Attracting More Ultra-HNW Clients By Taking The Time To Due Diligence More Alternative Investments: #FASuccess Ep 448 With Monish Verma

Resources Featured In This Episode:

• Monish Verma: Website | LinkedIn
• Sample Client Portfolio Recommendation – Download (docx)
• 2025 Trends In Investing Report
• Summit Financial
• Summit Partners
• Halo Investing
• Blackstone Private Credit Fund
• Blue Owl
• FS Credit Real Estate Income Trust
• CAIS
• iCapital
• CAZ Investments
• Opto Investments

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Full Transcript:

Michael: Welcome, Monish Verma, to the "Financial Advisor Success" Podcast.

Monish: Thank you, Michael. Pleasure to be here. Appreciate you asking me to join you today.

Michael: I really appreciate you being willing to join us today and to get to talk for a little while around all things alternative investments, which I feel like is almost all the craze these days. So with platforms iCapital and CAIS and Opto are raising hundreds of millions of dollars in assets to support advisors that are putting billions and tens of billions into alts. But I find when you dig into some of the industry studies like FPA's Trends In Investing [Report], it's still only about 10% or 20% of us advisors that are actually adopting and implementing alts with clients. And I feel like for some there's this still view that this is just another fad, the next fad, right? And most of us doing this for a period of time, most feel like part of our job as advisors is to keep clients from going after the next hot thing because usually, on average, that has not turned out well for clients. And then some folks at the other end say, no, no, no, the investment world is fundamentally changing. [The] number of publicly traded companies has fallen by 50% in the past 30 years. It was was 8,000-plus in the '90s. It's less than 4,000 today.

Companies IPO later than they used to, which means if you only participate in publicly-traded equities, you're literally leaving out a material segment of the whole economy, particularly small cap that, again, might not even IPO until their mid-cap stage now. So I feel like we span the debate in the industry from it's a fad to protect my clients from to this is a fundamental restructuring of markets that we have to participate in. And I know you spent a great deal of time on this, building alternatives into your practice, figuring out the due diligence and the access and all the other challenges and just how to thoughtfully use them with clients. So today I'm excited to dive headfirst into the rise of alts, whether they fit in client portfolios, where they fit in client portfolios, and what the advisor's role should be in bringing alternative investments to client portfolios.

How Monish Introduces Alternative Investments To Clients [05:03]

Monish: Wonderful. No, I appreciate it. I think that's a great question. And I would tell you that for part of my career, the first 15 or so years of my career, we were very particular about doing the financial plan and then using the equity markets and the fixed income markets to solve the solutions that the clients needed for their planning. But then about 12 to 15 years ago, we really kind of thought about like, what is it that we're missing in this whole equation? And I think we kind of came up with this idea that there's this whole other market out there, which I call private markets versus public markets. And we're not really tapping that lion's share of the resources we could bring to the table to our clients.

And so when we fundamentally started looking at this, we kind of told our clients, look, in a very macro...there's the there's the equity markets, there's the fixed income markets, and there's the silo in between that I call the private markets. And there's various different types of products that are served in that mix. Some can come from the equity risk profile or some come from the fixed income profile. But the goal of those investments is really to kind of give you a return model that you need based off the risk assessment we've done and to give you some agnostic risk against the public markets and to give you cash flow or protection you would kind of traditionally see coming from the fixed income markets.

And it takes a lot of education for a lot of clients to kind of understand that concept, because a lot of times when we're getting referrals, we're seeing a very similar 60-40 or some version of that coming in. But they're saying, "Well, is there anything else that I'm missing?" And to me, I'm always of the answer of, "Maybe, depends on your your risk tolerance, your education level of how you would us to educate you on this on this space," because to me it's all about the component of us educating our clients prior to using any investment products and then seeing which right fit of those investment products fit what their needs are and put them in that proverbial third basket for them.

And I think our hope and our goal, which we've had some success in, is to really start with the plan, show them the education second, and then then lead in with, "Here are the products that kind of fit the goals that you want us to succeed at." And that way, we kind of really get to the best solution of putting together a dynamic portfolio for our clients. And so they can see the success as they go in the markets, they can see the risk band that they're in. I think a lot of times clients come and feel...when you start talking about private markets or alternative investments, their minds directly goes to investments that need to be held for seven to ten years. They have a lot more return, but they also have a lot more risk. And do I really want that risk, that return? And sometimes once we get through our process of educating them on the different types of investments that we can put together to make that sleeve of alternatives, they're like, "Okay, well, I kind of get this now, more so than before, and it's not what I thought it was." So the perception is one of the first things we have to break through of what they think alternatives are or what is the private market sector.

Michael: So there are a few things that strike me as you frame that. One, there is to me this funny double-edged interpretation of clients come in and say, "Is there anything else I'm missing? You're here to give me a second opinion. What else should I be doing that I'm not doing in my portfolio?" There's both perhaps a kind of literal, what am I missing? Well, a significant portion of the economy actually happens in not-publicly-traded markets. Maybe we need to be looking at whether you're participating in that. And literally, okay, there's now a whole shelf of products that help to solve for that that you don't typically own in a traditional 60-40 portfolio. There's a product answer and there's a meta markets answer. But I guess, how do you even think about it between those or when you're positioning with clients?

Monish: Well, when we start looking at their portfolio, we do a lot of deep diving and understanding of what is it that they're really wanting to understand or know. Sometimes they think they want to know, am I okay? And then, how do I define what is okay? And then we start there and say, "Well, what's your risk profile and what is your goals? What are your needs?" A lot of our clients are coming to us already wealthy. So our job is really to keep them wealthy. It's not, can I retire at this year or this age with that amount of income? It's kind of like, I've made a reasonably successful amount of wealth, and now my goal is to try to figure out how to live off of it, protect it, grow it, gift it, be philanthropic with it. And all of those goals are things that they come to us for. So when we start talking about their risk profile, we start to figure out which part of their money is going to be long term. What part of their money will be intermediate term, and what's immediate? What do they need right now? And sometimes that's going to come from maybe a monetization event that's going to happen in their near future. So we start structuring a lot of their things in the estate planning world and the insurance world accordingly.

But when it comes to the allocation, we start saying, "At your size of portfolio, have you been introduced to the different concepts of private markets, public markets? And sometimes clients will honestly say, "I don't know, but I don't really want to get there, and I don't want anything that I have to lock up for a decade." I said, "Yep, I understand. That makes a lot of sense. But let me walk you through it if you're open to it. If you're not open to it, no problem. But if you are open to it, I can walk you through it. And I want to share with you how we've used some of these investments in other clients' portfolios to give them a result that's somewhat similar to what you want to do." And then we start talking about the different private market investments or the different alts, I should say. What are structured notes? How do they work in a portfolio? What are the pros and cons? What's private credit? What does it do and why does it exist even, right? What are real estate investment trusts or REITs? And understanding that a little bit.

And then we will talk about, what are hedge funds and what are private equity investments and even commodity investments? And we walk through all of the variations of different types of investments and the pros and cons of each and how they would fit a client portfolio. And then we start engaging and the clients engaging with us and saying, "Well, I kind of really understand this, but I don't want to use that because I heard from a friend of mine that that can do this or that for you." And we start getting and honing in a little bit more on what's the available suite of options that we should be looking at for our client from their comfort level. And then we start to make sure we have a level of education with them and say, "Let's talk about these a few times, show you how they work, how they fit, what they do, the pros and cons." And then now we've gone from the whole lineup to maybe a core few that they they're comfortable and open to dive deeper with.

And then we create a model at some point when their comfort level's there so they can see, okay, this is how it's going to fit. Here's where the money is coming from, if it's not coming from an event, but it's coming from a different part of their portfolio. We want to be mindful of how we do that for taxes, if it's after-tax money. And then we start building that plan out and we tell them that sometimes it takes time to build it out. We don't sometimes do it all at once. And then here's what we should be seeing out of it in a volatile market, you should be seeing this out of this investment, so that we're really holding their hand along the way to make sure they understand that. Now, some clients will come to us if they have an ownership interest in a company, like if it's a privately owned company. They get the fact that that's a private market versus a public market. So they're at a different level potentially on that education curve that we like to call it. But at the same time, they kind of know their their business, but they don't understand how it fits in the ecosystem of private market. So it's a lot of education upfront because there is a lot of product out there. But the goal is really to make sure that we're using the products for a solution that the client has a need for.

Opening Up The Lines Of Communication When Discussing Alternative Investments [13:27]

Michael: So I feel like in some ways this gets challenging or overwhelming, even including for advisors, because there's so many products and ways that this can come together now. So can you walk us...I guess just walk us through a little bit more. You mentioned a couple of different product categories, verticals or structure notes, private credit, REITs, hedge funds, PE, commodity. Is that actually how you segment the marketplace for clients when you're explaining it to them or how do you explain the different range of options when you're talking to clients?

Monish: Yeah, it's just like that. I talk to them about what are equities and I kind of reiterate to make sure they understand what are global versus international versus domestic are. I kind of reiterate to them so they understand what mutual...the packaging, the mutual funds versus ETF versus separately managed accounts. I do a version of that for fixed income. And then I go into the alternative markets and talk to them a little bit about what is a structure note, how does it work? I walk them through what is a hedge fund, what is private equity, what is private credit, what are the nuances of each one? And then I do the same thing for the real estate investment trust. And then I just walk them through. That's kind of the level one, that very macro approach of what each one does and how it works. And then I say, "Does any of this resonate? Have you heard about any of this before? Have you thought about using any of this before?" And sometimes clients will say, "If you looked at my portfolio, I might have some of that, but I don't really know what it means."

And we'll explain to them what they currently own so they understand it and say...and then the question usually comes from them is, "Does that fit for what you're talking about? Is that one that you would use or is that one I should be using?" And I walk them through the pros and cons. Sometimes that comes around, what is an opportunity zone, as an example, is that a is that a private investment or is that not a private investment? Because they've heard the buzzwords sometimes. So explanation and education on all of those at a macro level. And then as we do their financial plan and dig deeper into seeing what their goals are, then we start coming up with a plan. We may not use, obviously, all the time all of those investments, but we'll kind of say, "Here's the ones we feel would be a good fit initially for you to start with." And we'll say, "If you have a $25 million portfolio, our goal for you, because of our risk profile and our introduction conversations, is you should get to maybe 20% in this space, and let's walk through what that looks like, where it comes from, and which products we should use for that, and what does it do for the rest of your portfolio."

And then they feel comfortable knowing that there's going to be a plan in place. And then we'll know which products we'll use in that plan. And then we'll start dissecting those out and it'll take us time to build out that portfolio. Sometimes we'll say, "Okay, now we know the footprint of your overall allocation. We know what percent we're going to use in this kind of sleeve. It's going to take us three to five months to completely fill it because we want to walk you through each one and make sure you're comfortable with it. And then we'll dollar cost average into those if we are able to do so." So now they know, okay, I'm going to do 20% of my $25 million portfolio. That's how much is going to go in there. We try to use three to five different types of versions of the investments to keep them well diversified, even within the sleeve of alternatives. And then we walk them through which ones and we start adding them to their portfolio and educating them along the way.

We have to let them know, are they going to get 1099 or K-1? Ideally, we don't want to be the first time they see a K-1. But if they are, we want to educate them, what does that mean? And then a lot of times what we'll do is we'll include their other trusted advisors. If they're working with a CPA, we'll have a call with them and their CPA and let the CPA kind of walk them through, what's the tax side of some of the alternatives? What do they see from some of their other clients and why do they use them in those kind of portfolios? So now they get the tax advice, but they're also getting it from a trusted source that they've been using for a while if this is still a prospect for us. And then if they need to, and we always offer, we offer references and say, "If you're an entrepreneur that is going to go and sell your business in two years, we'd like to offer you some of our clients that have been in your boat and have been working with us for five or seven or ten years and you can you can have a conversation with them." We never disclose the client's name. We ask the client after they've given us permission to share their name. And then a lot of great conversations have come from our clients to our prospects. And that's really where sometimes the real value comes in for them to understand what they're using, why they're using it, and how it works.

Michael: So you don't disclose the new client's name...because I'm trying to understand which way it goes. You don't disclose the new client's name to the existing client. You get permission from the existing client to share their name with a new client.

Monish: No. I will say, "Okay, John Smith, you're a new referral for us. Would you be open for me to share your name with a couple of my clients to make sure it's okay for them that they speak with you?" And I'll go and call my client and say, "I have a gentleman, his name is John Smith. He's engaging us potentially. He'd to have a conversation with someone we've been working with for a while. Would you be open to have that conversation?" And they'll say, "Sure, no problem. Given them my cell number or connect us by email, whatever method you want." And then I'll call back the client, the prospect, and say, "I'm going to be connecting you with so and so. They've been a relationship of ours for a while. They've allowed me to release that name to you. I'm going to connect you by email or if you'd like to, here's their mobile number. You can call them and ask the questions you'd like." So that's typical. And that happens 50% or so of the time. Sometimes they're like, "No, you were a referral anyway from someone we know very well. So in my eyes, that is our reference. So we don't need to call references that you're offering. But the fact that you have them is really nice and we appreciate you even considering giving us a name like that."

Michael: And no compliance concerns for you around that structure?

Monish: No, we are never releasing any information about the client without permission from the client directly. Asking the permission from the prospect upfront if we can release their name. So if they decide they don't want to do that, which has really happened on a very rare occasion, then we will honor that. We won't ever name drop or do any of that kind of stuff. But if there is someone that's kind of engaging with us, they're going to end up seeing some of our clients. We do events periodically where we invite clients, we invite prospects, they engage with each other. Some businesses have happened because of those kind of events. So at some point they will see each other. But it's strictly kind of a protocol where some of these clients have already told us, "Hey, Monish, if you ever want, you can just use my name." "I appreciate that, but I'll never use your name without your permission."

Giving Prospects And Clients Examples Of Use Cases For Alternative Investments [20:33]

Michael: So I'm curious to hear more about how you actually explain and frame up some of these alternative products, alternative vehicles to clients. So when you get in a realms like structured notes, private credit, private equity, how are you actually explaining to clients what is this thing that you're introducing to me? What have you found works just to communicate what these are?

Monish: So one of the best ways I found is to show them examples. So if I'm going to suggest that I feel like at some point private credit might be a good option, I will use a private credit investment we're currently using for other clients. I will email the client, "This is the private credit sample that you should take a look at. Here are the pros and cons of private credit. How does it fit in your portfolio? Which side of the market of your fixed income or equity should you kind of think you're bringing money to this, what is it providing you? Here's some bullet points and some documentation on this investment. And now let's have a conversation." So I've given them the opportunity to maybe read up a little bit on it. And then we'll have a conversation and say, "Okay, this is interesting. I like the distribution rate. I like the...there's a little bit of growth. I like the background of where is this being sourced? The revenue and the cash flow, they're lending to people or institutions. I understand all that." And then they'll have maybe a point or two conversation.

And we'll talk about, "Is this the one that's the right fit for me or is this a good...?" I said, "This potentially could be the right fit for you, but there's many options and they have different kind of styles of how they would work. But this might be the first baseline of the first tranche. If we're going to use X amount of dollars in private credit and we know that we're going to do two different investments in it, do we want to do it all with one manager or we might use two managers? This is the first one we might use." And then we'll talk about structured notes, how they work, how they operate. We'll send them a line up and walk them through what the notes are and all the lingo of the notes and the barriers of...what's a buffer and a barrier and all that. And then they'll say, "Okay, I get it. So what would happen to the notes?" So I'll explain to them, "If we had bought this note a year ago, this is what could have happened if they wanted to call the note and this is what happens when...what call means. And this is how the note should act. And at the downside, this is what could happen. And then if we need to, we can try to sell the note back to the market, back to the company that's putting the note out."

So I'll walk them through all that and if they do decide to go with a note, we'll start with a very small amount so they can see it on their statement, they can get an understanding of how it operates because they're not typically accustomed to daily pricing sometimes of an instrument on their portfolio or how it looks on their financial plan or in their portfolio review. And then we'll work our way through that. Sometimes we're doing that for two or different types of investments in the same alternative world. So as you can see, there's a lot of education sometimes involved if there's a client that's kind of wanting to know more and wanting to understand how we can use this in their portfolio. But we definitely take the time to teach them and for them to understand how they work in a portfolio.

And then they want to know, like, what do we do on our discipline to make sure these are still relevant investments and instruments to use? So me and my team, along with my back office, we're always reviewing and vetting and scanning and making sure that what the team is supposed to be doing, they are doing. Are they aligned with what metrics they've set out for us? Are they deviating from it? Why are they deviating from it? We do manager calls to make sure that we're talking to the people making the decisions, not just the wholesalers. So we do a lot of that. So I have a co-CIO on my team who helps really do that back deep dive information process, and then we have a team in New Jersey that also is reviewing it. So we have a pretty healthy due diligence process on the investments that we work with.

Investing Significant Time With Prospects To Win UHNW Clients [24:43]

Michael: So I'm struck in hearing this relative to how a lot of advisors implement with clients where there is a, I don't know, "traditional approach," which essentially is clients come in, they tell us their goals, needs and circumstances, they tell us their risk tolerance, we construct a portfolio that's appropriate to their needs and goals and tolerance. And we come back to them and say, "This is the portfolio I've crafted that I recommended for you." And generally they're kind of in or they're not. Maybe there's some light customizing for circumstances. But usually clients don't really get to say, "Well, I heard mid-cap growth is kind of funky, so I don't really want that in my portfolio." It's like, "No, we own a diversified portfolio. Like, this is one of the things that we own."

Whereas what you're describing here, just to me, it feels much more conversational. It feels much more gradual, right? Clients aren't going to end out in a full allocation of traditional and alts off of a one-time upfront investment portfolio recommendation. It sounds like they may get there over time. Their portfolio could morph over months or years as you work with them and they decide which alts they're comfortable with or not. And clients are all going to end up being somewhat different because of the things that they said yes to or they said no to. Is that a fair characterization of how this is different?

Monish: It is a fair characterization because I work off the belief that we are here as a fiduciary and have a responsibility of educating. And part of that education is to get them to a place where if they decide they want to pursue having alternatives in their portfolio, our responsibility is to confirm to them what that means, what they are, how they work. We get very granular. We might have sometimes, depending on the size of the relationship and the amount of education involved, three to six, seven conversations before we make our first investment in an alt for a client. And I think we get a lot of stickiness with our clients and a lot of trust built up really quick early on because they really feel comfortable with the fact that we're spending the time with them and we're educating them and if we added a new option to this a year later, we're still going to go back and educate them on it. But it is very conversational and it is very customized to a point of making sure that we understand where their level of understanding is of the investments we want to use.

I think that in our industry, the communication component to the client has to be much more robust than I think some traditional advisors think where if we get a client coming in and they're like, "Here's my allocation, what do you think I should do?" And we send them an allocation without a lot of communication behind it, we have now leased a client for a while. But if we spend the energy up front and the time that I believe we need to, and that each client's different, to edge and to invest in that relationship, then we have a relationship, and then we have an opportunity to have a long-lasting, multi-generational relationship with very, very integrated opportunities for referrals. And that's why I tell my team, I don't care if we bring on seven relationships or 20 relationships in a year, it has to fit. We have to be having some level of alignment with the client. We have to make sure that we can resolve all of the things that are around them, whether it be their estate planning, or their insurance planning, or their need or want of having more than just a 60-40 model portfolio. And it takes a lot of time for us to have that education process.

So I think that it's probably the slow burn of really building that relationship upfront with a lot of capital upfront of time. But I think that if we know or they know, if the fit's not there early on, we know that early on, right? So if that happens, then we know early on. And we're not shy about letting clients know that we are having an interview process. A funny side note is a new client that came on last year was a referral from a family member of theirs and they were about to monetize a business. And I met them for lunch and his wife wasn't very engaged in the conversation until I said, "This is an interview. This is you interviewing me and me interviewing you to see if it's right fit. I would encourage you to interview one or two other advisors." And she kind of turned and said, "Wait a minute, we're supposed to interview you and you're kind of seeing if you want to work with us?" I'm like, "Absolutely. This should be a mutual relationship built on the fact that we're going to expect to trust each other and grow together. And when you do have your events, you'll have your capital coming in, and I'll be somewhat responsible for making sure everything's being managed along with you for your retirement."

Totally different meeting for the next half hour. At the end of the conversation, she's like,

"So what do you think? Do you want to work with us?" And I said, "I'd be happy to if you'd like to, unless you want to discuss it." And she didn't even look to her husband. She goes, "We're good. Let's proceed." Right? So I think that with this conversational type of approach to a new opportunity happens, it takes more time and energy. But you can get to the fact that you've gotten the commitment from that client to want to work with you and then you build off of that for all these conversations about putting the portfolio completely together over a period of time.

Michael: How do you evaluate the trade-offs as a business of, is this actually worth how much additional time and effort it's taking to implement?

Monish: That's a great question. And so our clients that we look at to come in and work with us typically are between $5 million and $50 million of assets that we're working with. So when we're looking at that kind of level, there's a level of we're almost being graduated from someone else to you, right? I mean, the old adage of the reason we're talking to you is because you have an advisor, right? If you didn't have an advisor, that means you may not have the capital to have an advisor. So we're basically at that point where most all prospects coming to us are already working with someone else and they feel because someone mentioned to them that they've had a good success with us or they feel like we're very communicative to the relationship for someone else. That's why they're coming to us in the first place.

So when I ask people and say, "Well, we can ask the sample questions of, can I see your investment policy statement or your financial plan?" Nine out of ten don't have one or it's not relevant. Relevant meaning it's at least updated in the last two years. And we talk about your goals. "What's your performance? Is it within your risk profile? What is your risk profile?" They don't really have a good answer. And I said, "So what's your communication cadence with your advisory team? How do you know...what's your communication cadence?" They like, "Well, we hear from them, I guess." "With what cadence? Is it monthly, quarterly, semiannual, what's your cadence?" They're like, "We don't really have a cadence. When we call, they pick up." So we have a very disciplined approach of having a cadence with our clients. And when we bring on a new client...and as I mentioned, we're not bringing in 50 new clients a quarter, right, our goal is interview clients and see who we want to work with long term, who want to work with us long term.

If they're coming in at that $5 million, is there going to be an event in their future, an inheritance in their future, we're doing a lot of work to see that there's a fit, because when we bring on a client, I don't want to lease that client for one to three years. I want to have that client for the rest of their lives. And I want their children and their grandchildren as clients. So the work that we put in up front, I think as you communicate it to someone else, it sounds like, wow, that's a whole lot of work. I think that's table stakes to build a relationship for a new opportunity to work with us. But would we spend that kind of time and energy if it wasn't within that scope of $5 million to $50 million? Now, at this point, we are looking at that $5 million to $50 million as an average pool of capital that we can work with because it does take time and energy to build that rapport after they've committed to work with us.

Michael: It strikes me in that context, as you highlighted, most of our clients who have the financial capital to work with us almost certainly are coming from another financial advisor already, which means I have to differentiate in some way about what can I do for you or bring to the table that you're not getting from your current advisor because I'm assuming you have one, given your resources, and I know you are a meaningful financial opportunity for my firm if we can win you as a client. And so there's almost a piece of me hearing this...a lot of advisors I find in practice struggle to keep their top clients because it's hard to put in as much time as it takes to keep those relationships with those three to five top A-plus-level clients because I've got so many other clients to serve as well.

And we're busy in our practices that one of the distinctions when you start with "Our clients are $5 million to $50 million and we're pricing at a level where I know I'm going to be able to spend this much time and I'm even choosy about which clients to take to make sure I'm going to get clients that are worth spending this much time" that you're building a business that's simply from the start going to have far fewer clients per advisor, which allows you to spend far more time per client for which they can remunerate you appropriately at $5 million to $50 million. And so the math just works and you end up winning away clients from other advisors because you're investing more time into the client relationships because you're focused on clients at that level. And so you're built to invest that much time into each client relationship.

Monish: Exactly. And when we have these clients, there is at some stage an education process of what kind of referrals we would like them to provide us. And so they know, if it's a family member, we'll take on any family member. We've had a lot of them come to us and say, "Can you work with my son or my daughter? Obviously, they don't have our resources." I said, "You're a client, they automatically become a client. We will never turn away your son or daughter." But then they also will say, and I've heard this many times, "Hey, I have some questions. It's my wife's best friend, but she doesn't have the resources that would fall within a number that you would want her as a client. But can I ask you to speak with her on my behalf for 15 minutes and answer her questions about a portfolio that she might be managing for $3 million or $4 million?" And of course, we'll spend the time because you're our client, we'll do that. And we have really good relationships...but the clients know.

When they precursor their, "I know this is not a good fit for you because they have under $3 million or $4 million," I know that I've done a good job to educate them of what I really am looking for, which is the $5 million to $50 million, and that's important for us to let them know, "When you give us a referral, we love it for it to be in this kind of space unless it's a family member" And so we may not get 50 referrals, but when we get them, we get the ones that we really want and with the ones we're really interested in. And I've been known to be this uber A-type personality, like a lot of my colleagues who might listen to this podcast, but we'll sink our teeth in and until a prospect tells us, "I'm okay, no thank you," we'll continue to prospect them. We have one of our best clients who's referred us a ton of clients, he was an off and on again prospect for ten years before we landed him.

And I asked him every occasion, "Are you okay for me to continue to follow up? Are you still on the radar that you're making a decision?" And the answer was always, "Yeah, I'm getting your information. I like that you're checking in on me every so often. Let's continue to do so." And at some point we did get them because he's like, "Wow, I either have to sign up with you or tell you not to call me anymore. But I really like the information you send me. And I think I'm going to have to just go with you." I'm like, "I don't want you to feel it to be a detriment because you're making that decision, but..." He's like, "No, no, the level of persistence that you've shown respectfully over the course of time." I said, "Well, just so you know, it's been ten years." He goes, "I can't believe it to be ten years. It felt like two."

Michael: As the person on the other end who's been calling on you, trust me, it's definitely ten.

Monish: The first time in my first note that I've called on you was this date and they were just...he started laughing. And so obviously not every client takes that long, and especially if they're referrals, but we've been known to be respectful and make sure. You have someone who is in that range, in that $20 million, $30 million, $50 million of assets. It makes a lot of sense to do the hard work to the client and to do the education to do the client well and serve them well, because there's a lot of people who would love those clients, but they maybe don't want to invest in all the work and communication to keep that client.

Monish's Process Of Going Independent And Finding A Home With Summit Financial [38:26]

Michael: So then help us understand just the state of the advisory firm as it exists today. How many clients...I guess however you measure clients or household or families. How many clients, what's the asset base, what's the revenue? Just help us understand what this adds up to that you're executing on.

Monish: Yeah. So we are doing about three and a half [million] in [revenue] production. I have a team of four people, including...and then myself five in our office in Farmington Hills. We have got 200 people we share in the back office in New Jersey. Tax attorneys, compliance strategists, planners, and...

Michael: What's the firm in New Jersey?

Monish: Summit. Summit Financial. We're a DBA of Summit. So I'm Vardhan Wealth Management and we're doing business as...Summit Financial is our back office.

Michael: Okay. And so structurally, are they a corporate RIA structure and you're IARs of their corporate RIA?

Monish: Yeah. So I'm an equity owner at Summit Growth Partners and they're an equity owner in Vardhan Wealth Management. So I sold a minority stake and I felt it to be like a diversifier. So now I'm equity owner in all the other DBAs that are in Summit Growth Partners. So we collaborate, we meet a couple times a year together. We collaborate with each other. I have calls with other advisors. They do all our IT and I do all my own marketing and we run our own office space here, but they charge us a small fee to be a member of the Summit Growth Partners platform where we can now share with all the resources. We have CIOs there. We have a whole insurance group there. We use them pretty actively. We use their estate planning attorneys to review documents for our clients pretty regularly. Our custody is with Schwab and Fidelity, but we have our relationships through them. So we have back office support if we need help. So we really leverage that platform.

And then I have a team here that's really client-facing. We have a space here of 6,000 square feet in Farmington Hills, Michigan. And we're growing by adding advisors to Vardhan Wealth Management right now to bring in other advisors that want to leverage our platform because we have a great team and as we need to grow, we continue to grow. I always have two or three people in the back office that I can go and call from people I've worked with in the past that may want to make a switch. And then we have 12 different advisors in different stages of conversations that we're talking to that we want to bring in to grow our brand going forward.

Michael: So can I ask, what is the revenue sharing arrangement to Summit? Just how does it work? How does it price for you guys?

Monish: Yeah. So they charge us 5% to be on the ecosystem. I sold 20% of Vardhan Wealth to Summit Growth Partners. And in return, I got a multiple upfront for that. And I also get dividend payments because I'm an equity owner at Summit Growth Partners. So if I make a dollar, basically I get 80% of that dollar, and that's what my revenue would be. So our gross revenue is three and a half. So I get 80% of that. And then out of that 80%, I pay my expenses. And I run a pretty lean ship, so our payout still is in the high 50% range after the 20% ownership is done.

Michael: Oh, interesting. So the bulk of the arrangement is not I pay them a percentage of my revenue. It's they literally own a percentage of my firm and participate in the economics of the firm. But I'm presuming that I have to transition shares in part of the deal, that's how it works so that they get the economics they need to actually run their business and be financially viable.

Monish: Well, so to become a Summit Growth Partner, it's a choice. If you want to come to Summit Financial and you want us to work with you, you can choose to sell part of your business or we can just give you economics and it's a 90% payout and the 10% is a cost of doing business with us, right? Whereas I opted for the economics of selling a portion of my business because I wanted to diversify and invest in all the growth of all the other advisors that are also growing their businesses. Now I'm getting participation in their investments and their growth and they're getting an opportunity to grow in my growth. So it's kind of a win-win in my book. And as we talk more about the process of going independent from the wirehouse, I'll walk you through what I...I talked to 16 different aggregators before I went and talked to Summit Financial and learned about this model and tried to cut it, split it apart five different ways before saying, okay, I'm committing to it.

Because when I was going independent, I never fathomed to sell any part of my book early on or my revenue early on. But I will tell you when I educate clients on how my structure is, they really resonate with the fact of, okay, that's great. So you're an RIA in Michigan growing advisor-wise. But the fact that you're part of this ecosystem of Summit Financial and Summit Growth Partners and you have this really big bench behind you per se with all these advisors all over the country that you consider your colleagues, not your competitors, but your colleagues. So you have a big mind trust, a brain trust that you can tap into if you needed to. And I've partnered with some people in the past when they've asked or I've asked them for specific cases that they might have a higher level of talent for, depending on the circumstances. It just brings out a new dynamic to winning the client that you want to win.

Michael: So you get dynamics of needing an agreement about how much you get paid in your own business when there's split ownership. I'm just otherwise envisioning this world where you can pay yourself a "very generous" salary and kind of minimize profit distributions to owners since you get all the salary and they get a percentage of the ownership. Do you have to get into a world of determining what reasonable compensation is and how to split the dollars between owner salary and dividends to owners?

Monish: No, because basically they get 20% of the gross. Yeah, so they get 20% top line. That that way you can pay yourself whatever you feel like or take distributions of whatever you want.

Michael: Okay. So it's not common equity shares essentially that they own, it's more of functionally a preferred-style structure where they're getting a certain percentage of revenue off the top tied to their ownership. That's the deal.

Monish: Correct.

Michael: So I guess I'm curious, since you were diligent seeing all the different aggregators out there, how do you assess the landscape? What else led you, I guess, to Summit or away from others? What was working and not working for you?

Monish: Yeah. So when I went, I talked to about 12 to 14 of the ones. And the first level was when I knew I wanted to go independent. I started taking the calls I used to not take, right? So that was my first. And I talked to them and I walked through and I talked to their business people and their CEOs and mindset-wise, well, what are they doing and why are they doing it? And then I said, okay, I'm going to go to another set. And on my own, I researched a few and then reached out to them. And then what I did is, I used to work with a consultant in New York and reached out to them and said, "Here's who I've talked to, and who else do you see out there that maybe haven't been on my radar that I should talk to during I'm doing my due diligence?"

And so they connected me with three. Summit was one of them. So I didn't find Summit on my own. I found them through this consultant that was telling me, "Here's other people you should talk to." So when I reached out to all of them, the three, I just had a really good...I resonated really well with Summit. I talked to them...I was the first wirehouse advisor that transferred over to Summit. So they've been around for 42 years. They have a background of planning. They're basically in the New Jersey, New York area with advisors. But then they brought in a new CEO about ten years ago that was going to basically build that brand out to be more of a DBA brand all over the country through Summit Growth Partners. And that's where I was...I was a year in. I was probably one of the first people they were talking to a year in and really resonated with the people that were there. It was kind of one big family and they were growing together as a family. So I met with them. I talked to them many times and just felt the right fit.

I still talked to the other two, but I felt everything else felt corporate when what I wanted was a partner. I didn't want to work for someone. I wanted to work with someone. And that's what I found in Summit. To this day, I still work with them. I still have a monthly call with the CEO. He calls me sometimes just to check in and say hi. And I do a lot of the calls for advisors that are interested in joining Summit. They call me and check in with me to see how my experience has been. I hosted two of them yesterday in my office who are going to be going to New Jersey to meet with Summit today. So it's kind of like a big family and we want to be mindful who we let into the family kind of thing.

How Vardhan Wealth Management Operates Today [48:06]

Michael: So now with the resources that Summit gives, what are the actual roles of the people on your team in the Michigan office?

Monish: Right. So the people in my office, I'm the lead advisor and the owner. My goal is to bring in new opportunities and vet new clients that we're going to take on, service our existing client base, and then obviously run the office. I have a COO that's been with me for a long time. She's very meticulous. She's an engineering background. She runs our team. We run 10 a.m. meetings every day and she runs them. So she's in charge of running the office, running the team, and she's also in charge of doing all our paperwork for alternative investments for all our clients.

Michael: So what are the 10 a.m. meetings?

Monish: Every morning we get together in the boardroom. We talk about what's going on. We walk through all the clients that we're talking about for different specifics. My other advisor on the team who's been with me for 15 years, he started with me as an intern, he has no responsibility to bring in clients. He has every responsibility to talk to our clients, to send them the conversation emails that we might be talking about some of these alternatives. He's doing all the due diligence for all of the investments we have. So he's spending a lot of his time on that. He also is head of planning, but we have another planner that we brought in. So he's in charge of making sure all the plans are complete and they're aligned with the goal of the client. So he's having a lot of conversations with clients and making sure that we're up to date on our planning. And then he does have education calls if they have questions about some of the investments. I do a lot of that for the newer clients. He does that for clients that may have been with us for five, ten, or 20 years. And if we're introducing a new investment to them, do the due diligence for talking to them.

I have another lady on the team whose name is Jeane. She was a CSA [Client Service Associate] that I knew in my past from a wirehouse. I asked her to come join me three-and-a-half years ago. She came over here from another RIA. She's done a great job. Just this year, she's been promoted to head of insurance. So we've been doing a lot more for insurance in the last five months than we have probably in the last ten years combined. So I needed someone to just support the insurance role. And then...

Michael: What kind of coverage or policies are you writing?

Monish: So we work with MassMutual through Summit as well. So we can work with MassMutual and then we also have 23 other carriers that we can work with through our insurance group. So when we're doing the financial plan and evaluating what the goals and needs of our clients, we're reviewing their insurance. If their insurance is appropriate and fine, we let them know it's appropriate and fine and we make sure that we've checked that. But if they need something more or less, a replacement, modification, adjustment, we make those recommendations. And if they don't have an insurance person they're already working with, then we always let them know we can provide that service to them as well.

Michael: Well, what kind of coverage? Are you writing long-term care insurance policies? Are you doing disability insurance? It sounds your clients are usually not in the life insurance and income replacement realm. They'll be okay.

Monish: Yeah, disability, long-term care. But we're also doing a lot of the personal life insurance policies if they're gifting to their kids and they don't need the capital. We're showing them different ways that they can use insurance if they need to. Second-to-die life insurance for estate planning purposes. We're doing business insurance planning for buy-sell agreements. We're reviewing their second to die and first to die insurance. If it needs to be adjusted or modified, we will do it. A lot of times we review it and it's appropriate for what they need, but they need someone to review it because they've never had it reviewed in years. So we review it and then we make sure it's appropriate for the plan, what they're doing.

Sometimes if they're going to have their unified exemption credits, which is supposed to sunset at the end of the year, if they're beyond that, for some of our clients, their net worths are in the $50-plus million, $100-plus million, $200-plus million range, we're working with estate planning attorneys to make sure that we can shelter as much as we can for the unified credit exemptions. And then if they need to...if we know there's going to be a tax bill, then we're going to do a second-to-die life insurance policy to alleviate some of that tax bite down the road, given the size of their wealth. So there's five to seven different reasons why we would do review insurance. But we look at it from the eye of consulting, not from the eye of, how do we sell a policy?

Michael: So I guess as I'm curious that realm, I see a lot of firms as they move up market into higher net worth shedding insurance and brokerage licenses because they want a position as fee only and not doing any of the brokerage or insurance products. So I guess I'm just curious, is that an issue for you? Is that a concern? Is that not a concern? Do fees versus commissions and fee only come up with your $5 million to $50 million clientele?

Monish: So we are a 95% fee base. So all the asset management we do is all fee-based. The only commissions we would get is if there was an insurance component to the equation. So all our structured notes, all our alternative investments, everything is fee-based. We don't do any commissions on those. So only thing that we would have a commission on, if there was a solution that was needed, would be on an insurance policy.

Michael: So that's your dividing line is absolutely no commissions on the investment product side of the ledger as it were, that can equalize fee-based across the board.

Monish: Yeah. We want to be purely consultive on that. It's all fee-based. We've had clients come to us and say, "Well, I want you to charge me a plan base." We had a referral come in with $7 million. "I want...you just charge me a plan fee." And I said, "We'll do the planning because we're going to do the planning anyway. But if you don't want to become a relationship with us, that's not a good fit for us." And they're like, "Oh, so you don't want to work with me?" I'm like, "Well, I want to work with you, but I want to work with you in the realm of what's the right fit for both of us, not just for one of us. And so unfortunately, that's a good fit for you, but it's not a good fit for us." So we would pass on that. And honestly, last year, I think we passed on five or six client relationships that we could have had. But through the process of doing the interview, it just wasn't a good fit. So we decided...we let them know that, "Unfortunately, this is not a fit that we can pursue, but we hope that you you decide on a good fit with maybe one of the other advisors you're talking to." So it's a very consultive approach is what we take. It's a lot of education.

You asked the question of what how many clients do we service. We service approximately about 225 households. And our goal is to make sure that every time we add a household to that relationship, we are going to be able to educate and add value to that relationship. So we define that to the client when we sit down with them and say, "This is what our value proposition is." Well, I don't show them a pitch book. I have a process and procedure protocol of how I run our team. A lot of questions come up of, "This is interesting. What's this 10 a.m. meeting about?" I said that the meeting's really revolving around communication. One of the reasons we could survive through COVID as a team is because we had a 10 a.m. call and a 4 p.m. call every day. The 10 a.m. call was about process, procedures. What are we talking about, clients? And the 4 or 4:15 call was about checking in to make sure how everyone's mental health was. Sometimes we'd have a cup of coffee at 4:15 together just to check in with each other and make sure everyone was fine because they're all at their own homes.

But our office is open for clients to come in. We're an in-office five days a week kind of office. I'm in unless I'm out meeting with clients or meetings. My team is in every day. We run it and the clients are free to come in. And sometimes a client will come in when they have a need or a want. And sometimes they call ahead and sometimes they don't. But at the end of the day, they feel we're part of their family. We're part of their circle of who's going to take care of their family. And we get calls all the time about various things. "I'm deliberating for my son to go to Berkeley versus the University of Michigan. What do you think about that? You've met them. What do you feel is a better fit for them?" We've been brought in on those kind of conversations.

Michael: And then what's the overall AUM for the business relative to this client base?

Monish: $560 million in assets right now.

Michael: Okay, okay.

The Alternative Investments Monish Uses Most Often With Clients [57:02]

Michael: So now, take me back to the alt side again, now that we just got better context of over half a billion of AUM, 225 households, core five-person team plus the Summit resources. So coming back to the alt side. So you talked about a wide range, right? There's structured credit, there's real estate investment trust, there's hedge funds, private credit, private equity, commodity, opportunity zones, etc. Just in practice, what are you using most often? Are there particularly categories that are very common for you? Are there some that are much less common for you? What's actually getting used?

Monish: Private credit is one of our big ones at the moment that we're using in practice. We are also using hedge funds. We are using private equity. So I'd say those are kind of the more common ones. We're not doing a whole lot of structured notes at the moment. We we have done some more of those in the past, but we're not currently using a lot of them at the moment. But that would be kind of the roundabout here's the...and then we do some private placements when we do have opportunities to do some private placements that come to us a lot of times through Summit. And then we'll evaluate those to see if there's a fit for some of our clients.

Michael: So what led to structured notes less and some of the others more?

Monish: I think we had a little bit of a shift in the market where we are using some of the notes. We have four different platforms for notes that we can use.

Michael: Which are what that you use?

Monish: There's the case in the intercapital options, and then there's Halo, which is the one that we were using quite a bit, which they're tremendous platforms, but a lot of them are sensitive to the market and how they price their notes and how the buffers are on their notes. So we were very accustomed to higher buffers or higher barriers than what was currently in the market now. When it goes down to 20%, we're not really a big fan of using those. We would rather use things that are heavier, protected on the downside of those kind of notes. So as those started to become more sparse, we deviate away from them and we'll wait for those opportunities to come back to them when we see that there's a better fit for us to use them.

Michael: So presuming that that's tied to when interest rates started to shift and come lower and just the shifts in the yield curve change, the time value of money options, pricing, that starts to shift the buffers and barriers in ways that were just not as compelling for you.

Monish: Exactly, exactly. And that's when we started...we evaluate them, we review them constantly. But when we find a fit...we know what space they fit in our clients' portfolios and we know what specifically we want, and when we see it, we will act on it. But if we don't see that, we won't. And they're all fee-based as well. So as you know, you can have them commission or fee-based. All our notes are fee-based.

Michael: So structured notes are getting sourced more on the Halo side for their platform. So how are you managing access to some of the others, to private credit, to private equity, to hedge funds?

Monish: Yeah. So private credit, we use a variety of them. There's Blackstone private credit that we have used. That's probably one of the more common table stakes one out there that a lot of people know about. There's Blue Owl that's out there that people probably know about as well. There's FS Credit. There's a handful of them that are out there that we use and then there's a few that we're vetting that have approached us directly or through Summit that have asked us to take a look at them. And then we'll review them to see if there's a fit on our platform for them or not. And then if you go look at the REIT space, if there's a REIT need, then we'll look at the different REITs. Some clients, when they come to us, we evaluate what their portfolio has. If they have REITs in them, then we're kind of evaluating should they keep them or not. If we have clients that we want to do a percentage allocation to REITs, then we'll look at the REIT opportunities there.

But I would tell you that...and then if you look at the space where there's private equity or private placements, then there's opportunity there, and those are for the clients that would probably have an excess of over $20 million with us where they might have a legacy bucket for that. They know that they can tap it, but they're probably going to be leaving that to the next generation. Some of those things have three- to five-year holds. Some they might have a little bit longer than that. There are some different packaged types of secondary private equity offerings that are available that might only have a one-year hold, so we look at the different options and see what the right fit is for the client.

Michael: So it sounds like for a lot of these, you're going directly to providers. So you're going directly to some of the PE placements, private credit, you're going directly to Blackstone or Blue Owl. Are you not a user of the alt platform folks? So like the CAIS, iCapital, those folks, or do you still do it through them?

Monish: Yeah, for some of them, we'll go direct. For a lot of them, we are using CAIS and iCapital, honestly. And when we use them, we will still go direct and have our conversations with the institutions directly. If they're available on CAIS and iCapital and we're not doing enough volume for us to do direct and we're getting a better price point, we'll use CAIS or iCapital.

Michael: Okay. So is that the defining factor for you? If I have enough volume that I can go direct and get reasonable pricing, then I'm just going direct. If I don't have enough volume to go direct, then I'm using CAIS or iCapital as a platform access pathway?

Monish: Yes. Yeah. Our goal is once we find the right fit that we're going to use for our client base, we want to get them the best pricing possible as well built into the ecosystem, internal pricing. So, yeah, we'll look at that. But CAIS and iCapital do a great job, in my opinion, of using a layer of secondary review of these investments in the alternative world. So just having that next set of eyes and diligence I think is important sometimes to really kind of hone in on what's working, what's not working. And I also think, as we spoke briefly about how should advisors kind of approach the alt world and kind of get into it, reaching out to their CAIS and iCapital representatives and their Blue Owl and Blackstone representatives and having their wholesalers help educate the advisor or their advisory teams a little bit, the different services and products that they have, is a good baseline or foundation of setting yourself up to go to the next level.

They all have these universities of education. Obviously, the end game is the more advisors they educate, the more probability is they're going to be using their products. Correct? So I say that that's a great platform for advisors that are saying, I want to learn more about this space. How do I learn more about the space or the AI universe as a whole? Start with the wholesalers and their their firms to get that education. Once you start getting that foundation of what is private credit, you can start then diversifying out and say there's five of them out there, which one's the right fit for me?

Michael: And so are there other platforms that you typically use besides CAIS, iCapital for credit and equity, Halo for structured notes. or is that your main go-tos?

Monish: We use Caz, Opto, some other options out there.

How Alts Fit In As A Percentage Of A Client's Portfolio [1:05:02]

Michael: And in the end, are there typical allocation percentages that you get? Is there how much at least you want to see clients in alts? Is there a max beyond which you don't want to see clients in alts? What are some of the parameters in practice?

Monish: Yeah. So the baseline is if you really look at these endowments and foundations, obviously have a tremendous amount of capital, but they don't need a lot of liquidity and a lot of them have in the mid-30% range in the private investment world. So if you kind of think about the institutional market and the performances that they get, our goal is...if we're going to start a client with alternatives, our goal is to get them started at a 15% number in their portfolio. And then we do go as high as 35%, depending on the client and their circumstances.

Michael: Okay, but it sounds per the conversation at the beginning, there's a lot of latitude about which alts or which alt sleeve they participate in to get there. So if I've heard bad things about PE and I don't like it, but I think the private credit sounds neat, we may do more of it on the fixed income side or vice versa. I don't the credit stuff, but private equity sounds cool because I made my money in a private equity-funded firm and they did well, so I want more of that.

Monish: So I think, Michael, one of the things that I've learned doing this for so long is if they had a bad experience before, it might have been a miscommunication, a lack of education, a lack of financial knowledge base that they didn't get the education on. So as we build the rapport for clients and they sometimes come in and say, "I don't want to see this or I don't want to see that," it's been pretty frequent when we come back to that after a period of time working with the client. They're like, "So I told you before I didn't want to do that or this, but what's your opinion of that?" And I explain to them why we use it and how we use it for clients and what our experience has been. And I walk them through and say, "Have you had a bad experience in it before?" And there's a lot of times where the client will want to circle back on things they've said I don't want to do to like, "Okay, well, I've understood a lot more of now what the private market world is. I understand how it works. I've seen it happen in my portfolio. I agree with you that we should go from 15% to 25% now. And I'm more open for you to share with me some of the things that I asked to be off the table now be on the table."

That's a very common conversation because I think to me it's kind of like you set these foundational platforms of education about different things, private markets being one of them. And as they trust you and you educate them and they see that you're taking the time to do that and now they feel like that base has kind of been met, what's the next level? Then you start talking about the next level and they kind of understand that to be something that they want to go into. And what we do is we host events and we bring private market investment speakers in and we'll have two-thirds usually of clients, one-third prospects in the room, and we keep them small, under 30 people. And we encourage communication between the people that are in the room, and then we have a speaker to talk to them. And that kind of draws out a lot of these questions about, "Well, I never liked this, but why do you think it's...?" And then after those, we call every client and every prospect and say, "What did you think? What did you hear that was different than what you may have heard in the past?" And we kind of dissect those conversations a little bit.

How Monish's Firm Conducts Due Diligence On Private Investment Products And Platforms [1:08:34]

Michael: So then share with us a little bit more how you handle the due diligence of all these different products and platforms and vehicles.

Monish: Yeah. So in our immediate team here locally, it's tasked to my other advisor on the team. His role is to really do the very nitty-gritty, get the baselines. We do a quarterly review on all the managers and all the investments we're using. Speak to the managers, bring in the wholesalers if they have value add to add to the table. We really don't care about bringing in a lot of people and having a lot of lunches. We really care about having the conversations with the people making the decisions. We leverage our back office. We talk to our investment committee at Summit and see what they're seeing and what their due diligence have been on these investments. We'll talk to CAIS and iCapital if they're on their platforms to make sure that they're doing their diligence and if they're seeing the same things we are. And we're concluding to make sure, are we still with the right team doing the right type of business for the right products? So there is some diligence that's being done there and it's being done predominantly by the other advisor on my team.

Michael: So how much do you worry that...or is that something blows up that there's stuff in there that you missed or weren't able to get to in the diligence process?

Monish: I think as an advisor in this ecosystem, you're worried about that constantly, whether it's an alternative investment or even an equity, right? So we've seen equities blow up in the past. We've seen things come out in all different...So our job is to make sure that we ask the questions, the hard questions. Keep diving, keep making...look at different ways to see who the investments are being looked at. Leverage our CFAs in New Jersey to see what they're seeing. Ask the questions from our colleagues over at CAIS and iCapital and ask direct questions and have direct conversations. And on occasion, we actually go and visit these investment firms as well. But we do, I think, a very good job of our due diligence to make sure that we're either accepting someone into our ecosystem or keeping them in our ecosystem.

And we have had cases in our past where there was a manager change on something and they called us and said, "Hey, this is what we're doing." And we did a background check of the manager that was supposed to be coming on as the lead and we got out of that investment immediately. And slowly after, we found out the next year, year and a half, they bled out that portfolio because it wasn't a right fit for that manager with that style of investing. So we're not sitting on our laurels looking for just, how do we bring in the new client? We have to take care of our current clients and they trust us to help make good decisions, and the good decisions have to have good data. So we are very meticulous about our data and our fact finding to make sure we're with the right places. So I think we do a good job of making sure we're doing that due diligence behind the scenes.

Michael: So in practice, how many different products or vehicles are on the list that you're trying to monitor and due diligence?

Monish: Yeah, on any given list, we have 12 to 15. So it sounds like there could be a lot more. But I think it's impractical to have a list of 50, right? So if someone comes to us, or CAIS comes to us, or iCap comes to us and says, "You should look at X, Y, or Z," or another manager comes to us, if we already have a good solution that we've gone through the wringer with…we're not just adding other managers on for no reason. There has to be a reason we add another one on. So we have our platform that we will work with and we have the products on that platform that we're doing heavy diligence on. And I think it's a robust enough platform for what our needs for our clients are. But we also know that with every new relationship we take on, there's a process that has to take place. And if we need to bring out another one, we will. But we say no more than we say yes.

What Surprised Monish The Most Building His Advisory Business [1:12:53]

Michael: So as you reflect back on this journey, what surprised you the most about building your own advisory business?

Monish: So when I went independent on May 7th of 2021 and became an RIA, I think it took me a while to fully embrace the word freedom. And when I say the word freedom, because we always ran our own teams when we were in the wirehouse world, but you didn't have freedom. And how do I define freedom? There's a value of this RIA that's on my balance sheet now. When I was at the wirehouse, I ran a business...I built that business, but it wasn't my business. It was that firm's business that I was babysitting, growing. I kept 45% to 50% of the economics, they got the rest. This is now a freedom of how do you want to grow, who do you want to work with, how do you want to work with them? I choose to price this way. I choose to educate on this way. And having a support system in place, meaning Summit in my back office, and a partner rather than a firm that I'm working for. To me, there's so many components of freedom and the word definition that took me a while to really embrace. And I think it took me about a year and a half to really kind of get it.

But when I was introducing and asking our clients what we're doing and why we're doing it, a lot of them are business owners. Even if they're physicians or periodontists or dentists, they still run businesses. And I think so many of them knew me for so long. And I was always kind of this nervous Nellie, like what are they going to say? What are they going to do? And we had our kind of like, "Here's why we're going independent. Here's the fiduciary. Here's the transparency." At the end of the day, a lot of them started laughing. They're like, "It's just about time." I'm like, "What do you mean, it's about time?" They're like, "It's about time that you run this the way you've been running it. And all the things you say to us make sense, but we've seen that in you anyway."

So it was very surprising. When we moved, we invited 97% of our clients to join us. And within six months, we were at about 115% of assets. And I think that goes to the fact of the people we work with, the relationships that we've made, the hard work of doing a lot of the education early on to solidify the conversations and the trust that we had. And they know that basically they come to us with anything and everything. And we either can provide it or we find the right place to help them get it. So I think it was a really good transition in the sense of moving.

Michael: So 115% assets, ultimately clients brought more when you left the wirehouse?

Monish: That happened, to our surprise, to be candid. And then also after I went through and talked to every client, I went and talked to every prospect and some of the prospects came back surprisingly and said, "Well, now that you're independents, I'm more apt because I don't want to work with a wirehouse. I want to work with an independent like you are. And I understand that you have custody at Fidelity, but we are ready to work with you. But we didn't want to work with you before because you were with a wirehouse."

Michael: Was that a surprise to you?

Monish: It was.

Michael: Historically, one of the reasons you went with the wirehouse is that supposed to be an asset to your credibility, to your ability to track clients.

Monish: Well, I would tell you that growing up in the wirehouse world for almost 26 years, I think it's kind of this theory that you're there and because you're there, you're going to be able to win clients. I think that's probably some level of transition at some point where you start and then you start building your clients, you ask for…prospect. I think going through that model, I think what COVID taught me was the clients are really there for you and you're the reason that they're your relationship. And you might need a slew of things behind you to service that relationship. But the essence of that relationship is the advisor and the client. And I think that now that we're a few years out of COVID and now you're seeing all these aggregators and RIAs out there, and now you see the growth of all these RIAs, I kind of chuckle to myself that anyone who's a successful advisor in the wirehouse is most likely looking at the RIA channel very closely to ask themselves, should I be doing something about this or not? Meaning make that move.

And I think that because I think 10 or 11 years ago, their option was you do it all yourself or you're in a wirehouse. For the most...that's a very generalist way of looking at things. But now with all of the supported independence platforms out there, I think that there's a lot of opportunity for a lot of wirehouse advisors to truly make a move and feel like they're keeping a lot more of the dollar that they're generating that either, A, allows them to build their infrastructure out deeper and have more meaningful conversations with their clients, still making more of that dollar. And oh, by the way, a 1099 versus a W-2 has a lot of tax benefits.

So I think there's a lot of transition happening in our industry. And I think another component to that is the transition of the advisor that's 60-plus and looking for a succession plan that may not want to stay at the wirehouse. They want to move and then they want to be acquired over a three-year window and then be gone. But they want to make sure that they get to pick the advisor and the team that will service their clients going forward because they've built that book and they have personal relationships with those people and they want to make sure they're taken care of. And so I think that there's a lot of movements and there's a lot of opportunity in our world of financial services at this point in the game.

Michael: And what about the dynamics of having access to these kinds of investments in the first place? I know one of the reasons a lot of advisors like to be in the large wirehouse environment is because of the access, the access to private investments, the access to IPOs, the access to funds. So I guess I'm just curious, now you lived both sides, you did alts there, and now you've done alts on the other side, so how really does the access compare for you at the end of the day?

Monish: I will say it's mind-boggling at the comparison. And I think at the RIA world, you can go out there and say, I want to work with this alt or this investment and then show the due diligence and do the due diligence and then have another team do the due diligence for you and say, okay, this makes sense. There was really no recourse of doing that, in my opinion, from my experience in the wirehouse world. It was kind of like, here's your platform, you can use it or not. Whereas, again, taking that freedom and that ownership of going out there and saying what my clients need is X, Y or Z. I'm going to go out there and seek it out, talk to them, do the due diligence on it and then go back to our back office and have them do another set of due diligence on it. And if everything checks out, potentially use them on the ecosystem. I think it's just a more robust platform of allowing you to be customized to the clients that you're working with.

The Low Point On Monish's Journey [1:20:38]

Michael: So what was the low point on this journey for you?

Monish: I think the lowest point in my career overall was when I felt stale. When I was about...2019, I was really wanting to grow by acquisition. I didn't really feel a strong support from the organization I was involved with, the wirehouse I was with to allow me to do that. I went off on my own and met with ten or 12 different teams within the same company. And it seemed like every office had their own way of doing things and there wasn't the systematic, let's figure out how we can help Monish grow by acquisition. So I felt that to be very hitting yourself against a proverbial ceiling there because we were growing organically, but I wanted to grow by acquisition at that point. So that was one of the components to my decision to want to move and then go independent and want a partner, not a parent per se, watching over and saying you should do this and we want you to do that kind of mentality.

So I felt like I had the aptitude to do it. I had the desire. I had the willpower. I had the motivation. And fortunately, I had the team because the team...without a good team, you can't really do half the things you really want to do. And the team is aligned. One of the reasons we have a 10 a.m. meeting is to check in with everyone, see how they're doing, make sure that they're aligned with things that make them happy on the day. If you're not doing more than 75% of the things that you like to do, then we want to see if there's someone else on the team that we can assign that to or hire another person to have to do that thing. So I'm very mindful of making sure that we have a level of quality of what people are doing is happy and they're resonating with that and they have an ownership interest.

I won't hire a new person on this team until my whole team meets them and vets them and gives me their feedback, because they're going to be in the same world then as that person is. And there's been times where I was about to hire an advisor and the team came back and said, "With all due respect, we don't see the fit." And so I have to listen because they know me and I know them and we've been together for, some of them, decades. And I want to bring in the right talent and I want the right fit to be there because, at the end of the day, the more successful we align together as a team, the more valuable we will be to our client.

Monish's Advice For His Younger Self And For Newer Advisors [1:23:00]

Michael: So what else do you know now you wish you could go back and tell you from ten years ago?

Monish: Yeah. Well, I think I kid and joke, but my colleagues that have all left wirehouse and gone independent, we all have a kind of chuckle and say, "I wish I would have done this earlier." Right? I'm 53 now and I have 20 years ahead of me. And I feel like I did this when I was just about hitting 50. If I would have done this five, seven, eight years ago before that, I think...I always wish and said that's a regret I have, why didn't I do this before? But you can't look backwards and you got to look forwards. I did it. And there's a lot that are considering to do it. And I'm always open to tell people and I said, "Call me if you have questions about independence."

Not only Summit or Vardhan, but independence, because I don't see anyone else as a competent competitor. I think clients will resonate to the people they need to resonate to. And if that client doesn't resonate with me and they find themselves with another advisor, that means that advisor was meant to have that client. So I feel very honored that the people we work with have chosen us to work with them. And I continue to feel honored every day when we win new cases because they feel the same way. But I don't think about the clients that said, "You know what, I think I'm going to go somewhere else because that's a better fit. Thank you for letting me interview with you." I don't dwell on that stuff. So I think it's always a way forward.

Michael: So any other advice for younger, newer advisors coming into the profession today?

Monish: I think be mindful of who you want to align yourself with. I think a lot of younger advisors have aligned themselves with teams thinking at some point they'll run that team. Ask the tough questions, have it be a two-way conversation if you're coming in and looking at teams. There's a lot of opportunity out there for a lot of teams that are looking to hire great young talent that want to have that. But at the end of the day, have grit, because this is a business where you can learn a lot, but the fear of failure or having that grit to kind of just make that one other conversation or go to those events to try to win and get in front of people with money, believe in yourself and have the grit. You have the aptitude. You can learn the aptitude. Take people, if you need to, with you to support you. But have that grit and determination to go out there because this is, at the end of the day, a sales opportunity, right? We are selling ourselves every day to our clients, to our prospects, to our centers of influence, and we want to put our best foot forward. And our reputation is everything, right? It takes a long time to fill that bucket. It takes a very quick instant to splash it all over the ground of reputation risk. So treat your reputation and covet it because that's the only thing that you really have right now in this business is your reputation.

What Success Means To Monish [1:25:50]

Michael: So as we wrap up, this is a podcast about success, and just one of the themes that comes up is literally that word success means very different things to different people. And so you're on this wonderful path of success with the business as you're crossing $500 million and picking up the inflection point of growth. And so the business seems to be in a wonderful place now. How do you define success personally for yourself at this point?

Monish: I define success personally for myself is mental happiness for my family. I have a beautiful wife and three great kids. And I feel that the healthier I keep myself, the more mental, stable I keep myself when I'm present at home, I'm present at home so I can make sure that they have what they need to be thriving 13, 16 and 18-year-old young men, and to support my wife and her own journey for happiness. So to me, happiness is defined by making sure I have the best self I can be so I can provide that to others. If I'm not the best I can be, I can't provide the best to someone else. And I feel the same way about our team and our clients. So that's where my value kind of lies in is really making sure that you take the time to be grateful, offer gratitude for what you have, be mentally fit, work out, train hard, have time for your socialization and your family…always important.

I try not to miss any significant things that are happening in my kids' lives for work. At the end of the day, if you miss a conference or you miss something, it doesn't matter. It pales in comparison…if you miss that one tennis tournament or that one banquet that that you missed for your child. So I'm very mindful of making sure that these kids are young once and they're mine and I want to be present and available for them in whatever way they want me to and I can be. And I'm fortunate that they want me. As teenagers, sometimes it's like the, "Dad, you just drop me off at the curb and I'll be fine," kind of mentality is not there in our house, which I'm grateful for.

So to me, I try to be physically fit, eat well. I feel very mindful of those things more now as I'm over 50 than when I was in my 20s or 30s. And you know what? I don't have a dungeon. I laugh when people ask me, "What do you mean, a dungeon?" I let things roll off my back. I'm not upset at people. I feel that people have their own journey that they're on and I don't know what their journey...where they are in their life and their journey. If I can be helpful or meaningful in any way, I will, and if they don't need it or want to reciprocate, I don't let it bother me anymore. So to me, it's kind of like let all that stuff go, let the baggage go, and just enjoy what you have. I think a lot of advisors who listen to your podcasts are very successful and on a journey to be even more successful, but don't let that success get in the way of the things that are really valuable in life, and that's your family.

Michael: Amen. Amen. Thank you, Monish, for joining us on the "Financial Advisor Success" Podcast.

Monish: Thank you, Michael.