· David Senra, Kurt MacAlpine
[00:00:00] S0: I find optionality disgusting, by the way. [00:00:00] S1: Yeah, but it starts to create complexity that people, I don't think, understand. So, if you're ... proposing to acquire a business, and then you start to compromise in terms of the structure, the service offering, how people collaborate. You are effectively, over time, compounding a lot of smaller problems that create a lot of underlying complexity. And at some point, businesses get too complicated where it's very, very hard to reset. So we've been very, very disciplined, again, the structure, the compensation model, how people operate. It all has to naturally fit together. And my view is that if we're not advancing towards achieving our objective of being the best in the world at serving ultra-high-net-worth clients, I don't want to create optionality to get there. I want to focus on, well, what's not resonating and how do we continuously improve those areas so we can get on that pathway? So, call it all of our complexity that we create is how advisors serve clients. It is not in terms of how we govern ourselves internally. Hence, the one compensation system, incredibly important. One P&L, no chargebacks, incredibly important. Partnership structure, everybody important. One brand, one offering. So, as you really unpack all of these decisions, there's a lot in the structure and the design that I think positions us well to achieve what we're trying to do.
· David Senra, Kurt MacAlpine
[00:00:00] S0: Deel is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade, and one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, ElevenLabs, Uber, and DoorDash all use Deel. Many of the top founders I know have personally invested in Deel after using their product. And what they discovered is that Deel is the best company in the world at building infrastructure for global hiring. Deel will help your business hire, pay, and manage any worker anywhere in the world, so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of ElevenLabs has a great description of the value Deel can give your company. He said, "We built ElevenLabs to break down language and communication barriers. With Deel enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world." Deel is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deel.com/cenra. That is deel.com/cenra. I think we have an overview of Corient now. [00:00:00] S1: Yeah.
· Kurt MacAlpine, David Senra
[00:00:00] S1: Yeah. [00:00:00] S0: We'll come back to, there's a couple other things I want to talk about, which again, is this, the day you do the acquisition, the branding, everything is completely integrated. [00:00:00] S1: Correct. [00:00:00] S0: But the story of how you built this is so wild. I want to go back- [00:00:00] S1: Sure [00:00:00] S0: ... to when you took over the company, and then we're going to launch into Corient. [00:00:00] S1: Yep. [00:00:00] S0: The acquisition you did, the fact that the stock market hated what you were doing- [00:00:00] S1: Yep [00:00:00] S0: ... and you were just resolute in the face of this drastically falling stock price. [00:00:00] S1: Yes. [00:00:00] S0: So if we go back, it's like, okay, I laid out this plan to this sleepy Canadian company. [00:00:00] S1: Yep. [00:00:00] S0: I'm going, "This is what I want to do." Then can you bring us from that point until, and basically how you've been building Corient? [00:00:00] S1: Yeah, so there's a couple things. So one, the first thing is you have to have conviction in the business and the idea, as we've talked about a lot. I had a tremendous amount of conviction in both the opportunity for the business and in tune ultimately what we could do for clients. The second piece, as you mentioned, is volatility. So, you have to kind of put that a little bit in context as well, is can you... Public companies don't typically love transformation stories. [00:00:00] S0: Well, hold on. We got to define volatility. [00:00:00] S1: Sure.
· Kurt MacAlpine, David Senra
[00:00:00] S1: Sure. [00:00:00] S0: How volatile was your stock when you're doing this? [00:00:00] S1: Sure. So, in 2021, we were, I think, the best or second-best performing financial services stock in North America. 2022, the second-worst. [00:00:00] S0: Right. Yeah, that's volatility. [00:00:00] S1: And so you see a lot of tremendous volatility. So then you can start to unpack. So, there's a couple of layers to that, right? So, one layer is public markets don't necessarily love transformation stories. Now, to be fair to the public markets, we were taking effectively a Canadian asset management business and using the cash flow to build and launch a new ultra-high-net-worth global wealth management business. So, pretty meaningful- [00:00:00] S0: That's a hard right turn.
· Kurt MacAlpine
[00:00:00] S1: It is a pretty meaningful departure. Now, if you think about the underlying benefits, you're effectively creating diversification. You're diversifying from asset management to wealth management, from more mass affluent to ultra-high-net-worth, from a single country to multiple different geographies. So, the merits of doing it make sense, but kind of call it the journey from the starting position around the conviction of the idea and how public markets ultimately respond take different turns and different courses. The second thing is, when you're looking at public markets, a lot of it ties into the underlying composition of your shareholder base, right? And I'll tell you what I mean by that. So, we had a series of strategic investors, let's just say somewhere, 15, 16, 17% of the entire float. We had a very small index inclusion, just given the company that we had, the market that we traded in. So let's just say 25% of our float was, call it, locked up by strategic investors that didn't have intentions of selling, and then indexes that effectively had to hold the stock. And that creates 75% of your float that's active. That is an unusually high active share. So you say, "Well, so who comprises the active share?" It's hedge funds, and it's mutual funds. So, hedge funds obviously are looking to optimize performance, so a lot of the volatility comes... The reason 2021 was such a good year from a share price appreciation standpoint is obviously had a lot of hedge funds piling in. 2022, a lot of the hedge funds ultimately leaving, and that creates a tremendous amount of volatility in the stock. And then on the mutual fund side, so the mutual fund holders of the public company tended to be value-oriented mutual funds that have been in net redemptions from a, call it a category, for a number of years. So think of it as every single morning, people wake up having to sell your shares to fund redemptions in their underlying mutual fund.
· David Senra, Kurt MacAlpine
[00:00:00] S0: Because there's headwinds in that industry. [00:00:00] S1: Inside of the underlying mutual fund. [00:00:00] S0: Okay. [00:00:00] S1: So again- There's a lot of different factors you can attribute to it, but the reality is, you have a series of things happening at once. Building a brand new business, creating a massive transformation story inside of a public company, and then calling it, having a composition of your shareholder base that doesn't... It's not like you have 85% of your shares locked up in a small float that dampens volatility. You kind of have the opposite. But look, you have to stay true to the convictions that you ultimately have. And the part that gave me a lot of confidence was I had a tremendous conviction in the opportunity. I was able to see the business and the strategy taking off relatively quickly. So, once you start to launch the story- [00:00:00] S0: What do you mean you were able to see it taking off relatively quickly?