· David Senra, Kurt MacAlpine
[00:00:00] S0: Okay. [00:00:00] S1: So, you're getting better access, ideally better access, better pricing, and more services. And then if you're sitting in the- ... shoes of the entrepreneur running the business, like what's in it for them, the way that I think about Corient, because I don't think of it as us buying people's firms. People are coming to be partners at Corients. They're coming to own and operate the business alongside myself and the other equity partners of the firm. So this is about founders continuing on the entrepreneurial, or partners, continuing on the entrepreneurial journey they've already been on. It's just we're doing it together than us doing it independent of one another. [00:00:00] S0: Do they see everything? Like, let's say you want to acquire me, correct? [00:00:00] S1: Yeah. [00:00:00] S0: And we're going through this conversation. Like, I see access to all your books, I see everything? [00:00:00] S1: Yes. [00:00:00] S0: Okay. There's a great historical equivalent. I think I mentioned this to you when we spoke previously, but Rockefeller essentially built a company of founders. [00:00:00] S1: Mm-hmm. [00:00:00] S0: Like, if you look at the partners in Standard Oil, he did largely through acquisition. [00:00:00] S1: Yeah. [00:00:00] S0: And part of it was just like opening up his books, and he's just like, "This is what I can do." [00:00:00] S1: Yeah. [00:00:00] S0: "They're obviously superior to what you can do. You can enhance this, and I'm willing to exchange your stock for mine." [00:00:00] S1: Yeah.
· Kurt MacAlpine, David Senra
[00:00:00] S1: Yeah. [00:00:00] S0: "What would you rather have?" [00:00:00] S1: Right. [00:00:00] S0: Is that a similar situation here? [00:00:00] S1: It is. Yes, it is. And also, there's a natural inflection point that businesses hit, right? So, I think you can, and I'll make up the numbers, but just, I think you can scale a wealth business to three or four or five billion dollars with a limited set of services. And by limited, it's not overly limited, but it's wealth advisory and investment services. Once you start to push kind of through that scale threshold, clients start to demand more services from you, which start to create real challenges, right? [00:00:00] S0: Let me interrupt you real quick. Is the demand for more services tied to an increase in wealth? [00:00:00] S1: It is in many instances, yes, and also expectations of clients grow as the firms continue to grow and evolve. But a lot of it is tied to increase in wealth. [00:00:00] S0: Okay. Continue.
· David Senra, Kurt MacAlpine
[00:00:00] S0: Okay. Continue. [00:00:00] S1: So, once you start to hit this inflection point, and then the investments that you need to make. So think of it as this. You can grow and scale your business up to a certain level. Let's just say it's three or four or five billion dollars. Then the required investments to get that three or four or five billion dollar business to a 50 billion or 100 billion dollar business require a significant amount of investments. So in my opinion, for many entrepreneurs in the space, that's where the risk-reward trade gets out of balance, right? The incremental risk associated with building all of these services on the hope that the assets will ultimately come in the future creates the imbalance. So for us, someone can continue on that same entrepreneurial journey that they've been on, continue to have a phenomenal wealth creation event for themselves and their families, while immediately benefiting from all of these underlying services that we've already ultimately built together anyway. So literally on day one, instead of someone saying, "I'm going to stay on my own path, make these investments, and kind of see how it evolves over the next one to two decades," tomorrow, I can literally have access to all of these services, extend them to my clients, and continue on that journey myself. So as a result of this, we skew as a business very, very young, from a wealth management perspective. So yes, we're doing M&A, but we're not doing M&A to fund effectively retirements. We're doing M&A to bring on partners to continue to grow the business.
· David Senra, Kurt MacAlpine
[00:00:00] S0: That's an important distinction. Say more about that. [00:00:00] S1: Yeah. So, from our- [00:00:00] S0: What would typically happen, and then what's actually happening? [00:00:00] S1: Yeah. So from our industry, I don't have the exact number, but I think the median advisor is probably in their early 60s. Our median partner, so our most senior title, is in their mid-40s, and our median employee age is in their 30s. And so when you look at that, and you'd say, "Well, how did that come to be?" A lot of that's deliberate on our part in terms of who we're targeting, but it's also deliberate on the part of the individuals that are joining us, because they're joining us with a long runway, right? They want to continue to be owners, they want to continue to operate in what I think is a fun, dynamic, unique environment, and spend the next couple of decades collaborating with great clients as we all build the business together. So there's a bit of a self-selection bias that is kind of present both in the structure that we've put in place via the partnership relative to others, and then also in terms of who we're targeting inside of it. [00:00:00] S0: But isn't it beneficial to you as the owner of the company? I know that everybody- [00:00:00] S1: Yeah [00:00:00] S0: ... has equity in this, because if they're younger, you know you have low churn in your customers, and you want to build a business that compounds. [00:00:00] S1: Right. [00:00:00] S0: Like, I know you well enough, you're not stopping here at 525. [00:00:00] S1: Right.
· Kurt MacAlpine, David Senra
[00:00:00] S1: Right. [00:00:00] S0: You're like, "Oh, no, we're cool, guys." [00:00:00] S1: Yeah. [00:00:00] S0: "We're going to stop here." [00:00:00] S1: Yeah. [00:00:00] S0: No, you want to compound this thing for decades. [00:00:00] S1: Correct. [00:00:00] S0: And I think the age of the people providing service- [00:00:00] S1: Yeah [00:00:00] S0: ... assuming they're going to continue to do that, will allow the compounding to happen more effectively, correct?
· Kurt MacAlpine
[00:00:00] S1: Correct. So it's a combination of, call it the runway that the individuals have, and then also the ambitions around building, right? Because again, the industry is almost entirely oriented one way. We're oriented a different way. So there's this natural, if I'm having a conversation with somebody who's interested in joining the business, it's really, the way I would describe it is, we tend to be someone's first choice or their last choice, right? Do you believe in partnership? Do you want to be an owner of the business? Do you want to collaborate with your colleagues for the ultimate benefit of our clients, or are you looking to recreate kind of the silo that you have at whatever firm you're ultimately contemplating leaving from? So, when we're having conversations, think of it as like the ultimate screening mechanism, is people will understand and gravitate toward it and latch on, and we'll be their absolute first choice, or they'll say, "That's just not for me," and we're not going to be their first choice. But it's rare that we would come in second, just given the structure is so different, which is fantastic, because it creates this ultimate selection bias or this mechanism around who's interested in joining. And again, because we're oriented and structured the way that we are, like, I need strategic, cultural, and financial alignment across the business in order for us to be able to achieve the ambitions that we've put in place for the company.