Episode Transcript

[0:00] You never know how much time you have. For me, that stopped being an idea and became reality on August 22nd, 2021. The doctors put me on a ventilator and told my wife to call hospice, so she could prepare for the day they planned to pull the plug. Six weeks later, I woke up to an entirely different reality. I could not walk, I could not talk, I could not even lift my own arm. And I woke up realizing something else. I had not made the right preparations for my family. The plans I thought were pretty good fell through when it mattered most. That is why fiduciary alchemy welcomes voices that would have warned me about the holes in my plans. My hope is that you live a long and prosperous life, but I also hope you make better plans than I did. So tune in, take notes, and stay with us through the end when bluesman grendle and the compliance

[0:51] choir. Bring a word of caution. Hey, I want to welcome Mark Miller. He is the president and CEO of Hilton Wealth. He brings 40 years of tax and wealth management, experience he helps business owners, executives and high net worth individuals build, protect, and sustain their wealth. I know one of the things that's passion on Mark's heart is bringing many of the tools that are available to larger family offices to smaller investors and delivering for them some version of the home office experience. And Mark has been on the leaders in Leicester's podcast where excited to have him on fiduciary alchemy as well. Mark, welcome. Well, good to see you again, correct. Thanks for having me. Yeah, I really enjoyed our conversation last time. And obviously, this is a podcast with a slightly different focus, you know, leaders and

[1:58] legacies of course is about leadership. And not that there's not leadership in what you do. Obviously, there is, but the fiduciary alchemy podcast. We're focusing more on the actual practice. I mean, for example, let's just start off with one of the things I know is passion about your heart. What are you doing differently than what you've seen that's out there? So, what a Brad Hilton who is the grandson of Conrad Hilton is my main partner. And we just kind of had this passion and we have had for years Brad even more than me to say because he's been exposed to kind of the institutional side, the smart money side of investing for years and with generally older individuals that have a lot more net worth and how can we bring those kind of strategies more down to Main Street and more the average investor?

[2:54] And I think that that was a big, big deal that we were focused on and we were all, you know, really both of us were we got to figure out a way that we could get these more advanced strategies a little bit more down to Main Street. So anyway, that's kind of the thing that's different and we've gotten great traction with that and we've just been able to show people how the wealthiest of the wealthiest truly invest that's so much different than how a retail investor invests. And so what are some of those differences? What are the advantages of having a family office that are not available to the average folks? So family offices is where a bunch of wealthy people get together, they kick around ideas, they give ideas back and forth each other, but it's also economies of scale.

[3:47] So the advantages are less fees, less volatility and portfolios, which ultimately is better returns, better safety and security, so people sleep better at night. I mean the wealthy generally, although they often have a lot more responsibilities, they generally sleep better at night than retail investors because the portfolios are designed specifically for that. So they're not worried that they could the market could change and they could be down 30 or 40 percent, you know, in a short period of time. So those are the main differences and the other big differences really, again kind of along those same lines, is the wealthy tend to focus more on safety and foundational safety more than retail investors do. And how do I know that? Well, every time we have people that come to us and let's say they've been

[4:43] retail investors for a long time, we look at their portfolios, we do, you know, a risk analysis, wealth analysis and where they are and we find maybe they are a, you know, a mid type of risk investor, a moderate risk investor, but then when we look at their portfolios, they're in the highest risk levels and they don't even know it. They have no clue. They're just focused on, well, the market's been going really well. I'm making great returns. This, this, this woman man that's been working with me is done a great job for me. So wealthy investors tend to focus on safety and security more. Yeah, I'm curious. Why, why do you think that is? And let me get, let me give kind of premise for that. We'll set up. You know, I've, one of the things I've heard

[5:32] Dave Ramsey say is, look, if you get in the market and stay in the market, ever, yeah, obviously not just him, but ever a five-year period, the market always rises. And so, yeah, if you have one whole where you're, you know, if you're taking income from your investments, okay, maybe you have something that, that over where it's less volatile. But if you're in it for the long haul, why worry about short-term risk influxuations? Yeah, but, but that's therein lies the problem because when we talk about this in our book, Hilton Wealth, is that when you deal with and just let it ride and just stay on the roller coaster, over time, actually your returns will be less. Why? Because you're, have to be generally out of the market or sitting around making returns for long periods of time when we have extreme volatility in your portfolio goes down.

[6:34] The real, the best investors of the world, the, in the world, they protect their money more. So maybe they have a lot less drawdown, a lot less risk so they can get back to even faster where they can start making money again. By eliminating large losses, getting back to making returns faster than you have a smooth ride and when you have a smooth ride in your portfolio, you get better returns over time, too. I make sense. Yeah, a lot of that. A lot of people don't know that again because the retail, on the retail side, they want you to believe that the real, the best way to invest in the way everybody gets rich is putting lots of your money in equities and just riding the roller coaster. And when it's down, just don't think about it at all. Come back.

[7:25] But generally 2008 was a perfectly example. People had to wait two and a half years before it to quote, come back. The other thing that the concept of people don't understand a lot is you, and people have heard this, but you don't think about it investing. Let's say you lose 50% in your portfolio. That means you have to make a hundred percent return to get back to even.

[7:50] So that's something that people don't really think because you've got obviously half the amount of money. So you've got to make a hundred percent to get back to even and start quote, making money again.

[8:02] Yeah, and I heard some absolutely horrible numbers about the OA crash of how long it took folks to get back. And it was a long time. So how do you go about mitigating that? So so I'm going to use a real simple example. And sometimes we do this with even our extremely wealthy clients that have never even seen this before. We show them an investment pyramid. And the concept of the pyramid, there's a reason why the pyramids have been around for thousands of years because the base is massive. So investing, the base is safety and security. So no matter what happens, no matter what storm hits, the in your investment portfolio, you're going to weather the storm if you make that base stronger. So what does that mean? That we may in a portfolio like in our true wealth portfolios, we may have 50-60 percent of the

[9:01] money in a pretty strong position. Now the good news is, is we're on the institutional side of the smart money side. So we can still make pretty good returns in there, but making a lot of that money guaranteed, safe, very secure, has very little volatility. And then maybe take the other 40 percent and take risk with that. That's more of a wealthy of the wealthy investment model. So like Warren Buffett's a perfect example, everybody sees him and goes, look at all the money he's investing in all these companies, right? Value investor. That's all he has every single bit of his money sitting in those. No, right now actually he's sitting on a massive amount of cash because he's looking for opportunities and concerned about a market turn, but generally his portfolio

[9:47] 50-60 percent would be a very safe, secure types of investments and then he can gamble with the rest of it and still make incredible returns and be considered one of the greatest investors of all time. Yeah, yeah, it's finally mentioned Buffett. We helped a client get a blog article ranked number one for the search term staying cash. It was all about Warren Buffett and it was just a question. It was this was like 2017 and Warren Buffett was sitting on a hundred billion in cash and people were like looking at all the cash he's sitting on, what's his signal? Yeah. And they said, well just having that cash allowed him, you know, when he saw bargain, it's like you're walking down the street

[10:34] and you see some might have something on sale and you're like, oh, well I have the cash to pay for that right now. Yeah, it doesn't necessarily mean that he's out of the markets because he believes the markets are going to crash tomorrow. There's a number of reasons why wealthy individuals have money in cash. Many of our folks have money in cash because simply for opportunities that will come along. That's actually a wealthy of the wealthiest strategy. So if you're sitting there, you've got every single penny of your money deployed and a lot of it's illiquid, then you can't take advantage of opportunities as they come. And I'm not saying I think it's a little bit of both with Warren Buffett but he's the one that you've always heard this and most people have heard this. His first rule

[11:21] of investing is don't lose money, right? His second rule of investing is look at rule number one.

[11:28] Right. So does that mean the picture that everybody has and he's investing in all these companies in 100% of his money is at risk and what if one of these companies goes back? No, he's doing the smart money strategy. He's got the majority of his money sitting in cash that is there for his base on that pyramid. And then if something really goes wrong, guess what? He's still got his base intact and he can still recover and do well. Whereas a retail investor like most folks that we see might have 70% I would say is probably the average that we see of 70% of clients money when they've been on the retail side and even very wealthy people when they come to us and they maybe been with fidelity or Edward Jones or one of these retail platforms for a long time and they've made some decent money but 70% of it is generally

[12:27] exposed to the equity markets and they have no clue. They don't even know that. They're just like, hey, I feel like I'm making money. I'm doing okay, but gosh, I can't believe how much money I lost in 2022. That's because 70% of your money is sitting there at total exposure. If something really goes bad in the world or the economy, then they could literally be wiped out. That doesn't happen to the wealthiest of the wealthy. That's why no one you never see people dropping off the Forbes 100 list in drugs. It's not like they're growing the dice and hope that every year they make 50% return or whatever, you'll see those same people a year after year after year that are in the top 10, 20, 30, 50 on those lists. Here's a concrete example involving Warren Buffett

[13:21] from the O8 crisis. GE was in trouble and they needed a loan. If all Buffett's wealth was tied up in equities, the equities just tanked. They was sitting on a chunk of cash and he made a loan to GE. He made a $5 billion loan to GE that would make a payday lender blush. He made $3 billion in profit in like two or three years. Yeah, what are those? That's bridge loans. And bridge loans that we do a lot with health and finance in that area because there's all sorts of opportunities and companies. They're really good strong companies that have the ability to pay back that get in a position where they need to. Some companies even operate on that model because they make so much money. They're just like, hey, we'll bring in capital. We need to bring in capital from different

[14:14] bridge source, like Berkshire Hathaway or other companies that Warren Buffett has. And it's worth it to them for maybe a short-term period of time, six months or a year period of time to pay 20 percent on that loan. Because because of that, they kept their business model operating or they use it to stack another department or another revenue source and they just made 50 or 60 or 70 percent on that money in that period of time. Yeah. I remember from Moe, they built a brand new mall right next to our neighborhood and spent $192 million building them all. And when they had to convert the loans from construction loans into regular operating loans because the financial crisis, nobody would write the loan. Right. That mall went on the auction block and sold for 75 million.

[15:13] And I remember thinking, sure, I knew that was a bargain. Sure, I had enough money that could rally some investors and buy that. And the guy who did buy it, he owned it for a few years and resold it for rumors about 150 million. Yeah. Yeah, double this money in a couple years. Yeah.

[15:36] Yeah. What you're talking about is the smart money side of the finances. And that's the side that we work on that have all these different types of private equity opportunities. Our clients participate in in bridge loans that we did. So they'll bring the, they'll bring the money on board. They get a great rate of return. It's all collateralized backed by assets, whatever we're issue or working with or funder or whatever. And then the Hilton finance would make money too on that spread, depending on what we're able to loan that money out for for whatever project it is.

[16:18] And so, you know, there's plenty of opportunities out there like that on that private equity alternative side. Right. Well, it hits me. Those are transactions that are regulated by the SEC. Is that right? Yeah, it depends. It totally depends. But a lot of what could be done. It's a amongst accredited investors. People that have done a lot of investment before. Maybe they've had experience in different investments in a different LLCs that they've owned. But yeah, there's different structures that you can put them on it and depending on whether they're highly regulated or not.

[16:57] What are some other services? Because, you know, when I think of family offices, you know, I think some are like highly involved all the way down to check writing, you know, yes. So what what are some of the other services that you provide that would be traditionally under a family office? Well, you could go to our website, which is hiltonwell.com and then go to the section, which is on our family office and it has a kind of schematic and diagram there of all the different things we can provide. Now, we generally don't go as far as check writing services because people can generally figure out a way to handle that fairly well. But we have the well side. We also have tax planning, which is huge because that helps you build your wealth. We also do risk mitigation,

[17:46] which is a lot of insurances, different types of insurances. We also have business optimization. We have kind of a business planning department where we help our clients make really good decisions on their business planning side. We even have a fleet of planes, which is usually available to our higher level clients in the family office. But you know, the reason I'm doing a lot of these podcasts have been on podcasts is because we're really promoting hilton tax and wealth advisors, which is more kind of our retail arm. But helping again retail investors more to take advantage of all these things that can be available on the family office side. Then of course, there's, you know, depending on the family and there needs sometimes there needs to be some governance, there needs to

[18:34] be some trust structuring, high level trucks, trust structuring. I'm not talking about just putting a living trust together, but much much higher level than that was spent through if trust or beneficiary trust that are much more complex. So there's just a myriad of things that they come up. We try to be kind of both in hilton tax and wealth advisors and the home family office. We try to be kind of a one-stop shop. But but often we need to outsource and when then we outsource to the, what we believe are the best and the best in the business to provide different services.

[19:12] Now, that kind of raises another question in terms of when you're setting up a trust. Yeah, the in terms of who the trustee or the executor is. I know a lot of times people want a family member to play that role. Do you recommend that family member or third. I think that's fine. If there's a trusted member that has a little bit of experience, has some decent business experience and kind of good common sense. I think that's fine on some of the smaller amounts. But I think when you get to maybe in a state of 10 million plus it gets a little more complex and maybe you need an outside administrator for the trust when you're gone. So that gets into what's called legacy planning. So there's a state planning which is more kind of we might say a little bit lower level.

[20:06] Make sure you have a basic steep planning package living trust. So things don't go into pro debate and things of that nature and then when we get to certain levels and sometimes it's not I wouldn't even say put 10 million on it. It kind of depends on the complexities of somewhat somebody's estate overall. Then we might move into legacy planning which we might start layering some different trusts in there. We might start doing one of the things we love doing is when people get to certain levels they don't they're not even aware of it because they have it been made aware of it. But maybe they can leverage their estate through some you know institutional based life insurance products that can take in a state from say 10 million to be more 20 million overnight

[20:56] and products things like that and then do some layered trust structuring like a life insurance trust things of that nature. So I don't want to get too much in the Dica because I mean literally you can go so in depth at all of these things. But but it really depends on the complexity of someone's estate their investment portfolios to where we kind of get more of the complexities of legacy planning or not. Got it. Let's kind of pivot and talk a little bit about the business of running wealth management family offices and we're having one of the challenges I've read about is staffing. I think the average age of an advisor these days is like 56 or 58 years old. The young folks aren't coming into the profession. Well I haven't heard that I mean we bring people in and internships and

[21:58] different young people we like younger people because what we do is kind of a little different

[22:05] and what's going on in the retail side which is where a lot of jobs are and we like bringing younger folks in because then we can kind of teach them our systems and processes. We're always saying you know we hire for character first and then smart. How smart is this person because

[22:26] although they might have some experience in the financial world maybe they've got experience very limited experience and but if they're smart enough if they've got some financial experience then we can kind of teach them the things that they need to know. Yeah. Yeah there's a there's a age fact company in Charlotte they've sent sold to PE but when it was still run it was Morris Jenkins and when it was still run by Dui Jenkins he would not hire someone from the competition if you'd ever worked for a competitor you can get a job there and he actually started his own age fact school so he could teach people and how they wanted to do things and it sounds like you're doing a little bit of that yourself it's bringing in the young minds. Yes. Show them the help and why.

[23:14] Yeah and they come from the retail world where they've learned a certain way and sometimes it's a it's a paradigm shift for our clients and it's a paradigm shift for employees too because there's like oh well this is a little bit different. How does this? Well you know because they haven't had experience kind of on the institutional smart money side of the business. What about tech and especially AI? How is that shaping your world? Well one of the things that we and whether we're dealing with very wealthy clients or maybe more average clients. One of the things we've done and one of the things I've worked on is we believe not only in portfolio building and all of that but simpler is better so literally we try to limit our tech stack to internally we have

[24:08] obviously a very good CRM program that is specific to our industry. We have then portfolio building

[24:21] risk analysis different software with different kind of algorithms. Some things that we can put in proprietary ourselves internally that's important we obviously have you know marketing based tech stack things to do a lot of different marketing things we do to get the word out there and so forth. From a client-facing perspective really we have a portal that we can do practically anything on it that we have our you know billionaire clients on and then our average you know more everyday clients on too that everybody utilizes we do all our tax planning through there we do all our wealth planning everything so they have one portal one contact then we use zoom like we're using right now to to communicate generally or if they come into the office obviously coming into our office

[25:14] and and dockysine and that's pretty much it and then obviously we use the telephone and email

[25:24] which you can't get by with that you know ironically mostly what we still use is that that out-of-date crazy email system all right so there as event that was a pretty darn good

[25:37] invention right we still use email to do most of their business um so and that's how we communicate with our clients mostly and get back and forth with everybody you know it's fine I discovered email 1991 I just moved from Japan back to the United States and you know 91 I didn't know about the internet I didn't know about email and I'm looking at this yeah I just been paying a dollar minute to communicate with folks back in the United States and I thought something's wrong here when the telecom companies figure out this they're gonna find some way to regulate this yeah yeah yeah it's like texting yeah that's like texting is somehow they're gonna regulate this or do something we're not gonna have this for a very long it was the wildest thing you know for some my who

[26:31] you know used to have to I would drive to find a phone booth and put in my card and call back to the US and it was expensive and we don't remember the days of the fax machine we're gonna be listening to this gonna cut these guys are old yeah the days of the fax machine and wait for faxes to come in and all of that and then the fax machine breaking half of the time and yeah this is the modern ways to communicate are so much better we we found too often because we have a whole texting system and everything that the thing that we do like about texting it's really easy to get in touch with people because people look at their texts and they're seeing their texts because everybody's got there got my phone right here and everybody's got it in front of them all the time right

[27:21] they see their texts nowadays there's more and more phone you know phone calls getting blocked and you know blocking software and all of that so we find often if we really need to get in touch with somebody quickly or you know changing a point note or whatever you know the texting is phenomenal so I didn't mention we you know have that texting system that is kind of an overarching system for our company where we can constantly be in communication with clients too that's cool you mentioned marketing what what are you doing for organic growth so one of our partner owns a very large marketing company and does a lot of our social media stuff we just make sure we have things out there in the social media we do do marketing campaigns with some of our other partners on various things different kind of investment opportunities or the true wealth

[28:27] portfolio's where that we've got some funnels we've got we use on our marketing side a program of cartridge I know there's it's similar to clip funnels I think that we maybe do we do campaigns in there or email campaigns or other types of marketing campaigns and try to get the word out there we just were about to launch a podcast that they helped them true wealth podcast and we're going out to social media and we're announcing it you may have seen being connected with us you may have seen kind of an announcement we'll be doing two or three and kind of you know shooting some email blast out there so you know I'm not an expert at marketing but we've got folks that are pretty good at it we can always be better and we're working on being better but that's our big thing Brad

[29:23] nice passion is we've got to get the word out there and get it out there as fast as possible about what we do because in our opinion it's just so much better and so much more powerful than what people are doing on the retail side of the business yeah well and what you've described is amazing and one of the things I wanted to make sure of people that miss the login portal that your billionaire clients use is the same one that someone you know with much smaller asset shoes yeah that's pretty powerful you know so the low guy gets the same login gets the same portal as a big guy yeah yeah and so here's the thing that you you make that point but reality is that we work with a lot of our clients that are much wealthier and trying to simplify things because what happens is when and the sweet spot is about at maybe 10 15 million when somebody gets

[30:25] up to that level they're starting to get over into territory where it's very hard to operate on the retail side of the business and what we find often is they have a bunch of different moving parts because you start getting that much money you have lots of different investments you have lots of different things going on and it gets very overwhelming for people so but what's ironic about it you would think okay well then you hire somebody to deal with all of that that over wellness or all the different moving parts well what's really strange about it is usually we'll bring people on board and then we're like let's simplify things so so because you want to take otherwise we find people they're all over the place they're spending half a day just dealing with all their money stuff

[31:12] when they're very wealthy they should be dealing with the things they want to do in their life and enjoying that lifestyle that they've made for themselves right yeah so so ironically people that I think are really good when they get wealthy sometimes you'll even see people that are in the billions where their life is a lot more simpler than you would think and they because they've designed that and they have the money to be able to design that so really what we try to do overall it doesn't fit for everybody but overall we say hey oh this is caused all this angst let's simplify things let's consolidate things here this one of the things that are portfolios the true wealth portfolios do for people consolidating things simpler get that off of your plate when you're constantly

[32:00] worried about buying and selling things and is this the right money move is at the right money move and then other areas of our life we get even simplify more and then just make your life a lot more or a lot less complex I should say well I tell you what that definitely what's the appetite because I don't know any way that wouldn't mind a simpler way this has been awesome again I hope folks will listen to your episode on leaders and legacies as well but thank you for coming on fiduciary alchemy how can folks reach you very simple just go to our website which is hiltonwealth.com they can you know watch for my podcast coming out soon but they can also order one of our complimentary books which the main one right now is hiltonwealth had invest like an

[32:51] American dynasty and then we have another book on tax planning for business owners too but so you're welcome to order those books and we'd love to chat with you thank you thank you thank you for tuning into fiduciary alchemy the coolest financial podcast you're likely to find we go looking for voices like the one you just heard because I want you to dodge the mistakes that I made and learn it without the coma without the drama without nearly paying the man I don't know why I lived when so many others die at that part still a mystery now some folks ask Craig what is it you do well I'm telling you now that's no mystery at all we solve hard marketing problems and crowded markets so good folks like our guests can rise above the noise become visible memorable here

[33:40] resistable and grow like never before if organic growth is your problem reach out call me let's make a plan and bring your next steps into the light but don't leave yet stick around a minute more and listen to blues man grandal and the compliance choir deliver a word of caution just for you

[34:14] this podcast is for information education that is all

[34:22] it is not financial tax only the advice to dodge your call nothing here's an offer

[34:34] nothing here's a bio cell no recommendation no solicitation i'm saying it plain and well plain and well

[34:58] past performance a no promise of what tomorrow brings market's turn and people who don't know kind is a hopeful thing every investment carries risk

[35:17] prints a pork and fade away what works for one more fit as home and that truth is here stay fade away yeah that's the compliance blues lord the compliance blues get your own financial tax and leave go help before you make your move that's the compliance blues you sit you as you're alone you need to not the same different facts and different goals can change the whole down game so talk to somebody qualified before you choose your own because the weight of every money move is your own loan the whole your own loan that's the compliance blues lord the compliance blues get your own financial tax and leave go help before you make your move that's the compliance blues

[37:10] get qualified financial tax and leave

[37:40] that is right for you