We had the chance to sit down and talk about wealth management and fractional family offices with Brandon Henry, Co-founder and Partner at Mosaic Advisors. Family offices are the answer for families who have a massive amount of net worth. This gives families that may bot have the assets to support their own family office to have the benefits of one. Fascinating business model.
Please excuse any typos in this hasty transcript.
Matt Register: Hey guys welcome back to the show, Texas Business Radio. Texasbusinessradio.com is the Web site. See the entire thing in beautiful, high definition video and get your questions in there. A lot of ways to get your questions in. We monitor #TBR on Twitter. You can do it through the Web site. You can call in 844-814-8144 is our 24 hour call in line. Call in whenever you want. We’re going to get the experts on here to get those questions answered. We’re going to continue to talk to you about your business. You have built your business up, you’ve built your business up to something that’s very successful. Now what? Now what do you do with it? Now what do you do with it when you’re trending toward the end of your career. When you’ve built up the amount of wealth that is generationally changing for your family. What do you do then? Well there’s a right way to do it and a wrong way to do it. We’ve got some folks in here that are going to make sure that, that you don’t make some very common mistakes. That people make when they go through that transition in your life. I’m your host Matt Register, here as always with Jay Curry over in the co-host chair. Jay talk to me.
Jay Curry: Well, what a great program. I mean this has been fun and this is a perfect setup for. We’re wrapping it up. You build your business up. You’ve got a little asset in there. You’re not sure where to go. You’re not sure where you… what you can do with it, how you do it. You’ve got to get some advice and that’s what Brandon is going to help us with. This wrapped up great program.
Matt Register: Well and at the end of the day there are folks that are very, very good at this. Mosaic Advisers out of Houston, is some of these, are some of these people. These are folks you need on your team.
Jay Curry: And they’re all over the state, so that that helps.
Matt Register: No doubt. Brandon Henry, Brandon Henry co-founder and partner of Mosaic Advisors. Brandon welcome to the show.
Brandon Henry: Thank you so much for having me.
Matt Register: So tell me about Mosaic Advisors. What do you do? Who do you do it to?
Brandon Henry: Yeah we’re a, we’re a multi-family office that focuses on closely held business owners. And specifically our role is to help the business owners achieve the goals that every entrepreneur has. To reduce the amount of tax I’m going to pay. Whether that’s income or a state. How do I better protect my assets, my hard work. Make sure that a bad business decision, a divorce, an automobile accident, doesn’t erode the energy and effort I put forth the last 20 or 30 years. How do I put myself in a situation if I’m going to transition my company. Whether that to be a third party, somebody strategic or maybe a private equity firm or potentially even somebody internal. Maybe my business partners, my management team or my child.
Matt Register: Or even a relative. That’s right. Children and a generational change here. Now family offices historically are reserved for very, very wealthy people. Billionaires have family offices.
Brandon Henry: Yes sir.
Matt Register: And, and this is on a fractional basis. A way that families that are very successful, maybe not successful to the point they would otherwise have a family office, can get the services of family office without having to try to fund one themselves. Talk to me a little bit about what kind of size you guys typically handle.
Brandon Henry: Yeah absolutely. So our business focus is on a different market than the traditional family office space. First we’re a multi-family office. So we serve the needs of a number of families. And we focus on entrepreneurial families. And so we measure the eligible client not necessarily by how many millions of dollars of cash they have in the bank but really by how robust their businesses is. And so for us the typical measures of a client being quote on quote eligible or really needing a services firm like ours. Are $20 million a year in sales, approximately $2 million a year of profitability or 20 million dollars in total assets. And those assets can include their operating business, their real estate portfolio, the ranch and the lake house. For us, we’re looking about adding enough assets that significant planning will have a meaningful impact. It’s not about the liquidity. Our actual average client is somebody who has most of their net worth tied up in the legacy assets, in the business and not actually cash. So it’s that well before the liquidity about.
Jay Curry: That’s a lot of people, right?
Matt Register: And it’s lot of people, it’s a good solid middle market company.
Brandon Henry: Yes. That’s right.
Matt Register: That you guys can help. It could be pre transition or during the transition. So a sale doesn’t or transaction doesn’t necessarily have to be a part of it.
Brandon Henry: That’s right.
Matt Register: But there’s a lot of ways that families can mess this up.
Brandon Henry: Absolutely.
Matt Register: And you’re talking… and I know my clients. When I, when I sell them, these are guys that are machinist that 30 years later have made some very wise decisions and all of a sudden have their hands on a 30 million dollar business. There is a skill set required to have that kind of money and to manage that kind of money effectively. And a lot of these guys are very good at whatever it is they do, they’re not good at that. Right?
Brandon Henry: They have the typical middle market client is a crafts person. Who went out on their own, created something of value and has focused with their head down on their business. And the reality is that being really successful is also unfortunately really complex. And so you need a team. And many of the families we work with have got the team in place, in name. They have the attorneys, they have the accountants, they have the quote on quote wealth managers and the insurance professionals and the bankers. But the reality is that when you’re a business owner, you can’t separate your business from your family. You can’t make a tax or a legal decision without impacting a variety of other aspects of your life. And so for us our responsibility is standing among and between those professionals and ensuring that what needs to get done actually does get done. So helping them really achieve the stated goals and objectives on time and on budget. Making sure these guys communicate and collaborate on a regular basis.
Matt Register: And well that’s the operative term right there is communicate. Because a lot of these guys will end up, that will have the attorney, they’ll have the CPA but they don’t talk to each.
Brandon Henry: That’s right.
Matt Register: Right. And quite often these problems affect various silos that they need to be communicating and need to be… have a comprehensive plan. Not a silo plan.
Jay Curry: Because they can make a plan you know relevant to them but not relevant to the other three people that are suppose to be on the team. Right?
Matt Register: No. That’s exactly right and that’s where you come in and kind of quarterback the whole operation. To ensure that their, their estate plan matches exactly what it is they want. Walk me through a little bit your process. When somebody comes in as a brand new client, what’s the first thing that you look at?
Brandon Henry: Well, unfortunately this is the brain damage part of the program. Our responsibility there is to break down their entire life and we have a team of people at Mosaic, who do nothing but that. We’re collecting every legal document, every tax return, every bit of information that we can possibly produce to build not just robust balance sheets but to then really be able to recreate an accurate presentation of their current plan today. I think there’s a misconception with many of these entrepreneurs. That they can will their own destiny and they don’t recognize that the plan is actually being set out for them, whether they like it or not. And so after we collect the information. Our due diligence process then reporting to them exactly how their life would unfold under a variety of circumstances. under the 4 D’s, death, disability, disagreement or divorce. And so once they see that and they see the legal fees and taxis distilled into plain-English or more accurately distilled into some pictures. They can start making some decisions about what they want to achieve going forward. And once the game plans is laid out, the rest is pretty simple.
Matt Register: Yeah. No doubt, this is… and this is complex stuff. You guys are not attorneys. You’re not accountants but you know all the right guys. And you know how to look at the entire picture and lay it out in a way. How do people mess this up? What is the biggest way that you have seen entrepreneurs, former entrepreneurs that have exited, make a mistake that cost them a good portion of their life’s work.
Brandon Henry: So for us, the thing we see most common and there are a variety of trends. We’ve identified 10 that seem to impact almost every family. But the reality is when we distill them all down it’s this concept of being fairly well planned. These entrepreneurs feel like because they’ve gone through the process at some point in time. They had some wills or trust drafted five or 10 years ago. They’ve got the partnership or the LLC up and running two or three years ago. They’ve got an attorney and or an accountant told to firms and there are more than qualify. That just because they have the stuff. It means that they have a plan. And it’s not until they recognize that it’s all inner related and they step back and they invest the same time and energy they would in their business. Are working on their business, that they actually are able to yield some meaningful results.
Jay Curry: Now that is interesting because the way you describe it. There’s probably nothing about what they originally thought that’s still relevant. I mean every element of what you said has got all the laws of changed, people have change. Relationships have changed. People have had children. I mean everything changed. And that’s where you come in.
Brandon Henry: It’s a living, breathing, evolving thing. And the reality is if your documents are sitting in a banker’s box somewhere. On your shelf getting Dusty. The likelihood that they’re going to provide the same benefit that you thought they did five or six years ago, even if they were drafted perfectly, is slim to none.
Matt Register: Yeah. Got it. And you guys are experts at making sure that what is in place today is reflective of what their needs are today. And it’s something I guess I didn’t realize until the break when we were talking about it. This is available to middle market guys. You don’t have to be a billionaire.
Jay Curry: That’s right. It’s a great program.
Matt Register: No absolutely. So, Brandon Henry is the co-founder and partner at Mosaic advisors. mosaicadvisors.com is the Web site. Thank you very much for joining us.
Brandon Henry: Matt, Jay thanks for having us.
Matt Register: Yeah absolutely wonderful stuff guys. This has been a fascinating show.
Jay Curry: I loved it. Yes.
Matt Register: Because we preach all the time what to do, how to grow your business, how to, how do you know, find efficiencies in your business, how to increase your sales, how to build wealth. But this is the first time we’ve really sat down and talked about, well what do you do then? Right?
Jay Curry: Yeah. What’s next after that. So if in your business you’re not going to just create a process and go away. And 10 years later you use the same one. You stay on top of it,you get more efficient. You’ve got to do the same thing with your assets and your, your retirement plans.
Matt Register: No doubt. And just like with everything else in business, you’re not off the hook that easy. If you had an estate plan 10 years ago, it’s still not exactly what you need. Guys thank you very much for joining us. We’ll see you next week, same time, same place. Till then Guys.
Sponsored in part by:
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.