Moving a family from ad hoc decisions to formal governance is extremely hard.

[14:05]

"I would have loved to have heard a lot more discussion on the nitty-gritty of family governance, because it's extremely to get a family to move from the very ad hoc way that it's used to."

[19:47]

"Before they understand how to create wealth themselves, you know, how do they know how to spend money in ways that are valuable for other people because they've never created value themselves?"

[09:47]

"They were the main advisers to the lender family who's the lender management versus IRS case in 2017 is kind of the landmark case for modern family office structuring."

Full transcript

So Heil has his own uh multif family office and he's based out of lo Angeles but helps uh manage capital for clients globally. Um we've gotten to know each other over the last couple years. I think you first found us over uh YouTube between your father uh and yourself and he works on a wide variety of transactions all over the world really specializing in growth focused deals uh some lending and positive cash flow uh type investment opportunities. What else would you maybe add um about your background or bio?

Uh there's there's honestly a little bit too much to add because I've worked in so many different fields from being just a real estate agent to a property manager to a political consultant and and kind of everything between. Um, I'm not I'm not particularly sure what to add except for that uh I always manage to find myself in very unique situations and tasked with solving unique problems which is kind of the the business of a family office, right? That's that's the day-to-day to solve a problem that only a high net worth family has. Got it.

Uh when you look to work with someone or not, what do you care about most? What do you look for first? Well, I mean every there's there's so much to look for, but I mean at the beginning, just the outset, one, are they good people, right? Are they good people to do business with? Are you happy? Are do you fit culturally?

Because I mean, I mean, you taught me this yourself, but you if you get into a great deal, it could be the best deal in the world, you know, run uh perfect returns, whatever. But if you're with a bad partner and something goes wrong, you will be left out in the lurch. Whereas if you are in the worst deal in the world and you've got a wonderful partner, you know you're going to be taken care of when when you know the bad things come. Right.

Right. Uh so he and I were in uh one deal got a little bit of challenging. We're able to bring in another investor, replace the capital, got out, skin 100% intact, and then you're able to move on with life and you know, no stress because you're out of the deal, right? Yeah. Well, I mean that particular that particular transaction is is the perfect example of this because that when you guys manage to pay us out that that that really sticks with an investor because that's not something an LP would ever expect when something goes wrong to be paid out not only paid out but paid out with a tiny bit of profit as well.

Right. Right. Um, so because so for when they came back and said, "Hey, you know, we've finally we're finally at the point where we're stabilized and we want to get rid of our seller financing. We want we want you to come in as the first lean." And, you know, I because of that experience, I was I was happy to to consider it and I ended up being the lender on that.

And they're we're still in that deal. I think they they've got, I think, two months left on their term. Yeah. Pretty unique to have a a deal go uh a little bit unexpected and then be like, "Okay, I want to be replaced out of this deal." You get replaced and then you actually come back in the deal later.

Yeah. Um that's great. But we've heard so much at this event like, "Oh, it's relationships first. Oh, it's judge of character. What's non-obvious? What hasn't been said on stage 20 times already that maybe be counterintuitive or surprising about that?"

I don't know about counterintuitive or surprising, but one thing you wouldn't think of off the bat is is to is to hear the the second level or third level strategies or or certain terms that you know will will automatically tell somebody who knows what they're talking about that hey, you know what you're talking about, too. So, if I'm talking to somebody about real estate and they they talk to me about a cost segregation, I already know that you've been around the block at least once or twice. You've heard this before. Maybe you've done one of those yourself.

Or if I'm talking to you about a 1031 and you you tell me, you know, about your experience with, you know, an EAT, an exchange accommodating title holder, I know I know that you've been through that through that ringer and and you know, we can we can talk on the same level. Uh, and that in fact, that's something that I intentionally try to do with a lot of people that I meet is is specifically mention something that I know that they know that I also know that they know that I probably don't. Right. Right.

Got it. I think uh Eban Pagan taught me that if you can explain the problem just as good or better than they do that explain their pain point or a solution to it better than they can then they kind of instantly build that rapport like we speak the same language right because a lot of the language we speak as investors is pretty specific to our niche to real estate etc. Um, can you talk about lending, credit, investments, you know, what you like there, what you look to source, what you're looking to get out of events like this, you know, over time in terms of type of deal flow. Mhm.

Well, I mean, as far as what I look to get out of events like this, it's I I it it really only comes after coming to an event like this for uh you know, multiple times, multiple years in a row, say, because you know, there are many people in this room that you know, I've met at previous conferences that you know, had approached me with a deal or maybe I had approached them with a deal and um you know, that you know, it it got executed or maybe it didn't. We can follow up afterwards. You know, what what did you expect to happen? What happened that you didn't expect and how did you get out of the problems that you were in and and how at at the end of the day did you perform.

Um now as far as credit goes um I do really like to stay on the safer hard asset side of things. It was originally meant as you know a way for me to find high-grade fixed income for my clients that wasn't real estate but at the very end of the day it it it is real estate. That's what you're talking about because we all love a high cash flowing business and we can secure debt on that, but there aren't as many of those as there are hard assets like real estate and and plenty of those need, you know, alternative financing. Nobody wants to work with a bank anymore, believe me.

Right. For sure. So, what else uh do you look for in different niche industries that you like besides real estate? Even if that is 80% of the focus or even 90%. Are there some other areas that are uh personal passion areas like we heard about on the last panel? I I don't know about personal passion areas because right now my my sole objective is to is to build um a balanced portfolio that that solves for my clients immediate issues and their their medium-term issues as well.

Um, but I do I I do specifically look for especially when we're talking about something VC like for example better bath better body um we're talking about we're looking at okay one are they operationally excellent but two do they have a choke point in their industry like for example right Epsom salt manufacturing there's only one two Epsom salt manufacturers in the entirety of North America and you're if you're able to if if you manage to get in on that uh get in on that cut as Jason is trying to do, you know, that that could pay off dividends into into your hundreds or 200s. You know what I mean? Right. For sure.

Okay. Uh can you talk a little bit about um thought leadership? We we talk about this at our workshops related to capital raising mid June. We're going to be talking about this. Um it's how we first got in touch. We've worked on you know several deals together that that your family's invested in.

Um, do you have any insights or advice for people here in the audience who may work in, you know, could be energy, could be real estate, could be healthcare on thought leadership that attracts investors? Um, any suggestions on how to do that in today's world? What works? H how to curate themselves as thought leaders in their own space?

Yeah. Or like what attracts someone just like you when there's thousands of AI generated or human written posts going out on LinkedIn, Instagram, YouTube, etc. Podcasts. What do you spend the time to listen to? What is a legitimate large ultra wealthy investor actually drawn to right now with all the noise out there? Um, I like to get more specific.

Um, you know, the the broader, especially with with the flood of all this content, the broader that a topic is, the less I'll learn from the particular video or piece of content. So if there if I I'm not going to read an article about a basic article about say partnership allocations. I'm going to read an article specifically about section 704C and you know the the specifics around you know how a built-in gain works when you contribute appreciated property to a partnership. Okay, great.

And what about for uh podcast or YouTube content? And I've always had this theory that as I've gotten busier that my most valuable clients are often busy and then probably like a a 12minute condensed super focused piece of content on a niche topic versus then a 2-hour interview. But then you see all of these big podcasts, many of the top podcasts do three-hour interviews, hour and a half interviews and they seem to blow up and top the charts on podcasts. I mean, what's your opinion for the family office market based on the family office friends you have and what you listen to or watch on YouTube?

Is short format better? As long or does it just depend on who you are as a as a person? Uh, it depends on the audience, but it also depends on um it depends on the topic as well because if we're talking about say if we're talking about more of a on the philosophical side or the cultural side, that's something that short form uh videos I think lend themselves really well to. Uh but if we're talking about, you know, say the uh not not necessarily a broader subject, but but a more complex subject like how to structure legally structure a for-profit family office.

I'm specifically thinking of a of a about an hourong video that Pathstone family office did um on this structure. The they were the the main advisers to the to the lender family who's the lender management versus IRS case in 2017 is is kind of the landmark case for modern family office structuring. Got it. Okay. Um and then for those in the audience that want to work with, you know, nextg family office investor types, uh what are some suggestions for navigating that dynamic?

Uh, I mean it it sort of goes to what I was talking about yesterday with code switching to, you know, know who you're talking to. Uh, for example, if I was talking to Sally, I'd probably say unhoused rather than uh rather than homeless. Um, but, you know, if I was talking to if I was, you know, someone like you talking to someone like my sister or or for example, Lisa, she does this really well. She she found specifically um certain investments that my sister would be particularly interested in based on her history and interest in Broadway and musical theater.

Uh whereas for me something that's that's a little bit more focused towards education that has that kind of an impact is not as compelling to me. I'm more interested in the numbers. But with the right it you've got to hone in on on the specific thing that they're they're interested in and that may take a very long time to figure out which is exactly why you come to to conferences like this multiple times is because you need to you need to learn the people. Sure.

It's sometimes challenging to know when you're working with a ultra wealthy nextgen or not. Obviously um sometimes I've heard people say like oh I met with someone you know I thought they had the authority to invest. I met with them nine times. Oh, turns out they have to get approval from the father and now they're frustrated. And I think what people don't realize is that like sometimes it might be a 10 million or five million or$1 million or half a million dollar check and um to be frustrated by that.

It's just part of building a relationship and getting to know a family. Uh what insights or advice do you have on just navigating that dynamic of family dynamics, winning the trust over the patients factors? Anything you want to comment on that? Uh I I suppose don't I I guess the biggest thing that I can say is to is to not shy away from extra facetime especially with I mean the the NextG members probably this doesn't you know relate to them as well but you know the the older members of the families they do really really appreciate you know you sitting down spending time with them right when when you came to our house I I probably would have been very happy to just have a Zoom call with you.

But but we made it a point, my dad made it a point to bring you to the house so that we could have this discussion, you know, more deeply and to include all of our different priorities often that we hadn't even properly thought of before. Because often with older generations of the family, you know, the question of why you made money, it it's still a stupid question even at the end of the rat race because it was always self-evident for them. They needed to provide for their families and and getting that getting that shift of mindset from okay, let's make money to why am I making money or or how do I stop trading my time for money and start trading my money for time. Um, that's something that you can only really it's it's like beating your head against a brick wall until it knocks down.

You know, you won't see really any progress until the very end. I mean, it's kind of like smoking, right? I think you made this point earlier uh in in when we were in Vienna is that you 90% of the damage um you you don't know that you won't see the damage of smoking until 90% of the damage has been done. Right.

Right. Right. Right. Yeah. A lot of stuff builds up. Right.

Some critical mass. So interesting. So um speaking of critical mass, when you've been working at formalizing putting together your own multif family office, formalizing your family's kind of family office situation and operation, um you've been doing that for several years now. What do you wish you would have heard in a fireside chat years ago that would help somebody here in the audience who's grooming their son or daughter or they are the son or daughter about formalizing their family office?

Um, that's a I would have I would have loved to have heard a lot more discussion on the nitty-gritty of family governance because it's it's extremely to to get a a family to move from the very ad hoc way that it's used to dealing with things and making decisions into a fully proper institutional-grade committee style form of decision-m is a huge huge huge huge cultural shift. And it it it and again it requires you to really to hear that maybe 10 20 times and many different ways for you to properly get your head around how you're supposed to interact. Sure. Sure.

Got it. And uh you've met with people here at the event who show you their healthcare company, their real estate deal. You see some of the sponsors speak on stage. What do you think almost everybody not messes up because it sounds almost like rude or mean but like what do you think almost everyone gets wrong when they are explaining what they do because at some point yes you get to know them as a person but you do ask oh so what do you do what does your platform do is there anything that you think they should be doing much differently in presenting to families like yours um for someone like me it's a very it's very relationship based like going back to that first question it's you know I can do almost any deal with somebody as long as I I'm, you know, comfortable with them and I understand them on a personal level.

So, for example, one of the one of the um the one of the ones you set me up on yesterday with with Bayion, um our first the first 10 minutes of our conversation were entirely about conservation. It had nothing to do with with his business or what was going on, but because that was a particular topic of interest to both of us. Great. Great.

Awesome. And it, you know, really helped me connect with him on a personal level. Yeah, makes sense. Um, and just so people know, um, for investors that are participating or if you run an investment club and you're looking for certain types of deal flow, we want our events to be more productive for you than other random conferences you can go to in the world.

We realize we're not the only investment conference on any given day even. Um, so we do look through all the bios and if you tell us what you're looking for, we'll say, "Oh, here's a here's a few people that are doing exactly that." And try to make sure you have a great use of your time here with us. So, one other thing I'll mention there is is that yes, it's just not on your side, but also on their side to to look up the people that they're they're talking about because he, for example, he would not have known that conservation was a particular interest of mine unless he saw all of the work on on LinkedIn that I had done both in college and and just outside of college regarding conservation and and political maneuvering regarding say carbon dividends and things like that.

Right. Right. And there's no excuse not to do that research now because you could be walking to your car and tell GPT or Grock to do deep research on a certain person of a certain family office and look at their investment history, public notes on deals they've done, LinkedIn, etc. And that's partially how we feed the AI tool um for networking here in the room is to take the content from a LinkedIn profile, deep research report, and now we're adding that to our um our data products as well.

So the deep research is finding those connections and deals, etc. So, there's no excuse not to show up prepared nowadays compared to before, right? Um, what advice would you have for me or anyone in the room that has, you know, I have a 8, 10, 12y old girls, you know, anyone here that has kids. Um, what do you think I should be doing to mentor my children?

What what insights would you have related to that so that they're well equipped when it comes to investing, family dynamics, talking about money or not, etc.? Well, I don't have kids. Um, I still very much am a child myself. Uh, me too. Yeah, I guess I guess we all are at the end of the day. Um, but one thing I would recommend a lot of people do is is well, exactly what what you've done.

You've uh set out a very very clear list of values for your kids. You've let out you've set out clear incentives with fun, playful goals that enable them to to connect with them and and also apply those values. In the real world in their own lives in in you know whatever limited way that 8 10 12-year-old can. Right.

Right. Okay. Well, I think it's uh it's interesting to hear it from you because you're a second gen. You're not a kid, but you're not 60 years old either. And so being in that position, I think you have a unique perspective having gone through that. So, um, is there anything that you would not do that you think is a mistake having being secondgen yourself and you're like, "Oh, this kind of made me less motivated knowing this or this made me, um, feel like I was being controlled by the family and told what to do with my life or anything like that."

Well, I won't I won't get into my own family dynamics. That's that's a whole that's a whole mess and a half. Um, but one thing I've recommended my my other clients do, um, and we've we've not really had this problem in our family, but I've seen this in a lot of other families that I don't work with, is that when the youngest generation gets into philanthropy too early before understanding how wealth is created, they it starts to warp their mind to think that, okay, well, the purpose of wealth is to be given away. And, you know, it's it's wonderful to give away your wealth and and to spread it, right?

You know, all money is a is a storage of value and if you keep it locked up, then you're not providing any value to the rest of the world, right? But if you if you that I very firmly believe that philanthropy is a privilege earned by wealth creators. It's it's their money that they made. They get to determine how it how it goes out.

And then then you have the other point about, you know, it's it it's a little bit towards their mentality. Sure. Um before they understand how how to create wealth themselves, you know, how do they know how to spend money in ways that are that are valuable for other people because they've never created value themselves? Great. Awesome. Um are there any of the AI tools we've created that you've been using or or had luck putting to use?

Uh I've used I've used Dwey quite a bit. Uh, in fact, it's um it's it's cut my research time quite a bit because I I mostly use I'm I'm very uneducated and uh terrible using AI tools, but I do use it for a lot of first order research to to set up uh for example um in the past we've we've talked about um like you've had a large due diligence questionnaire for example with say a 100 questions you know this person fraud this person you know SEC this person FINRA whatever Um, just having chat GBG do that for you replaces 100 uh 100 Google searches, right? That how much time, how much energy, how much you know, you you could replace an entire employee that way if you if you know your your team is set up that way. Sure.

When you uh come to an event like this and you're um doing more investments yourself for your yourself and your your family and clients, what is uh one or two or three um like super skills you're trying to develop? Or you look at other family offices and say to be the type of family office we want to be, that's something that I'm going to really dig into and get really strong at as an investor in case there's someone here in the room that could help with that. Is there a an area or two that you're really focused on developing um over the short term? Over the short term.

That's a a little bit of a harder question. Um because we're we're in a bit of a holding pattern right now as far because we're doing a fair amount of estate planning restructuring. Um but in the medium to long term, I would 100% love to expand our um our tow hold in multif family construction and development uh or hotels and hospitality in general. Uh, it's something that we've we've done very little of and it's it's something that we've always known that we wanted to get more into.

Okay, great. Um, any other final thoughts for today? Something that you maybe wanted to share with the room and didn't get across yet? I don't know. I mean I I it kind of really goes back to finding the right partners because even with say things that you're not expert in say that you have zero expertise in maybe you can do it yourself but maybe you can find a good partner who understands you who you work with well who also understands this business that you can learn from.

I very much try to emphasize educational opportunities in the investments that I go to. I I don't want to just be a silent investor. And if I am a silent investor, I at least want to learn a little bit about about what I'm investing in. I'll have, you know, we'll have regular calls. I'll do regular site visits even when it's not necessary because it's important to to to get that to get that knowledge right because you never know what you don't know, right?

So you'll always it always make sure that you you keep on learning because there are so many learning curves to jump up at the same time in a family office. If you can find shortcuts, find the shortcuts. Find good people that can help you like like what Tyler had mentioned yesterday, right? He he had hired a uh he said he'd hired a mentor to to teach him how to flip multif family and you know six years later he he's got what 300 million AUM something like that.

Right. Right. It's a great example. We had uh someone recently come to us who had raised, you know, $400 million and he said, "Oh, I'd like to educate your investors on, you know, investing in commercial real estate." We said, "Okay, well, um, it' be like a a sponsorship role cuz we're really featuring investors mostly on stage." And he said, "Oh, no, it's not a pitch.

It's just educational." And I said, "No, every sponsor is told it should be educational because the education is the best type of pitch because what would heard 40 times this whole event, it's about relationships, about trust, it's about education." So, uh, that keeps on coming up as a theme because it's so true. Um, so for those in the room, um, it's interesting that the sponsors sometimes are confused and they pause a minute and say, "Wait, I can't even pitch what I came here to pitch as a sponsor."

It's like, well, you can mention what you do and maybe have the last slide or two about the opportunity. But the more you educate and to show off the deep expertise, then the more you're actually going to convert people, even if you didn't mention what you do at all, and you amaze people, they're going to want to be drawn to your expertise, of course. Right. So, um, appreciate all your thoughts there, Sahil.

Appreciate you being here and doing the fireside chat. I know this is not something you you like to do every single day of the week. So, uh I just appreciate uh you spending the time. Let's give a big round of applause. Thank you. Join the family office club by visiting family offices.com.

We look forward to seeing you at our next live event.