[00:03:16] Richard Wilson: And some of our clients are billionaires, some are millionaires. But I’m just curious why everyone doesn’t want to study billionaires, right? It’s like we were talking before the recording. If you want to learn how to play basketball, you can study college athletes, which would be average.

[00:03:29] Richard Wilson: Business book writers like myself – I’ve written many books – I’m not a billionaire. Or you can go and study a book written by LeBron or Michael Jordan, you know, Larry Bird, and you might as well start with the NBA players and not study the college players, ’cause maybe the college players are good at marketing their book and making it look awesome.

[00:03:55] Richard Wilson: But at the end of the day, probably should study the billionaires first. Right? 

[00:03:59] Trey Lockerbie: I totally agree. And on that note, you know, it’s funny how people get off course maybe a little bit. I think it probably comes from what they teach in schools. I always had an issue following advice from anyone who hadn’t been there, done that.

[00:04:10] Trey Lockerbie: And as far as s go, how did you fall into that whole arena and, you know, get involved with this? 

[00:04:17] Richard Wilson: Well, I’d been doing risk consulting and it was really boring, but I paid my MBA in cash and then I said, okay, who else is going to pay a 21 year old kid, a hundred thousand a year? And I figured it was selling commercial real estate or raising capital.

[00:04:31] Richard Wilson: So I went into the capital raising world, studied the psychology of influence, and while raising capital, I started a website sharing information on hedge funds, capital raising, and family offices. The family office content just took off. There were no other thought leaders in the family office ultra-wealthy niche that were really putting out helpful information.

[00:04:53] Richard Wilson: It was just like a journalist article here and there, and so when we started doing that, we got 3,000, 5,000, 7,000 hits a day to the website. I got on the front page of the Boston Globe, and I was 24 years old, and I spoke in over 16 countries a couple hundred times, and that’s how the Family Office Club really got started.

[00:05:19] Trey Lockerbie: Well, you threw something interesting out there, the psychology of influence. Are we talking about Cialdini’s book or what do you mean by that? And how did that get thrown into the mix there? I’m interested. 

[00:05:29] Richard Wilson: Yeah, that got thrown to the mix because I had always wanted to take some courses from Wharton or Harvard, and then I was in Harvard Square inside of the Coop bookstore and somebody having a cup of coffee next to me said, “Hey, I don’t know if you’ve read this book before by Cialdini, but it’s amazing.

[00:05:52] Richard Wilson: And he had me read it, and I just said, “Wow, this is super powerful.” So our whole business is structured based on that. And if you know the Cialdini influence principles, you’ll know a few of them: have a position of authority, scarcity adds to influence, reciprocation (you do something for someone, they want to do something back to you)

[00:06:16] Richard Wilson: And then commitment and consistency. And so what I’ve found is if you stack all those on top of each other and you consistently provide a lot of thought leadership to a very small niche group like ultra wealthy, super ultra wealthy families, and you do that over and over again over 16 years, just like you guys have with your podcast and I have with Family Office Club and now Billionaires.com, that you enact all these different influence principles at once, right?

[00:06:50] Richard Wilson: You get mass reciprocation across everybody getting your content. You’re very consistent with how you put out the content and it positions you as an authority on billionaires or starting a , et cetera. 

[00:07:00] Trey Lockerbie: When you’re just getting started, I understand you’re building this platform and over time that builds authority, but how do you start as a 21-year-old kid, like you said, fresh out of MBA school? What authority are you bringing to the table at that point?

[00:07:18] Richard Wilson: Yeah, sure. So I had no authority. Then I went and worked for a capital raising placement agent firm. And what I did is I asked them, “I’m like, will you hire me?” They said, “No, we want people with seven years experience who have raised a hundred million dollars, so go away.” And I said, “Well, I’ll quit my six-figure job at least for three days a week, and I’ll work for free for three days a week, calling investors for you to show you I can do the work.

[00:07:54] Richard Wilson: And I’m a hard worker. And you’ll want to pay me after a few months. So after a few months, he started paying me for one day a [00:08:00] week and two days a week and three days a week. And eventually he paid me to be there full-time. I took a big haircut on what I got paid, but I had potential commissions. And then once we had brought in over a hundred million dollars in allocations, but my website was also taking off, he said, Hey look, I’m a regulated broker dealer entity.

[00:08:16] Richard Wilson: You have to either shut down the silly blog or leave the company. And at that point I was like, well, I’ll just find another capital raising. I would appreciate the exposure and the insights I’m getting by creating this website. And by the time I got that next job offer, the blog was making me over six figures a year.

[00:08:31] Richard Wilson: And we did seven figures of revenue our third year in business 13 years ago. but the real shortcut was I just studied everything going on in the industry, like Mark Cuban always recommends you do. Just read everything possible in your industry, digest it, interpret it, put it back out there for other people who don’t have time to go and read everything.

[00:08:57] Richard Wilson: And then when I got a book deal with Wiley, And I had bought s.com. I just interviewed 30 s and put all their interviews in my book, and that showed everybody that I was very well connected and that I knew what I was talking about. And then everything just kind of snowballed from there.

[00:09:13] Trey Lockerbie: So if the psychology of influence is in play for you, I’m curious if you also saw in the billionaires that you’ve studied now and interviewed throughout their career, have you seen them put into practice I, these principles of authority, scarcity, reciprocation, consistency, and yeah. I’m just curious if you’ve seen examples of that come up?

[00:09:33] Richard Wilson: Yeah, for sure. I have a couple of times. One is in Howard Mark’s book called, The Most Important Thing. He talks about how. They don’t like to chase deals. They like to be known in the industry, so deals come to them so that when people come to them, They have a big edge because they’re the ones that are asking for the business.

[00:09:52] Richard Wilson: They’re not going out and asking to invest in somebody’s deal. And that way they get much better terms. So that’s kind of like an attraction factor type position instead of chasing people. And then the other one is more generic across most types of billionaires is that there’s the opposite of blackmail.

[00:10:07] Richard Wilson: You could call, you know, white male or alpha male. And it basically has nothing to do with your gender. It’s just basically that. When you, instead of saying, if you do something, if you don’t do something for me, I’m going to break your window. It’s just an implied unsaid thing that if you can get in business with Oprah or Warren Buffet, that really good things are going to happen.

[00:10:26] Richard Wilson: You don’t have to even say it out loud, right? People feel that. And so that position of authority as a titan in the industry, whether you’re worth a hundred million or a billion, attracts business deals. And one of the most important things I’ve learned in 16 years is that as an ultra wealthy investor, or a billionaire.

[00:10:43] Richard Wilson: Your wealth will compound exponentially faster. If you can see deals first exclusively and at a better valuation than other people, then you are going to compound your wealth very quickly. And so I think that’s the most powerful thing that I could probably share from studying the billionaires and starting up all these.

[00:11:00] Richard Wilson: If you’re not known so well in your niche at least, or the niche type of deal flow you want that you’re not seeing deals first exclusively and at a better valuation, then you’re added disadvantage to what you could be at. 

[00:11:12] Trey Lockerbie: So it seems like as you become ultra wealthy, like these people have become, it’s inevitable almost to set up something called a Family Office .

[00:11:19] Trey Lockerbie: And maybe, maybe you found that some people are not even sure what a Family Office is, even at their success level. Right. But I’m curious, can you explain to us what a Family Office is and, and also what it isn’t? 

[00:11:32] Richard Wilson: Sure. Yeah. So a Family Office is just an ultra wealthy investment management, wealth management solution.

[00:11:39] Richard Wilson: It really manages many aspects of there. The reason why it’s important is if you’re worth $1 million and you mess up a tax filing or one of your two LLCs you have in place, et cetera, maybe the penalty is a thousand dollars or you lose a thousand dollars because you made a mistake on a filing date. When you become wealthier and you have dozens of LLCs and a hundred employees, or a thousand employees, et cetera, one little mistake could cost.

[00:12:02] Richard Wilson: $50,000, $400,000, maybe $4 million, and as you grow, you get busier and busier, and your time is worth more per hour. So you just need people around you helping you allocate capital, make things more tax efficient, make sure the investment you want to make today is going outta the right structure at the right time, that reporting is done.

[00:12:21] Richard Wilson: And systematically track all your holdings in K one s and LLCs, and you’re more likely to make a mistake the busier you get. And each mistake costs you much, much. And then you probably are very powerful at creating new wealth. And so you doing everything makes less and less sense as you build teams around you.

[00:12:36] Richard Wilson: You should only be doing what your best ability allows you to do or your unique ability, as Dan sold and says often. And so I think that’s really critical. And there’s three types of s. There’s a virtual for those that are worth 10, 20, 50 million, maybe a hundred million or a little bit.

[00:12:52] Richard Wilson: And that’s a super lean structure. We don’t have very many full-time employees. It’s usually just remote, maybe a half-time [00:13:00] ceo, halftime cio, et cetera. And then you could have a single , which is full-fledged. You might have 2, 3, 5, 10 full-time employees, even dozens or a hundred plus full-time employees.

[00:13:10] Richard Wilson: And then you could have a multi-, which is really just a wealth advisor who’s geared everything towards the super ultra. And some of those will take in 10 million net worth clients. Others have a minimum of a hundred million net worth per client. But virtual , single , and multi- are the three main types.

[00:13:29] Richard Wilson: But people throw around the term, you know, and some people who are really just raising capital say, oh, we have a . But next minute you talk to them, they’re trying to sell you their real estate deal and they’re really just syndicating real estate. So, you know, we have to watch out for a legitimate one versus ones that try to look like one, but are really just an investment company.

[00:13:46] Trey Lockerbie: So you mentioned the virtual is around 10 million and up, let’s say, because even at a part-time CFO or part-time staff, that’s also, those are real costs that you’re incurring, right? So you need to cover those costs and then some and make sure they’re paying for themselves and getting good returns.

[00:14:00] Trey Lockerbie: So I imagine there’s a certain threshold that you have to kind of achieve in order for that to make sense. Is that around the 10 million mark, or where have you seen it to make the most sense to get started? 

[00:14:11] Richard Wilson: It’s right around the 10 million mark. It also depends on how complex your portfolio is. When you get beyond owning your primary home, and let’s say your other investments are just a wealth advisor and maybe one or two past homes you used to live in, or one or two vacation homes.

[00:14:24] Richard Wilson: Once you get beyond that level of complexity and you start doing angel investments or operating business investments and real estate, syndications and passive deals, and you’re a lpn, And you have half a dozen extra LLCs, et cetera, you’re starting to feel the need because the level of chaos around you is growing.

[00:14:42] Richard Wilson: And then your net worth is growing so much that you say to yourself, I want to make less expensive mistakes that feel dumb, and I want to move faster and play a greater offense. Like most of the really ultra wealthy families I know specialize in just one or two niches, maybe three at most, where they’re playing offense and then they have a strong defensive team and strategy.

[00:14:59] Richard Wilson: They’re not playing all defense and just diversifying into 400 niches. They have three segments of their portfolio. They have their wealth advisor, usually just one, sometimes maximum three. And that’s pure defense, really. And then they have their real estate allocation. If they didn’t make their money in that niche, they’d usually do a percentage of real estate development, a large chunk of cash flow in real estate, and that’s sleep at night, money that should grow and match inflation over the long term.

[00:15:25] Richard Wilson: And then the third niche area is really where they play offense, and that’s their operating business niche where they created their wealth or those one or two areas where they want to really be strategically, hands-on involved. 

[00:15:36] Trey Lockerbie: As far as Family Office’ s go, is that itself a legal entity? Do most people set up LLCs?

[00:15:43] Trey Lockerbie: Do they roll up all their many other LLCs under one roof? How does that all look? 

[00:15:48] Richard Wilson: Yeah, sure. Many times it can be helpful and advantageous to have an LLC or a business structure around the actual entity. It allows you to write off more things that otherwise might be scrutinized such.

[00:16:01] Richard Wilson: Traveling with family members or going somewhere to look at assets together with family members. Someone might say, oh, was that really a business expense? But then you can show that this is our p and l of this business. So many times that is done, many times, a lot of restructuring is needed. Not so much because of the , LLL C needing to be the managing member of every other LLC perhaps, but just because as an entrepreneur is moving very quickly, they might invest in a.

[00:16:27] Richard Wilson: And then didn’t really read the fine print of the operating agreement inside of that company and what was promised over email was never put into and baked into the operating agreement. There’s a lot of cleanup work in general needed there, and then a lot of trust and estate planning work. So many times.

[00:16:41] Richard Wilson: The proactive active tax planning, the estate planning, and then the direct investment strategy work more than pays for all the costs of the, the, the games the family gets. 

[00:16:53] Trey Lockerbie: Since we’re on the topic of Family Offoce’ s, I’m curious, maybe walk us through the first priorities you tackle when you’re setting up a Family Office , where would you start?

[00:17:03] Richard Wilson: Sure. We first talk about what their values and objectives are. Is your goal to spend one hour a week on email and phone calls and spend the rest of the time on the beach? Is your goal to grow from 200 million net worth to be worth 2 billion? Is your goal to donate a billion dollars in your life.

[00:17:21] Richard Wilson: Or to pass on a hundred million dollars to your kids. So all of those goals are remaining a different investment of your time, different level of cost, different level of complexity in your family. If you want to just play pure defense and go for an income portfolio, it’s completely different than what you should do if you want to quadruple your net worth in 10 years, right?

[00:17:38] Richard Wilson: And so all of that, the most important thing is that you really customize it to who you are and what your values and objectives are. And that’s where we always start. There’s otherwise, every hour of time you spend or dollar you spend and who you hire, it completely changes. And while it’s so obvious that every company should have their company values, everybody talks about that just in any  undergraduate business school course.

[00:18:01] Richard Wilson: What I find is that most families, even ultra wealthy families don’t have their family values. And so having your family values above your kitchen table and having those around in your house, so your family unit, your is acting in line with those values and you hire and fire investment managers based on that, is really important.

[00:18:18] Richard Wilson: So like two of my business partners in one entity are Eagle Scouts, and I happen to be an Eagle Scout as well. And we were comparing three different capital partners that were all willing to provide all the capital we needed to scale this platform. And we said, well, let’s just, it’s apples to oranges in terms of the actual investment terms.

[00:18:33] Richard Wilson: So let’s select them based on their values. And kind of half jokingly we said like, well, if they don’t really fit the Boy Scout law, the 12 values of. Being in the Boy Scouts, then they’re an outlaw and we just don’t do business with them, you know? And so not having your values and objectives and your mission identified means we can’t really work with the family yet in a way that respects their interests.

[00:18:53] Richard Wilson: because we don’t really know exactly where they want to go. And if nobody’s asked ’em those questions before, they might not know exactly where they  want to go. And so you’ll sometimes talk to people in the space and they’ll say, oh yeah, we’ll look at anything. But you know, really, do you want to invest in a dry cleaner in Australia?

[00:19:07] Richard Wilson: That’s just a. Probably not, right? Like you probably have some areas that you are more interested in and are the best use of your time while other people diversify you into other areas. So we help set up s at no cost. We end up just doing business with them over time, but we earn their respect and time by saying, well, instead of just buying.

[00:19:26] Richard Wilson: You know some auto parts companies, why don’t you buy a top three distributor of auto parts on a direct to consumer website if that’s where the trend’s going, and buy auto parts.com or whatever it would be, and then find a top five Amazon distributor and buy one of them as well. 

[00:19:42] Trey Lockerbie: Talk to us about what strategies are available to Family Office’ s that are not available elsewhere, if any, and maybe it’s for, you know, when you achieve a certain ultra wealthy level or status, do things open up to you at that point or get easier?

[00:19:57] Richard Wilson: Yeah, really great question. And  that auto part example, the reason why that’s so powerful is now every company you go to in the auto part space, you can say, oh, well we can boost you through our Amazon division. We can boost you up and put you on the front page of our website or your best deal flow might come from looking at the website, see who’s selling a lot, negotiate with the top three in that category, and then boost them to be number one in the exclusive person sold on that website.

[00:20:22] Richard Wilson: And. Leveraging things like that. It’s basically a strategic choke point is one of those strategies that you can do as your business becomes more sophisticated. And a lot of these families, they look at things like a chess board, like, okay, this business moves forward and makes me smarter in this way. Or like in Steve Schwartzman’s book, What it Takes, he talks about how doing m and a work and also LBO work create consistent fees and then big jumps in profits when things go well.

[00:20:46] Richard Wilson: But then let’s say they take a head partner at Goldman Sachs and commodities and they open a commodities division. that now informs their other divisions. So if they know commodity sales are about to tank, they can write in an option on a railroad deal in their LBO division to lower the price of that acquisition based on having extra information that other people don’t have.

[00:21:03] Richard Wilson: And in the public markets, extra information is sometimes insider trading and illegal. And you go to jail in the private markets many times, it just means you’re a better investor and you’re smarter and can move with more conviction. And the other thing is that many times when people come to you and they really want you.

[00:21:19] Richard Wilson: Like we had a deal last year where the company wanted us to invest and so we bought 5% of the company, but we only invested 2.5% and they gave us the rest and advisory shares. We had another company last year that gave us 33% of their company to help them strategically grow and scale because they knew the company would become much, much larger.

[00:21:39] Richard Wilson: If they could plug into our investor club and our relationships. And so big families, when they grow a reputation of being very strategically helpful and having a lot of ownership of choke points and influence and distribution, they’ll get sweetheart deals where the valuation is so good for them.

[00:21:55] Richard Wilson: They also, like Warren Buffet, always negotiate extra warrants or extra collateral, et cetera, and it’s just like an amazing deal cause they really want to do the deal with him. And not somebody else. So that’s the most powerful thing that you can do. And that goes back to the scene deals first exclusively at a better valuation.

[00:22:12] Richard Wilson: So getting used to it, how do you structure rider participation? How do you do an equity cap or an equity warrant, or a gross revenue royalty deal, or have a structure that aligns everybody so everyone gets paid handsomely. , but you as an investor get all your money back first. And a lot of people in their first decade of being ultra wealthy don’t focus on investment structure enough.

[00:22:33] Richard Wilson: And so you take an average deal and if you structure it well, you can turn it into an amazing deal. And if you take an amazing deal and you structure it very poorly, then it can be really bad for you. You have no collateral, you get none of the income. The person running the deal gets all the profits first.

[00:22:45] Richard Wilson: And so we really emphasize this in our work with clients. And everything else we do. So a lot of our investments I talked about in medical practices and the short term rental properties, those are all structured. So investors get all of their money back first or double their money before any asset management fees are charged.

[00:23:03] Richard Wilson: And I think that’s the way of the future as investment organizations get more and more aligned in the future. 

[00:23:09] Trey Lockerbie: When you mentioned the gross royalty deal, what’s coming to my mind is Mr. Wonderful on Shark Tank, and he’s pitching these royalty deals and then they kind of seem to get a bad rap. You know, you see the other sharks, you know, dogging ’em for it and being like, come on man.

[00:23:21] Trey Lockerbie: But you’re saying this is more the future. I’m kind of curious what is the incentive for the company to take this on? They don’t seem very advantageous to the person on the other side, I guess is what I’m saying. So how do you get over that? 

[00:23:32] Richard Wilson: We could do a whole episode just on royalties, and I would love to do it because I just love this topic.

[00:23:37] Richard Wilson: Of all the s I’ve spoken to in 16 years, I’ve met one family from Norway that’s ever done a royalty deal. It’s very uncommon, but it can be structured to be really great for the business owner or be really great for the investor or be really balanced. But it’s just a nice way to align yourself.

[00:23:51] Richard Wilson: And so a few examples of why it’s great for the business owner. Sometimes in a medical practice deal we will bring in. Investors, and then the investor will get a certain treatment, let’s say 3% of gross revenue. Until they double their money. Now they’ve already doubled their money and they could be outta the deal at that point and cap a two x return.

[00:24:12] Richard Wilson: Sometimes we’ll structure in a rider participation, so when the medical practice sells to private equity one day they get an extra little boost of their return. Other times they might get their equity reduced from 10% to 2% because they’ve already doubled their money or some sort of treatment like that.

[00:24:26] Richard Wilson: And it allows the company owner to grow and not be diluted as much if you’re diluted permanently. Like people on Inc 500 have often sold their soul and they only own 12% of their own company. So it’s great that they’re big, but is it really their company anymore? They almost have a job at some point, because some of ’em only own one or 2%.

[00:24:44] Richard Wilson: And so you can use royalties to protect equity and make it so you get all the capital you need and you only get diluted by one or 2% each time you raise capital instead of 10%, 20%, 30% right out of the gates getting massively diluted. Or it could be flipped the other way. And made really good [00:25:00] for the investor or right down the middle, like with a manufacturing company or another medical practice deal he did.

[00:25:05] Richard Wilson: You get all your money off the table off a royalty and then you’re just an equity holder or just an equity warrant holder at the end of the day. So there’s a hundred options on how to structure all of that, but it’s just like you can make it really good for either party or write down the middle. But people like to complain about Mr.Market.

[00:25:20] Richard Wilson: Wonderful, because it’s comical in part and sometimes lots of the shark deals are such ridiculous terms, right. 

[00:25:27] Trey Lockerbie: I understand you don’t want to be diluted and that makes a lot of sense, but you find contrary ideas around this. For instance, I was watching the Richard Branson documentary on HBO, which is great, but a fact pops out at you.

[00:25:39] Trey Lockerbie: That’s kind of surprising. He has 400 companies and he, I wouldn’t say only, but he’s only, you know, worth $4 billion, which is obviously right, a ton of money. But for a guy who owns 400 companies, you know, it’s almost on the low end of the net. And so I’m kind of curious because he’s partnered with many people.

[00:25:56] Trey Lockerbie: He’s diluted himself, he’s gotten other folks in the ring. And I know that you’ve actually also interviewed Mark Cuban and one of his pieces of advice of where people go wrong, seemingly was around not giving up equity, not incentivizing those around you to share in the success and get them motivated, everyone rowing in the same direction.

[00:26:13] Trey Lockerbie: So dilution yes, can be bad, but. There’s strategic ways to use it as well, and I’m kind of curious where you kind of fall in that philosophy. If you go either way on. 

[00:26:24] Richard Wilson: Right, right. Yeah, for sure. So if you have a chance to do a deal with a billionaire, their level of sophistication is max their institutional level or above.

[00:26:33] Richard Wilson: And so the terms you’re going to have to give to them and the dilution you might need to do to get them on board is going to be different. They may still appreciate having a gross revenue royalty till at least their principal gets off the people, and now they can recycle that cash into the next deal. They might put 10 million in your.

[00:26:49] Richard Wilson: You might not have an exit for 12 years, but maybe they get that 10 million out through royalties over three years. Now they can put 10 million in the next company and do the same thing over and over again while still having a decent equity stake. And they may feel more comfortable doing that and owning 20% of your company or 40% instead of owning 25% or 45%.

[00:27:06] Richard Wilson: because now they’re money is freed up and they’re not illiquid for a decade crossing their fingers. They’re going to have some magical exit to Amazon like the ring company. So I think that’s really important to note. The higher the level of sophistication, typically the more that the investor does not want to be capped at a two x return and then out, right?

[00:27:22] Richard Wilson: They want the upside for the risk they’re taking, but everybody that I know would rather not be illiquid forever and just be playing with house money and get their initial investment off the table. And now everybody can be winning together more handsomely as true partners. Now you’re not at risk of losing.

[00:27:38] Richard Wilson: The other person’s money and it’s just plain for the upside. And I really like one thing they say on Shark Tank is about one of the points I made earlier. They basically say, oh yeah, that’s great that you raised a 7 million valuation for your nothing Burger mobile app idea. That’s mostly a dream, but now you’re in the Shark Tank.

[00:27:54] Richard Wilson: and you only have 400 K in revenue. So if you want my partnership, it’s 25% equity. You know, it’s done to be dramatic on TV and somewhat comical, but you know, that’s what some people can’t say in exact words. But basically if you want the attention of a big strategic partner, you’re going to have to give ’em different terms.

[00:28:09] Richard Wilson: And we had one group in our investor club who basically had 30 million of asset center management and they got an offer from a billionaire. To invest 250 million into their strategy over time. But what’s interesting is talking to them, they said, Hey, these terms look harsh. I mean, I don’t think these are fair terms.

[00:28:26] Richard Wilson: I said, okay, well if you want to go out and compare it against other institutional term sheets, you know, please do. I mean, what do you think? Like what terms look worse than others. Term sheets you’ve gotten from people offering a quarter of a billion dollars. And they said, oh, well we’ve never seen another term sheet from anyone else at that level.

[00:28:41] Richard Wilson: I said, okay, well feel free to go and shop it around and if anyone will even let you see a term sheet, much less offer you one, then we can compare it. And people are afraid of getting a Scottie Pippin contract. I get it. And that’s important to think about long term. But you can skip college ball and aaa, minor league baseball and go straight to the major leagues if you want to operate on these.

[00:29:03] Richard Wilson: So I think that’s important to say for those who are looking to partner with bigger families. 

[00:29:07] Trey Lockerbie: Now talk to us about warrants, because I know that you are a big believer in focusing almost more on warrants than equity wherever possible. Which makes sense because for those who don’t know, warrants are essentially options for people who aren’t working in the business.

[00:29:20] Trey Lockerbie: So you’re getting this coupon on the company, or you know of that price baked in that you can purchase at a certain point later on, which makes sense. I’m kind of curious in other ways that you might look to prioritize warrants over equity at the start of a deal . 

[00:29:35] Richard Wilson: Right. So this could be said from a few different directions.

[00:29:37] Richard Wilson: One benefit to the company owner is maybe if they’re getting their money back and then they just participate when you sell the company. Now you’ve got their liquid back in their pocket now, and then they can cross their fingers, but they don’t have their money at risk of losing all their money if you don’t make it right.

[00:29:52] Richard Wilson: So that could be good for both people, because if they have straight equity, you owe them a dividend check every time you take profits out as a business. So that actually benefits the company owner in that way. One thing to try to do if you’re an investor is have the write of participation at the sale or the equity warrant not expire.

[00:30:09] Richard Wilson: You know, if you just have a write of participation of X percent, when they sell the company one day and it doesn’t have an expiration date, they could raise money 10 more times. And if you had equity, you would be diluted 10 more times. But if you just have that right of participation that doesn’t expire based on the terminal sale, then you may be able to participate there without having to respond to capital calls and without having to get diluted 10 more times.

[00:30:30] Richard Wilson: So that is something important to consider as well. Most equity warrants do have a dollar amount per share value that you have to invest within a certain time period. And you know, if the company greatly grows, then you’ll be very happy to buy. 4 million valuation when the company’s worth 40 million, of course.

[00:30:48] Richard Wilson: So it can still be a great deal. But if you get in a company early enough, you might be able to negotiate something where you don’t get diluted over time and don’t even have to invest anything more in the future. 

[00:30:57] Trey Lockerbie: Interesting. So the participation rights, you know, connected with a royalty deal potentially are interesting because you’re still getting the right to put in some more money or to purchase some shares at a certain point, but that’s actually separate from the warrant itself.

[00:31:11] Richard Wilson: Right. A right participation could just be when the company sells for a hundred million and you’re getting 4% of it, you’re getting a 4 million participation in that. But it’s almost like the equity doesn’t activate until that sale happens. When we talk to medical practice owners, a lot of times they say, well, we need to recruit Dr. Talent more to scale our five or 10 or 20 location medical practice platform. We want to grow to a hundred million or billion dollar valuation and you know, we can go and get debt or we can sell our soul to private equity, and now we have a job. And so they don’t have the time to go and raise money from others, and they don’t know how to navigate that.

[00:31:45] Richard Wilson: And then worse yet is that they don’t know how to structure it. So they’ll give away 20, 40% equity. And they’ll not know that there are other options to do that. And so it becomes a time suck and then they have no idea that these other structures are open. So we just love working with the doctors because they usually have gone to school for a decade.

[00:32:01] Richard Wilson: They’ve then done a residency, started their medical practice. They’re very unlikely to run away from Venezuela on us when we trust ’em with our investors’ money. They sell really high multiples once you have 10, 12 locations or more. So we’re always looking at, you know, what’s crowded in the investor space and then what is a niche that is not crowded?

[00:32:18] Richard Wilson: But it’s going to have big future demand, and we’ve learned that from working with Naomi offices as well. So you don’t want to play the same game that everyone else is playing. You want to do something unique and have a real high conviction edge over what kind of the masses are doing in your space. 

[00:32:32] Trey Lockerbie: I want to talk a little bit more about the billionaires you work with and have also interviewed.

[00:32:36] Trey Lockerbie: I was recently speaking with Michael Sonnenfeldt, who founded Tiger 21, which is a billionaire club and you know, a high net worth individual club. And he mentioned that for, I dunno, the last 23 years real estate had been the number one strategy and only in the last year or so it’s actually slipped down to I think the number three spot.

[00:32:53] Trey Lockerbie: Behind private equity, Publix, and then now real estate. So private equity has seen this huge increase. And I’m kind of curious you know, how that’s come back into vogue a little bit from, you know, you mentioned LBOs earlier and you think about the eighties and when everyone was getting into that, but it seems like it’s becoming popular again.

[00:33:09] Trey Lockerbie: I’m kind of curious what you’re seeing on that end. 

[00:33:12] Richard Wilson: What I’m seeing is that a lot of people conduct these benchmark surveys and they’re always delayed by a good amount. And at the end of this last cycle, before rates have gone up the last four or five times and they were just starting to go up, a lot of the smarter investors in real estate were like, wow, the Fed is signaled we’re going to raise rates and so we know real estate is going to take this hit.

[00:33:33] Richard Wilson: So they’re looking for something that can force appreciation and still grow, and perhaps an exciting private equity opportunity could be. But technology investment flows are down right now. Real estate flows are way down. Cannabis flows are down 90% for the last 18 months. So I think flows across the board are down a whole lot.

[00:33:50] Richard Wilson: But what’s really exciting about that is that one of them, like I’m reading every book I can from billionaires and one of the most surprisingly good ones is from Howard Mark. And I, it’s not surprising cause I didn’t think he was an, wasn’t an intelligent person, but sometimes when you think of a hedge fund billionaire, you might think it’s going to come off as dry and analytical.

[00:34:09] Richard Wilson: But one of his books, the most important thing, is really great. And he talks about how when there is perceived risk and people start to sit on their hands instead of allocate to things, that is when there is less risk because now you’re getting a 20, 25% discount. So, In investor residences.com, our average discount is 23.5% on each property we’re buying and we’re offering all cash.

[00:34:33] Richard Wilson: High earnest money, 14 to 40 day closings. And there’s no bank involved. And the average home that goes under contract has a 27% chance of not closing right now, because the bank doesn’t approve something at the last minute or asks for 19 things the night before closing like they love to do. So we just take banks outta the equation.

[00:34:50] Richard Wilson: And Howard Marks emphasizes that you should be pessimistic when others are optimistic and everyone’s heard, oh, you should invest when there’s blood on the streets. But to actually do that takes some courage. And no one can time the bottom perfectly. So layering into the bottom is one lesson to take from Howard Marks is just that the more that other people see risk, the more that there’s actually less risk in the market.

[00:35:12] Richard Wilson: And I think that’s an important point to point out in terms of where flows are going and when they’re going and what direction. 

[00:35:21] Trey Lockerbie: You know, that saying about investing when there’s blood in the streets, I always feel like it was missing a piece because. Usually some of your own blood is in that street

[00:35:29] Trey Lockerbie: And that’s what makes it hard. Right? Right. It’s not just the blood in the streets. It’s like you are probably bleeding yourself, which is why it’s so hard to do this. And I don’t feel like that gets stuff appreciation. Yeah, 

[00:35:39] Richard Wilson: for sure. And it’s not popular. Other people say, why are you buying? Why are you buying?

[00:35:43] Richard Wilson: Like literally yesterday someone was like, well, why are you buying at the top? It doesn’t make any sense to buy at these peak prices. And we say, well, nowhere near the top right now. If you’re paying what. what the market was at before rates got raised, then you’re getting a raw deal for sure. You know deals have come down across the board  in my experience, and you might still have to look at 300 deals to get one or two amazing deals done, just the nature of any market.

[00:36:05] Richard Wilson: But yeah, you’re told you’re totally right. It could be your own pain and suffering and kind of licking your own wounds, but then trying to press forward versus doing that at the top of the market . 

[00:36:14] Trey Lockerbie: Some other billionaires you’ve interviewed have stood out to me. One was Jeff Hoffman, and that’s because through your club and others, you’ve done over 150, I think, events with billionaire speakers and all kinds of amazing guests.

[00:36:27] Trey Lockerbie: But Jeff has been a recurring guest today. I know that he’s stood out to you as one of the best billionaire speakers you’ve had at these events. So he’s an entrepreneur. Maybe tell those who aren’t familiar with Jeff, who he is and why he’s the best billionaire speaker you’ve had at your event.

[00:36:43] Richard Wilson: Sure. Yeah. Yeah. He’s a, he’s better, he added more value than any billionaire or billion dollar plus ceo. We’ve had for a few reasons, and for those of you who don’t know who, Jeff Hoffman should definitely go and see him speak in person sometime. He spoke at our annual [00:37:00] event, the Super summit.

[00:37:01] Richard Wilson: We had. Some 800 and some people in the room and the demographic was your average investment event, maybe 48 to 54 years old, you know, mostly males. Unfortunately we wish there were more females in space. So that’s just how it is right now. And half of the room was in tears from his talk. And basically, he created the airport check-in kiosk.

[00:37:21] Richard Wilson: He loves to travel. He has a passion for travel. It’s been to 150 countries and he also is an early investor in priceline.com and booking.com. And what he talks about is that you don’t, you know, making a lot of money here is not an evil thing. And sometimes the media is like, oh this wealthy person, and it makes ’em look really evil in every way possible.

[00:37:42] Richard Wilson: But there’s nothing wrong with being super wealthy. It’s just wrong if you don’t do anything good with your. . And so it kind of flips on its head like, well, you know, I guess if you’re a bad person, then more bad things happen on planet Earth if you become wealthy. And if you’re a good person, then more good things happen.

[00:37:56] Richard Wilson: And it really secured inside me the feeling that as business people, we should go out of our way to help people who are good people and make their capital platforms grow and back them and turn our backs on people who are unethical and not good and are not honest. And sometimes that’s not always the easiest thing to do sometimes.

[00:38:15] Richard Wilson: There’s a connection through a client with someone who claims they’re worth a billion dollars, but you do a background check and we found 14 negative events where they had signed a contract and left the person, for example, or we basically found that what they were claiming was not true when talking to actual companies.

[00:38:32] Richard Wilson: And we just had to tell ’em like, Hey, this isn’t a good fit for us. Even though it’s connected to an important client, like we just can’t work with you. So it’s just as important to help those who are really good people. As it is to turn your back on those that you think may be potentially a fraud or just unethical or slick or just constantly highly stressed out people or something’s off about them and you don’t know what, that’s our goal there, but that’s why we like Jeff so much.

[00:38:54] Trey Lockerbie: You mentioned some billionaire books and why it’s always great to go to the source and I’d like to pick out five billionaire books that stand out to you. And I’d like to tease out maybe one or two insights from each and go one by one and just kind of I’d just be curious to know if we can compare notes on a few things here.

[00:39:11] Trey Lockerbie: So you mentioned Howard Marx’s book, which is obviously an amazing book. What other books say top five stand out to you from billionaires that you’ve read . 

[00:39:19] Richard Wilson: Yeah, sure. My favorite one is Steve Schwartzman’s book What It Takes. I’ve listened to it twice on Audible. I’ll probably listen to it at least once a year for the next couple years.

[00:39:29] Richard Wilson: We talked a little bit earlier about how different parts of your business can inform the other division. Not only makes a more diversified company, but being smart in this one area, it makes you a lot more effective maybe in other areas. He also talks about how he likes to do really big things that can have big consequences.

[00:39:46] Richard Wilson: Instead of spending time chasing a bunch of little rabbits, he wants to focus on one elephant and get that done within different business segments and units. And he also talks about just an expectation of excellence across his organization. And anything  less than excellence will not be tolerated.

[00:40:02] Richard Wilson: And that’s something I’ve found through several billionaires is their expectation of. And just finding people who can do that and perform at that level, and otherwise they don’t remain on the team. So for the first book, you know, it’d be what it takes by Steve Schwarzman and I think everyone who listens to that would get a ton of value out of it.

[00:40:21] Trey Lockerbie: Yeah. And for those who may not be familiar, Steve Schwarzman is the Chief Executive Officer of Blackstone. So probably both have heard of Blackstone, but maybe not Steve himself. But that’s a great book. Let’s move on. What’s another book that stands out to me? 

[00:40:35] Richard Wilson: Yeah, sure, I can. I can go through a couple of others here. So another one is “How to Win At The Sport of Business” by Mark Cuban. If you haven’t read any books from a billionaire before, this one is not hard. It’s like an hour and a half. You’ll get through it quickly and you’ll start to see  why you should only read books written by billionaires, and until you run out of them logically.

[00:41:06] Richard Wilson: And Mark talks about how business is a 24/7/365 game, and the person who knows the most is going to have a huge also reading everything possible on your niche, becoming really overspecialized and informed helps a lot. But also, the side effect of that is you become really connected and well-networked over time. And then his message to our community when interviewing him was just that you should be kind and generous with others because people think in business you have to be a jerk too. And sometimes on Shark Tank, you know, or in the media and on the sidelines of a basketball game, he can be portrayed as kind of an in-your-face person who’s really direct or aggressive.

[00:41:55] Richard Wilson: But, you know, he basically says you have to treat others well and get them to like and want to work with you. It’s not about just being a jerk and ordering people around. So those are some of the insights I took from him. And then at our New York event last year, we had the founder of iChannel, Larry Naer, who spoke on stage like a fireside chat with him.

[00:42:14] Richard Wilson: He sold for 3 billion to Comcast. And what was most interesting about him is that nowhere along the way did he have a grueling, grinded out mentality or work ethic like Steve Schwarzman will. “I sleep five hours a night, I’m up at 4:00 AM every day. I’m high energy and I do this, and this,” he says. He doesn’t say the only reason he’s successful is he gets up at 4:00 AM, but that’s how his work ethic is

[00:42:47] Richard Wilson: And you’ll hear Mark Cuban say like that, he will outwork you and he will out, you know, research and study the space. And Larry had a totally different perspective. He just said to hire people that are much smarter than him. And I think that’s important for people to hear because that’s unusual. And you know, you hear Ariana Huffington say, “Oh, you know, you have to sleep, you have to take care of your body, your health because she passed out and broke her chin or something on a desk because she hadn’t slept in a couple days and was working too much.

[00:43:25] Richard Wilson: But when people hear that and they know that you did work that hard for 15 years first, and now you’re all about meditation and only working x number of hours a day, you kinda say, okay, but you grinded for 15, 17 years and if you didn’t do that, maybe you wouldn’t be Ariana Huffington. Right. It’s good to hear from someone who, from the beginning, was always like that versus a convert.

[00:43:46] Richard Wilson: And then Larry just focused on creating something really unique, the low cost basis. He was basically saying like, well, we can get access to this movie trailer content for no cost. They’ll pay us to put out their movie trailer content. So our cost of production is really low on creating  this content.

[00:44:01] Richard Wilson: You know, just a very unique model, and it just exploded and grew really quickly in popularity. And then just being really humble was something that Larry suggested, both him and Jeff Hoffman when they get off stage. They sat around, networked with people for a couple hours, just chatted with everybody in the audience, you know, they didn’t have, you know, who, who I’m going to talk about next, Grant Cardone, or I’m sure if Steve Schwarzman came, I doubt he would hang out for a couple hours and just chill and chat with anyone who wants to chat.

[00:44:27] Richard Wilson: You know, you know they’re on a mission and they’re, they’ve got 400 things a day to do. So definitely the humbleness came off on stage and we’ve got that recording on billionaires.com as well. And the final one is Grant Cardone. I’ve read several of his books. His personality might not be for everybody, but he’s a smart guy and he has a lot of strategies that definitely work.

[00:44:47] Richard Wilson: And he has built a big brand for himself. And some of the insights from his books is just to be obsessed or be average. And that relates to Mark Cuban’s idea of being all over a niche or saturating a niche, almost  monopolizing a niche to be doggedly persistent, and stay after someone until you get it.

[00:45:04] Richard Wilson: And that’s something I can really relate to. A lot of the best deals we’ve ever done. Either took us years of follow up, a hundred plus emails, or they literally told us in many cases our best deals we’ve gotten done. They told us, go away. This deal’s never going to get done. You’re wasting your time, you’re wasting our time.

[00:45:19] Richard Wilson: And then we change the investment structure and we get the deal done, or we keep following up another eight years and we’ll get the deal done. So that’s one thing that I got from Cardone just to encourage me to continue to keep doing that cause that’s what’s made him successful. And then the last thing I’d say with Cardone is just his ability to transfer his knowledge and then go into real estate and raise a billion dollars of equity and convert into being a decently large player in the real estate space.

[00:45:47] Richard Wilson: Not that a billion dollars. There’s a lot of a u m for real estate, but um, he was going to take someone from one industry and then leverage it into a hard asset space. It’s something that we do take some inspiration from because of what we’re doing at the medical practices and. [00:46:00] Investor residences.com, you know, or different personality, different business, different strategies, but that was one takeaway we had just from like giving.

[00:46:07] Richard Wilson: He spoke at our events maybe three times now. I’ve got to meet with his team several times and been on his podcast. 

[00:46:14] Trey Lockerbie: At that point that Mark Cuban brought up about just being a nice person and how far that can get you and how underappreciated that is and how people think you need to be ruthless. They hear these stories about, I don’t know, Elon Musk cutting, slashing half the company, or Steve Jobs or Bill Gates berating people in a conference room.

[00:46:30] Trey Lockerbie: I mean, you hear about this stuff and you hear these guys are ruthless. But I just have to point out that from interviewing a few billionaires on this show, They always seem to be the nicest people. Yeah. That I’ve interviewed. And it’s come up. I mean it, not that everyone isn’t nice, but they are especially warm and nice and easy to talk to most of the time.

[00:46:48] Trey Lockerbie: And I find that so interesting just in contrast with probably more of a causation there than a correlation actually. So that point that you brought about. Grant Cardone is interesting because I believe he raised that billion dollars from  social media, which I think was unheard of at that point in time and pretty innovative on his part.

[00:47:05] Trey Lockerbie: But when he was talking about putting that into hard assets, as you mentioned, he said that owning a single family home, The idea of investing and owning a single family home is dead, which I find really interesting. And I don’t know if that was a sign of the times before interest rates had started going back up and maybe markets were changing, but what do you think was the basis for that comment?

[00:47:29] Trey Lockerbie: And do you think he was onto something there? 

[00:47:31] Richard Wilson: Yeah, it’s interesting. I mean he likes to say something, he’ll say things that are polarizing and 25% of people are like, oh my God, I can’t believe you just said that. That’s so rude. You know, whatever. And so you have to know that about his marketing persona, right?

[00:47:46] Richard Wilson: He does that on purpose, I believe, and he is good at it. And he’s built a huge brand. So more power to him for pulling it off and not offending people as much as Trump while still using that strategy, I think. And so that’s part of it. Part of it I think was him making a point that multi-family gets valued at such a low cap rate, compressed cap rate compared to a single family residential.

[00:48:08] Richard Wilson: All else equal. Why would you put your money into buying a couple more vacation homes? And then, you know, his conclusion I think is like, maybe you should put some money with me. And then in our multi-family deals or in somebody’s multi-family deals, it’s just a better space for your money was his argument.

[00:48:23] Richard Wilson: Obviously sophisticated investors in the space know that SFR built the rent communities. They’re being sold at just about the same cap rates. Is a multi-family asset. This is basically a horizontal multi-family asset. And so people can argue against what he said and I have never said buying a single family home is garbage because we’re buying a transaction with those every three to five weeks and our fund, of course.

[00:48:45] Richard Wilson: But I think that’s partially why he said that just because the multi-family space has so much money, Chas. And over the long term, you know, lots of people have done quite well until probably about February, March last year, what’s been happening as rates go up, especially those that had no interest rate insurance in place, or had bridge loans or floating rate loans, et cetera.

[00:49:06] Richard Wilson: Now what happens is people go to the table to buy a multi-family asset from someone who’s really excited to exit. His rates went up and the person said, well, wait. Rates went up three times since we put our offer. And I know you have 80 K of our escrow money, but the property is now worth 400 K less or 4 million less.

[00:49:23] Richard Wilson: And maybe they have a million of their escrow money, but the property’s worth 4 million less. And then meanwhile, they’ve locked up another property right next door for three or 4 million less, and they say, Hey, we’re just going to break this contract. You know, Merry Christmas. You can keep our 80 k or our 1 million.

[00:49:36] Richard Wilson: Or you can meet us in the middle, reduce the price by 2 million or 2.5 million, and then we’ll still close. And if you have to re-list this property, you’re going to be in another 60 to 90 day closing. That rate will go up again and the next person will probably do the exact same thing to you. So just meet us in the middle so it’s somewhere fair.

[00:49:53] Richard Wilson: So we don’t look down to our investors. You’ll look down to yours, and we’re both halfway happy. Halfway not happy. So that’s important to know. It’s just that. That just shows the type of discounts that are happening across the board with luxury homes or multi-family. It happens to all areas of real estate as rates go up.

[00:50:09] Trey Lockerbie: Walk us through how you organize your own investments or how you kind of strategize, you know, allocating throughout these different entities that you’ve set up. 

[00:50:19] Richard Wilson: When I look at putting my money to work, we’re continually getting better and better terms. So we have you know, equity in 23, soon, 24 medical practices doing the 45 million in revenue there.

[00:50:30] Richard Wilson: And then on the investor residences side, and those are one-off deals, it’s not a fund on the investor residences.com side. We can do one-off deals if we want to, but the main offering is a fund. And I have just under the $1 million mark of my cash and the fund alongside my investors. Basically that makes it so I’m an LP in my own fund.

[00:50:50] Richard Wilson: And then that can help grow our balance sheet because we want to grow a 500 or 1000 asset portfolio of. Short term rental properties. And the key thing  is that from learning from billionaires, tie it back to your show here, is that they don’t do things where they’re playing the same game as everyone else.

[00:51:07] Richard Wilson: That’s why we have different investment structures we use. We see a big opportunity in providing the growth capital to medical practices versus just buying them or providing them debt like most other people. And then in the short term rental space, less than 1% of it is owned by institutions. So we think if we.

[00:51:23] Richard Wilson: A thousand asset portfolios, there’s going to be many institutions that would like to get diversification into that, so we’re pretty conservative on that. But we tried to stay focused on those two platforms for 90% of our energy and then just help people set up s and see how we could be keeping them in mind to source things for their portfolio.

[00:51:41] Trey Lockerbie: When I was talking to Michael Sonnenfeldt recently, he brought up this really interesting point from his experience with Tiger 21, which is that he’s seen a lot of these billionaires who are entrepreneurs and they, that takes a certain skill set, certain mindset, and they grow these businesses and sell them, and they’re often very bad investors from that, which I’d never heard before and I just thought was such an interesting perspective.

[00:52:04] Trey Lockerbie: I’m kind of curious if you’ve had a similar experience where you’ve met folks who. Become these billionaires, but it’s more through compounding probably their own business and then not being really savvy when it comes to actual investments or having the patience that’s needed. Because you know, like you mentioned with some of these other billionaires, they’re action packed sometimes.

[00:52:23] Trey Lockerbie: Right? When they’re so hardworking and driven as they usually are. 

[00:52:27] Richard Wilson: Right? Yeah. Great point. So the thing is, they might be a titan in their industry. Like let’s say they make zippers and they’re like the zipper titan, and everyone knows them. and I want to work with them. They may not know though how to invest outside of that niche or even how to structure deals because maybe the structuring was done by an investment banker for their company.

[00:52:47] Richard Wilson: So what happens is that their knowledge runs super deep in that level, in that area for 30 years, but then they’re a relative infant in the area of choosing a wealth advisor or diversifying across different direct investments or investing into real. And a couple things happen often, and these are 10 million mistakes that get made by billionaires that they’ll trust whoever has access to them.

[00:53:09] Richard Wilson: And because of that trust, they’ll go forward with a deal that they really shouldn’t be doing if they really compared it to other deals in the market. They’re not familiar with common deal terms. So we have a 150 million net worth family, and they showed us a deal that had a 5% a year. And it had their money at risk in the deal.

[00:53:24] Richard Wilson: And every other deal I’ve seen of that type was nine to 12%. I was like, why would you only do this for a 5% return? This makes no sense. They said, oh, well we just didn’t know, but we were about to pull the trigger and put seven figures into that. And so they don’t know what they don’t know. And the worst mistake I see is that they think they’re being smart because wealth advisors just bang the drama, diversification, and that’s all they hear.

[00:53:44] Richard Wilson: Diversify. But it’s diversification when it comes to direct investments. Typical. So you want to diversify in public markets. You want to diversify maybe across a few food groups of real estate and a few brain trusts within each of those food groups, perhaps even. But with operating businesses and direct investments in the area where you made your money and you want to play offense, diversifying could be potentially a really bad idea.

[00:54:07] Richard Wilson: You can’t invest in 19 different operating business niches and want full control and be really smart at 19 different niches. You’re smart with zippers. Maybe I have a passion for stem cells. You want to start reading everything you can on stem cells. Go to stem cell investment events. Look at 80 pitch decks on stem cells.

[00:54:22] Richard Wilson: Hire a consultant on stem cells. Make small little test investments on stem cells. Okay? You become pretty smart even in 12 months or three years doing that, and then pull the trigger on some larger investments. And I think that’s what’s lost. A lot of times people have this exit and then they start allocating a million here, 3 million there, 200 K there, and they’re funding somebody else’s dream, and they’re just looking for someone unsophisticated with deep pockets who would just fund it without really thinking, is this strategic, is this align with my values, my objectives?

[00:54:51] Richard Wilson: Is this a direct investment that makes sense as part of my portfolio? The chess port I’m trying to set up for myself. And Warren Buffet says that in the game of  investments, you don’t strike out by not swinging at three in a row. You can just not swing for as long as you want to until there’s an amazing pitch that’s right in your sweet spot.

[00:55:08] Richard Wilson: And you know, you could nail that deal and then you can swing hard at that. And so I think that’s just important for the ultra wealthy to hear that it’s okay to pass on a lot of things and you should have a strategic game plan and not just be investing based on what randomly falls in your. And not in too many angel investments and startup seed capital investments, unless it’s in the niche where you created your wealth or you want to be in one of those one or two areas where that is the game you’re playing now, you want to become really good at that game.

[00:55:37] Richard Wilson: So think that’s important for a lot of families to hear. 

[00:55:40] Trey Lockerbie: I know that you have an expertise also around tax strategies and these structures you’ve been talking about, so I’m curious if there are any tax efficient strategies that you’ve seen commonly used, just what your observations of how people typically approach things that may or may not be common knowledge at this point.

[00:55:56] Richard Wilson: Right. Yeah. Most people know that if you or your spouse are focusing most of your time on real, Management that you can be designated as a real estate professional in the eyes of the irs. This allows you to use bonus depreciation in more fluid ways than you could otherwise. In general, a lot of 10-31 exchanges set up for trust.

[00:56:16] Richard Wilson: A lot of work needs to be done before you have an exit. If you’re saying, well, I’m so busy, I’m so focused on my exit, let’s just get there and then I’ll figure out all this lawyer trust and estate planning structuring work. You’ve missed the vote on probably 80% of what you could have done, and you’re really not doing yourself justice because if you pay 30% taxes instead of 20% overall on a transaction, or 30% instead of 10%, it’s equal to saying, okay, well I just spent the last 30 years building my.

[00:56:44] Richard Wilson: But you know, those last seven years I could have been sitting on a beach or playing with my grandchildren or traveling to 80 new countries, but instead I wanted to grind for eight more years and not care about structuring things well until after my exit. That’s basically what you’re saying. So you want to be smart about that and get second and third opinions on large transactions and make sure someone’s double checking.

[00:57:03] Richard Wilson: Even a large firm may make a mistake and if that disqualifies your 10 31. I know one group had something not filed properly and missed out on 80 million in tax savings because it wasn’t done correctly, and the insurance policy of that large firm only covers up to 30 million. So I took a 50 million hit because of a clerical mistake and knowing tax things to look out for like r and d tax credits.

[00:57:28] Richard Wilson: Can be huge for manufacturing companies, software companies, and that can be a massive tax saving on a deal that someone may not even be aware of or even ever thought of. R&D tax credits are just one example. The families who are worth more than 30 to 50 million often find pretty quickly, if they haven’t already, that they need to really think ahead and proactively tax plans and use things like qualified opportunity zones to protect against capital gains taxation, for example.

[00:58:01] Richard Wilson: And a lot of families don’t want to just be super tax efficient. They also want access to their capital. And so they may set up trusts and different structures and donor advised funds, etc. But many of them, like with a qualified opportunity zone, they might say, “Okay, well, let’s protect 60% of the capital or whatever percentage is right for their situation against capital gain taxation today and put it in qualified opportunity zone deals, and let’s find the three institutional QOZs.”

[00:58:35] Richard Wilson: To put that work into and then we’ll just, we’ll take the hit on the 40% because it’s a long-term capital gain and you know, it’s not as bad as being taxed on income. 

[00:58:44] Trey Lockerbie: You’ve provided so many cool insights and a lot of stuff we don’t often talk about on this show, which has been really fun. I want to make sure before we let you go that you have an  opportunity to hand off to the audience where they can learn more about you.

[00:59:05] Trey Lockerbie: You’ve, like you’ve mentioned, written 13 books, so definitely hand off to that as well as the investor club, all the many things that your billionaires.com, all the many things you’re involved in.

 

[00:59:18] Richard Wilson: Sure. The best way to find out about our events coming up or our membership, if you’re running a company and you want to raise capital, or if you’re running a fund or syndicating deals, would be to go to s.com, and you can check out our membership there when our events are coming up.If you are just getting into raising capital and you want our best look on the topic, it’s free at familyoffices.com/capital-raising/, it’s super easy. Just go there and fill out a short form. But if you’re an investor and you want to have a 10-minute call with us and come to some of our events as our guest and see how we could help you set up your structure or just help you in some way as a private investor with tax feedback, etc., more importantly, just go to investorclub.com and fill out that 30-second form, and then Laura, on our team, or I will get in touch with you.

[01:00:22] Richard Wilson: I mean, if anyone needs some quick feedback on something, my email is just Richard@investorclub.com. Or you can shoot me a text message at 305-333-1115.

[01:00:32] Trey Lockerbie: Richard, thank you so much again. I really appreciate it, and I’d love to come to one of your events, so I’m going to keep an eye out for that. It sounds like a lot of fun. I appreciate it. Yeah, and you, let’s do it again.

[01:00:52] Richard Wilson: Great. Sounds good. Thank you, Trey. 

[01:00:54] Trey Lockerbie: All right, everybody, that’s all we had for you this week. If  you’re loving the show, don’t forget to follow us on your favorite podcast app. And if you’d be so kind, please leave us a review. It really helps the show. If you want to reach out directly, you can find me on Twitter @TreyLockerbie. And don’t forget to check out all of the amazing resources we’ve built for you at theinvestorspodcast.com. You can also simply Google TIP Finance, and it should pop right up. And with that, we’ll see you again next time. 

[01:01:32] Outro: Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or  rebroadcasting.