#FASuccess Ep 219: Serving Families Of Multi-Generational Wealth By Tackling The Personal Problems That Money Exacerbates, With Coventry Edwards-Pitt

What You’ll Learn In This Podcast Episode

• What It Really Means To Serve Ultra-High-Net-Worth Clientele [05:02]
• The (Inverse) Relationship Between Good Financial Decisions And Good Family Decisions For The Ultra-Wealthy [10:37]
• How Covie’s Firm Helps Ultra-Wealthy Families Communicate About Money And Teach Their Children Foundational Money Lessons [16:09]
• What Prompted Covie To Write Her Book And The Common Traits Among Well-Rounded Children From Ultra-Wealthy Families [28:53]
• How Covie’s Work With Client Families Fits Within The Broader Context Of The Wealth Management Business [43:22]
• How Ballentine’s Service Level Differs For Its Two Client Segments [55:10]
• The Scope Of The Work That Ballentine Does For Its Clients [1:02:45]
• How Ballentine Structures Their Fees [1:07:12]
• Covie’s Journey In The Industry And How She Ended Up At Ballentine [1:14:55]
• Understanding What It Takes To Serve Ultra-High-Net-Worth Clients [1:23:41]
• The Low Point In Covie’s Career, Her Advice To New Advisors Coming Into The Industry, And What Success Means To Her [1:25:44]

Resources Featured In This Episode:

• Coventry Edwards-Pitt
• Ballentine Partners
• Raised Healthy, Wealthy & Wise
• Aged Healthy, Wealthy & Wise
• Women Presidents' Organization
• The Bemused: Making Sense of Money (Akeiva Ellis)
• James Grubman

Full Transcript:

Michael: Welcome, Coventry Edwards-Pitt to the "Financial Advisor Success" podcast.

Coventry: Thank you, Michael, I am so thrilled to be here.

Michael: I'm really looking forward to today's discussion with you and talking a little bit about what it's like to serve very high-net-worth clients. I feel like it's something in our advisor industry, we do tend to skew towards the more affluent, in general, relative to the average U.S. household. Some firms work a little bit more in a higher-net-worth space. By I know you live at a firm that just does this at a whole other level. I know a lot of advisors that spend their career building up to 100 or 200 clients. It's a great client base, they have a team member or two that supports them, and they serve their 100 or 200 clients. You're a firm with a little over 200 clients. But it's $8 billion under management, which means if you do the math, the average client has $30 million or $40 million with the firm. And I'm sure that means even more beyond.

And so, I know just your firm, to me, really works with a level of high-net-worth clients that not a lot of other advisors see, and has spent decades building and offering for what it really means to do wealth management for ultra-high-net-worth clients. And just it's a realm that I don't think a lot of advisors really get to see in the same way. So I'm excited today, just talking about, what does it really mean to provide wealth management services to clients that start with tens of millions of dollars, and go up from there to 9-figure-net-worths and 10-figure-net-worths?

What It Really Means To Serve Ultra-High-Net-Worth Clientele [05:02]

Coventry: Yes, well, so happy to talk about that, and shed light on that. And I'd say that we have two groups within our firm. One is what we call a high-net-worth group. And within that group, we're working with clients with $3.5 million to $20m. And then we have our family office group, which is working with $20m and above. But you're right, probably, 90% of the asset size that we're dealing with sits in that family office group.

Michael: And I love that that just so many of us at advisory firms, we segment our clients, we do simpler investment-only services for smaller clients, we do more holistic offering setup for our more affluent clients. I love that your firm does the same thing. It has the same segmentation, except your minimum starts at $3 million and the dividing line is $20m. Like, after $20m, you can really have all the services. Like you're big enough now, you can utilize the full scale of what we provide. I don't say that to make fun of it, just that you live in a very different realm of who you serve and what you offer to them that that's the threshold between ‘merely’ offering high-net-worth services and going into the next level of wealth management.

Coventry: Yes, it's so interesting. You're exactly right that perhaps it's a different perspective, I think, when we think about it, in the $3.5-20m realm... and we approach every client from the same holistic perspective, bringing both a planning and investment perspective to the client engagement. But within the $3.5-20m realm, primarily, the issues center around investments, they're primarily looking for someone to help them with their investment portfolio. And then the issues tend to be about growing that and preparing for retirement and things like that. And then we are looking at the planning issues, obviously, to deal with risk mitigation and estate planning and stuff like that. But we start to find in the $20m and over is that all of those planning issues get very complicated or more complicated. And then you start to talk about, typically, multi-generational wealth and the issues that come up there.

And there's just a greater degree of complexity in implementation. And I'd also say, when you ask the larger question of what's it like working with clients at this level of wealth, everyone's human, and there's a whole human aspect to this work that I absolutely love is what draws me to this work, which is all about the problems that money exacerbates rather than solves. Whether it's whether you can raise your children well so that they're not demotivated by this abundance of resources or whether the resources you'll be leaving to your family after you die are going to solve family discord. There are all kinds of these generally psychological issues that get very complicated at that level of wealth. And we really specialize in helping clients think through how to handle that to mitigate the problems that can arise.

Michael: Interesting. And so, it sounds like part of the hinging or the transition of what starts to change for you north of $20 million, it is the realm where you get out of, “there's a lot of money, and we're going to live a nice lifestyle, and there's going to be a good inheritance left over, in all likelihood,” into, “no, we're not even just talking about the inheritance for the next generation. We're already talking about enough money to fund multiple generations down the line”. Like, multi-generational wealth is not my clients and their kids. “There's enough money now for my clients, their kids, their grandkids, and the great-grandchildren already, before we grow it for the next 100 years, it's going to take to get down three or four generations”.

And it sounds like that's where we really start having different conversations and a different kind of clientele need when we're not just talking about wealth that's going to get inherited, we are in the very literal sense talking about multi-generational wealth, and figuring out what happens with it.

Coventry: Yes, it's certainly the potential for multi-generational wealth. There's the overarching, larger, more fundamental question about whether that is the goal, whether that should even be the goal. And even if that isn't the goal, there's a potential to provide your children much greater sums of money at points in their life where that may or may not be beneficial for their own development of their capacities that they need in their life. So I see the risk for making decisions that affect your family in ways that have unintended consequences are much greater at that level of wealth.

And I sometimes say that the benefit that we bring to clients is that we work with 250 families, and we've done this for 30 years, we see the movie play out, we've seen it for all these families. And so when a client comes to us, they haven't seen the movie, because they're just living their life. They may be just sold their business or something just happened that means they need our advice. But we know where that movie likely plays out. So we can come to them and bring them questions that they need to answer for themselves and bring them ideas about how they plan now so that they avoid the types of issues that people run into when they don't do this thinking and planning.

The (Inverse) Relationship Between Good Financial Decisions And Good Family Decisions For The Ultra-Wealthy [10:37]

Michael: I really like how you framed it, that the risk of decisions that have unintended consequences is much greater when you're at these levels of wealth. That's a striking way for me to put it. It's not necessarily that they're going to make bad money decisions, per se, particularly if they're the wealth creators, they usually are at least pretty good at making a couple of good financial decisions along the way if they got to these dollar levels in the first place. That it's not the decisions they make, per se, that might be bad decisions. It's the unintended consequences they don't realize because there are so many complexities that attach to their decisions when there's just literally this much money at stake and in play.

Coventry: Exactly. And I had never thought about it this way, but there's almost like an investment analogy of a correlation coefficient. And I think that the correlation between decisions that are good from a financial perspective and decisions that are good, necessarily from a family perspective, decreases the greater the amount of money that you have. I just think that I've seen that there's a gap between what either might be a good tax mitigating decision, but then what decision would actually improve your child's quality of life or degree of feeling that they have self-actualized in their life or that they have earned their own success? Those tend to become farther and farther apart, the more money that is involved.

So yeah, and I think that is the work we all love. Of course, we're in our business to do all the great nuts and bolts things like increase investment returns and have good complex estate planning strategies. But you have to do all that stuff to do what we do well, and clients, of course, expect that, but you have to do all that and wrap all that in this ability to see these much deeper issues and see how those, seemingly, simple financial decisions have far-reaching consequences across these deeper issues. And bringing that whole perspective to the client engagement.

Michael: And being the numbers nerd as well, of course, I love that we got this down to correlation coefficient. So that's fantastic. Like probably talking a slope of –0.6 here.

Coventry: That's it. That's the number.

Michael: But you make, again, a really striking point that the larger the dollars get, the more you end out with, for lack of a better term, financial decisions that get made for financial reasons. We're moving this money here, we're putting this money in that bucket, we're doing all these different things because it's an income tax strategy, it's an estate tax strategy. There's literally could be millions and tens of millions of dollars at stake in arranging financial affairs in certain ways that help manage tax impacts or legal risks. But that has a whole bunch of separate, and perhaps, unintended consequences for the other people who may be attached to the money, inheriting the money, and having access to the money, having expectations around the money, and the more that's at stake, the more those can diverge from each other of what is financial or tax optimal and what was necessarily a thing that you wanted to do just from a pure family values perspective.

Coventry: Exactly. And I'd say another dynamic that happens. And I think that all of us, in our industry working with clients at this level, need to be cognizant of and be careful of is that the industry is essentially organized around helping the parent generation exercise their wishes. So most wealthy clients come to an advisor like us when they have built a pool of assets, and now they're at that stage in life thinking, “what do I do with this money”? And what most people at that stage in life, which tends to be middle-aged to empty-nester, what they most want to do is help their kids. Like, who do they love more than their children, essentially? Even philanthropically minded people, it's hard to beat helping my kid.

And so, generally, you add on to that, then all the good tax reasons to transfer wealth into a trust and multiple generational trust. There's basically this huge industry push to push money down to these kids. And very few people are talking to that next generation about what do they actually want? Do they want to be living with a trust for their whole life? Do they want to be dealing with a trustee when they're 50? All of these types of questions. And I think that that's something that we try really hard to bring the perspective of not just what the parents wish for and want and what they think will help their kids, but in reality, what really will help those kids. And sometimes those are not the same thing.

Michael: And again, as you had said, when the dollar amounts get bigger, there's really a lot at stake. When you're talking about millions or even tens of millions going down in future generations, for lack of a better term, you could really screw someone up by leaving that much money, and either structuring it wrong, because they've got too much freedom or too little freedom, or whatever, incorrect or unhealthy incentives you unwittingly create around it. Not that we can't create some harm with smaller dollar amounts that are left with poor incentives. But just as you said, the stakes get a lot bigger when you add a couple of zeros to the net worth.

How Covie’s Firm Helps Ultra-Wealthy Families Communicate About Money And Teach Their Children Foundational Money Lessons [16:09]

Coventry: Right. And I think the other thing that certainly I've learned in my career, and as a firm we've seen and what we try to bring to our families is that I think what's often talked about in this world is “okay, there's a lot of money and it's going to be passed down. So we need to talk about how to communicate about the money.” And it's all about “the money”, and communicating about the tax strategy or the estate structure, and all that. What we've seen is that the type of communication that needs to happen to actually prepare kids for a life where they will inherit money has to start so much earlier. And it actually doesn't have to do with money. It has to do with teaching the child sound financial and life values. Like, “Gee, do I understand how to abide within a limit that has been set? Have I had a sense of our work ethic inculcated in me? Do I know how to stick with a job that I might not love on any given day? Do I understand that just because I might have some money at my disposal doesn't necessarily mean I need to spend it or I need to keep up with my friend who's spending it?”

So there's this really critical life, almost like adulting values that we’ll weave... our philosophy has come to really embrace helping our clients who are parents transmit those values to their kids as early as possible because it's going to be the absorption of those values that will prepare that kid to actually be able to inherit the money that they'll inherit.

Michael: I still remember a conversation I had with a very affluent client who was struggling. They had had their wealth transition event, and suddenly, there was a very high net worth. And they had young kids, and they were trying to instill fiscal responsibility and basically the way that they learned growing up, which is like, there are certain things that you want to buy that you can't afford. So your parents tell you, we just can't afford that.

And that was how they learned their particular lifestyle, which had actually been fairly frugal throughout their adult lives until suddenly, there was a lot of money out there. And I remember, they still said the first time that they had this awkward realization, where one of the kids wanted to get something, and just the instinctive response was like, “Well, no, we can't afford that. We're not going to buy that.” And was like, “oh, oh, no, we really can. Like we could buy 1,000 of them. We have an eight-figure-net-worth. This is so not a money issue anymore.” And they realized just the fundamental mechanism that they had had, that they had grown up with about teaching some level of fiscal responsibility, which is there are things that you just can't buy because it's not within your means, that filter broke for them. We can't say that to our kids anymore.

And, “well, I don't know what to actually say when we want to say no, because, I always grew up with, there are some things you can't afford because you have to live within your means.” But they're like, “living within our means, means our kids spend a million dollars a year and we don't want to teach them to do that. But ‘live within your means’ doesn't work anymore. We need a new script. What do we say to our kids now?” Which starts leading to, “well, you don't really don't want them to spend because there's something about the value of what that spending means that you don't think was appropriate. You got to figure out how to articulate that part. Because your old script, ‘live within your means, don't spend wastefully’, that doesn't work when you've got that much money.”

Coventry: Yes, you hit it on the head. That is exactly the old default, “well, we can't afford it”; that filter breaks. And when the filter breaks, it's exactly what you're saying, people don't have the script. So much of parenting is the default script that's in your head as a result, probably of your own upbringing. And so when that filter breaks and the script is useless, people feel very unmoored.

And a big part of what we try to help clients with is to write a different script. And to understand that it's going to feel actually a little artificial, that actually, your kid does need to learn those same lessons that you did. It's just that you learned them by default. Like, that just happened. And now you need to essentially create opportunities to teach your kid those same lessons, even though you don't need to. Like, when I'm talking about my first book that I wrote, there's a lot of stories in there about ways in which parents intentionally recreated a situation where the kid would have to earn back the money to pay back the parents or whatever. Like, of course, the parents didn't need the kid to pay them back. But they needed to...

Michael: Because it was not like a tax family optimization, we're going to take intra-family loans because there's some wealth shifting within the family.

Coventry: No, this was a daughter who had a credit card and spent money on the credit card, and dad and mom got the bill, and were like, “okay, these were not approved charges”. And had to create a mechanism for her with her own sweat equity, earn the money to pay that back, even though it was like a rounding error for them. They didn't need her to do that.

And so, a lot of this is creating the opportunity for a child to learn the lesson they would have learned in a family where if they had had less abundant resources, they would have learned these lessons by default.

Michael: And to me, there is something interesting that comes from that and reflecting that you have to figure out how to create, for lack of a better word, artificial systems and constructs to reinvent some of the scenarios that other people of less wealth learn naturally through just how the world may operate, that they need help to create the artificial frameworks to instill the same lessons, which to me then starts to drill home like this is why it helps to actually have this level of expertise and specialization in these kinds of families because when you've worked with a few hundred families that have had to figure out how to create these you actually have some lessons of, well, “here are some things we've actually seen that have worked with other people who are trying to show a child why a $10,000 credit card bill is irresponsible, even though we're worth $80 million and no one's actually going to notice the $10,000 bill”.

Coventry: Exactly. And you need two things. You need help with the practical execution, like what are the constructs? What are the things? What are the scripts you can say? And then I find clients really need help with the psychology of it, because it's like, “Look, I've earned this money. I have these extra resources. Is it so bad if I put my child on the private plane?” People have a lot of trouble reconciling their own totally understandable wish and desire to enjoy the fruits of their labor with their also equally compelling need as a parent to feel like they are educating their child in a whole host of socioeconomic outcomes in life.

And so there's like guilt there. Especially, I find there's a fascinating statistic that I learned from Jim Grubman, that actually, in the U.S. 80% of wealth that's created on a rolling basis is newly created wealth. So, actually, many of our clients, and I know a lot of the wealthy people out there came from much less themselves in their own upbringing.

Michael: Which just means it's very, very likely you have no idea what the artificial constructs are to teach, and no one has ever modeled them for you because you actually probably grew up with the real version of the construct. For lack of a better word.

Coventry: Exactly. And then you layer on to that sometimes people have come from a real scarcity environment. And they remember being really poor. They remember things they felt deprived of when they were young. And so they have this completely deep-down desire to save their own children from that sense of deprivation. And I think that can be an incredibly powerful and understandable emotional urge, but it can also be really damaging because you can follow that through to the conclusion, you basically want to give the child everything, which does have the effect of depriving the child of the ability.

So much of this, I find with what we've seen works with raising these kids is creating outcomes. I sometimes say to my clients, and I say this to myself, try to, and I hope I don't come across as the perfect parent because literally, everything I've learned from these people, I interviewed and I wrote the book about I try to teach myself as a parent. And it's not easy, because it's always easier to say yes than no. It's always easier to fix the problem than to try to provide your child with a way to fix the problem on their own.

But the question I tend to provide my clients as the sort of guidepost is, “in every situation, ask yourself, what role do I need to play in this situation so that the outcome, whatever it is, whether it's a success outcome or a failure outcome, my child will feel like they earned that outcome on their own?” And basically, the answer is “nothing”. In most situations, the answer is “do nothing”. And that is so hard. I think it's hard for parents, in general, but it's really hard when you have a lot of extra financial resources, and it would be so easy to provide help.

Michael: And I think it's worth noting, as you mentioned you have a book on this, it's called "Raised Healthy, Wealthy & Wise," of taking stories and experiences with clients and putting those stories in a book for others to read.

So this is Episode 219. So if you go to kitces.com/219, we'll have a link out for Covie's book if this is a thing that fascinates you, or you want to check out a little bit more around these dynamics of what it's like having wealth advice conversations with families where there's a whole realm of creating artificial limits to teach values that otherwise don't get taught because the limits actually don't exist when they've got that much money or at least the limits are a different order of magnitude where the usual lessons break down.

Coventry: Exactly, you got it. And I also think another really powerful thing is to just allow a child to operate at all ages at the highest level of their capacity. So Jeff Sadla who's an advisor for our field has this great term he calls "the golden sippy cup rule," which I love. Which is as soon as your child is old enough to like teeter-totter over to the dishwasher and put their own sippy cup in the dishwasher, let them do that. That provides such a sense of accomplishment. And if you follow that analogy through all of life, and all of childhood, I think it's incredibly apt.

But the stakes get so much higher when the failure potential grows. When you're now talking about whether it gets into the school you want them to get in, or they get the job that you hope they'll get, and all these things. And when you have resources to accomplish all those outcomes, it gets really hard for parents to just say, “I'm not going to help”.

And what I help people think about in that situation is I share the stories that I heard from the book, which is the level of pride and self-satisfaction from the kids who were given the opportunity to do those things on their own, like fail or succeed, they felt like they did those things. And I say if you're the parent trying to help, remember the pride in this person's voice I interviewed and know that your effort to help will mean that that pride will not be there in your child's voice because they will not end up feeling like this is something they did for themselves.

But it takes, literally, constant reminders for all of us because it's not intuitive. It's not what you want to do as a parent.

What Prompted Covie To Write Her Book And The Common Traits Among Well-Rounded Children From Ultra-Wealthy Families [28:53]

Michael: I'm just curious. How did you end out at a point of writing a book on this? Was it just, literally, I'm having this conversation so many times with clients, I'm just going to write all this down and give it to them so they can read it for themselves?

Coventry: That's such a great question. No. Well, there's a long story, but I'll say a couple of things. I'm always curious about what is conventional wisdom, and whether it's actually borne out by what I'm seeing. And so I would say, I was noticing... So a couple of things. First of all, so grateful to Roy Ballentine, the founder of our firm for being a curious person, and for his own experience in life, having come from a family business, which was the impetus for starting our firm. He knew from the get-go and felt very deep down that our work was about much more than money. It's about the family relationships, it's about children's capacities, things like that. So he was curious and was willing to go there with our clients.

So I happened to join the firm, just as I think Roy was starting to ask questions and look around like, “okay, we've done all this amazing planning with the parent generation,” and like, “Yay, done all these amazing tax strategies, and it made them great investment returns. How are the kids? How is this going for their kids?” And starting to ask that deeper question, because what you start to notice, when you're working with families like this you can have all the money in the world, and you can have the best tax advice and everything, but if there's something going on with your child, you are not a happy person.

And so if you're in that room, as the advisor, it becomes very apparent that the work that we actually really need to do is to help these families have not only good relationships with their children, but feel like their wealth has not impacted their children's life in a negative way. I think that that is what all of our clients are hoping to avoid, whether they understand that when they first hire an advisor, like us or not.

So Roy was primed to be asking these questions. And then that's exactly the work I'm most drawn to. So I'm starting to ask these questions in my client relationships. And I started to see some unusual things in the industry. Like, the industry talks a lot about how children need to be prepared to be good stewards of wealth and they need to be educated about the trust that they will be beneficiaries of. And it's not that I disagree with those things. But what I felt was missing from that, when I actually looked around at the clients' children, I saw in my practice, who were the kinds of kids we'd all want to have. Like grounded, self-motivated, content in life. They had had a different message. The message they had received was more like, “you're going to be your own person, you should go out and figure out how to feel a sense of accomplishment in your own life.” And they had been given capacities to do that. Like they could set limits for themselves and they could stick with a job.

And so I just started to be curious about how these kids actually became those kids. And just wanting to interview them and ask them, what did you hear from your parents, and then being able to reconcile what I was hearing with what was talked about as industry best practice.

And it turned out to be a lot of different things that I heard that was not exactly what we at that point in the industry had been talking a lot about.

Michael: Because it was less about being good stewards of wealth, and was much more around kids' personal learning journey and self-discovery journey, values-finding kind of journey?

Coventry: Yeah. Well, so I'll give you a really crystal clear example. I thought about these people where I just described, these profiles for contented, grounded, and motivated. What I found when I interviewed them was that they all shared four characteristics in common. So I dedicate a chapter in the book to talking about those characteristics. But the first characteristic is one that I think is actually pretty controversial in our industry, which is that all these people I interviewed said that a critical thing for them in their life was that they were all given a chance, some portion of time in their life, it didn't even have to be that long, like, for one person, it was only a year, where they were earning their own way, they were living off of money that they themselves had earned, rather than any family money. And they all talked about some moment in their life, that it was absolutely foundational for their sense of self-esteem and such a critical gift that their families gave them that they gave them the ability to spend some time doing that.

And what was really critical was they said, they all said some version of because “I've had that experience for some time in my life I know that if my family money disappeared tomorrow, I would be okay.” So it was really less about, “Yeah, I can go out and get a job and support myself.” Yes, it was that. But it was even deeper than that. It was a sense of confidence. This confidence in their own ability to support themselves separate and apart from what they had inherited, or would inherit, that was so critical. It's like, actually really foundational for a sense of self and identity.

And that was such a powerful thing for me to learn through these interviews. And it's actually shaped completely the advice I give to clients. But also, I've started to think if there's one thing that I can leave my clients with that we can all try to do as parents. If you were to ask most parents, what do you want for your child, most parents, your knee-jerk response is, I want my child to be happy. But then when you think about yourself as a person going through the world, and what you would most want for your adult self, I think most people want to feel a sense of capability. That they will be able to handle whatever life throws at them, which things get thrown at you.

And so if you actually think about it that way, “how as a parent do I help my child develop a sense of capability, which will probably end up leading to happiness?”, that leads to very different decisions. And it's through that lens, these kids so valued the sense of capability that they were able to extract from that year. And it fueled all of these other things in their life. Like, “okay, I did that so I can do this.”

And so, basically, what I find when there's a lot of money in a family, parents, almost, literally, need to sit on their hands to keep from providing resources that strip a child of that ability to have experiences that fuel that own sense of capability for their own life.

Michael: Very cool. So then what were some of the other areas? Sounds like one big one was just the opportunity to have earned their own way for some period of time.

Coventry: Yes. And two was that, I'll say a common situation in our world is you'll be asked by parents, okay, I've got this, 28-year-old child, and they have cycled through three or four career attempts, or maybe they've been in a couple of different graduate school programs, but they haven't yet really developed any traction in a career. So what was really interesting about these people I interviewed is that all of them, as the second shared characteristic, did not have that profile. Somehow, they had this ability to have stuck with some career or vocation of their own choosing long enough to essentially do what, you know, a lot of people do in their careers, like “figure out what you're good at, what you're not good at, what you're passionate about.” Achieve some success, have some failure, but basically, you have traction, and that traction allows you to progress.

Kids from a non-affluent family get a message like, “Hey, if they were lucky enough to go to college, or have anyone pay for college,” they usually get this pretty clear message, like out of college, “okay, you're on your own, you just support yourself.” When there's extra money in a family, that message turns into a different message, which is often something like, there are family resources here, your job is to figure out what you're passionate about. And our resources will help support that passion. Or invest in that passion or whatever it is.

And so they're left really confused about, “do I need to support myself? What does that mean exactly?” And what's challenging is, it's exactly backward. What that means is that kids end up showing up at job number one, and expecting passion to like alight on them. And what that also means is the first day that the boss isn't nice, or the job isn't fulfilling, or whatever, they think this wasn't a great day. This must not be what I'm passionate about. And especially, if there is then some extra money, say, in a trust distribution or a bank account that provides them some economic safety net for some period of time, and means that the job isn't even economically necessary, kids leave. And I see that that creates this cycle of starting, stopping, starting, stopping.

And so how the parents who raised the kids I interviewed avoided that cycle is they gave their kids two important messages. The first one was, “yes, find what you love, find work you're passionate about, it won't feel like work if you love it, we love our work, blah, blah.” But it was always paired with the second message, which was “that might take a while, and no job is too small, and give every job, your best effort. And learn from every job.”

And so, essentially, it was almost like a form of inoculation when these kids showed up, and day one on the job wasn't great they thought, “Well okay, it's not great. But let me stick around and let me see what I learned.” And so they were able to have the endurance, essentially, to stick with something, and thereby discover their passion, which typically, is discovered once you stick with things and learn about things. And so it was just fascinating how parents achieved that outcome.

Michael: Interesting. Interesting. And so then, what was the next one that you'd found?

Coventry: Yes. Okay. So if you have one and two going on, so say you're like a young person out in the world, you've spent some time in your life supporting yourself and you feel like you have the capacity to earn your own way, and now you have two which is that you have some traction in a career of your own choosing, you end up with three. Which is, essentially, a sense of self-identity, a foundational sense of self-esteem that is based largely in your own mind. And really, this is all that matters. It's what you perceive, in your own mind. It's based largely on your own achievements and choices in your life more than what you were born to, and what you inherited. You understand there were advantages there. But you also feel like you actually contributed meaningfully to the success in your life through your own efforts. There's like a sense of skin in the game. And that foundational self-identity is so critical for the sense of confidence that we've been talking about.

And the fourth one is probably the best thing and the most important thing, and the most valuable gift that parents can give their kid, which is, all of these people could point to some time in their life where they had been required to get themselves out of a problem of their own making without help from their parents or money or whatever. So I started calling it "earned resilience." But again, you can see the same theme, because they had had some time like that where they had gotten out of a problem. It gave them a sense of confidence that they could do it again. And they were then able to take that sense of confidence into other endeavors in their life.

I interviewed one dad about his daughter's quest to get a job. And it was like a seventh-month quest. And it was ultimately successful. And I had interviewed her, she was really 25. And she was, literally, glowing with pride. And this had been two years ago when she was talking all about how hard it was, but she did it. And he was like, "You have to hear my story." He's like, "She first came to me and asked if I could help and I didn't know anybody, so I couldn't help." And then he said, he was, literally, tortured sitting there watching her flail for months. And I really didn't know if she was going to get a job. And what was really interesting to me as the interviewer is two years on now, from this experience, she didn't bring that up to me that she asked him for help, and not because I don't think she wanted to know, I think it's honestly because, in her emotional memory of this experience, that doesn't even hit the radar. I think what she remembers from this is she did it. Like it was...

Michael: She remembers that she did it. Not that she may have at one point tried to get dad to help. And then after dad said no, she ended out doing it. The point is she did it.

Coventry: Exactly. She was like, "I did. It was so hard. I did it." And there was even pride too, "I'm not 100% financially independent yet, but I'm more financially independent than a lot of my friends." Just so much pride. Whereas dad, all dad remembers is that was torture. “Two years ago was torture, it's still torture, it was torture.”

And I share that story because I think it's just so important for parents to understand that their emotional experience and their child's emotional experience are like two trains running on totally separate tracks. And I think so many times, parents want to just rush in there and get in there. Because they think that this torture that they've experienced, which by the way, I'm sure it wasn't fun for her at the time. I'm sure she was talking about how hard it was the time. But they see only that, and they think that that will be what it will be forever. And they don't see the pride that she developed later. And how sad would it have been if he had jumped in because then she wouldn't have that experience that she was so proud of? But it really takes reminding, because it's just painful for parents to tell. So that's just the sad truth.

In fact, sometimes I have to say to my clients, “you have to just recast, because it's impossible to say no to your kid.” I think it's actually better to recast what you are feeling as a ‘no’, which is, “No, I will not get the toy” or “No, I will not help you get the job,” or whatever is the no, as “I am actually not saying no, I am saying yes to you developing these capacities for yourself. Because I have derived a lot of satisfaction in my own life from having these skills and practices and I want that same satisfaction for you. And, unfortunately, that requires me to say no at this time.” And I even say to people, tell your kids that. You don't need to be too secretive about this. I say, just say to that, “like, I want this for you. I love you. I want you to have these feelings of satisfaction for yourself. And that means, unfortunately, I really can't help you right now.

So, anyway, it's easier said than done. That is for sure. I know it myself. It's easier said than done.

How Covie’s Work With Client Families Fits Within The Broader Context Of The Wealth Management Business [43:22]

Michael: So now help us to understand and fit this into the business context of just how does the business work of what you do. Walk us through, “I'm a prospective new client. I have $42 million. I'm hiring your firm to work with because I'm anxious about these wealth management family legacy issues. So, Covie, I've signed up with your firm, we're going to get started.” What happens? What do you do?

Coventry: Yes, what do we do? So, okay. So you're one of these people, and you sign up with us. And you are assigned a team of people with essentially probably one primary senior client advisor who is going to be your person who will hold your hand through these issues. And we view our role. So we charge one fee, one annual fee. Probably about 60% of our clients are paying us a flat annual fee. And the rest are paying us some asset-based fee, but it has to do more with the complexity of their situation than are we "managing the money" or not.

And we view it as our job to bring our expertise across all these issues to that client for that one fee. So, typically, what happens is, there are certain issues that are top of mind for any new client. Like, “okay, I just sold my business, I've got this pile of money, I need it to be invested, I've got this trust that my lawyer says that I should do that needs to be funded.” All this stuff. And so we look at all that stuff, we see all the immediate issues that need to be handled, and we handle all of that.

What we find is that usually the first 1-3 years of a client engagement are very much immersed in these nuts and bolts issues. Get the money investing, get the reporting done, figure out where all the assets are, and get the nice balance sheet, all this stuff just make their life run much more efficiently from a financial perspective, and to make sure that there aren't any unaddressed risks or any opportunities that are, sometimes we find significant tax-saving opportunities or significant mistakes that have been undisclosed. Things like this. So we deal with all that. And what I find is that once we have handled all that, and it starts to be freed up out of our clients' minds, they're then better able to contemplate and engage with some of these deeper questions.

And all of our senior client advisors are trained in all of the stuff we've just been talking about. So we don't necessarily lead with this in meeting one, two, three, because clients sometimes can't hear it when they're worried about their investments not being invested or things like that. But we always have it top of our mind. So I'll give you a good example. Like, if a question comes up, a seemingly simple question about should we make an annual exclusion gift? Well, of course, it'd be good for tax minimization, blah, blah, blah. We are always thinking about, “Okay, what about these deeper issues?” So, for us what might seem like a simple tax decision is actually a much deeper conversation about, “Okay, so where's that gift going to go? Is it going to go into an account that your child is going to have access to? How are you feeling about your child's life right now? How are you feeling about their work ethic, their job, all these things?”

So we view as our role for our one fee to bring those questions up in a client discussion. So we'll be meeting with our clients quarterly, probably talking to them much more frequently than that, and we'll go through all the topics, investments, estate, philanthropy, all those things. But throughout all of that, we are thinking of these deeper, I guess, human, family issues and bringing up questions around that when we know it's going to be important.

Michael: So I'm struck by this that for all of what you're discussing about this framework, it was still we almost went over a quick like, oh, but if we do spend the first 1-3 years just getting the money invested and putting everything together. Just getting them their foundation. And that's a long period of time in and of itself. I'm struck by that point that, yes, this is what we're going through with our clients in the long term, but it still might take a few years before we get to this part, because there is just a lot of other, I was going to say, nuts and bolts, whatever the nuts and bolts equivalent is when you're $42 million that you're trying to allocate and deploy because you used to have it all tied up in a business and now you have liquidity event, and suddenly you have to figure out what to do with these dollars.

Coventry: Right. And I mean, we're ready to go there immediately. If someone comes in and says, I'm here to talk about my kids. “Yes, we are there,” like, “awesome!”

But what we find is, a great example is you'll have a business founder who has just sold their business. They've sold their baby, they put 40 years into this thing. It's all they've known. They don't know anything about the investment world, they used to have a complete sense of control, they owned the business, they were in charge every single day. And now they feel essentially a great degree of fear about what's going to happen to what used to be a business there is now money.

So, for that person, there's a lot of investment education, there's a lot of explaining how this is going to work. There's also, typically, a flurry of estate planning that has just happened with gifting and all this stuff. And so we find that just even with like a client's attention span, they're going to be engaged on those issues at that time. But what we know, back to the movie analogy, we know where that movie goes, is that you now have gone from being a business-owning person to a wealth owning family, and that all the issues that are going to arise, like, “should we buy a family vacation compound? And how will we structure that? Should we set up a multi-generational trust? And how will we talk about that with our children?” We know all those issues are going to come up, but they're not ready yet to engage in those. So we plan our meeting agendas thoughtfully so that we deal with things that must be done, and then try to introduce things that we know clients don't have on their mind but need to be starting to think about to the level that they can hear it and be able to act on it at that time.

Michael: I'm struck by this because, regardless of the wealth dollar amount, I feel like there's a piece of this that so many of us do as advisors in a way that, frankly, sounds now a little bit wrong relative to what you're saying here. Like, your version of I'll call it comprehensive wealth management involves not just, we're going to invest the dollars, but we're going to get into all these issues around your holistic life and all the things that are going on, which might be tax planning, and estate planning, and these kinds of family values issues, and legacy issues, and all this stuff that goes on there, which to me is not unlike the rest of us may be working with mere millionaires or hundred-thousandaires who have our version of, I want to do this comprehensive financial plan with you, and we're going to look at your insurance and your estate and your retirement and your tax, and we want to cover all the different issues. And we tend to lead with the comprehensive plan. That's where a lot of us tend to do. We differentiate because “my financial planning is more 'comprehensiver' than anybody else's financial planning, and that's why you should work with me.” And we lead with the financial plan because we say, “hey, that's our value. It's not just the investment portfolio.”

But I think you make an interesting point, that starting with the first things first, that if the client's issue is, “I got dollars, and they need to land somewhere, and I want to make sure they're deployed,” it's okay to start there. And if it takes a while to do that, it's okay to be there for a while, before you get to the other stuff that you want to get to even if that's, ultimately, the thing that you're saying is the value in the long run, it really is the value in the long run, that it's okay if you just do the first things first, which is whatever is really actually on the client's mind that they want to solve, which might not be our comprehensive financial plan, or in your context, the comprehensive multi-generational wealth legacy discussion, or however you frame it, which is probably more eloquent than that?

Coventry: Well, yes. And I'd say, also, I think in our world, a lot of what we think about too, is “what are our clients hiring us to do for them? And what do we need them to be engaged in to do in partnership with us?” So we tried to take on as much as we can do for them that they don't need to be involved with.

So, as an example, take that business founder. We know, they need probably a comprehensive property and casualty insurance review. So we're going to work with the insurance brokers to do that, we're going to ask them the five questions that need to be asked to make sure that's done. But we're going to handle that. And the same with life insurance. And go down the list of all the things we know need to be done but they don't care that much about them and they don't need to be involved in it. And we're going to use the time with them to focus their attention on the issues that are going to be most critical for them and for their satisfaction that their situation is being handled. So in this example, for a client who's just sold a business, probably half of the meeting is going to be just talking about how the stock market works. And what it means when it goes down 30%. And why that's not necessarily a complete disaster.

Michael: Particularly, if you've built your wealth in a privately-held business where, for better or worse, your business's value is not marked to market at the close every day. So, you know your wealth might have technically been quite volatile in your business. You never saw it.

Coventry: Exactly. And we've had that exact discussion when people that like, right, you were in a business that also probably had a valuation volatility, but it was not in your face, pull-up-able on Fidelity every single day. And so we would probably devote a lot of time in our actual client meeting time in helping people make that psychological transition from the control they felt as a business owner to now an investor, which is basically they feel no control, even though we try to help them feel a lot of control. “You got strategy, you've got multi-generational horizon, all this stuff. Blah, blah, blah.” But the reality is it can be very frightening. And let's talk about that.

And that just takes time to get over. As you know that just takes time, it takes the market going down 15%, and you surviving that, and all this stuff, and tax loss harvesting. It just takes time to learn that.

And so, you find that when people don't have learned that, “okay, I'm feeling better about this pile of money now, I'm okay, I've transitioned to, I'm a wealth owner, not a business owner. Okay, let's start talking about this wealth. And now I don't feel like it's going to disappear overnight. Now I can actually engage in this deeper conversation about what is this for?” Like, “hey, maybe I should think more about philanthropy or for my kids” or whatever.

So this stage, it's a learning stage. And I just want to say that we view our role to be on top of all the things whether or not the client is even not aware that we're on top of all the things. So.

How Ballentine’s Service Level Differs For Its Two Client Segments [55:10]

Michael: And so when you've got this layering of offerings. Your under-$20 million versus over-$20 million. Is there a difference in services? Is there a difference in what they get? Is it like a difference in training because you only get the advisors trained in the family legacy conversations if you're over $20 million, otherwise, you get different advisors who haven't been trained in that? What's the functional difference in what the under-$20 million clients get and what the over-$20 million clients get?

Coventry: Sure. So, the same approach, the same holistic approach that looks at the whole person and the whole financial planning situation. One point of distinction is that at the high-net-worth level, the $3.5-20m… so say we think to ourselves, they might benefit in this situation from having an irrevocable life insurance trust. We would make that recommendation, we'd recommend the attorney or the insurance person, but we'd stop there. At the family office level, we're going to be, essentially, having discussions to help talk about what that trust should look like. We're going to be modeling all that. We're going to be making sure that the trust is all of the things that have to be done after the trust is formed to make sure it's in good standing or done. All of that implementation stuff, which tends to be much more complicated at level, anyway, we're handling. So that's one point of distinction.

The other point of distinction is, even though we're actually looking at the same investment philosophy and implementation, but just the way it works in terms of asset size, the actual underlying implementation may differ slightly. So, at the higher level, their clients might be interested and willing to put more in private investments, or they may be able to access different private investments that have higher minimum investment requirements. That's it. We've actually, because of our aggregate, like you said, $7.5b that we're advising on, we have been able to negotiate access points down so that even our high-net-worth clients are able to access some things as a result of our aggregate asset volume that we are bringing to manager.

And I would say there's sometimes a specialty and just, it's not necessarily different training, but I'd say there's a different focus area. Like for clients in the high-net-worth group, the whole issue about when to take social security, or how to structure their retirement plan, those are significant decisions as a percentage of their overall income stream, potentially, or their asset pool. It's not that those are irrelevant decisions on the other end, it's just that they tend to pale in comparison sometimes to the rest of the picture.

So I would say that we split up the knowledge around that we need to understand in our firm, by teams. We have knowledge management teams. And for years now, our retirement experts have come from our high-net-worth group, because they're in the middle of those issues all the time. And they have to be really deeply well-versed in them because they're seeing a whole host of retirement plans, and it really matters in terms of a percentage of the person's total investment base.

Michael: So, help me understand, you mentioned something interesting there. What are knowledge management teams?

Coventry: Yes. So, as you can see laid down, there's a lot that we're covering. So we'll have clients come in with highly complex stock options, or we'll have clients who have incredibly complex estate stuff. And then there's all the philanthropy stuff. And then there's all this family legacy stuff we were talking about. So there's maybe 15 different areas that we feel like we really need to be expert in. And the way that we organize our firm, as I mentioned, we have a senior client advisor in charge of each client relationship. And they're the ones bringing and organizing the internal team, which is a couple of people on the investment side, two or three people on the planning side. They're pulling that all together, but they are charged with being the ‘generalist expert’. They're supposed to know this stuff. It's different than some organizations where there's more sort of like a salesperson in the relationship role. And then they bring in the actual expert. Our senior client advisors are really supposed to know all the stuff that they need to know in engagement.

That said, there are like total rabbit holes you could go down in our business. So the way we make sure we're on top of the rabbit holes, is we have these knowledge management teams. So I happen to be an SCA, and part of my role is I and two other wonderful colleagues of mine are on our people and purpose knowledge team, which is everything we've just talked about. Educating children, its end-of-life legacy planning. It's all of this stuff. So as all the teams are tasked within our little area, we are tasked with doing several things. We're supposed to know who are the external vendors or advisors that are really awesome in that space.

So, in our world, it's people who help do memoirs or death doulas, or people who help advise kids getting out of college about getting jobs. So there's all these other resources we could bring into a client engagement. So we need to know who these people are. And we're also supposed to provide training to the rest of the firm on specialty areas. So like, our little team does a training every January on goal setting. And we talk about all the different tools in our space to help clients with goal setting. Like awesome cards with pictures on them from 2164, or George Kinder’s EVOKE process. There's all kinds of tools, but so our job is to really be familiar with those tools and then to condense the training so that we can equip all of our advisors with what they need to know. And that's the case for every team. So we have an estate team, a risk team, a philanthropy team and they go on and on. But that's how we help ourselves know what we need to know.

Michael: Interesting. And I'm just wondering, you all have other day jobs too. Like, just clients and other things to deal with. How does this balance in practice where at some point, you could get pulled in on so many other people's client meetings that you start running out of time to do your own client meetings?

Coventry: Yes. Well, we're not actually going into other client meetings. That's the thing. We do internal training. We do internal training so that everyone who is in the senior client advisor role or other members of the team are equipped with what they need to know on our little knowledge area. They're equipped with that and may then bring that to their client.

And I think the other way that we share knowledge is that we have a matrix structure. So, as an example, I am on 11 different client engagements, that's pretty much a full load. Generally, we have 10 to 15 clients that we're each on. And I'm working on each of those engagements. I'll be supported by a wealth planner, and a wealth planner associate. So I'm working with four or five different wealth planners throughout the firm, and maybe another five wealth planning associates. So the client team stays the same. But each person at each level is working with different senior client advisors, different partners, different... And so what happens is, when we're in an internal client team meeting, and an issue comes up, I can say to someone, “are you seeing this issue in any of your other clients? What did you do in that client situation?” Whatever. And so we're able to share knowledge across clients that we might not be on because someone else on the team will be on. And that really does help us spread knowledge around the firm.

The Scope Of The Work That Ballentine Does For Its Clients [1:02:45]

Michael: And so, I want to come back to that for a moment. Eleven clients, and 11 clients supported by a wealth planner, and a wealth planner associate because, eleven clients on your own would be very busy. So help me understand what 11 clients looks like? And what sort of work are you doing? Or what meetings are going on? When you look broadly at the industry, you usually see numbers of how many active clients per advisor in the 80 to 100 clients per advisor range, sometimes higher at some firms with high volume clients. What are you doing all day and all week with, I'm not saying it in a negative way, but what are you doing with only 11 clients and 2 support staff? What does that engagement look like?

Coventry: Sure. And I would say in our high-net-worth practice, I don't think it's exactly those higher numbers you talk to, but it's closer to that. So I'm talking more about on the family office side. So yes, what are we doing? So what I would say, first of all, is, when I say “client”, first we have to talk about what that means. So that is a client's entire family. So, typically, a husband and wife, maybe mother or father, then maybe three or four kids, their spouses. Okay, so that's, first of all, “client”.

Michael: So we're really talking households, and household here is a pretty broad definition of household.

Coventry: Exactly. So that's one thing, not always, we do have single people or just couples without children we have, but that on average is like that. Then it's also, being in the role of pulling together all of the external advisors so that we work as a cohesive team on behalf of the client. So now you're talking about the estate planner, accountant, life insurance agent, property-casualty insurance agent, maybe evaluation person, two or three on and on, maybe a person who is more on the therapy side of things, there could be a whole host of say, five to eight or nine other people.

So, an example, I have a client situation where the person has moved overseas, and they're buying property. I think we literally needed something like seven advisors on a phone call because you've got the U.S.-based income tax person, the U.S.-based estate tax person, you got the marital person, you've got the local jurisdiction, all those equivalent people, you've got us. So this is just an example. Like that was one one-and-a-half-hour call to deal with this one situation and this one client situation of the tech.

So, hopefully, this is giving you a good feeling. And then you're meeting with those clients, which now is Zoom meetings largely, but you're meeting them, usually, four times a year, not always, sometimes more, sometimes less. You're talking to them pretty frequently, more frequently than that.

Michael: I'm just curious, how frequent is frequent You could be corresponding interacting with them weekly, because this week, they're buying the house in another country, and next week, they've got a weird tax issue in the following week some other things happening with one of the kids and we're down that rabbit hole. At that level, just in terms of how many conversations because even one "client" is a household that could have a half a dozen people or more involved. So someone's got something going on, almost all the time.

Coventry: You got it. Yes, exactly. And it's always different. That's what makes our stuff fun, too. We have a lot of people who, say they came from the investment professional world, then they retire and they go become artists, and now they want to start an art business. And then they need our help doing that. Like, I need to get the space, I need to get the insurance, I need to figure out how to do this. Oh, I want to meet this nonprofit. All this stuff. They call us first, which is awesome. So, you know what I mean? So every day is different. And you're always then seeking out the appropriate CFP code. Like, “what can I do myself? What do I know myself? What do I need help with? What do I need to go bring other people in to do? And then how do I make this simple for the client? This is not simple? How do I make it simple?” Because they don't want to know about all this stuff, they just want to know, what do you need for me and how can you make this happened? And basically, that's what we do.

How Ballentine Structures Their Fees [1:07:12]

Michael: And so then take me back again, to just how on earth do fees and fee structure work in your firm? You had said some are flat-fee, and then others are AUM. But can you just help me understand, even just the neighborhood. Are we talking about $20,000 flat fees, $100,000 flat fees? Is there a world of AUM on someone that has $82 million? What does fees really look like when you get down to practice with clients at this level?

Coventry: Yes. And so at the high-net-worth level, it follows more of what would be your typical fee schedule. I don't have ours in front of me, but it's competitive. If anything, I think it's a bit lower perhaps than other competitors might be but...

Michael: AUM fee usual kinds of breakpoints on AUM fee.

Coventry: Exactly. So, at the family office level, typically, it starts with a fee schedule concept. But the reality is, we've worked with so many people across so many different situations. We know that there are several factors that influence the fee in terms of being able to provide necessary advice. The size of the family, the complexity of the situation.

So that's why we're going to a flat-fee structure because then you'll also have people who come and say they are people in private equity firms, 70% of their balance sheet is locked up in assets that they're running themselves. It's like they don't want to pay you on those obviously. But meanwhile, it's actually a factor, like the fact that that's happening in their life creates a lot of complexity and capital calls that need to be tracked. And so we put all this into the soup. And we understand the range of fees that need to be charged for us to be able to do all we do at these levels of complexity.

So just to give you a general range, and I'm probably not going to get the number exactly right. But we have a minimum fee at the family office level. And it used to be $100,000, I think now it's more like $120,000-130,000. But that's an annual fee. So like for us to be able to do the work that we do, we're gonna need to have to charge at least that on an annual basis. So you'll get some people where maybe they're at a certain asset level where that's not going to make sense. So then we're going to talk about whether that actually is what they should be doing right now. Or maybe we'll do something more where we're doing more of the high-net-worth and investing some of their liquid assets until their life gets more to the level where they can afford our full suite of services at the family office level.

But I'd add one last thing, which is something that is I think, pretty unique about our firm and about this fee structure is we don't need there to be liquid money to manage to work with people. Often, business founders don't have a lot of money that is liquid, but they have a very complex life. And they have planning that needs to be done now, not when they are liquid. So often, we'll start working with people, say three or four years before a major liquidity event. Because if they have the cash flow to support our fee, we are happy to work with them and be able to do a lot of this great work that they need done now. And then sometimes that transitions to a different fee structure once they have liquidity, but it allows us to do really good planning work for people who need that help now.

Michael: And so fees started off $100,000-120,000. I'm presuming then that means they go up from there. So you may have clients that have $150,000 engagements, $200,000 engagements, and even higher than that.

Coventry: Oh, it's a typical fee in our industry. And this keeps changing, but I think maybe 3 or 4 years ago, a number that was floating around, which I think was quite fair and accurate, was for wealth advising client with $100 million, they would be paying basically 40 basis points. So it's a $400,000 fee.

And so I'd say, our fees, on average, at the family office level are somewhere between the $130m and up, and it just...

Michael: Just if I do the math at a $20 million minimum for the family office level, a $120,000 fee is essentially 60 basis points.

Coventry: Right, exactly. So it makes sense. It follows the breakpoint concept that the more assets you have, it does come down a bit, but that's why we have a minimum fee, because, as you can see the amount of work we're doing, it's just a lot like. You can't take it down that much because... Yeah.

Michael: I'm imagining someone's listening to this and saying, you could just hire your own person for $120,000. But at the same time, at this level, their lives are going to have so many different complexities. It's like, yeah, you could hire a person, but they're not going to have all the different expertises that you need, because there's investment expertise, and there's tax expertise, and there's estate planning expertise, and there's all the family legacy planning expertise that you're talking about. And A, you're probably not going to find one person who does that who can do it at the level that you need it when you're a deca-millionaire. And even if you do, they're actually going to cost you a lot more than $120,000, which means you're probably still getting a deal at $120k relative to hiring a person for it. Just that whole phenomenon of wealth and needs are incredibly relative up the scale. Even if you've got $100 million, yes, you could hire several people for $400 grand, but you actually may have so much complexity that it will cost you more to hire the depth of expertise that you need than to just pay the $400,000 to the firm.

Coventry: Exactly. And we, of course, look at that issue. And there is a level of wealth where you could probably get enough people to replicate what we're doing. But that's something more I'd say north of $700 million, $800 million because exactly the point you're talking about, it's not just the one person. Just talk about how much you have to pay excellent investment people. There's that. Then there's all of these other areas that we're talking about. But then I honestly think the priceless piece is that we're seeing 250 families. And so I think that that's actually something that every single family office struggles with that they just see that one family, and it's really hard to through that one family have access to all of the types of issues that come up. You feel a little bit on an island, I think. So I think that that is something that we really help clients with by bringing all of the experiences of all these different families and these share of lessons.

And why we price it that way is if we did an a la carte menu and said, “and how much would you like us to charge you to help you with these family issues with your children?” I think most people on the way would be like, “I don't know. I know, my kids are so young, I'm not sure I need that.” But the reality is, everyone needs it, they just might not know they need it.

So our one-fee allows us to be able to bring that up when we know it's really necessary. And now we find, of course, on the back end, I know, our fees might sound incredibly high to someone who's not in this world on a daily basis, but we have tremendously high client retention because clients find that we are saving them way more in either money saved or family harmony or everything else that these fees start to seem totally... I don't know, if you're achieving priceless changes in people's situation, our fee does not seem high.

Covie’s Journey In The Industry And How She Ended Up At Ballentine [1:14:55]

Michael: And so, what was your journey? How do you end out in this kind of work, in this kind of role? Is this like, I always wanted to do this since I was young and work in ultra-high-net-worth wealth management? How do you end out in this sort of role and career?

Coventry: Yes, I love it because I just had this mental picture of like five-year-old Covie like, “I want to be a wealth advisor”. No, that's not what I would say. And I'm so glad to tell the story because I hope, first of all, people are hearing this and think, “wow, I had no idea that you could do this in the financial advising world,” because I think if I had learned that at a young age, I think I would think that was pretty cool. My background was, I always wanted to be a doctor. I decided, junior year of high school, I was going to be a doctor. I did all my pre-meds in college. I spent one day a week of my junior year working in a hospital as somebody they call the surgical liaison where you, basically, you were like the volunteer person floating around from the ICU and the OR then telling the waiting families how their patient was doing because the medical field was changing, and the economics were changing. And they used to pay nurses to do that. Then they had retired nurses. Then they weren't even doing that. And I was the first college kid and I was trained by this awesome salty nurse who was awesome.

Anyway, but I learned in that process that, actually, had a lot of doctors who I had gone to since I was little, tell me that they really would not recommend becoming a doctor at that time. This was like the '90s. This was the mid-90s. So I literally had gone to see a dermatologist since when I was11. And when I was 19, she's like, "Okay, my partner in my practice just left to become a financial advisor." And I was like, what?

And basically, what they were saying was, “the economics are changing in this field. And what it means is that it's really hard to serve patients the way you want. And the joy has gone out of the work.” And I got really frightened by that because the economics didn't scare me as much, since I wasn’t going to make a lot of money. What really worried me is that I would feel like I would be on the clock with patients and I wouldn't be able to help them in the way that I wanted to because I'm a real kind of helper person. So that was confusing because now I'm like senior year in college and my mom was clear that like “okay, done paying for college.” And so I needed a job. And I was trained for nothing because I had done my pre-meds and I had taken not one economics class.

And Goldman Sachs came on campus and they hired me into a sales job, which I didn't even like sales. Laughing at all this now. I guess they thought I would enjoy talking to people, which is true, I do like talking to people. But anyway, lucky me, they decided to shut that group down three months later. Actually, they moved it to Chicago but I was in New York and I had family in New York and I went to them pleading and said I really don't want to move to Chicago. Is there some other place you can stick me in my two-year analyst deal? And I got so lucky because they then put me into what was Goldman Sachs's first foray into open architecture.

So it was this fascinating exposure to the investment industry. And here, I was like me with no experience. And the job was traveling around the country and around the world, interviewing money managers to decide whether they were good enough to be hired for the portfolio for Goldman clients. Let's just say, as a way to see the investment world, it was awesome. And I was traveling around the world meeting amazing investment managers.

But what happened is, as I said, I'm a helper person. And around year three, or beginning of year four, a woman who I knew from a different group, went on a family vacation, she was in her 30s, she was single. She went on a vacation with her parents, and they got into a car accident, and she died. And I remember it was such a critical moment for me because they were nice. They had a funeral. But then it was like, two days later, everyone's back at work. And I just remember thinking if this happened to me, would I have been true to my purpose in life of helping people? And I really couldn't say yes to that question. I could maybe say yes, but that well, I'm hiring managers to be in pension plans, and maybe I'm helping, but I was like seven steps. And so the short answer was no. And I decided I really need to do something else.

So then I went searching and seeking and in that process, I had been working on my CFA, I discovered the world of fee-only advising. I literally did not know it existed because my friends at Goldman who were in private client, that was basically a sales job. And I did not know that something existed where you were just doing family advising. And when I learned about it, I was like, “Oh, my gosh, that is medicine”. It actually struck me as so similar to medicine. You have this technical expertise, you bring it to this, hopefully, very long-lived human relationship with a person, it's all about helping them achieve their goals in life. And that's it. That's like me being a doctor.

And then once I decided that I started looking around for a firm that I thought would be not only practicing with excellent integrity and ethics but would be practicing with the types and through size of clients that I had seen at Goldman, even though I wasn't working with them directly. And that's how I came across Ballentine. And that was, Oh, 17 years ago, I think, 16 years ago, a long time ago. So.

Michael: Very cool. Very cool. And been there ever since. What did you come into the firm originally to do?

Coventry: Yes, I came in originally, as what we termed at the time a senior client advisor in training, which is basically an apprentice role. I spent the first three years following Roy around, essentially. So I came in, Roy had some clients that he had just begun working with, I was put on to those clients as like, this is going to be your person, once she knows something other than investments, which is what I came in knowing, but I knew nothing about estate planning. And by the way, when I say this, Roy did this for probably like 10 of us at our firm, which is how our whole group of next-generation leaders are created. And then we all did that for another 10, 15, 20 people, which is how now we have almost 100 people. So I really credit Roy for the apprentice thing that he did for a master-apprentice that he did for so many of us, but essentially, I just watched him while I was running like a little duck trying to finish my CFA and get my CFP learn about all these things I didn't know about, trying to say things in the meetings that would imbue some competence even though I was clearly still learning.

So I spent maybe two, three years, in training. Then I became a senior client advisor with my own 10, 15 clients. Those families still are the families that I serve. Now I'm more what we call partner in charge on those engagements, which is that I come to the meetings or every other meeting, but there is now a senior client advisor doing what I was doing.

And then in 2011, we did a whole succession process at our firm where we made Drew be CEO and I became chief wealth advisor officer. I was managing our whole planning group. And I did that for four years, five years. We had about 25 people in the group then. And then I started to write these books. And that started taking me in a whole different direction where I eventually gave up much of my management role. And now my wonderful co-partner, Adam Ochlis is doing that. And I'm spending the bulk of my time writing a third book, speaking on these books, still being involved with the clients that I was involved in. And I'm sort of our chief marketing officer, we don't call it that. But I manage that piece of our work. And I have another wonderful woman, Carly Augeri who does all of that. She's our marketing manager and works for me.

So, yeah, and there's one other thing now we're doing a whole financial literacy from the books and from, I mentioned, my colleague, Akeiva when we were talking earlier. She has this whole side thing where she does financial literacy training to help close the racial wealth gap. She has 8,000 YouTube subscribers, and she's awesome. We just create a role for her of creating a financial literacy curriculum for our clients and their children. And so she's reporting to me, and that's our thought leadership capacity and family education capacity.

So that's what I'm doing now. So it has evolved.

Understanding What It Takes To Serve Ultra-High-Net-Worth Clients [1:23:41]

Michael: So having done this journey, what do most advisors not understand about what it really takes for serving ultra-high-net-worth clients?

Michael: I think one thing that people struggle with is that they look at these people, and they're so successful, and they think, “Wow, they have so much money.” And I think that can sometimes create a barrier. And I've just always seen my clients as people first. And in fact, many of them are people who never ever imagined they'd have this amount of money, and never imagined that it would come with problems.

I think that most people think, “Yeah, when I am rich, all these things will go away.” And the reality is, it comes with some problems that are actually really hard to talk about. And so I view my role as helping my clients have that person and that place where they can talk about those things, and help them feel like the humans they are. And help them engage on these issues that… I think that can be a little sad when you have so much wealth is that I think people expect life to be like... “Shouldn't life be amazing now? You have all the resources to make it amazing. So if it's not amazing, why is that?” And generally, the answer to that question is, it's usually about the most intractable problems. Broken down relationships with children, or life's dreams deferred, or these things that are really hard.

And so, it's just sometimes help clients get unstuck. Like, think, just because we have these homes or have these assets doesn't mean that has to be the life we are leading. It's almost like helping people perceive the freedom that they have. But I think it's sometimes hard to perceive yourself as truly having choices. And so there's normal managing of human investor psychology that plays a role in this work, too.

The Low Point In Covie’s Career, Her Advice To New Advisors Coming Into The Industry, And What Success Means To Her [1:25:44]

Michael: So what was the low point of the career journey for you?

Coventry: I think when I first started working with clients, I'm a helper person, I'm an optimist, I think I just thought “I can solve every problem.” Like, if there's a problem with a kid, “I will just teach them how to budget, I will bring in my little black bag doctor full of tricks, budgeting 101, whatever, and the problem will be solved.” And I think what I learned, that probably sounds incredibly naive, but I do think now upon reflection that that is how I thought about things. And I think I learned just working in reality and working in this field that by the time I'm called in to help a situation with a 25-year-old who's having trouble with staying in a career or living off of a trust distribution that is supposed to last for three months, and they're spending it in a week, that I can do some good work there. Yes, I can definitely improve the situation. But I think I learned that I wish I had been able to get involved with those families so much earlier to basically really help guide the parenting choices along the way.

And I think as part of that, I also learned that sometimes what needs to change is parents' behavior itself. Like the ways in which how they are behaving are actually enabling the child. And sometimes it's just really hard to hear that... I think that sometimes people just can't hear that. So I think I learned through these situations that we're difficult. I think partially, that is what pushed me on to seek out the stories about what can go well and try to spread those messages through the book. I really was like, if I can reach through the book, families who still have young kids who can do these things right, that would be a wonderful thing. It would just give me such a sense of satisfaction to be able to spread those messages out there. So.

Michael: So what advice would you give newer advisors coming into the industry today?

Coventry: That's a good question. I think I'd say, it sounds so cliche, but dare to be different. And I think that I so applaud our firm for letting me write these books. I took serious time out of commission. I could have been on more clients, I could have been doing a lot of other things, but they let me have the time to write these books because it was important to the firm that we get to the right answers on these issues with our clients. And I think that was like a real risk that the firm took, that I think has been really beneficial for our clients, and it has been helpful for people to better understand what our firm is about.

I think that I would encourage young people coming in to beat that drum at whatever firm they're in, and try to, whatever thing they think will move the needle to try to get the firm to embrace that.

Michael: So as we wrap up, this is a podcast about success. And one of the themes that always comes up is just, even the word success means very different things to different people. And so, you've had this wonderful career journey of success and building your career at the firm and becoming a partner and writing the book and side hustles with billionaires and all that fun stuff. But, particularly, because I know you spend so much time on this conversation with the clients that you serve, how do you define success for yourself at this point?

Coventry: Well, I think it's the same as for the clients. Like, when I was writing the book on aging, I talked about George Kinder's question about “if you're told this is your last day on earth, what is that immediate feeling of regret that comes to mind about who you didn't get to be and what did you not get to do?” And I think success is not having that sense of regret; it's doing the things in your life that will mean that if you get to that point in your life, you're not going to feel that sense of regret. And that's why I always keep asking that question of my clients to keep getting them to focus on, and I think, especially highly successful people can be in this constant state of forward momentum where success is defined as the industry by the zeros on the balance sheet, and the houses accrued, and all of the wealth accumulation and scorecard-keeping, but what I actually find is that that is not what people perceive in reality as feeling like success later in life. It's different for everybody. But I really think that question gets to, what is that thing that you would regret not having done or become?

And so, for my own life, when I wrote book two, I started to carve out some more time in my life to do my art because, for me, that was the answer to that question. And I was like, I don't want to feel that way. I don't want to feel like this thing is burning inside me that has not had a chance to get out.

And so that's what I think is success. It's listening to that voice and doing that thing. And I think our role as an advisor is helping clients frame that question, and helping them feel like the rest of their financial situation is being handled so they have the freedom to work on whatever that thing is that will help them answer that question.

Michael: I love that. I love that. And even the framing of part of our value and role as advisors is to help deal with and worry about some of that money and other stuff to free their space and mind and time and focus to have the freedom to pursue whatever that thing is that eliminates the end-of-life regret.

Coventry: Yeah, well, I think this is where I come back to, we're all humans. Think the goal is the same. Like, my clients have hundreds of millions more than me. But I think it's the same goal, that we don't want to have to feel regret at that question. And so just trying to help them ask that.

I once had a client say to me, After I left my work life, people didn't ask me challenging questions anymore." So I actually feel like that's like a really important role that we bring to our clients is asking those, Jay Hughes called it "courageous questions." Being the one to say, how's that going to feel if you don't do that thing? Or how's that going to feel if you do, do that? And get people to really think hard about that versus just going through the motions.

Michael: I love it. I love it. Thank you so much Covie for joining us on the "Financial Advisor Success" podcast.

Coventry: Thank you for having me on.

Michael: Thank you.