Latest / Success Story with Scott Clary / Lessons - How the Ultra-Wealthy Make Investment Decisions | Ronald Diamond - Founder & CEO of Diamond Wealth

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Lessons - How the Ultra-Wealthy Make Investment Decisions | Ronald Diamond - Founder & CEO of Diamond Wealth · Success Story with Scott Clary

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  In this lessons episode, discover how to navigate the complexities of major liquidity events,
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  the evolving role of family offices, and the strategic approaches to wealth management and philanthropy.
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  Gain insights into fostering trust, avoiding common pitfalls, and leveraging entrepreneurial
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  innovation to tackle real-world challenges.
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  Well, you know, I'm curious about going through a liquidity event that large, and I know that,
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  you know, you chair, I think, one of the offices for Tiger 21, and I've spoken to Tim
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  from Tiger 21, and I understand that that's not an advisory for like a private equity firm,
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  but it offers guidance as to what to do holistically, very, very similar to what you're saying,
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  all the multi-family office services provided. It's a realistic view of what to do after a major
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  liquidity event, right? And I think that, I mean, you see this firsthand, people going from operator
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  to capital allocator that, like, on mass, like with huge amounts of capital, have no idea
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  really what they're doing, and also maybe just, you know, speak through some of the things that
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  they have to think about outside of just capital allocation that are the realities for them.
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  I mean, like, you've just mentioned these numbers. These very devastating numbers about how quickly
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  generational wealth is lost. So why does that happen?
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  Um, in my opinion, a lot of it has to do with ego. It has to do with the ego of the founder of
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  the person who had the liquidity event. Um, you have a liquidity event, you could do anything you
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  want with your money. And I make no judgments. You do whatever you want. Um, but I'll, I think a
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  lot of times people think that because they're good at one thing, that means they're going to be good
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  at everything. And it's a different skill set to solve beanie babies than to take a billion and
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  grow into two. So I think the problem with many people is because they've had such success with
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  with so much money at such a young age. And remember, this is not generational. Back when the
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  Rockefeller started, it took 10, 20, 30 years to create generational wealth. You can create an app
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  today in a year and create huge amounts of generational wealth. So it's happening so quickly.
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  And that's why the speed is happening so quickly. So family offices right now, um, you could talk
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  to 10 experts and what's the family office? How much money do you need for family office? Why do you
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  create a family office? You're going to get totally different answers. Um, I gave a keynote at
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  Stanford five years ago. I had five billion dollar families and I asked each one of them,
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  what is the family office and why did you create it? And there were five completely different answers.
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  And nobody was right and nobody was wrong. It's just that's where we are in the industry. So I think
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  that the fascinating thing for me is that in 1986, when I was a senior in college,
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  my dad, who was a brilliant banker, wanted me to meet this guy who was also a banker. And he said,
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  there's an industry called private equity. And I'd like you to look at it because I think it's
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  going to be big. Well, when you're 20 years old, you're smarter than your dad. And so I said,
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  dad, I already got a job at Drexel Burnham. I'm not going to listen to who you want me to talk to.
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  And I went to Drexel. Well, fast forward two years, Drexel goes bankrupt and the person you
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  wanted to introduce me to was John Canning, who started a medicine dearborn, which became one of the
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  largest private equity firms in the industry was called private equity. So that to me, when I look
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  at that point, and obviously in retrospect, I would have done things differently. But I do think
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  that we're that inflection point right now, we're just like private equity investor capital firms
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  disrupted the public markets. I do see family offices starting to do it. So I do think we're
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  at a tipping point right now. And I think family offices can make a huge amount of difference,
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  not just in creating alpha, but equally, if not more important in a lot of the philanthropic endeavors,
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  they can engage in. And obviously to engage in philanthropic endeavors have to be successful and
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  maintain that success. But I'm curious about this seems like there's this problem with the
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  family office industry for lack of better term. It's that they're so fragmented. You mentioned
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  this before. So how do you actively fix that? Because there's no, there's no group or organization
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  that supports, you know, the collective body of family offices. So what drives them in the right
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  direction? Well, in the other issues, you know, a lot of there's a lot of family office. First
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  of all, every bank, every law firm, every accounting firm, you're trying to get into the family
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  office world. We're all the money. That's what it makes sense. And you've got all these family
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  office conferences. The problem with a lot of the conferences where these family offices are
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  supposed to learn to invest is many of them have become a pay to play game. So if you're speaking,
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  it's not that you're necessarily an expert in real estate. It's that you spent $25,000 to be able
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  to speak. And you're really just selling your funds and hearing conflict of interest in my
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  opinion. So I think that you have to look at from the standpoint of what is in the best interest
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  of family offices and where are you getting your deal flow from and what are people's agendas? So
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  everybody has an agenda and that's fine. But I just think that family offices in general,
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  the first, second, third thing they want to know before they're going to work with anybody is
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  can I trust this person? And then the fourth thing is what's your one, three, five,
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  your track record, what's your biggest drawdown? That's flipped when you look at it from an institution.
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  So trust is the main component of why family offices will work with somebody. When you work with
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  you deal with this industry quite a bit, where are the biggest misconceptions about family offices
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  that you've seen? There are so many misconceptions. How much money you need to have a family office,
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  what's the point of a family office? I mean, a lot of these people, and again, I make no judgment.
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  If you make the money, you could do whatever you want with it. But many people would be better off
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  just finding a philanthropy that they like and outsourcing a lot of what they're doing.
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  It's a full time job. If you're going to do it right, it's a business. In many of the family offices
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  don't look at, don't take it as seriously as they did their business. If they did, then they would
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  realize the full time job. And if they did that, I think it would become more efficient. I think
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  that's starting to happen. But the beauty to me of where we are in the world from an economic
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  standpoint is this is changing real time right now. So the family offices, they're not there today.
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  The smart people want to find the rich people and the rich people want to find the smart people,
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  but the smart people don't know how to find the rich people and the rich people
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  hide behind a veil and want to be secret. So how are they going to find the smart people?
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  This is starting to change. And I think it's going to happen over the next three to five years.
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  It's not going to like click in all the sudden. It's going to happen. But I think it's going
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  to gradually change. And people will start realizing the value of working with the family office.
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  A lot of people who are in real estate, a lot of people who are in private, you know,
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  who have deals, independent sponsors, they would prefer to work with the family office
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  rather than a private equity or venture capital firm. The problem is how do you find them?
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  So one of the things that I'm trying to help with in the industry and it's a massive
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  task is how do you connect the rich people and the smart people? Because once they're connected and
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  they know what everybody wants and everybody says this is kind of what I'm looking for, it will be
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  a much smoother market and it'll be like more a fission market.
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  I was okay. So we've spoken through significant, significant amount of info on family offices.
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  I'm curious if you want to take us in a couple of different directions because there's other
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  things that you do for these families. I mean, you literally invest in them. So I'm curious if
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  you want to go into how you source and look at deals and what your thesis is for what is good and
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  what is bad and what you put in front of families. We could do that. Or I was, you know, we can
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  also go into wealth transferring that's super interesting because you hear all the time about why
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  are the rich not paying enough tax and what's going on with that? Well, I mean, there's strategies as
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  well to help you avoid tax that maybe the average person doesn't know that much about. So whatever
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  you feel like you want to go into, which is the most relevant, but they're both really interesting
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  topics. No, they are. And also philanthropy, which is huge. That's been a big, I don't know a
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  question to ask about philanthropy outside of I'm assuming it's a focus. I mean, I'm not at that
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  level of wealth yet where I have to worry about philanthropy. So well, so kind of my north star is
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  so my dad passed away from prostate cancer. Yeah, if he's having my first boss was Michael
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  Melkin, Michael Melkin developed prostate cancer. What Michael Melkin did is rather than throw a
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  hundred million dollars at the American Cancer Society, he built it like a venture capital fund,
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  right? So he put 250,000 to this crazy idea, 500 here, two million here. But because of him,
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  you and I and all the male listeners will die with, but not of prostate cancer. You look at what
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  Bill Gates did for vaccines. I would argue he did more than the US government. My point being that if
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  you can't run a, a, a philanthropy or family or a charity exactly like a business, but you could
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  run it more business like. So kind of my north star, if you take these really innovative entrepreneurs
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  who've done extremely well and you apply that more towards philanthropy, and I think that's going
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  to solve some of the big world problems. So I just did a podcast with David Rubenstein the other day.
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  He owns the magnetic card. He owns, I mean, he, he helped rebuild the Jeff some memorial. He's done,
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  or the Lincoln Memorial. He's done so much for philanthropy right now. And so I think there's a lot
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  of good that can happen out of that. I mean, you're starting to see that. No, I was going to say,
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  so it's interesting. So you think that some of the future of philanthropy and it's not, this is not
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  to generalize that this has to be all a philanthropy, but it's, again, it's more doing direct investment
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  into causes that you can actually see. Fighter think something or. Yeah, I think that if you'd look
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  at milk in or you look at gates or you look at what Bloomberg's done, you, you can take these
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  business minds and you again, and apply it more towards to solve some of these real world problems.
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  I don't think it's going to come from the government. And I don't think it's going to come from
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  the corporate sector. I think it's going to come from these entrepreneurs who can make a difference.
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  So I think for me, philanthropy is the most important aspect of family office because at the end of
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  the day, you could only, you know, the Pharaohs tried to barely bury themselves with money and
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  that didn't really turn out to be a great idea. What else could you can't take it with you? So
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  giving it away and doing it in a way that are important to you is something that's really,
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  really relevant. So we do a lot of work with family offices, figuring out ways to, and prostate
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  canches near and dear to my heart because my father passed away from it. No, I think that the smart,
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  a smart way to look at philanthropy because I think the way that I default to looking at it is the
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  way that I think most people do is just how do we put money into an organization or a government
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  or something that's already set up. And that's not the only way to truly do for me. And also,
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  what's the first, if somebody has a philanthropy, the first question people ask is what's the overhead?
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  It's not a good question. You don't go to Apple or Microsoft and say what's your overhead?
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  Is there relevant what your overhead is? It's what's, you know, you can have a lemonade stand
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  that the overhead is 1%, but you're going to only create $5. So I just think you have to start asking
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  the right questions and looking at it from a big picture standpoint. Thanks for tuning in.
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  description to watch the full episode. See you in the next one.
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  you