The Multi-Dimensional Framework of a Family Office | AWM Insights #173
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Episode Summary
Financial services and investment expertise have traditionally been scattered across many different roles with no one “Quarterbacking” the process. In the past, investors worked with brokers, accountants, private investment specialists, and other professionals individually with differing levels of knowledge and involvement.
There was little to no cross-communication between these individuals, and partitioned advice ultimately hurt investors.
The Family Office Framework centralizes experts and allows them to collaborate and focus on delivering the most holistic and customized advice while offering the best investment experience.
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Episode Highlights:
0:00 Intro
0:49 The Multi-Dimensional Framework of a Family Office
3:19 Maximizing the facets of life through proper management of wealth
6:15 Looking at your wealth journey holistically
8:23 Building a healthy foundation
9:13 Text us!
+ Read the Transcript
Brandon Averill (00:00): Hey, everybody. Welcome back to another episode of AWM Insights. Brandon and Justin here. And we're going to continue down this path of really talking about life invested, what is the experience of investing? Maybe even talk a little bit through the emotional aspects of it, the behavioral aspects of it. But wealth in a greater sense. And I think we're going to make a lot of relations back to health. I think everybody on this call, or everybody that's listening to this, you're probably self-selecting it as a pretty high achiever. So you care about your health, you care about your wealth, but we just thought we'd go down a path a little bit to talk about that there aren't one-size-fits-all solutions. Things have to be individualized. But when we're thinking through wealth, what are we really starting to think through? And so maybe, Justin, let's start there. Let's start with some frameworks here and maybe make some relations. It's no longer a 1.0 investing world, where our service to our clients is purely, hey, what kind of portfolio are we going to put you in? That is very important, but it's so much more than that, right?
Justin Dyer (01:12): Yeah, you can almost define investing 1.0 is traditional active management, hey, I'm selling you out performance, which I think at this point, hopefully every listener, and if you're new, go back and listen to some old ones, but we just believe that's a really, really, really foolish proposition. A waste of everyone's time, waste of an end investor's time, if that's what they're solely paying for. 2.0 you could almost say is traditional passive investing, which is a better solution, but in our opinion, still not fully complete. You can go then to investing 3.0, which if anyone is a Peter Attia fan, you could apply some analogies or comparison to Medicine 3.0, I believe is how he defines it, where we're taking a much more holistic approach to give a more fulfilled life overall. Investments are an incredible foundational aspect of that, but really what that means to us is tailored portfolios, looking at what the academic literature says, and improves upon passive indexing in such a way that still gives us a lot of the benefits, but even a higher expected return as a result of certain exposures to aspects of the market.
(02:29): But you could really sum up 3.0 investing, 3.0 is total financial structure management. Financial structure is a term we use quite a bit, which is, in a way you can think about your net worth, but it's beyond your net worth, it's what is your human capital? Go back to the whole human or multi-generational wealth formula series we just did, and talked about the different components of human capital: social, intellectual, et cetera, and how you can think about those. But really at the end of the day, what we're doing all this for is to give people a more fulfilled life, and focusing everything we can in that endeavor is really what investing 3.0 is geared towards.
Brandon Averill (03:16): And I think at the end of the day, we've talked about this, it's a [inaudible 00:03:20] term around here, but money is just a tool. And this fits into this aspect of it, is really what we're talking about is this 3.0. It's something we've practiced for a while. We actually just sat down with a luminary in our space, I guess, somebody that's led a lot of different families through wealth, their wealth journeys over time. And he just kept reminding us, "Hey guys, you got to remember what your job is here." And it is not to get, so we get myopic, but not to solely hone in on one little aspect of the overall plan, but it is to scan out, take the bigger picture.
(04:00): And really our value is coming in and being the strategist, helping our clients to really think through this wealth 3.0 structure. What is the overall financial structure that we're thinking about? Because again, stealing from Peter Attia in his most recent book, but he talks a lot about healthspan. So a lot of people are focused on living as long as possible, but the goal isn't probably, you don't want to be decrepit at 90, last another 20 years. That's no good. You want-
Justin Dyer (04:29): That quality of life.
Brandon Averill (04:30): You want the quality of life. It's more than that, right? It's a tool to provide experience for you. You want your health, because you want to enjoy the loved ones that are around you. You want to have experiences. You don't want to just sit in some room and waste away to the end of time. And it's similar with wealth, right? It's the wealthspan. There's a great quote by David Booth, the founder of Dimensional Fund Advisors, but he had this quote, "Having a healthy wealth span is about more than accumulating money. It's about maximizing LIFE." And he really looks at that acronym LIFE as a bigger life integrated financial experience. But it's that experience piece. And when we take a step back and we work on this with you guys, it's why we spend so much time on the priorities you're trying to achieve. What is the ultimate legacy that you're trying to create? And then what's that multi-generational aspect of that, and how do we live that out? Because all of those things are the experiences that we need to have.
(05:33): And everybody's going to be different. Everybody's going to be individualized. All that should be integrated. Unfortunately, that just doesn't happen often, and that's why we're at this 3.0.
Justin Dyer (05:41): Yeah, and the unfortunate reality or fortunate reality, how you look at it, is there's no quick fixes to accomplish this. It takes time, it takes discipline, it takes the behavioral understanding, which is kind of what we're touching on today. But it also takes some technical understanding or at least appreciation, because if you don't understand the nuts and bolts, nitty-gritty, you're probably not going to stick to your plan. And hopefully these podcasts really, really help in that endeavor.
(06:07): But there's no quick fixes because the market doesn't go up in a nice linear fashion. You're not guaranteed a 10% return each and every year. Sometimes you're up, sometimes you're down substantially. And you have to have that patience. You have to have that long-term vision in mind to really stay the course. That understanding, the appreciation that this is really a long-term game. And then with that patience ideally, you're going to take advantage of the benefits and really true power of compounding. So there's no one size fits all, which we truly believe in. We tailor portfolios each and every individual and family's priorities. But then we also have to acknowledge that that's not just the quick fix. You have to be patient. You have to understand a lot that goes into the day-to-day, the taking care of yourself from a healthspan perspective. You have to understand and work at taking care of yourself from a wealthspan perspective as well.
Brandon Averill (07:04): And I think maybe where we could wrap up a little bit, it's just it's healthy habits at the end of the day. We know the formula. We just went over the formula for the multi-generational wealth creation and stewardship. But if we don't do the right things in the right order, we're not going to find ourself in a very successful position. We often see this on a health kick. I know I need to eat well, I need to eat well in order to do this well, et cetera. Personally, I'm surprised I haven't fallen out of this chair this morning, threw out my back running, because I've got a bone spur in my ankle that I haven't taken care of that impacts the nerve that runs up my back, and now I'm in all kinds of pain. Go take care of the bone spur, right?
(07:48): Really come on. When you're thinking through your wealth formula, I think so many people jump to the end. They jump to, hey, I want this multi-generational aspect to my family, so let me go throw a bunch of money in venture capital because that's a multi-generational asset class. But you haven't taken care of the first pieces. You're not saving 40% of your gross income, you're not doing the little things that really matter. You're not protecting your essential priorities, et cetera. And I think when you start to do that right, it's the breakdown of the whole system.
(08:21): And we know that for a really healthy wealthspan, just like a healthy healthspan, we need to be practicing really healthy habits. And so it's taking those little things at a time. They're not easy. If they're easy, everybody would do it. But that's why we're here to support you guys. So hopefully this is a little bit of a riff on just how we start to look at health and wealth more progressively, and how we are trying to help you guys really build healthier habits towards ultimately getting to that legacy and that multi-generational goal that I think most everybody wants. So until next time, own your wealth, make an impact, and always be a pro.