For those lucky few who’ve sold a business, inherited wealth, or otherwise find themselves in the enviable position of staying wealthy, not getting wealthy – the investment game can be more about playing defense than going on offense. But how do you go about that, who do you partner with to figure out complex tax and estate issues. This week, Jeff is sitting down with Homer Smith, the founder of Konvergent Wealth Management, to dig into just how investment advisors like him go about solving the complex financial challenges end investors face.
Homer and Jeff dive into a variety of topics, including how allocating to managers differs from being an asset manager, how to add DEFENCE to build an all-weather portfolio, the benefits of return stacking (Be sure to check out this WP on Return Stacking), how to navigate and scale an investment firm, and take a closer look into the future of wealth service. Plus, we’re playing two truths and a lie with Homer; tune in to see if he really is Matt Damon’s stunt double — SEND IT!
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Check out the complete Transcript from this week’s podcast below:
The Business of Staying Wealthy with Homer Smith of Konvergent Wealth
Jeff Malec 00:07
Welcome to the Derivative by our RCM Alternatives, where we dive into what makes alternative investments go analyze the strategies of unique hedge fund managers and chat with interesting guests from across the investment world. Happy first day of September, everyone, you guys crushed our back to school episode last week. Thanks for them. And we’ve got great guests coming up throughout September, so make sure to subscribe and be the first to get new pods as they drop. Under today’s episode, where we flip the script a little and talk to an end user of all these pros and asset managers we have on the show. We’ve got Homer Smith, the founder and CIO of convergent wealth. We get into how to talk to clients about defensive strategies. What’s next for the wealth advisory industry and being in the stay rich versus get rich business? Send it This episode is brought to you by our Sam’s managed futures group, go to our cml.com Sign up for all the great content there and pick up the phone and call one of the specialists to hear what’s going on under the hood. You won’t want to miss it. Now back to the Show All right. Welcome everybody. Welcome Homer. How you been?
Homer Smith 01:19
I’ve been well man. It’s it’s been a good summer so far. I know. Putting when this gets posted in deliver, but it’s been a great summer out here in the Pacific Northwest.
Jeff Malec 01:28
Yeah, tell me a little about the Great Northwest up there. What do you guys do in the summertime for fun?
Homer Smith 01:34
A lot of boating you know we’re the Puget Sound is if you look on a map and dial it in it’s pretty much you know, every city town has got water mountain something related to that. So a lot of time around water we ourselves just built a property or built on our property. We’ve got a acre and a half ponds we’ve got our own little mini Lake and so that’s our version of waterfront but we’re out on kayaks and paddle boards and doing all that sort of fun stuff. So
Jeff Malec 01:59
yeah, acre and a half lakes pretty big right?
Homer Smith 02:02
Yeah, it is. Yeah, it’s it is a mini Lake and it’s a really pretty property and we just moved in last year and last summer was all packing and then moving in and so we really lost the summer so it’s been nice to really have a relaxing summer out on the property.
Jeff Malec 02:20
Do you stack it with fish or birds?
Homer Smith 02:23
Yeah, they’re efficient they’re we haven’t started it yet. But we got hair in and and hawks come in diving in and grabbing fish out of it. We’ve seen him get some pretty good sized fish out of there. So it’s about 12 to 15 feet deep in the middle so it’s a decent, decent depth. So our goal is to get get it more stocked and have some fishing tournaments with the friends and family out there and do some fun stuff like that
Jeff Malec 02:45
night the I was involved in a golf course development a while back and that totally artificial lakes and ponds, right. And people would be catching huge bass and stuff out of there. Like how does that happen? And finally I learned like the eggs will get stuck on duck’s feets or the herons you mentioned. Right and they fly from one place where there’s natural fish come land and this like deposit the fertilized eggs and boom you get fish. Yeah, nature finds a way. And is anyone ever go like offshore? Right like into the Pacific Ocean. You’re just tooling around in the saddle. Yeah,
Homer Smith 03:21
there’s a lot of people for Fisher men do for sure. And people, salmon fishing and halibut and they’ll go pretty far off the coast. Decent drive from Seattle area. You know, it’s a good couple hours to get out there. Yeah.
Jeff Malec 03:37
past her Cobain’s house, I think Yeah.
Homer Smith 03:40
Aberdeen and now. Yeah, for sure.
Jeff Malec 03:43
And you just set me up for my favorite dad joke. Why do fishermen go fishing? Why is that? Just for the halibut.
Homer Smith 03:51
Nice. Girls will love dinner time lately. As we sit around as a family they’ve been asked me to do jokes. I have to look them up. Online. So I have to add that one to the mix. There’s a
Jeff Malec 04:03
good Twitter guy I follow like pun something I’ll send it to you. But yeah, he’s he’s got all those that are pretty good. Hit this one today. Was there a French fire? A factory cut fire in France. All that was left was debris. All right. Well, we’ll stop on the digestion. So anyway, wanted to get you on fun for me kind of to flip the script for our listeners here. You know, we’re usually talking to the asset managers, the ones making the trading models doing the execution, figuring out the complex option theory, et cetera, et cetera. And happy to have you here the one who’s saying hey, I like the cut of that guy or gals jib. I’m going to allocate some client assets them so tell us a little bit what it’s like being in your chair from that perspective and having to make sense of all the math and separating out facts and fiction from all these. Hedge Fund guys you hear on Are podcast here.
Homer Smith 05:01
I appreciate being on and I, you know, one thing I can promise is you won’t have to pull out the dictionary like he would if like Jason Buck were on or something like that I would enjoy learning new words or not, when he’s on the know, it’s, you know, in terms of especially the this space that you guys live in more of the trend following managed futures long volatility space is relatively new to me really the last couple of years that we did our research and came along to this world. So podcasts like yours and some of the others out there, it’s been a massive educational experience for me to kind of learn a whole new part of our investing world, you know, we grew up in the broker dealer ra space, and you kind of get into this 6040 portfolio world and you don’t really look much beyond that, and no one really expects you to look much beyond that. And so, you know, the rock stars that I look at now in the investing world are probably very different than what most traditional advisors would would view as people that are very interesting and, and have the best takes and the most interesting research. And so it’s, it’s a, it’s been really fun to find your podcast and find your firm and the research you guys do and the people you bring on, because it’s been transformative in our business.
Jeff Malec 06:23
The and how much of a learning curve was that for you to kind of get up to speed with just some of the vernacular, like you’re saying some of the vocabulary and like these concepts of like, okay, like, I think you can get it conceptually. But then oftentimes, here we go into the weeds. And it’s like, Is that helpful to you to get that far into the wheat?
Homer Smith 06:40
It is, it’s super helpful, because I think one thing I’ve always been good at in my career when I started really young in this business. And I think one reason why I made it and did well was I’ve been good at taking really complex concepts and helping clients understand it in their world in their language. And so for me to be able to do that, I have to go really deep into the weeds of it to get to the point where I can translate it back into something more simple for them so and needing that knowledge. So they need to know that I have the knowledge on that topic to be able to trust the translation into their more simple vocabulary. So yeah, it’s been extremely helpful to have that
Jeff Malec 07:17
depth. I used to joke with these managers who write these big 30 page, monthly letters and stuff, right or quarterly letters. And I’m like, then they were transitioning into mutual fund world. I’m like, Alright, your letter needs to become a paragraph, the wholesaler reads a paragraph gives it to the RA explained to them, then the RA turns it into a sentence to give to their client. So here, you’re basically you’re 30 Page letters, getting bogged down into a sentence to the end client. Which is more difficult than it seems right? Like you got to, you got to pull out all the pieces of it, and what and how hard it is like, how many pitches are you getting a week or a year, in terms of people coming in and saying, I’ve got the next best thing, here it is. And you kind of have to suss out, we’ve already got some of that we don’t have that. This, it’s interesting. That look like
Homer Smith 08:07
it’s easier now because I have a good team. And so I there, we have good gatekeepers, and they have rules of who can get to me and who can’t. And so it’s you know, we get a lot I mean, it’s constant, as you can imagine, I mean, I emails are, you know, 510 a day at least or more. And then phone calls and are constant. But thankfully, they know, you know, we have a certain philosophy our team does. And so only so many get through and and so I but rarely do I entertain new meetings if it’s not something I’ve found through my research. And so usually those meetings come about because I read a piece that was really interesting to me, I then reached out to the management group to find out more and see how it fits. And then they might say, Hey, you should talk to this manager or this manager because they’re doing something similar. And so, so today, I try to keep it I try to not entertain too many new ideas. Because you know, there are so many and only so much time in the day and and mostly find them through my own research now.
Jeff Malec 09:08
And you’re saying you get five to 10 new pitch emails today, not total emails a day because you’re gonna be my hero.
Homer Smith 09:15
Yeah. Five to 10 a day I’d be right.
Jeff Malec 09:19
It’d be out on that pond just sitting in a rowboat doing some
Homer Smith 09:24
sorts of rules in my email now to capture those and send them to their own files. I don’t ever have to really look at them even but
Jeff Malec 09:30
and so that I like that. And so that’s like, just killed a bunch of people are like, no, we’ll do LinkedIn ads and reach out to RAS on LinkedIn and be like, hey, you need to be involved in this new read or this new whatever. So that doesn’t work.
Homer Smith 09:47
That doesn’t work either. But I get plenty of those to sorry, LinkedIn
Jeff Malec 09:50
marketers. And so how do you keep that focus or what you said there’s some rule like what are those rules look like? And so you’re not like chasing down some new condo proud. Jake Dora private sale of some unicorns, stock, right?
Homer Smith 10:05
Yeah, so part of it is our we do have an investment team, and they’re tasked with kind of the general. So I have my philosophy. And so, you know, we’ll talk about, you know, we have an all weather approach in general to our core philosophy for working with clients. But you know, we do have a lot of clients that have sold their business or, you know, inherited family wealth, and you know, they are looking for more than a simple model to manage their money. And so we do have access to private capital markets and private equity funds. And so they’re tasked with really doing a lot of that research and narrowing to the scope down to where it fits what we’re trying to do as a as a firm for our clients. And then for me, it’s a lot where it comes about for me is, you know, when I do my research and how it came about to the all weather, for instance, was I read The Allegory of a hawk and serpent, by Chris Cole. And the first reading of it was, okay, this is a really interesting idea. 100 year portfolio, I work with multi generational families, that’s really interesting. No idea what long volatility is a little bit of an idea what trend following is, and gold and all that. But after the third or fourth reading, I was like, this is really profound. And we need to, I need to figure this out and really get to know this. And so that’s how I kind of got down on the road to all of those managers was really starting with a research paper and then doing self education on the strategy and the idea and then finding who does this and in for our clients, and in the retail space, even the high net worth retail space, how do we access this? How do we how do we fit this into what we’re doing? And how does it fit into our philosophy
Jeff Malec 11:42
so I copied in one of your tweets in my notes here back from May, you said never slept better my career, I started my career, the week of September 11. Would have to maybe get an extra that’s crazy. That very week of Yeah. Took over managing a branch for a major broker dealer in October oh seven. Now COVID. Now this latest draw now nothing is perfect, but we’ve actively added defense to our portfolios, and it has paid off. So we’ll bury the label put that on hold for a second because now I got to know the 911 story. So the week of 911
Homer Smith 12:17
Yeah, so I graduated college, you know, June of 2000 in one of my licensing over the summer and got through all that and I think the Saturday you know, Friday or Saturday before and I love it was like my first like day in the office and my stack of leads and and cold calling and then I think it was a Tuesday was 911 and and basically shut everything down. For the next month or so, you know, you’re brand new to your career, and you’re basically cold calling it wasn’t it wasn’t quite a pretty darn close. And nobody’s interested in talking about Yeah, no way through their portfolio. So it was definitely a very interesting time to start your wealth management career without, you know, thrown into the mix. Who is that with? As well as American Express financial advisors at the time? Yeah. Ameriprise? Yeah.
Jeff Malec 13:06
Yeah, so that was kind of cold calling, but they were they were fee based. So they were transaction based a little bit of both.
Homer Smith 13:12
It was they’ve had a planning focus to the firm, which is what attractive and so but they were just moving into more of a fee based world, it’s still still relatively transaction oriented. But they did have a planning, focus. So it wasn’t just investments, it really was an overall holistic planning approach. Yeah.
Jeff Malec 13:33
And so we buried the lead there. But so that tweet thread and this adding defense, and you mentioned like, hey, all weather and generations of wealth. So talk a little bit like which which came first your client saying like, I want to protect this generation as well? Or are you saying, I think this is a better way to protect this generations of? Well?
Homer Smith 13:52
Yeah, good question. I think it came about I mean, as I’ve my approach to wealth management, in general is, you know, what we call a family office practice or family office approach. So we’re working with our clients to, you know, think beyond just the investment world? And really, how do we optimize their entire financial picture? And look at what outcomes are they looking to create both for themselves and then in future generations, if that’s important to them? And so that was a big part of what I was already doing from a planning perspective. But you know, when you’ve got an older generation, and then maybe G two and G three, their investment goals or how they think about investing might be completely different. And so I never really thought about, okay, when one solution kind of makes sense as a core for all of them. And it really was reading Chris’s paper, where he talked about the 100 year portfolio and why it made sense to think about it that way. It really kind of connected the dots like okay, this can be the core kind of a portfolio concept for any, you know, Age of investor or style of investor that this should be the core and thinking about it from combining the offense and defense Together perspective.
Jeff Malec 15:02
The end before that, what was the core? What was the idea of like, Hey, we’re going to diversify stocks, bonds, real estate, some other?
Homer Smith 15:09
Yeah, I mean, I definitely I’m not unique in this, I think prior to that, but I was mostly of the idea that look, you can’t beat the benchmarks actively managing the fund. And so don’t overly try. And so we, I would say, we were more, you know, if you looked at our entire book, we were pretty close to 6040, although we did it, you know, different allocations based on age and risk tolerance. And so we are at 20, and 6040. And those, and then we also did some, you know, additional pieces, like we were using some ball targeting algorithms and groups that helped us with that. And, you know, it was working relatively well in that strategy. And so COVID hit, you know, and, and it worked at the beginning. So it pretty quickly de risked, and got out of the way of a lot of the downturn, but then because of kind of the high levels of volatility that persisted for so long and never, never got back in. Yeah. And so at the same time, that’s when I read Chris’s paper, and I was like, I don’t like what’s happening, I don’t the feeling that that what was going on our portfolios wasn’t good. And I didn’t like the idea of having to go in and out of the market based on some ball targeting and really like the idea of having this core portfolio. That could be not static, you know, obviously rebalancing a huge component of it, and how that work, but but at least as a core concept of how we would build a portfolio and construct portfolios for clients, it was just really, it really hit home.
Jeff Malec 16:32
How many you said, you’re talking to clients about second and third generation? How many? Say No, you said, if they care about that, how many say they don’t care about that just out of curiosity of like, no, they’re fine. We’re just going to spend it all.
Homer Smith 16:45
It’s a good mix, I would say really, there’s most have some desire to create some level of a legacy and pass the wealth down. There are definitely some that you know, interestingly enough, as you get into that space, you know, there’s lots of conflict between generations often or within the generations. And so, you know, there can be some consternation on exactly whether they want to leave everybody with all the money and what problems that might cause and will World War Three breakout, you know,
Jeff Malec 17:20
just saying it’s easier to say, forget it. None of you all go into charity.
Homer Smith 17:25
Yeah. So there’s some that that are definitely thinking that route. I mean, we obviously try to help and get involved in some of that. family cohesion, planning and trying to bring it all back together. And it’s difficult, but But um, but yeah, it’s a good mix. It’s not you think everybody would, would be looking to set up that multi generational wealth and dynasty planning, but but not everybody is interested?
Jeff Malec 17:46
Well, if you want to hire me as the poster child for protecting multi generational wealth, right, my great grandfather was Walter as Davidson, co founder of Harley Davidson. And then my father took two companies public back in the 80s. And here I am working on a Friday afternoon. So yeah, if it’s real, protect that wealth. Most of those problems, were getting divorce and the motorcycle business going back to zero after the Second World War. But
Homer Smith 18:13
now we talk about that a big part of our planning is in asset protection is, is we talked about divorce, and especially in future generations, and how do you keep the wealth in the family? Especially, unfortunately, given how common that outcome is these days? So yeah, it’s a big part of our conversations.
Jeff Malec 18:30
And then you mentioned the 6040. And people doing those portfolios, like, I’m always like, is it really a thing. So how many people are really actually just 6040? Right, we’d love in our alt space to compare to it. But part of me thinks like, nobody’s really doing that they’re more of a, like you said, 8020, or they’re around the edges doing different things,
Homer Smith 18:50
I would say, as an as an aggregate. So I was talking to another ra recently, on some other topics that we brought up the investment component, because you know, in general, when you’re an RA, and you’re in the planning space, like we are in family office space, we really do believe that the investments aren’t necessarily going to be the most impactful part of what we do. It’s the tax planning and the estate planning and all those other things. And so he was talking about that in the sense that he tells clients, it’s like the 30th or 35th thing on the list of 20 things that he’s going to talk to them about something. And he made the comment that his his aggregate of this book is basically a 6040 portfolio of clients are going to be at 2060 40 depending on their age and risk tolerance, sometimes less aggressive mix, but aggregate Lee he basically that is 6040. And so I think that’s, that’s my sense is that that’s where it ends up. If you look at the total portfolio construction for an RA it’s probably looks pretty darn close to 6040. All right,
Jeff Malec 19:48
we’ll keep we’ll keep using as a as a benchmark.
Homer Smith 19:52
I think it’s pretty real. I think in all the a lot of the advisors I talked to you that’s when, again, maybe individual client by client will be different but their aggregate The book is going to look really close to
Jeff Malec 20:02
- And how much either talking to other IRAs or talking with clients, how displeased? Are they with the 40 portion with the bond portion?
Homer Smith 20:11
Yeah, this year, I’d say quite a bit, right. I mean, we’ve been so used to having that be the part that at least is steady and stable and, and, you know, for this year to have everything go down at the same time, you’re not, you know, COVID, obviously, you saw that for a very short period of time, but then, you know, Vaughn pretty quickly recovered. You know, here, we had a very extended period of that. And so I think for the first time, you know, and I talked to clients about this a lot, you know, it’s been 40 years plus, since we’ve had any sort of real inflation that could have impacted the bond market, like it has, and there’s probably very few, if any financial advisors that were advising clients, the last time we saw this. And so, you know, most advisors haven’t ever had to think about it, and build a portfolio around that. And so most of them still have not right, and I think most of them have just kind of had to grin and bear it and hope it recovered. And, and, you know, obviously a little bit it has recently with rates coming down a bit, but clients had been very frustrated that, you know, new clients that we’ve spoken to that thought they were in a very safe conservative portfolio, not that the advisors overly sold them on, it couldn’t go down. But just, it’s hard to, I think, estimate the kind of risks that they were putting themselves into, because we just hadn’t seen it as an as a Advisor Group in most of our careers. And so I think it’s really difficult to set that up when you haven’t seen it, in fact, test would never show it. And, and so. So it has been a very interesting, eight months, nine months as we’ve gone through that, right.
Jeff Malec 21:44
I think the the general, like, well, it’s possible. Look at the last 30 years, very unlike Yeah, right, that one little sentence can can switch you to Mike. Okay. And then. So talking about the clients, how, how have they been a view getting them on board with a more holistic or whether approach? Versus this 6040? Like, so, tell me a little bit about how the clients came on board when they were brought dragging and screaming or whether they intuitively got it? Or I’m sure it’s a mix?
Homer Smith 22:14
Yeah, I think timing matters, you know, sometimes and by accident, I think we as we were doing our research on an all weather approach, and, and maybe backtracking on that a little bit. You know, when we first looked at this two years ago, our first answer was, we can’t do it. We can’t build it. Because of you know, when you’re building a defensive portfolio, you got to take away from your stocks and your bonds to add in managed futures or whatever defensive strategy you might want to put into the mix. And so all that looks good when the market goes down, you know, most of the time it doesn’t. And so your, your clients are frustrated for a longer period of time. And so when we first tried to try to start building it and find solutions for it, it just was too conservative. It was too defensive. And so we didn’t use it for like the first year. And it wasn’t until we you know, through relationships like Jason buck and robbery ogre do it resolve and Cory Hochstein and newfound and Mike Green at simplify, were we able to kind of really construct something that looked more like a dragon portfolio or a cockroach portfolio. And that’s what kind of made the difference. And so once we could actually show that this thing could still have the performance to the upside, or that we think it could, you know, obviously, back testing and all of that, that we could, you know, have a portfolio that we felt could keep up on the upside, when the market was going well, but still have a lot of that protection built into the downside. We finally were able to, I think, put together a compelling story for clients. And so you know, I stole a lot from Rodrigo and and from Jason and their presentations, they obviously allowed me to, but yeah, a lot of what they were doing and really thought about how can we present this to a client in a way that they’re going to? It’s going to be approachable for them. And so, you know, actually, we did most of the the initial work about a year ago, so it started in about the fall of last year. So the market hadn’t really taken its turn yet. But I think a lot of our clients, you know, being in the business owner world, they could sense things were weird, right? Little frothy? Yeah. And so I think the story we were trying to tell them that, again, I think it was a Chris Cole thing. And he said, you know, he’s talked about, you know, we’re not trying to predict the future. We’re just being prepared for what might come and that was a lot of the general theme of how we talk to clients about this is we don’t know when this major secular shift might occur and when inflation is going to really become a problem. But it looks like there’s something on the horizon and we want to be prepared for that and but we have things in here that will do well even if that’s wrong and if equities still you know, race to the moon, you’ll be okay. But if it doesn’t, you’re going to be protected and the most of our clients built their wealth, very concentrated. In real estate or their business, they had had that liquidity event and they don’t want to lose it. And so it was the conversation really was pretty, you know, I looked back, it was relatively easy either I don’t think we had any clients at the end of the presentation be like, no, they’re always like, yeah, that makes it. It’s like, basically that makes sense. Yeah. Yeah.
Jeff Malec 25:19
But part of me is like, they made all their money in these concentrated positions. Do they sometimes be like, like, come on? This is you worrywart. This is too conservative. And this is too, right. Like, let’s take a little bit more risk. Let’s do this.
Homer Smith 25:32
Yeah, we have, we definitely have clients that are the opposite of of trying to protect and one want to grow and still want to take those shots. And so we we still have components of the portfolios. We’re not like 100% in, like an all weather model. Yeah, Leo, it’s, you know, for those clients, we have, you know, satellite positions or core positions for them that are going to be still, you know, doing those moon shots and taking taking the risks for them. But we try to walk them through the idea, again, to do in a holistic planning, like, you know, what, if we took this chunk that basically, was what you needed to live off of for the rest of your life, and made sure that was in something like this and protected, and we could take all the excess money that you don’t necessarily need, and that’s where we could take the risk. And that that conversation seems to work pretty well.
Jeff Malec 26:17
Yeah. And so with the portion that can take the risk of you buying a Bed Bath and Beyond call it
Homer Smith 26:24
the although no.
Jeff Malec 26:29
Easy answer, no. And it’s funny to me, right? If you if you thought of this 10 years earlier, and you’re like, hey, we want to we’re worried about inflation, we’re going to go into this stuff, and it doesn’t come for 10 years, like would you’ve been fired? I mean, a lot of this is no, because it’s still participates in the upside. So it’s gonna be good, but right, it’s, yeah, it’s just a weird concept to think like, Hey, if you if you are early to this, you may have been not wrong, but not proven. Right, right.
Homer Smith 26:57
Yeah, 10 years ago, I think we would have been fired for sure. I don’t think the types of funds and managers were around retail space that we could have built the portfolio we have today. And so you know, the capital efficiency and return second concepts weren’t prevalent enough to have enough managers doing it. So we couldn’t, we definitely would have been fired to avoid using the crappy model we created at the beginning and decided not to use and so you want
Jeff Malec 27:21
to play like 30% in AQR is managed futures fund that had a terrible decade. Right, went up to 18 billion, and then down to like, four. So I think a lot of people did that. And, and got burned. And
Homer Smith 27:35
I remember coming out of, Oh, 809, you know, all of a sudden, you know, the Managed futures private funds, were, you know, that’s talked about barded. I mean, I remember how many of those came out and how amazing the returns were in Oh, 809. And how attractive it was, and thankfully, I didn’t, the timing, you know, probably a lack of understanding of what it really was at the time. And, and, you know, being focused more on the management of my, you know, part of my career, I didn’t really get involved in it. But um, but yeah, it’s definitely had its moment. And then, for 10 years did nothing. So yeah.
Jeff Malec 28:09
listeners of the podcast heard me joke that I tell my son, we’ve been in drawdown his whole life, this podcast is sold, that used to be true back when I first started now, it’s not true. It’s added drama, new equity has. So you mentioned return stacking. That, to me, is a fame. Not a famous a fancy way of saying leverage. Right. So how did the clients understand that it’s leveraged? How do you how do you get that point across? I think they’ve done a great job of explaining that you’re stacking these things. It’s not necessarily the bad kind of leverage, like in crypto or some of these places. But how do you bridge that with the client?
Homer Smith 28:54
Yeah, I mean, we’re very careful, obviously, compliance in the US bridge and all of that we have to, you know, we spent a lot of time with our compliance group going through the concept and how it works. And, and so as the best that I can, I help walk them through the idea of how I managed futures fund works, and how you know, really to get allocated to all of the different types of investments they want to be playing in, you know, they might have at different markets they want to be playing, and they really only need maybe 10 cents, 20 cents of every dollar that’s invested to get that allocation, and most of the rest of it sits in bonds or cash. And so, you know, they’ve had this money just sitting there for years and not doing much And recently, you know, groups like standpoint and resolve and others have figured out, Hey, we can take some of that money sitting there in cash and we can overlay s&p 500 or other allocations to get back some of that money that we would have allocated away from equities to get into that. So we walk them through those examples and, and, you know, we’re not we walk you through look, we can’t be as aggressive as it as you know, the institutional space where they might be to three times levered through through the return stacking or capital efficiency, I think our portfolio gets to about 1.4 1.5. But we do we walk them through what that means. And, and, you know, which is important, because, you know, the funds that we use in this strategy are not necessarily your low cost Vanguard ETFs. Yeah. And so helping them understand that, yes, there’s higher fees in the space, you get what you pay for. But also the the capital efficiency actually, you know, helps with the fee conversation, because you’re getting more dollars allocated for that fee. And so we’re obviously from a compliance standpoint, very careful how we explain all that, you know, the fee is the fee, but they’re, in our view, they’re getting more for what they’re paying in for those types of strategies. And it’s, it’s helped them understand that concept.
Jeff Malec 30:49
But it’s sure I’d look at it right, you could speak in a standpoint, you can look at it, like you get the Managed futures for the normal fee, and you get the equities for free.
Homer Smith 30:58
Yeah, yeah. Yeah. It’s definitely it’s, it’s, it takes a few times we walk it, you know, we walk them through it a number of times for them to get it. And, you know, we’ve kind of been doing our, you know, a lot of semi annual meetings coming up now, and re explaining it and reminding them exactly how it works. And, you know, it’s been good because the returns comparative to the market, you know, well, I can talk about returns, but I would say the volatility and the, you know, of the of the portfolio has been smoother than what they might have experienced in the markets. And so, it’s been, you know, it’s never fun to talk about volatile markets. But it’s been a lot easier to have those conversations, given the construction of our portfolio.
Jeff Malec 31:39
And I would, I would argue, you know, yet that tweet and may have like a, I haven’t said so well, but I think the more powerful piece of it is now, right of like, and it sounds like you pivoted away from this a long time ago. It’s like, hey, things are looking scary. We’re going to lighten up, right? And went to more systematic model, which I think a lot of people appreciate. But the whole power of the return stacking, or the cockroach or any of those is, hey, we can have that equity piece always on. Yeah. So we don’t have to try and time it. And when is the bottom? And when are we going to get back in? So to me, like, even better than sleeping? Well, back in May was like, Hey, we never had to decide when to get back in. We’ve been back in?
Homer Smith 32:18
Yep, absolutely. Very sure. Yeah. So, you know, again, it’s all relative to the level of risk we’re taking. But, you know, we’ve our portfolios have gone up along with the market in the last six weeks, as well. So it’s not like it’s just a defensive portfolio. So it’s, it’s doing what it’s supposed to do. Exactly.
Jeff Malec 32:36
And so, speaking of your clients, one last thought on those, like, what have you seen up there? And you’re sort of tech Road, would you consider yourself tech world there? Sure.
Homer Smith 32:45
I mean, to some extent, yeah. Seattle, you know, we’ve got Microsoft, Amazon. Yeah. All the tech in this area for sure.
Jeff Malec 32:53
So with this huge crash in the NASDAQ, all those unicorns losing 80% are going down. Have you seen a lot of people like as wealthy evaporated, or as the wealthy or wealthy, they’ve been just fine.
Homer Smith 33:07
Generally speaking, I think people have been fine. I see our client base, you know, I work a lot in private business owner space, but it’s more founder led more, I wouldn’t say brick and mortar necessarily, but but not necessarily startup tech companies. And so they they have seen much less impact from that. They definitely feel it in the economy, they see it in higher wages. And, you know, a lot of our clients are definitely in that, you know, baby boomer space that are now at the time of recognizing, hey, we need to do something with this company and look at selling it. But for our clients in general, we thankfully haven’t seen it. Because we don’t have even in this, I think the Seattle area in general, and our clients are kind of all over the West Coast. It’s not as concentrated like it would be, I’d say in the Bay Area, in terms of the impact of that. So I think with Microsoft, Amazon having been pretty steady through all of this, it’s it’s kept things pretty frothy, around here. Although, you know, you’re definitely going down the streets, you know, before you wouldn’t see a real estate sign lasts more than a day. You’re starting to see him stacking up now and in the bigger neighborhoods. So we’re seeing it slow down a little bit. But I think people are hanging in there pretty well for the most part.
Jeff Malec 34:23
And this just popped in my head was my notes but talk a little bit about dealing with these ultra wealthy mortgage rates have any impact on their real estate decisions whatsoever? No. Right right. So I see all this right nor good trades, the world is going to collapse like well, and maybe that is creates a problem like the big the more expensive stuff will just keep getting more expensive. And the bottom in the middle get priced out.
Homer Smith 34:47
Yeah, they it’s more than that. It’s almost an opportunity because you know, they have the capacity to add real estate and make those investments and you know, one of our clients has a kid that moved on to another state. And a few months ago, they made an offer on a condo that was below the listing price and were rejected pretty outright. And two months later, those sellers are coming back begging for that offer to come back on the table. And they’re now in a position to say no, we’ll wait a bit longer. Because they’re seeing that stress coming, because they’re coming in with cash, they don’t have to worry about, you know, financing. So So yeah, so not, I would say at this point, now, it’s, they’re more now, you know, sitting back and waiting for opportunities, and first, you know, because of the rise in rates versus being impacted negatively by it.
Jeff Malec 35:35
And then, similarly, how do they, how do they view which we’re making massive big generalizations here? But how do they view like tax arbitrage between states? So if you’re in all those west coast, high tech states, are you seeing a lot of clients like, I’m getting to Texas, I’m getting to Nashville, I’m going to these. I’m getting out of this game where I’m getting, you know, taxed to death.
Homer Smith 35:58
I work a lot in California, and I have a lot of clients in California. And I would say it’s on every one of their minds. It’s very hard for many of them to leave. Yeah, family connections. I just love the weather, whatever it might be. But I would say it’s been rare that we’ve not done at least a high level analysis of what it would look like if you were living in Nevada versus California for your business transaction or for your retirement and the income stream you would generate during that timeframe. So it’s a big deal. The tax planning around a transaction a sale is really, really important. And California. So yeah, it’s the tax arbitrage of of residency is huge. Washington relative is different. We don’t have income tax, but we have one of the most punishing estate taxes from a state level. And so the kind of the joke with clients always is the best strategy is this don’t die here. Yeah. retirements fine, there’s no income tax, but just make sure before you die, you you have residency somewhere else. So yeah, there’s a lot of planning that goes into that for sure.
Jeff Malec 37:03
So you got to call my guy Adam kucha that I had on the pod hearing helps structure some of that stuff.
Homer Smith 37:09
I’ve talked about him before, like, he’s a smart dude. Yeah.
Jeff Malec 37:19
So moving on from clients wanted to talk a little bit about just the RA business, in general, like I’ve long said, on this pod into personal friends, like doesn’t make sense to me that this guy met golfing in Racine, Wisconsin, is the single best person in the world to manage my money. So like, how does that work of everyone seems to kind of get a relationship with a somewhat local person. Yeah, it doesn’t make sense that that local person is also the best person to manage their money. How do you think about that? Or how do you? Do you ever get asked that?
Homer Smith 37:51
Yeah, that’s a good question. I mean, when I started my career, that we, that was kind of the conversation, like, find people that do what you like to do, and then you can build your client base, like going out to the golf course, or whatever hobby you might have. And, and, you know, I do think there’s some merit to that, I think there are some people who are just very social and, and they can, you know, build trust that way, I’m more of an introvert. So, you know, I’m like, the guy that goes into a big room and kind of finds the corner and maybe has one person that I tried to talk to them the whole time. And that never really would have would have worked for me. So the way I look at it, is in the space that we work in, and the clients we work with, they’re not looking for friends, they’ve got their friends, they’ve got their family, what they have is an issue or a problem, that they’re looking to have solved some tax issue and the state issue and investment issue. And we get hired to solve that problem. And if we do really well, and and we bring meaningful value. Over time, we develop friendships with our clients, because we are an integral part of helping them achieve all of their goals. So so that’s the way I look at, when I look at all of the top client relationships, I am very close and have really, really close relationships with the client and their family. But I did it by helping them achieve the outcomes that we’re looking to achieve. And, and so I guess that’s the way I look at it.
Jeff Malec 39:11
And what about that guy in Racine? Wisconsin?
Homer Smith 39:15
I’m sure he’s a good advisor. You know, I’m sure a 6040 portfolio will you know, hold up well,
Jeff Malec 39:21
but I think it leads itself to the whole ra business is shifted more to passive indexing and all that stuff, right? Like, hey, I’m not trying to be the best investor in the world, we just do these index funds for that. And what I’m providing you in the Estate Services and tax and all this is, and maybe correct me if I’m wrong, but kind of the same advisor advisor, it’s kind of its law, we’re just like helping you navigate the law. So that piece isn’t as hard and basically anyone can do it.
Homer Smith 39:49
Yeah, that’s definitely the messaging that I think has has gone out there. I think, you know, 10 years ago, you know, a lot of the RAS were investment focused RAS right. So they did Have a story around their money management, and it has shifted to the big IRAs are now planning focused on that, you know, the planning is the lead the investments are the, you know, we’re just a passive, you know, we just build you a passive portfolio. And, you know, I think, in general, for a lot of clients, you know, most clients, that might actually make a lot of sense. I do think though, as you get into more complex scenarios, and complex client situations, when advisors say they do tax planning, estate planning, my experience is, it’s limited, you know, they still really are building an investment portfolio, you know, maybe helping them do a Roth conversion here or there, but they’re not really getting into really complex, sophisticated retirement planning solutions, or different tax mitigation solutions. You know, for a business transaction, those those get more complicated, but, but, um, but I do think it has shifted quite a bit to that story. The story now is we do planning, investments aren’t that important? The problem becomes it’s I think, for clients that we all sound the same, it’s very difficult to tell the difference between an advisor from advisor so I think that’s why probably that model of, well, I met him at the golf club, you’re a nice guy, I like being around him, it still works. Because it’s, it’s hard to tell the difference
Jeff Malec 41:21
between I can’t tell the difference by all of their narratives on their website. So this guy seems like a good guy going with him. Or her. The and that kind of led into my like, what? So that seems like we’ve answered like, what is it like now versus 10 years ago in the RA business? Anything to add more there, like what it was, like 10 or 20 years ago, or?
Homer Smith 41:45
Yeah, I’d say the only other thing I can say too, is I wasn’t in the RA space 10 years ago is more than the broker dealer world, but the narrative in the broker dealer world was, you know, the RA space is the wild, wild west, you know, no compliance. And, you know, it’s, you’re basically taking all this risk by being an RA space. And, you know, maybe there was some truth to that maybe it was less regulated. And then, you know, the RA or the broker dealer space was, but, you know, coming into this space and living in this space the last few years. My belief is, and you know, whether this is right or wrong, but my biased view is, there’s much more sophisticated planning going on in the RA world than in the broker dealer world, as a, you know, generalization, but I think there are, you know, independent advisors that have the flexibility to go find the right solution for clients and can go anywhere and find the very best outcomes just going to lend itself to more sophisticated solutions.
Jeff Malec 42:50
Versus like out, no, you’re a Wells Fargo client, you have to use the Wells Fargo, yada, yada, money market fund or something, right? I’m the is the whole world of like, Hey, you’re my client, I’m going to call you up once or twice a month, and we’re going to sling some Apple shares, right of the old old school stock broker model, do you feel like that’s essentially dead?
Homer Smith 43:14
I think so for the most part, I mean, I thankfully started, you know, we talked a little bit at the beginning about being in the American Express, financial advisor and enterprise world. And, you know, while I’m not there anymore, and glad I’m not I do think that learning under a planning model was helpful, because I didn’t start my career in that methodology. And I think the world was kind of shifting away from that. And they were a little bit ahead of the game on that. And so I think learning in my career very early to, not to basically intentionally tell clients, we don’t do that. And if you want that I’m not the right advisor for you. Thankfully, personally, I never had to really do that for any clients and shied away steered away from it. And so, but yeah, and in general, I do think I don’t hear any clients expecting that anymore.
Jeff Malec 44:02
Do you get those sort of like, hey, what’s, what’s your hot stock pick for this month,
Homer Smith 44:06
we have a, we have a number of clients that, you know, we spoke earlier still like to take some risks, and we’ll definitely help them with that we have a great research group, and we will have some of those ideas from time to time for them or they’ll bring us ideas or hey, you know, my friend’s company this or that and have an idea and we’ll help them research it and implement it. But oftentimes, what a lot of times with those clients, what we’ll do is set up just their own kind of resource account and say, you know, this is we’ll trade it for a few Why’d you tell us what to do? But, you know, why don’t you just make those picks and well, you know, it’s an amount of money that doesn’t matter for you, if you lose it all it doesn’t matter. And it will still help you will sell what guide you in research and helping you with those decisions, but it’s kind of your account to just kind of play with and and so that’s that’s how we do it a lot of the times but we will for other clients we will if they want to get a concentrated count, we’ll, we’ll pick, you know, ideas that we really believe in based on the research and, you know, have maybe 10 stocks and help them try to get some bigger wins. But it’s, I would say most of our clients, even our very, very large clients don’t have much interest in that.
Jeff Malec 45:16
And you call it a racehorse account. Yeah, more like a race track,
Homer Smith 45:20
like, well, that the account is the race horse of the portfolio. Right? So
Jeff Malec 45:24
I was thinking more of like, that’s where you go to gamble, you go to the the track, the end how many times we’ve had, this was years ago, there was some lady who had like Coca Cola stock she known forever. And this advisor we worked with called it financial furniture. It just it lived over there in the corner, you could never touch it was grandma’s you weren’t allowed to do anything with it, they were never going to sell it. Like do you see that out of like, this is where I made my wealth. We’re not touching the Microsoft stock or the Amazon stuff. Yeah,
Homer Smith 45:53
we have Apple seems to be one that’s pretty popular with that, you know, have a chunk of apple and we do we just set it aside and a non fee account. And that just lives over there. And we talk about it and determine if it ever makes sense to do some tax planning around how we might help them get more liquid from that. But But yeah, we definitely see some of that.
Jeff Malec 46:11
Yeah, and what are those strategies? If you have some super low cost basis, and everyone’s like, you can never sell this, the tax is going to be so huge, like, what are some of those strategies to mitigate that,
Homer Smith 46:21
there’s exchange funds out there that allow you to, they’ll exchange your shares and a low basis company and give you more of a diversified fund of of other equities of people who have also done that. So ends up looking kind of like an s&p 500 Index Fund, at the end of the day, allows you to defer out the taxes. So that’s, that’s the main one we do. You know, if it’s a big enough position, we’ll do some hedging, you know, if we do feel, but there’s times in the market where that would make sense, just to make sure that, you know, with such a concentrated position, they don’t end up losing so much of it. And then there’s, you know, gifting strategies, there’s a lot of that is intended to go to the next generation or to a charity, then we can do a lot of gifting strategies around it to at least mitigate some of the tax impact of it, especially because it’s probably causing an estate tax issue as well as a capital gains issue. And so you know, which one’s going to be worse for your family, the gain or the estate tax, and let’s mitigate the one that’s going to be worse and help them think through that conversation.
Jeff Malec 47:24
So how, how do you view like, the scalability of the firm in itself, right, because if you have to have like, those distinct conversations with each and every client, is a hard thing. Either you need super big clients, or a huge staff to have to, you know, to deal with each
Homer Smith 47:40
client. Yeah, I think scaling in the wealth management are a world is a bit of a myth, I think there’s only can go so far, because it still is such a people focused business. Yeah. And so to your point, you know, if you’re going to be a firm that’s going to do the level of planning that we do, and there’s obviously many others out there that do it, you’re gonna need more people, and staff to be able to navigate as I talk to advisors that, you know, are like one person shops, it’s them and maybe a virtual assistant. And they have a certain number of clients, but they’re limited on what they can do, there’s only so much you can do for a client and that model, and it works for them. And it works for the clients they have and the types of clients we’re trying to attract and work with. They need, you know, more than enough, we kind of put ourselves out there as like a personal CFO, you know, for that client that’s going to look at every tax state asset protection, charitable solution that might fit and do all the research pros, cons, advantages, disadvantages, and help them pick the right outcome that makes sense for them. You just can’t do that on your own with a virtual assistant. And so we do have a much bigger team than probably the average ra does for the number of clients we work with.
Jeff Malec 48:53
And it seems to me from the outside looking in, and most of the growth in terms of assets or teams comes from like gobbling up smaller ones like that. Right and bring him in house. Is that what you see?
Homer Smith 49:05
I see there’s there’s a lot of acquisition world, I think we we’ve done it mostly through organic growth through working with other professionals. So helping CPAs attorneys, you know, there’s a lot of that obviously, every advisor typically works with a CPA attorney or more and they try to refer back and forth and, and we kind of have a different approach where we try to help the CPAs and attorneys look at their top clients, like how can you bring even more value to them and kind of become a partner to them to help them increase the reach and relationship with their own clients and inevitably, helping them that’s going to lead back to opportunities for us. So we’ve seen most of our growth from those relationships, it is leveraging other relationships. So there’s some scale on that but it’s still it when there’s only so many new clients that we can add before we have to add more people and resources.
Jeff Malec 49:54
But even so, like say you’re running ads and whatever, like Wall Street Journal, how many clients It’s out there don’t have a financial adviser or anything like that. Are your target clients, not just like, of the general population? But it seems to me that it’s totally saturated, right? Like,
Homer Smith 50:09
oh, yeah, they all have, they all have advisors. And so you know, when we talk to you, and we’ve been talking to the other profession, like the CPAs, and the attorneys like, well, they have an advisor. And like, Yeah, but are they? Do they need a new one? Are they doing what that client needs to get the outcome they want to get so. So I’ve, I’ve never met a client at the, at the level of client we’re trying to work with that didn’t have advisors, all sorts of advisors. But every time we’ve evaluated their overall situation, there’s always been opportunities to improve now, whether that meant on the wealth management side, sometimes it’s not, and the adviser is doing a good job. And so it’s helping the CPA or the attorney find ways that they can bring more value, but but they all have opportunities.
Jeff Malec 50:49
What just last bit on the whole Ira business? What does it look like 10 years from now or 20 years from Eric, will they continue? What are your thoughts on what it’ll look like? I mean, five years ago, it was robo advisors gonna take over, you guys are all going to be out of business.
Homer Smith 51:02
So yeah, I remember that I remember, you know, really trying to do a lot of research around that, and how that was going to work. And clearly, you know, it’s not done that yet, I do think technology will matter. And those firms that can implement technology to make their businesses more efficient, and to be able to do more, for clients more effectively, are going to be firms that do better than others. But I think in the space that we work in, in that higher net worth kind of family office space, just the level of complication that they deal with, you know, both financially and interpersonally, within the family, and it’s difficult to solve that, you know, with a bot, you know, or an algorithm, you know, really does still take a human touch. And I think that will persist, you know, for a while, at least, hopefully for most of my career. And so I don’t think that that’s going to change in the next 10 years. But I do think that as more wealth transfers down to the younger generation, the the need to use technology, the needs to understand how that younger generation approaches, making investment decisions and professional decisions on who they work with. If you’re an RA that’s worked mostly with the older generation, and you’ve not thought about that, I think there is just like we already see today, I think there’s a good chance that a lot of your assets walk out the door, because you’re not adapting and not staying up with what needs to happen to bring value to not just that older generation, but G two and G three on downloads on down the road.
Jeff Malec 52:37
And what does that look like? If G two g three, like cool, I got all this money, I want to put it into Celsius network. Right? I want to throw it into this crypto thing. It’s yielding 12%. It’s great investment.
Homer Smith 52:50
Yeah,yeah, it’s a good, it’s a good question. I mean, we just obviously have a conversation with them about, you know, risks and rewards. And again, kind of back to the what are your needs? And then what’s access? And so as you know, if you’re going to make those kinds of bets, you know, how much of your capital should you be risking in those types of bets? And what makes sense from a risk reward standpoint? And if you’re right, how much do you need of your capital to actually make a financial difference? Not much, if you’re right, go 100 200x on that. But if you’re wrong, and you have 100% in it, you’re done. Right?
Jeff Malec 53:27
Yeah. You feel like that’s your main job to just tell people? What if you’re wrong? Yeah, it’s
Homer Smith 53:32
huge behavioral side of what we do. And when I started, most of my clients were younger families when I started, you know, because I was young, and it made sense. And we joked that half of my job was being a marriage coach, you know, and not that I knew anything about being married at the time, but it really was, you know, psychology, behavior, management, helping them make good decisions. That’s a huge part of what we do is just giving them enough information and options to help them make a good decision. That’s really the biggest part of what we do.
Jeff Malec 54:01
And how much of your job my neighbor’s Ra. He said during COVID Nonstop 10 calls a day was just being a psychologist, like it’s okay. Everything’s fine. Which I don’t know if you had any basis for saying that, but it was like Yeah, right.
Homer Smith 54:19
Yeah, I mean, I because of my career, starting at right at 911 and then started my management career where I was helping 25 advisors navigate the financial crisis in 2008. Nine I think I was prepared well for how to navigate that with clients and COVID You know, I didn’t like the idea of just like telling clients don’t worry, it’s all gonna be fine because we really didn’t know but you know, we our conversation was we prepared you as best we could, you know, given the nature of how we’re managing your money and you know, we’re just gonna have to see how this plays out. But you know, we did what we need to we did what we needed to do to prepare you for this and we were relatively conservative, kind of going into that so it so it helped but by That was a lot it basically was. If I look back at my calendar, it was just booked solid for a couple of weeks of just constant, me proactively reaching out to every client. How are you feeling? What are you thinking? In most of them are, you know, because we’ve been working together for so long, and we’ve been doing a lot of behavior management, helping them understand how investing works, and making good decisions and not being right. Most of them are fine, you know, this really is ugly, and we need to see how this plays out. But they were, they really weren’t that concerned about it. At the time, they were frustrated, but not not concerned that the world was going to end yet. They probably had a better they, I wasn’t necessary, showing them but I was probably more nervous, because I was probably reading too much about what might happen. They might they might have been less nervous than I was about where it was going up at that not that we let that filter into our investment management decisions. But, you know, you start reading a lot about what could come and you start to do the math in your head. And so, yeah, it was it was definitely interesting time for sure.
Jeff Malec 56:00
And so speaking of which, not that you’ll let it again, filter into your modeling and whatnot. But what’s your thoughts on inflation? Is this rally been too quick? All that kind of stuff that we won’t give any credence to? But just interested in your thoughts?
Homer Smith 56:15
Yeah, I mean, the research that I do, and admittedly, I’m that, you know, the CIOs of these funds that are living this every single day, and looking at every every piece of data that comes across, you know, there’s only so much time, but, you know, my concern based on all the data is that this has been a just a, a really big bear market rally, that mean, people are maybe giving too much confidence that the Fed pivot is happening, and that, you know, they’re not going to have confidence to keep raising rates, and that there’s probably another leg down coming. So that’s, that’s our view of it. The beauty of of having our clients, you know, having their core investments in all weather strategy that kind of also lends me to be able to say, I don’t really care. Yeah, that’s because we’re good. Like, either way, you know, we were capturing the upside, if it keeps going up, and we’re protected. Well, if it doesn’t, so, while I do probably lean more towards the groups that believe there’s more pain coming. I can, nothing has changed since May. And then I’m sleeping really well at night. Kind of either way.
Jeff Malec 57:23
How much of the job is that of like, hey, and we didn’t I wanted to talk about duration, I forgot. But right. Also, like, who cares? It’s one month we’re talking about 3040 years of returns here and no structure and portfolio like, yep, don’t don’t sweat the small stuff. It’s just a it’s a blip on that long term radar. Yeah, but but you also have to have that behavior. So it’s like, you have to say this nonsense to them. You know, it’s nonsense. They know, it’s nonsense, but like, still, that Job has to be done just to get to the 40 years.
Homer Smith 57:52
Yeah, I mean, I have clients that, you know, we, when we talk to them, they say, I knew everything was gonna be fine. I just needed you to hear I just need to hear you say it. Yeah, once we talked, I knew we were good, but I just needed you to say it. And so and we and then the nice thing about to those because we also do the planning side beyond the investment side, like when we talk to a client during these crazy times, we don’t just talk about their portfolio return, we actually can pull up their entire profile and Shawn, look, you’re down X. Here’s your outcome, 3040 years from now, obviously, using assumptions and whatnot, but you’re still fine. Like your your goal likelihood of achieving your goal is still 100%, nothing has changed. And while they don’t always feel good about believing it, but we can show them that we’re not just, we’re not just kind of pretending and trying to make them feel good, we can actually prove it to them that because of the way we manage your money. While this is painful, you’re still more than on track for your goals.
Jeff Malec 58:50
So it’s it is helpful to have that side of the equation doesn’t ever say like, oh, now show it to me with negative 5% per year returns for stocks and negative 6% returns for bonds. But
Homer Smith 58:58
they never got that detailed, but they do. They do ask what our return assumptions are and they’re pretty darn conservative. We keep it pretty low, just you know, for that reason.
Jeff Malec 59:13
So two truths and a lie. I’m going to start it out because every time we talk, I get a little Matt Damon vibe. So the first of the two truths and allies that Homer used to be a stunt double for Matt Damon.
Homer Smith 59:28
All right. I’ll say another one is I I am the inspirar firm was the inspiration for the return stacking paper. Okay. I’ve got I’ll do one more. Or do you do another one or do I
Jeff Malec 59:46
know I’m not supposed to any I just put out two more. Yeah, two more. All right, one of which is a lot.
Homer Smith 59:54
I am I’m an ordained minister and I performed three weddings. And then while I was in Hawaii managing a branch for Ameriprise, I won an amateur surf contest.
Jeff Malec 1:00:12
I’m gonna go inspiration for the return stacking paper true.
Homer Smith 1:00:16
That’s probably too easy one since you’re the one guessing. Yes, yes. more insight on that. Yeah, no,
Jeff Malec 1:00:21
but the listeners might not have known but um, true there. I’ve want to say Hawaii is false, but I’m gonna go ordained minister false in Hawaii is true.
Homer Smith 1:00:35
Opposites I am in Universal Life Church. I’ve done two of my sister’s weddings. And also my best friend from college is wedding minister. And in Hawaii for the three years, I unfortunately, was painting my own house when we when we first moved to the inside, and I hurt my shoulder. And it kind of bugged me is like one of those when you’re young and a guy, you never go to the doctor, it’ll just heal and just didn’t. And so I only served like, once or twice the whole time I lived there, which is kind of where do you live? We live just outside of Honolulu in a part of a wahoo called Hawaii Kai. Yeah. It’s a nice part. Because it’s, you know, Honolulu itself, when you’re in Hawaii doesn’t feel like you’re in what you’re what should be Hawaii. And when you live out just outside of town, like we didn’t like how you kind of go around this corner, and it feels like paradise. And yeah, here we see the big city. And you know, we live really close to the beach. It was pretty, it was pretty special.
Jeff Malec 1:01:34
We were just there spring break was awesome. I’d never been through those. I think I’d been there as a young kid back those new highways that go through the center and through those tunnels. Those are crazy. Yeah. And so what was that, like in Honolulu of like, trying to follow the market? Right, weird hours.
Homer Smith 1:01:55
It was I mean, because it’s either two or three hours different from the West Coast, depending on time of year. So you know, five or six hours from New York. So interestingly enough, there was a large, you know, stockbroker community, they’re like old school stockbroker. And a lot of them would get up at like, three in the morning, do a bunch of trades, and then go back to sleep for a few hours and then get back up again. And a lot of them the other day was done at like 10 3011 o’clock. Because, yeah, the market was, you know, so that was an interesting quirk of being in the investment world out there, whether it was autumn in your day, or, you know, the market day if you had so we had client trades to get done. And you had to you had to get them done by 930 in the morning, right. Yeah, you know, 10 in the morning, so it was weird. Like it was definitely a lot more stress in the morning to get stuff done. Then then there is you know, West Coast special east coast, but yeah, it was it was definitely different world doing that part out there.
Jeff Malec 1:02:55
That’s crazy. I was wanted to live in Bermuda. So yeah, when I started in the pits in Chicago and read to be there at like, 6:15am to do the outrage, like this is terrible. Like I’m gonna go to Bermuda and sleep till nine and get there late. But didn’t happen. Thanks. So I’m gonna tell everyone the website where to find you.
Homer Smith 1:03:13
So we are my firm name is convergent wealth and it’s convergent with a K. The idea is it’s a convergence of your business and personal wealth coming together and we help navigate all of that and see was taken when I went CRA world. So Kay work, they don’t know where the Pacific Northwest, I was able to fit them out and into our logo and McKay helped with that whole deal. So conversion wealth.com is the website and yeah, this has been really fun.
Jeff Malec 1:03:39
It’s been fun. Thanks so much. I want to come out and visit out there. My brother lives out there. So we’ll be out there sooner than later.
Homer Smith 1:03:47
Yeah, get out there. We’ll get set. We have my wife as a chef when we were we’ve kind of built a farm to table Bed and Breakfast. Onto the detach from the house. We got chickens and a few other animals and so we got a good place to stay and get out on the pond
Jeff Malec 1:04:01
and I love it. All right, man. Book me.
Homer Smith 1:04:05
All right, man. It’s been great. All right. We’ll talk to you soon.
