· Kurt MacAlpine
[00:00:00] S1: The way that I like to position the business is, I think that we've built what I deem to be the only truly conflict-free business in wealth management. But let me define that. I think businesses get conflicted two different ways. The first way that they get conflicted is based upon the structure of the business or how they ultimately govern themselves. So think of it as two different standards of care. Fiduciary standard of care, you're operating in the client's best interest at all times. You are obligated to do so because of that standard. Or a suitability standard, which is effectively, is the product or the service that you're offering good enough to extend ultimately to the client? We have built the entire business to be a fee-only fiduciary business, so operating essentially at the highest standard of care. We're the largest business in the world that operates under that standard of care. So anyone larger than us has the ability to operate at a lower standard of care. So that's the first piece. Second piece is- ... in terms of the business model that you ultimately put in place, and this ties to how we ultimately serve clients and how we work together. And so, the goal when we launched the business was I wanted to make sure that there were no structural impediments to collaboration from the onset. So, if you think about every possible decision that you could make that would prevent something from collaborating, we've effectively, in my opinion, removed it at the launch of the business. So, I'll give you two examples. So, we have about, give or take, 3,000 people inside of the Corient business today. We have one compensation plan. We have no exceptions to the compensation plan. And the reason for that is once you start to put exceptions in place, let's say you and I work together, you're paid one way, I'm paid another way, it is very, very hard for us to objectively serve a client with different outcomes or different objectives. And that is kind of true across the different elements of the business. The second example I'll give is, I run one P&L across the firm, and I don't do any form of chargebacks. So again, you think about getting great experts in front of clients as quickly as possible with relevant expertise.
· Kurt MacAlpine, David Senra
Once you start to put silos in place, once you start to segment your P&L, once you start to run chargebacks, you're inherently creating underlying friction in the business. So effectively, by operating the business that way, fee-only fiduciary standard, a structure in place that maximizes collaboration with no restrictions towards it ultimately happening, it allows you to think about delivering services for clients that are different and outside of, call it, the norm of just traditional wealth management or wealth advisory services. [00:00:00] S0: This is what I was trying to get to, where it's like, you're not concerned about what other people in your industry are doing. Your North Star is like, "We just want to keep serving clients better." [00:00:00] S1: Correct. Exactly. [00:00:00] S0: And so, if we can offer a service that ultra-high-net-worth people would benefit from, it doesn't matter if other people in the industry are not doing that. [00:00:00] S1: Correct. [00:00:00] S0: That is the only thing we're focused on.
· Kurt MacAlpine
[00:00:00] S1: Absolutely. We want to be the best in the world at serving ultra-high-net-worth clients, and we think we can do that through deep specialized expertise. So the advisors, again, I mentioned, people love to play on optionality. I can serve a tech entrepreneur, I can serve a small business owner, I can serve a corporate executive. Those are all very different skills. So, we push ourselves, deep specialized expertise that starts in terms of the clients that you ultimately serve, and I'm always encouraging people, be as specialized as possible. The more specialized you are, the more relevant you are, the better advice that you can ultimately give to your clients. And then it extends beyond the service offering, and the goal is by pairing all of these pieces together, we can do more for clients because we're helping to connect the dots. Like, a lot of the services that I had mentioned are services that clients need or want or ultimately use, and if we're not piecing it together for them, we're putting that burden ultimately on them. So, by being able to manage somebody's financial plan, somebody's wealth transfer, managing their investments, overseeing their tax, executing their trusts, by thinking about that as a collective problem as opposed to five or six individual decisions, I think it leads to meaningfully better outcomes. But again, you can't do it if you have a structure in place that prevents you from being able to achieve that. And that's why it was so important, launch the private partnership to align objectives and create a fundamentally different experience, and then audit every possible area of the business model to ensure that there's nothing internally that would create these tensions or silos or conflicts that would limit the client experience.
· David Senra, Kurt MacAlpine
[00:00:00] S0: Okay. I'm glad you said it, because it's like 45 minutes into our last conversation where I was like, "Oh, shit." I started to grasp this flywheel that you have. What I found interesting is like, okay, I'm going to extend this shared economy scale- [00:00:00] S1: Yeah [00:00:00] S0: ... metaphor. You're doing that for your customers. It's like, I'm taking care of your aviation or art management or all these other things that you can go to other places for. It's like, I don't need to make money off that. [00:00:00] S1: Right. [00:00:00] S0: Like, I just want to serve you better, and I know- [00:00:00] S1: Correct [00:00:00] S0: ... that you'll stay with me, and therefore, the compounding effect of that. Not only there's very low turnover, like churn with customers. [00:00:00] S1: Yeah. [00:00:00] S0: In some cases, it goes into the next generation, which is very interesting. [00:00:00] S1: Multiple generations, yeah. [00:00:00] S0: Multiple generations. But then you also do shared economy scale with the wealth managers that you're acquiring. [00:00:00] S1: Mm-hmm. [00:00:00] S0: Where it's like, if you're a little boutique, explain the benefits of how you're taking the scale that you have at Corient, and you're approaching somebody that there might be two guys or three guys in an office, but you want to acquire them. Why would they come and agree to do it with you?
· David Senra, Kurt MacAlpine
[00:00:00] S0: Where it's like, if you're a little boutique, explain the benefits of how you're taking the scale that you have at Corient, and you're approaching somebody that there might be two guys or three guys in an office, but you want to acquire them. Why would they come and agree to do it with you? [00:00:00] S1: A lot of different reasons, I guess, that people would contemplate transacting. If you're looking at it strictly from a client perspective first, and then you can kind of work your way back. So, from a client perspective, scale creates benefits if applied in the right manner. So, our scale creates a number of different things for us, so I'll just give a few examples. Access to certain managers, right? So, you think about some managers are capacity constrained, they're harder to get access to. Having scale and being a more meaningful investor for them creates opportunities and access points that otherwise might not have existed. [00:00:00] S0: I don't think I understand that point.
· David Senra, Kurt MacAlpine
[00:00:00] S0: I don't think I understand that point. [00:00:00] S1: On the investment side, there's kind of two things. One is, are you able to get invested in the best managers in a respective discipline or asset class? And the second piece is, does your scale create purchasing power benefits? So, literally the volume under which you're investing, does that allow you to negotiate better rates on behalf of your underlying clients? As a fee-only fiduciary, on that second point, whenever we negotiate better rates for our clients, we pass those rates on to the clients for their collective benefit. And then that extends a lot of different ways. The lending rates that we're able to get for clients tend to be better because of the size and scale and the broader institutional relationships that we have, the services that we offer. So, if you're a five or 10 or $15 billion wealth manager, your ability to offer things like tax and trust and family office and aviation and art management at scale, virtually impossible. So, clients will then ultimately benefit as well. [00:00:00] S0: More products and services to give to their client. [00:00:00] S1: Yeah. [00:00:00] S0: And a way better cost structure than they can get themselves at the business level. [00:00:00] S1: Pricing. Correct. [00:00:00] S0: Okay.