E121: What Billionaires Do Differently in Investing with Ron Diamond

Dec 17, 2024

In this discussion, Ron Diamond, founder of Diamond Wealth and expert in family offices, dives into the upcoming $84 trillion wealth transfer and its implications for investment. He emphasizes the urgent need for family offices to professionalize to match top firms' expertise. Topics include using innovative structures like private placement life insurance for better tax efficiency and nurturing grounded values in wealthy families to combat entitlement. With family offices transforming the landscape, Ron's insights offer a fresh perspective on investing for the future.

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INSIGHT

Massive Wealth Transfer to Family Offices

Roughly $10 trillion sits in family offices, exceeding the $6.5 trillion global hedge fund market.
An impending $84.4 trillion transfer from baby boomers to the next generation will further boost family office assets.

ADVICE

Attract Top Talent

Family offices must offer carry, lines of credit, or forgivable loans to attract top talent.
They need to view talent as profit centers, like KKR and Blackstone, not as costs.

ANECDOTE

The Pritzker Model

Tony and J.B. Pritzker successfully incentivized Paul Carbone, a successful private equity professional, to join their family office.
They offered him carry and investment opportunities, demonstrating a strong compensation model.

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In this episode of How I Invest, David Weisburd speaks with Ron Diamond, a renowned expert in the family office space and the founder of Diamond Wealth. Together, they explore the transformative role family offices are playing in private markets, the impending $84 trillion wealth transfer, and the challenges of professionalizing family office operations. Ron also shares his insights on governance, structural alpha, and strategies for raising grounded, ambitious children in wealthy families. A must-listen for anyone interested in the future of family offices and their potential to disrupt private equity and venture capital.

Highlights:

The $84 Trillion Wealth Transfer: Over the next 20 years, baby boomers will pass down $84 trillion to the next generation, with family offices poised to be major beneficiaries.

Professionalizing Family Offices: Ron discusses why many family offices lack the talent to compete with top firms like KKR and Blackstone and emphasizes the need for better compensation models to attract and retain top-tier talent.

The Rise of "Private Capital": Sophisticated family offices are rebranding to "private capital" to differentiate themselves from the fragmented, inefficient traditional family office structure.

Structural Alpha and Tax Strategies: Ron explains how concepts like private placement life insurance (PPLI) and tax-loss harvesting can significantly boost after-tax returns, making them essential tools for family offices.

The Family Office Initiative at Booth: Ron details his work at the University of Chicago Booth School of Business, creating an ecosystem to educate and empower family offices through research and networking.

Raising Grounded Children in Wealthy Families: Ron highlights the importance of modeling humility, instilling gratitude, and avoiding entitlement to ensure the next generation thrives.

Guest Bio:

Ron Diamond is the founder and chairman of Diamond Wealth, a leading family office advisory firm. He represents over 100 family offices with a collective net worth exceeding $30 billion. A pioneer in the family office space, Ron is passionate about professionalizing the industry, educating the next generation, and helping families leverage patient capital to disrupt traditional private equity models. He is also the co-founder of the Family Office Initiative at the University of Chicago Booth School of Business.

Our Podcast now receives more than 200,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at dweisburd@gmail.com.

We’d like to thank @Carta for sponsoring this episode!

#VentureCapital #VC #Startups #OpenLP #AssetManagement

SPONSOR:

Carta is the all-in-one suite for private fund operations. Carta’s software-based approach takes fund administration out of the spreadsheet and into the modern age with powerful solutions and intuitive interfaces, all on one platform. Their suite of products and expert services help funds at any stage with up-to-date insights and automated workflows to get them to the next level. Learn more at: https://z.carta.com

Stay Connected:

Twitter: @dweisburd (David Weisburd) @RonDiamond (Ron Diamond)

LinkedIn: David Weisburd: linkedin.com/in/dweisburd/ Ron Diamond: linkedin.com/in/ronalddiamond

Link: Diamond Wealth: https://www.diamondwealthstrategies.com/

(0:00) Episode Preview (1:49) Compensation Issues in Family Offices (2:23) Turning Family Offices into Profit Centers (4:23) Case Study of a Successful Family Office (5:23) Branding and Private Capital in Family Offices (7:28) Why Family Offices Fail Across Generations (10:30) Governance and Tax Strategies in Family Offices (13:24) Sponsor: Carta (15:48) Tax-Efficient Investment Strategies (19:07) Cultivating Values in Ultra-Wealthy Heirs (23:27) University of Chicago's Family Office Initiative (27:35) Academic Interest in Family Office Management (30:55) Comparing Family Offices and Private Equity (33:20) Strategies for Improving Family Office Returns (36:07) The Role of Relationships in Family Offices (38:19) Closing remarks