Using Insurance to Help Wealthy Clients 'Disinherit the IRS'

It's growing fast. Now we're starting to do B-to-B business with other large RIAs around the country. If they have a client who needs insurance, we'll send someone into their office to assist them in getting that sale made — there's enough margin for both of us. We tell [the RIAs], "If you really want to solidify a relationship and make it last for years but don't go down this path, someone will come in and take [that business] from you."

How are you gearing up for the expansion?

We're about to go on a huge hiring spree. By the end of the year, we'll add eight to 10 specialists around the country to help with our B-to-B assisted-sales model rollout.

Broadly, what's your approach to working with ultra-high net worth clients?

Here in Southern California, if people have made several hundred million dollars and sold their business, say, they just want to relax and enjoy themselves. So a lot of clients will come into our office wearing jeans and shorts. We have to reflect that [attitude and lifestyle]. In my world, there's a lot less of cuff links and shiny shoes and more of pure intelligence and perception of what someone needs. We're a lot less about returns, more about overall planning for multiple generations.

You designed your office to reflect your personality. This was important to you because you didn't have that freedom at the wirehouses, right?

At the firms, even the color of a desk had to match their design. When I went [on my own], I had a designer help create my office. I wanted it to have a mid-century "Mad Men" feel, and the design comes from that era, an elegant time. I have a nice couch and coffee table, where, at the end of the day, I can sit and have a drink with a client. It creates a comfortable environment.

Some of your clients are on their third, fourth or more marriages. Is helping divorcees another specialty of yours?

Divorce is pretty common — not just out here. We don't "advertise" being a wealth management team for divorcees; but I have very long-lasting relationships, and what we've become very good at is maintaining both spouses who have common investment portfolios. That is, a lot of partnerships, co-investments and other structures can't be broken and split in a traditional way. So, for example, we'll move a lot of those properties into trusts for the kids. There are certain cases where we'll have family meetings [post-divorce] with both [sets of] parents. Through our planning process, we've become a peaceful component of our clients' lives.

Why did you choose a career in financial services?

I came to Los Angeles from the East Coast 25 years ago with the goal of going to law school. While I was studying for the LSAT [Law School Admission Test], I worked at a small investment bank for the summer. When I saw [how well] some of the guys [were doing economically], I ended up going over to Morgan Stanley and going through their training program. I still thought I'd go to law school and then come back and be an investment banker.

But that didn't turn out to be your path. How did you get involved with ultra-high net worth clients?

When I was in the bull pen with zero assets, I met an engineer at a party whose company was going public. He said he needed to pay $300,000. I didn't know what that meant, but I asked someone at Morgan Stanley who was high up on the derivatives desk. He said, "Get that stock certificate right now, and we'll send you $300,000."

What was this all about?

The engineer had elected an 83(b), which means he could prepay [his] taxes prior to the public offering on a lower valuation and then, as the stock grows, take capital gains. I wasn't aware of this [strategy]; nor was anyone in my office at the time.

How did it work out?

Six months after his tech company went public, the guy's piece was worth about $200 million. He was a co-founder, and we'd saved him an enormous amount in taxes. He was blown away with what I did. So I put together a team of experts — now that I had these assets, everyone wanted to help. [A little later], I thought, I can do all this myself: I can manage the intelligence that's offered to me in this firm.

And you started doing just that?

I eventually took over, and it became my specialty. That's how I built my business. To this day, that [engineer] client still adheres to the structure we created.

Why did you leave Merrill Lynch to go independent?

One of the major pushes was that it was a lot harder to do the insurance component there than it had been at Smith Barney. Merrill didn't have the mechanics to do the type of insurance we wanted to do. Also, after 2010 the [financial services] industry had changed; and because we were a bit different, we had a really hard time reflecting our true personality. When I left, I had more control over that.

How did Dynasty help you launch your practice?

I've known Shirl Penney [president-CEO] for many years. We had the same ideas about where the business should go. Dynasty handled my real estate after I picked the space, compliance, marketing, technology, custody relationship — and they kept me out of trouble because there's a fine line of what's legal and what's not when you're working at a brokerage firm while structuring [your own practice]. So I have a bit of help from others, but I own 100% of the equity in my firm.

Your clients are super-wealthy. Are you from an affluent background?

My family was very middle class. My mother owned a flower shop. From the time I was five years old, I worked there. But I decided to take a different route because I didn't want to come home every night with thorns in my hands.

— Related on ThinkAdvisor:

• 2 UBS Advisors Share Their Secret to Serving Billionaire Clients
• How an Advisor Who Hates Sales Built a Billion-Dollar Practice
• 12 Surprising Traits of the Wealthy