Freddy Frederick, COO at Stone Creek Group talks with us about family wealth investment and financial advising.
Please excuse any typos in this hasty transcript.
Matt Register: Hey guys. Welcome back to the show. Texas Business Radio, TexasBusinessRadio.com is the website. See the entire thing in beautiful high definition video, as well as links to all our guests, and a crazy amount of information there. Do yourself a favor, get to the website. Eight, four, four, eight, one, four, eight, one, four, four is our 24 hour call in line. Get your calls in. We’re going to get the experts on here to get those questions answered.
I’m your host, Matt Register. Jay Curry is one sitting over there in the cohost chair. What do you think, Jay?
Jay Curry: Hey, we’re going to talk about the great American dream. Managing your money, having enough money. How do you manage it? Because folks, if you try to do it yourself, you didn’t build a big business by doing it all yourself, right? So, you get an expert.
Matt Register: Well, I tell you what, as an investment banker, as somebody who finds business owners in exit, all of a sudden they go from their entire net worth tied up in steel, or whatever it is they do, to now sitting on a pile of cash. Right? And that pile of cash can make them a living for the next phase of their life, but you have to have somebody that knows what they’re doing to ensure that that pile of cash makes it and accomplishes all of your goals.
Freddy Frederick is here in the studio from Stone Creek to talk about just that. Freddy, welcome to the show.
Freddy Frederick: Thank you guys very much. It’s great to be here.
Matt Register: So Stone Creek, tell me about it. What do you do?
Freddy Frederick: Stone Creek Group is a great registered investment advisor. We provide great information for families. Some people think we just do a lot of investing and that’s an easy thing. People look for active, passive, all of those sorts of things. But, we can handle pretty much any situation from complex to, hey, I just have some funds to invest. Can you help me?
Matt Register: Well, in the lifecycle of a business owner, right, he builds up his business, and he grows his business, and then all of a sudden, at some point, whether vertically or horizontally, he will exit that business. Right? And you guys come in and can really sit down with that family and try to understand exactly what it is they want to accomplish with all of that. Walk me through some of that process.
Freddy Frederick: Okay. I think a good time to start looking for a financial advisor is before you get to that time to be quite honest.
Jay Curry: I hope so.
Freddy Frederick: Yeah. We have a thing at Stone Creek that we talk about, duration, and we’re not talking about duration of bonds or something like that, that you might hear on an MSNBC, but duration of your assets. What does that mean? What does that look like? Does that mean to the end of your life? Does that mean the end of your child’s life? Do you want to leave a legacy? Do you want to donate money to a museum? That sort of thing.
So it’s important, when you’re looking, to look at someone who has that idea in mind. Not just, hey, give me your money. We’re going to take a fee and invest it for you.
Matt Register: Well, we always preach, when we get a client that’s considering exiting their business, right? The time to think about this is not when you have a cashier’s check in your hands from the purchase of your business, but really there are things that a year or more than a year out from a transaction, you can do, in terms of the wealth management side, that can have a significant impact on the amount of taxes you pay.
Say, for instance, you want to donate to a family foundation or something like that. Sometimes it’s more efficient to donate stock versus waiting till after the transaction. How deep do you guys get into identifying what they need to do now to prepare for a transaction in the future?
Freddy Frederick: We definitely try to look at all of that stuff, and while we’re not tax advisors, we try to look into that stuff and bring people in who can help with that sort of thing. It’s really important to look at those transactions before they get done. Decisions can be made. There’s things that can be pushed out a few years. So it’s not just having that check and saying, hey, what do I do with it now? Because a lot of money can turn into a little bit of money very quickly.
Matt Register: Yeah, well, it’s a lot easier to spend it in is to make it. And when a family ends up being blessed with a liquidity event and they have it, there are times that the wealth management piece can have a very significant impact on second, third generation parts of this. Right?
Freddy Frederick: Right.
Matt Register: So how deep do you guys get in? I mean, I know you’re not estate attorneys, but you certainly can give advice on things that they need to look at, right?
Freddy Frederick: And I think that tax efficiency of it is very important. Looking at what your IRA situation is, what the distributions that you’re going to get from IRA’s that you might’ve had already. So oftentimes we feel that we’re not managing your assets, if you’ve had a liquidity event. Many times business owners have been able to put things away so that they are going to live comfortably the rest of their lives. So it’s important to think about that in a longevity standpoint.
It’s also important to start looking at what they can and can’t do. There’s some people that think they’re going to be able to sell a business and walk away forever, and that’s sometimes not the case.
Matt Register: Sure.
Freddy Frederick: And it takes someone to come in and say, hey, what is the lifestyle that you want to live? Can we get you there?
Matt Register: Yeah. Well, and sometimes it makes a whole lot of financial sense not to just walk away, right? There are many, many times to where a business owner exits and he ends up retaining equity or doing something going forward that ends up being very lucrative for him.
What are some of the ways you see guys mess this up, right? You see a lot of business owners, you see business owners that exit. I’ve seen guys exit their business using nothing but an Etrade account. Right? GIve me some examples of guys that screw this up.
Freddy Frederick: Well, I think this idea of I can do it by myself, which a lot of people sell now, the Etrades that are out there, those sort of things, they really look at you from a different point of view. They want the transaction done. They’re not thinking you of as a holistic person, someone that has a wife or a husband, that has kids. They want your money, and they want your transactional volume.
I think that you need to look at someone who’s viewing you as a relationship. Someone that’s going to be with your kids when you get older. And I know that a lot of people like to say that, but it is a really important thing to think about. Who is that financial advisor that you want sitting next to you at your kid’s high school graduation or, better yet, at their college graduation.
Matt Register: How important do you think it is, because we talk to a lot of wealth management companies. A lot of these guys are their own broker dealer, they have their own branded in house mutual funds, and things like that. You guys do not. What was the decision not to do that? And how important do you think it is for independence of the actual work relationship manager?
Freddy Frederick: Right. I think it is the utmost importance. Being independent truly allows us to look agnostically, diagnostically. When you go into a doctor or a car mechanic, you don’t want them to just instantly hear, hey, you need this after you haven’t told them what’s wrong with your knee, you haven’t told them all the sounds the car is making. And I think so many times people try to do that. Our independence gives us that ability to say, this product isn’t for you. This one is. We don’t get paid by the mutual funds we invest in. We do not sell insurance products. So it truly gives us, I feel, value in that we choose the best funds out there for you to use, and we’re not selling in house stuff.
Matt Register: Yeah. With no conflict of interest or anything else.
Freddy Frederick: No conflicts of interest.
Matt Register: That goes on. What do you think, man?
Jay Curry: So, I think, of all the people you hear these stories all the time, that win the lottery and all of a sudden they’ve got all this money, and then two years later they are bankrupt. I mean, folks, it’s crazy for you to think that you can manage your money when you’ve made this money by being very good at something else, right? That’s your expertise. Money management is very complex. It’s very detailed. You can’t just do it on your own. You need help.
Freddy Frederick: I would agree with that.
Matt Register: Yeah. Some business owners that are very, very good at whatever it is they do, they’re not good at making money with money, and we see that every single day that professional advice, and there are many flavors of professional advice, right? But get professional advice when you’re dealing with something that’s very important and you’re not an expert in.
Freddy Frederick: Right.
Matt Register: So interesting stuff. Stone Creek, you’re out of Denver, you cover the entire state of Texas. You got offices here in Texas as well. What is the easiest way for somebody to get in touch with somebody who wants to learn more?
Freddy Frederick: StoneCreekGroup.com.
Matt Register: All right. StoneCreekGroup.com. We’re going to have that linked right from TexasBusinessRadio.com.
Freddy Frederick out of Houston, Stone Creek Group, which is a wealth advisory firm. Guys, give them a call, go to TexasBusinessRadio.com. Go get a link back to StoneCreekGroup.com.
We got to go take a break. We’re going to be right back on the other side of the break with a whole lot more Texas Business Radio, as soon as we pay a couple of our own bills. We’ll be back.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.