· Kurt MacAlpine, David Senra
And as an example, if we were still a public company, back to how people respond, in a public context, that would have been an impossible transaction to execute, just given a lot of the dynamics that you've mentioned. In a private context, in my opinion, it was the best possible thing we could have done for the company. And the reason I say that is, everything that I said about the opportunity in US ultra-high-net-worth wealth management is equally true in the rest of the world. I firmly believe that there are no global ultra-high-net-worth wealth managers that exist in the world today outside of Corient. And to me, that was a tremendous opportunity for us to go capitalize on. [00:00:00] S0: Why do you think no one else pursued that strategy? Because it seems obvious in hindsight.
· Kurt MacAlpine
[00:00:00] S1: So, I think people would potentially disagree with my statement and say, "Well, of course there are other ultra-high-net-worth or global wealth managers that exist." My pushback would be, they're not. There are a handful of multi-jurisdictional wealth managers that exist. By that, I mean banks that operate in multiple different jurisdictions. The reason I say multi-jurisdictional, not global, is if you think about it through a client lens. So, let's just say you're a client of a firm that has offices in multiple different jurisdictions. Those are all a series of regional P&Ls, right? So, the client relationships get mapped into an underlying region, and the compensation system and the structures that people have in place create or limit or eliminate the ability to collaborate. So, I'll just give an example. Let's just say there's a billion-dollar family that exists, and they have money across four different jurisdictions, and they happen to have those assets at one firm. And the family says, "You know what? I'm going to take all billion dollars, and I'm going to consolidate those assets in Miami." So, what happens in practice internally is three of those P&Ls that are losing assets inside of those organizations are negatively impacted. One of the P&Ls is very positively impact. And then at the individual advisor level, almost all of those people tend to be commission or revenue share generating advisors. So, three of them, pay goes to zero on serving the client. One person's pay probably quadruples on the back of serving the client. So, the thought of saying that they are putting all of that aside and serving clients, regardless of those internal tensions or conflicts, makes for an impossible situation. So, a lot of the stuff that we touched on earlier, the private partnership that we initially built for the US marketplace, we've globalized it. Again, I have one compensation plan that is not only true for the US, it's everybody around the world, and one P&L. So, instead of thinking about clients in terms of what regional silos do they access us, we think about clients, how do we serve them all around the world, anywhere?
· David Senra, Kurt MacAlpine
[00:00:00] S0: Okay. The way I think of you in my mind, tell me if you disagree, is like you're kind of obsessed with incentives. [00:00:00] S1: I'm obsessed with alignment. So, if I think about it this way, again, it's very simple what we want to do. We want to be the best in the world at serving ultra-high-net-worth clients. In a human capital business, it is imperative that I have strategic, cultural, and financial alignment to achieve that. And so, incentives are a huge component of that. Incentives drive a lot of behaviors, a tremendous amount of behaviors. [00:00:00] S0: Charlie Munger has this great line, which is like, "Incentives rule everything around us."
· David Senra, Kurt MacAlpine
[00:00:00] S0: Charlie Munger has this great line, which is like, "Incentives rule everything around us." [00:00:00] S1: Yeah. So then, if you think about that, once you start to create fractures in the incentive, like I feel very strongly that every single client of Corient, regardless of where you live or how you've entered the business, should have the same opportunity for an equal elevated experience. So, similar to clients, I want to make sure that all of our employees have the same opportunity regardless of how they've entered the firm. So, as an example, if you were entered via direct hire in Seattle or an acquisition in San Diego, I want to make sure that every single person here is treated fairly. And you need to make sure that in order to treat somebody fairly, you should be paid for what you are delivering for the business, not whatever historical entry point or position that you ultimately had. It's equally imperative that you are paying people for things that drive collaboration and better outcomes, as opposed to things that drive personal or independent or siloed behavior. So, we've been very, very adamant to ensure that, one, clients can always get the elevated experience, and in turn, every single employee of Corient is treated fairly. So, by having one compensation plan, I can literally walk into any one of our offices in the world, and every single person knows that for an equal level of performance, they're going to be treated exactly the same as all of their colleagues.
· David Senra, Kurt MacAlpine
[00:00:00] S0: Okay. I love how you summarized that. You're obsessed with alignment. So, I want to talk about acquisitions. Since you started, you've done how many acquisitions? There are about 20? More? [00:00:00] S1: Probably closer to 50. [00:00:00] S0: Closer to 50. [00:00:00] S1: Yeah. [00:00:00] S0: As you have more AUM, does the size of the acquisitions have to keep going up or no? How do you think about this?
· David Senra, Kurt MacAlpine
[00:00:00] S0: As you have more AUM, does the size of the acquisitions have to keep going up or no? How do you think about this? [00:00:00] S1: It's a great question. So, I'm not looking for scale in acquisitions. I'm looking for exceptional people who align, again, I keep saying the same thing, but it's important, strategic, cultural, and financial alignment. So, whether that is a $50 billion acquisition, a $500 million acquisition, or anything in between or on either side of those parameters, that's less relevant for me. In a partnership model like the one that we have, I need those strategic, cultural, and financial alignment things to be true. So, we don't never look at it from AUM, we never look at it from scale. We're looking at it, how is this additive to the business that we're ultimately aspiring to build? And look, fortunate for us, I think given the scale, what we've built is at least currently resonating really, really well, and we're excited to take advantage of. But again, it's an ultimate screening criteria. So, if someone sees our model and they're looking for something totally different, they're not going to come here. So, it's great for us because we're able to filter through the structure, and it's great for them because they have total clarity in terms of what they're looking for. [00:00:00] S0: So, let's go back to this obsession of alignment. Explain, you acquire my company. [00:00:00] S1: Yeah. [00:00:00] S0: What happens the very next day? [00:00:00] S1: Sure. [00:00:00] S0: You told me the story in Miami, I thought it was very fascinating.