, $145
06:23,000 around a portfolio just to have a lot of gains and losses so that you get a massive tax
06:29impact.
06:30And there's problems with the custodians that was watching.
06:33I mean, it's a buzz right now.
06:35And it's a little gratifying to me because we were working on this pretty hard a long time ago.
06:41It's interesting.
06:42I see that, yeah.
06:43And I think we're pushing hard on more diversifying strategies, real assets.
06:50You know, we believe that if you look at what's been going on with Treasury and the Fed, we think
06:55that if you could make the case that politicians around the world are going to all stand up in unison
07:03and say,
07:03from here going forward, we're going to spend responsibly and we're going to cut down our spending and we're going
07:08to live without our means.
07:09But I'm going to take the other side of that.
07:11I was going to say, Rick, I don't know what world you're living in, but I want to take the
07:16other side of that and say there's going to be inflation.
07:18So let's have some real assets.
07:20Let's have some gold.
07:21Let's have some things that are going to do well when there's inflation.
07:25Again, I don't mind it, but for our families, I think gold's a little – you get most of that
07:30inflation-fighting goose without some of the volatility.
07:33What is it that you think when, you know, we cover the markets day in and day out, businesses, trends,
07:39politics, everything, what do you think we should be talking to investors about?
07:43I think that you guys have such an important role.
07:47And in today's world, there's so much coming at these investors.
07:51You know, there's nine million different ideas.
07:54They can't make sense of it.
07:55And I think sticking to the basics and letting them really know that, you know, yes, you can try to
08:01market time.
08:02You can try to pick the four months that you want to be in cash, and you can make a
08:06lot of money doing that, but your chances of executing are really quite low.
08:09And, you know, a little bit of fundamental blocking and tackling that allows them to build something on which they
08:16don't have to put themselves in such a corner that the markets have to go just right for them to
08:22succeed.
08:22Okay, so Carol wants to talk about that stuff.
08:24I want to talk about the drama, okay?
08:26Because you understand families and family offices, and with these families, especially multi-generational wealth, there is drama.
08:34There can be.
08:35How do you control for that in a family office?
08:38Well, people want different things.
08:40They do.
08:41Is this like succession?
08:43There's a reason that, you know, that exists.
08:46They had people in my office where I was saying, you have to watch this show because it's so much
08:50what we're dealing with on the 9 to 5.
08:51But I think there's processes you can put in place.
08:54You know, we've had a group we've called Family Engagement headed by Amy Hart Klein since 2015, which is just
09:01to stage a family meeting, to educate the children, to begin to, or second gens or third gens, to begin
09:07to put a process around that rather than it be in a dynamic where there's some people that hold the
09:12power and they don't talk about it.
09:14And you don't get it in the middle because that's when the real dissatisfaction happens, in my mind.
09:18And if you can get everybody around a table, maybe they don't like the way things are built.
09:22But if they understand the motives behind the structure, people get along better, in my experience.
09:28Does a lot of emotion come out?
09:29I just think about, ah, you know, Mom, Dad liked you more.
09:32Like, does this kind of stuff happen?
09:33Sometimes more.
09:34I mean, generally, right, you have, like, a family where there's two or three that work inside the family business
09:39and they know it really well.
09:42And then there's two or three that are disaffected.
09:44They're laying on that beach right there out in California.
09:46I get it.
09:47And the two that are inside the family business, they don't like the two that are out there because they
09:50don't do any work and they got us a good suntan and I'm working my tail off.
09:54And those two don't like the two inside the family business because they're dad's favorites and they got all the
09:59money and they got all the power.
10:00And you have to sort of bring them together and give the people outside the wheel agency and give the
10:06people inside the structure the ability to understand the point of view of those that aren't inside.
10:11Do you have a therapist on hand?
10:13We use them.
10:14You do?
10:14We would actually, we have several that where we can go out.
10:18I mean, if things get acute, we have a lot of in-house expertise, but there's a line by which
10:23you'd want to, you know, access outside experts because you don't, like, I'm a money guy.
10:29I was a chief investment officer for 15 years.
10:31If I try to say I'm a therapist, my credibility is shot.
10:34Right, right.
10:34You need to call in the pros.
10:35You need to call in.
10:36Sometimes you don't.
10:37Sometimes you just need to build a process.
10:39But I think to take it seriously and realize that these are real problems that these families have, then you
10:46get the kind of buy-in where you've made the family a client for life, basically.
10:50It's so interesting, right?
10:52Now, listen, I, family and money.
10:55It gets complicated.
10:55Well, we're going to talk to the Bonapartes in a few minutes.
10:59And they, literally, the couple wrote a book about this.
11:02So, yeah, they're going to be speaking to us a little bit.
11:04I always say, love, power, and money as a volatile cocktail, right?
11:08When you have all three of them in the same bucket.
Comments