Wealth Formula by Buck Joffrey

If you look at the wealthiest people in the world, they almost always get there through business ownership or real estate. The only real exceptions are athletes and entertainers—and let’s be honest, that’s not a realistic path for most of us. We talk about real estate a lot here and through deal flow in our investor club. But today I want to focus more on business ownership. One way in is to start a business from scratch. I’ve done that a few times—sometimes it worked out really well, other times it was a total disaster. That’s the reality of startups. They require a certain wiring, an appetite for risk, and the ability to move forward without much of a safety net. It’s harder to do when you’re 52, have three kids heading to college and alimony to pay. Another option is to buy an existing business. The advantage here is that you’re stepping into something that has already worked, which gives you confidence in the viability of the business. But it’s not without risks. Some businesses depend heavily on key people or relationships that don’t transfer, and the ones that truly run themselves tend to be very expensive and often out of reach. The third option is franchising. It’s not risk-free either, but it does give you a roadmap. If you’re the type who can follow a proven system, your chances of success go way up. You’re not starting from scratch—you’re plugging into a model that’s already been tested and supported. For people who don’t necessarily have the renegade startup personality but want more than just a paycheck and index funds, franchising can be a great fit. We’ve talked about franchises before, but this week’s episode brings a fresh perspective from someone focusing on non-food franchises. I think you’ll find it really interesting. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  We’ve seen so many real estate investors saying, where’s another tax advantaged alternative investment that I could participate in? More and more of them are migrating over to franchising. So that’s been a huge trend I would say. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. And, uh, before I begin, I wanna remind you that there is something called wealth formula.com. It is the home base of the Wealth Formula Podcast. So if you want to, uh, go check that out, check out the resources. One of the things you can do there is sign up for the, uh, credit investor club, AKA investor club. See, uh, opportunities gill flow that you might not otherwise see because they are private. As we get here later in the year, more and more opportunities particularly for, uh, potential tax mitigation, lots of real estate, uh, some other, uh, real asset funds that I think you may want to, you may wanna learn about. So go to wealth formula.com, sign up and um, get onboarded. This is a little building a little bit on, uh, last week, uh, when we talked about, you know, how the wealthiest people in the world. Typically, unless you’re like an entertainer or a professional athlete or whatever, uh, you’re typically going to get there through business ownership or real estate. Right? Of course, we talk about real estate here a lot and we have a lot of opportunities coming through on, um, on uh, investor club. But you know, today I wanna focus more on that whole business ownership concept because I think it’s something that probably more people could be involved with. Um, you know, but if you do wanna be in business, so there are a few different options, right? So one is to start a business from scratch. I’ve done that a few times and I’ll tell you sometimes it’s worked out really, really well. And other times it was a total disaster. But that’s a reality of startups. Um, they require certain. Wiring too. I mean an appetite for risk and the ability to kind of move forward without much, much of a safety net. By the way, speaking of safety net, it’s much harder to do when you’re 52 and I have three kids heading to college in alimony to pay, by the way, ask me how I know that. Anyway, another option if you’re interested in a world of business, is to buy an existing business. The advantage here is that you’re. Stepping into something that already has worked, which gives you confidence in the viability of that business, right? I mean, it’s a little bit, uh, if something’s been around for a few years, for 10 years, well that’s a pretty good chance you could keep it going. But it’s not without risk because some businesses depend heavily and key people or relationships, uh, relationships that might not transfer. And then there are, you know, businesses that can truly run themselves out there too. Those are great to buy. The only problem is they tend to be very, very expensive and out of the reach for people. So the third option, um, and I’m sure there are others too, but the third option I’m gonna talk about, again, we’ve talked about it before, it’s franchising, right? It’s not risk free either, but it does give you a roadmap, you know, if you’re the type who can follow a proven system. Your chances of success go way up. Right. So, and this is actually an interesting thing ’cause I, I think about the types of people who listen to the show and a lot of, a lot of you are highly successful students. So a franchise is kind of a interesting way to look at, you know, business because then you’re basically studying what other people have already done and you’re mastering it and you’re already really good at that. You’re not starting from scratch, you’re plugging into a model that’s already. Been tested and supported. So, you know, for people who don’t necessarily have that, you know, have the renegade startup personality, but wanna. Want more than just a paycheck in index funds, franchising can potentially be a really great fit. And again, like we talked about before, if you get into this world, I mean, there’s people who own tons of franchises who end up becoming really rich. Um, just because, you know, they can sell like a bunch of them and, uh, you know, and stack ’em up and, and get ’em going. Uh, but again, we’ve talked about franchises before. Uh, I just wanted to make sure this is sort of, again, on your radar as an option. Uh, so this week’s episode is kind of bringing a, a perspective from a, a guy who’s an expert in non-food franchises, and we’ll have that, uh, interview right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate. Much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today. My guest on Wealth Formula podcast is Jon Ostenson , uh, CEO of Fran Bridge Consulting, and one of the nation’s, uh, top experts in non-food franchising. He’s a former franchise president of Fortune 500 Executive, and now a bestselling author and consultant who helps investors build semi passive income through scalable businesses. Welcome to the show, Jon. Hey, buck, excited to be here. Yeah. And uh, uh, apparently Jon is a listener of the show too, so that’s, uh, that’s helpful. He kind of knows what we’re we’re about and what we talk about in the show, so that’s, that’s great. Um, Jon, uh, you’ve been a, I guess a Fortune 500 executive of franchise President, uh, and now you run your own consulting firm. Uh, how did that journey bring you to, uh, you know, focus specifically on non-food franchising? You know, buck, I like so many others, you know, when they hear the F word franchise, you know, immediately thought fast food. And uh, and I spent many years in the corporate world, had a great run, but franchising was not on my radar ’cause I didn’t want anything to do with food. And uh, really it was when I had the opportunity about eight or nine years ago to step in as president of Shelf Genie franchise system that I realized, hey, there’s a whole world of franchising outside of fast food. And um, you know, I really fell in love. With the franchise model through that experience and just saw how all these diverse backgrounds could come together under a shared system of support and become successful business owners. Long story short, ended up becoming a franchisee myself of a number of different brands, still am today. And, um, started my consulting practice about six years ago to help others get plugged in. And, and I’ll start by saying, we’ve got nothing against the food guys. We, we need them. But, uh, in my humble belief, there’s simply easier ways to make money. And I’m happy to go into the reasons why. Yeah, why don’t, why don’t you kind of tell us a little bit about that? I mean, I mean, just the differences and you talk specifically about sort of specializing this non, uh, food world. I mean, what. What’s the big difference there? Yeah. You know what? You can do really well with food if you’re in with one of the big brands. But, you know, oftentimes if you get in with a smaller one, it is just, there’s just a little more risk associated with it. Um, you know, consumer whims oftentimes change, you know, I, I joke the frozen yogurt was big until it wasn’t. Right. And so that’s a piece of it, but you’re really making a big CapEx investment in most cases. You know, it’s, those are not cheap to get into. And then once you’re in it, you’ve got, you know, long operating hours. A lot of hourly employees, uh, oftentimes the margins aren’t that good. So, uh, when you, you know, put that side by side with some of the opportunities that we go deep in things like home and property services, health and wellness businesses, uh, B2B services, you know, businesses that cater to kids or to pets or to seniors, you know. I’d say the general theme out there is understandable, cash flowing businesses, that’s what people are gravitating towards. And you know, food just has a lot of moving parts and a lot more complexity. So most people that we work with say, Hey, we want nothing to do with food, but we wanna go deep on these other ones. You know, I wanna start, I wanna ask you some very practical questions because I think, you know, we, as you know, we’ve discussed franchises on the show. Uh. Few times. Um, and I think people are still kind of, a lot of people are interested, but, you know, they kind of want to know a little bit of the nuts and bolts, you know. Can you give us a little bit of a sense for, you know, when we talk about non-food f franchises, you mentioned they’re, they might be a little bit less expensive to get into, uh, than food franchises. You know, what, what kind of investments are we talking about? I mean, for someone who’s. Um, you know, high paid professional, obviously you’ve, you’ve got some capital, but you also don’t wanna spend all your, of your investible capital in one year on a franchise because inherently, I mean, it is a business. Uh, it may have a higher likelihood of succeeding than a pure startup, but it’s still, there’s still possibilities of failure. So, so, you know, what are we talking about in terms of, uh, startup costs for. Your typical non-food franchise that people can expect. Yeah. You know, and some of these non-food categories aren’t cheap, right? I mean, we just had clients that bought 10 trampoline parks at $3 million each year. You do have some large ones. I’d say probably 75 to 80% of those that we work with. When you look at the franchise fee and the startup cost and several months of working capital, all built in your investment range is oftentimes in the. I’d say two or $300,000 ballpark in most cases. Um, you know, if it’s more of a larger customer facing retail play, then it might be a little bit larger, four or 500,000. But a lot of our clients are gravitating towards more service-based businesses. You know, where you can get in, maybe get multiple territories for that two or 300,000 mark. Some people are using all cash to fund it. Most are using SBA loans where you put in 20%, you know, fund the other 80%. Banks obviously prefer lending to franchises. Um, some are using a retirement rollover. It’s what’s called the Robs program, ROBS, where you can roll over and you have to purchase the business as a C corp or set it up as a C corporation, purchase it with a retirement plan. You can pay yourself a salary, somebody’s that in conjunction with sba. There are a lot of ways to make it happen, but no, you’re exactly right. I mean, business ownership. There’s a reason why you can make. Inherently larger returns, it’s because you’re also putting in a little more effort and there is risk associated with it. Right? Um, franchising does de-risk it in a lot of ways. You look at the sheer numbers, but end of the day it does take effort and. I always tell people if it was easy, everyone would be doing it right. Um, but it’s obviously something the government incentivizes. They want you creating new companies, new jobs, and so there’s a big tax play with it as well. Um, but yeah, no, it’s, it’s not easy. And, and when you talk about tax play, you’re just mostly talking about like bonus depreciation, that kind of thing, or? Yeah, if it’s heavy, heavy CapEx business, certainly section 1 79 and the whole bonus side, uh, with the new tax bill that gets extended. But, um, no, it’s, it’s things like, I mean, for me, I, I pay my kids in the business now. They’re all elementary age, but I’ll put ’em in my ads, they’ll ship my books out, that sort of thing. I then take some of that, roll it into a Roth IRA for each of them. The other part I pay. Back for private school tuition and I’m paying stuff, you know, there are things you could do if I get a tax write off for the business. Um, you know, certainly all the home office and travel expenses, you know, can be justified as write off. So there’s just a lot of things that as a high paid W2, you don’t have access to in the tax. Tax code. Yeah, yeah. Um, do you think. Uh, you know, obviously when you go, when you look, you know, I’ve, I’ve sort of looked through franchises in the past. Um, not too seriously, but just to kind of get a sense. But is it your sense that the more safer, the more stable, the better likely to hit? Franchises generally tend to be more expensive. Not necessarily. No, I think it’s it. A lot of it comes down to the model. How much equipment is needed, whether you need a retail storefront, how many employees. No, I’d say the franchise fee, what you’re actually paying the franchisor is pretty consistent across the board. Um, you know, franchising is like every other industry out there in that you’ve got good players and you’ve got ones that are not as strong, ones that don’t provide as good of support. And that’s where we come in to try to help identify the, the strong ones. But, um, no, it really is similar. You know, franchising’s not right for everyone. You know, there are. People that we work with that I have to explain, you’re too entrepreneurial. You wanna put your thumbprints all over it, it’s not a good move for you. Um, but if you have some degree of humility and you recognize you’re not always the smartest guy in the room, um, you know, I think it, it truly is a better path than business ownership for most people. So, um, but again, it’s not right for everyone. Not everyone’s cut out to be a business owner. Um, we see all types. You mentioned, uh, SBA financing, but these kinds of things too. There is. When we talk about cost, there’s sort of the upfront cost, but a lot of times it takes a year or two years to get something up and running. Right. So how do you, how do people deal with that? ’cause they’ve got a lot of, you know, they’re carrying a lot of costs for a long time. Mm-hmm. I’ve had multiple conversations on that topic already this morning, and everyone’s situation is different. Um, but I, I, I always want people to go in eyes wide open. You know, we have a whole discovery process where they can really ask questions, learn more, talk to existing franchisees in the system, hear about their ramp up, what that was like with their profitability. Looks like. Certainly the franchisor has their financial representation, but always tell our clients, let’s go conservative and assume it does take longer to. To get to the break even point to that point of, you know, I call it the oxygen of profitability, where you have that monthly p and l that’s in the black. Um, so no, it it, a lot of models, you know, you may not hit that profitable month until month six or month ninth, uh, the ninth month or even a year into it, depending on the business. Yeah. There are some that, and sometimes it’s, uh, and, and then sometimes it might just take a year to even set it up. Right. I mean that, that pretty. Typical to go from soup to nuts and starting in about a year, you know, from your first call with the franchisor. I’d say the process usually takes about two months, uh, to, you know, get to that point of signing the franchise agreement. From there, if it’s a retail business, then it is going to take site selection and build out, which takes time. Typically it’s not a full year, but sometimes it can be. Um, oftentimes if it’s a service-based business, which at least half of those that we work with are getting into, and I’m happy to give examples. If it’s a service-based business, you can be up and running oftentimes two or three months later. So it does condense the, the time period. Um, you know, so we’ve, we’re talking about this in the context of Yeah. Maybe diversification also, uh, you know, in the context of saying. There’s, you know, this is an earning opportunity. I know we we’re calling it semi passive. Um, but in order to do that, you have to justify that with the type of returns you’re gonna get. And I know you can’t really give projections in general, but how should people think about this in terms of, you know, if they’re getting. 8% in real estate. And you know, right now the stock market people, I mean, are getting a lot more there. Obviously that’s a volatile situation. It always is. How, how do you justify this to somebody who’s, that’s what they, they typically do. Yeah. You know, the juice has to be worth a squeeze, right? For the e effort that’s being put in. Absolutely. And, and I personally invest in real estate directly and through syndications and energy funds and private credit. I’m an all of the above guy myself, and, and a lot of our clients are too. Uh, we like the role that business ownership does play in the portfolio. That being said, most franchises will market themselves as, you know, you can be an owner operator running the business day to day, or you could be semi-passive. Some call it semi-absentee, some call it executive model. The idea there is that you put a manager in place, day one to run the business. Now, my preference is to call it semi involved because I think that’s a better term for it because you’re not gonna outsource the running of your business entirely. Right? And if you don’t have the right person in that seat, you’re gonna find yourself leaning in until you do. So if. Countless case studies we have of clients who are running the business as executive model, but they usually weren’t on day one entirely. It takes a little while till they get to that point, they can really pull themselves back. So I always wanna give that, uh, upfront disclosure, but no, from a return standpoint, I mean, some of these property services franchises as an example, you, you’re all an investment. Call it 200,000 in round numbers. A lot of these businesses can then return a hundred, I’m sorry, a million dollars in revenue, oftentimes at a 15 to 20% bottom line margin, sometimes even north of that. So let’s just call it 20% for round numbers. That’s a $200,000. Payback. Maybe it’s year two. You know, it’s not necessarily year one, but I mean, you’d call that a hundred percent return on your invested capital. Now again, you’re putting in effort, that’s why you get, you know, an outsized return. But it’s interesting. I mean, that would be a hundred percent. Um, and you’re building an asset that you’re gonna be able to sell one day as well. So when a lot of times people are looking to leave their W2 jobs to run a business and they say, well, I’m making. 400,000 in the corporate world. I can only make, you know, two 50 here as a business center. But then when they start layering the tax benefits they get and the fact that they’re building an asset that they’re gonna be able to sell one day, it starts to justify it. Yeah, yeah. Um, let’s talk a little bit about, you know, what it looks like. I mean, we, again, just a review. What does it look like to be, uh, somebody who owns a franchise? You know, you, so you go into one of these, you sign your franchisor agreement, you’re going to essentially, uh, you know, probably for, you know, at least six months, you’re gonna be like getting something up and running. Right? A lot of times people will be hiring managers and stuff like that at that point. What is the, what’s the typical route? Like what, what do you see like people doing, you know, just put putting people into the shoes of somebody who’s going into this process? What does it look like? Yeah, so first off, at the very beginning, I encourage people to date around to have conversations with multiple brands. I mean, we usually have our clients evaluate a dozen opportunities that are available in their area. That’s where the magic starts happening. You start to prioritize the characteristics you like in the business or don’t like, and compare and contrast. Um, they’ll usually pick three or four to talk with. So again, once they through that process, they decide on one to move forward with, um, you know, they sign the paperwork. Alright, what happens next? Typically, the franchisor has almost like a checklist of things that they’re doing on your behalf and things that you need to do in the months leading up to that launch of the business. Um, and again, it depends on the type of business, but part of that would be training. You’ll, you’ll probably do some online training. You’ll probably get with a franchisor and in person for a period of time at their home office. Maybe that’s a week. Uh, you know, you’re able to talk to other franchisees in their system. It’s kind of this built in Mastermind where you’re exchanging best practices, learning from each other. Hey, where did you find your people? Hey, how are you compensating them and incentivizing them? And so. If you’re able to take the franchisor’s job profile and then kinda layer in some real world experience from other franchisees to go out and find that team, um, you know, and I’d say start doing some secret shopping too. You know, get to know the competition. How are you gonna differentiate in the market, um, along with the franchisor’s training. So, you know. If it were getting really brass tacks here, let’s say it’s a service-based business, you would then run some sample appointments with friends and family, get your feet wet, uh, get used to it, and then, um, or have your team do that and then, you know, start launching to the market. But the franchise order’s gonna be running a lot of that opening marketing that’s gonna make the phones ring, draw people in. Usually it’s kind of a. Franchisors handling a lot of the digital marketing and if there’s any print, that sort of thing. And then you’re handling a little bit more of the organic, you know, maybe that’s doing some networking, getting involved in the Chamber of Commerce, getting word out there locally on social media post. Um, so it’s a combination of the two. Um, you know, but the franchisors there for support and I think the, oftentimes it does get overlooked that community of other franchisees. It’s cliche to say, but you’re in, in business for yourself, not by yourself. There’s a group of people that are living the same thing day in, day out, and so you really are learning from each other. And the more you lean into that, I think it fast tracks your success. Can, is there ways to find out likes, I mean this is, uh, I, I’m assuming all under NDA, but data in terms of which franchises? Um, I think, I think the big thing that most. That anybody who’s gonna get into this is like, okay, I’m gonna put a bunch of money into this and then it’s gonna fail and I don’t want that to happen. Of course, there’s no guarantees to that. However, is there data to show in any given franchisor if they, uh, you know, what their track record is in terms of, you know, they’ve started, uh, a hundred of these and 98 of them did well, or 75% did well, or something like that. Uh, is that data available? Every franchise system has what’s called an FDD Franchise Disclosure document. It gets updated every year. Typically in the April, may time period, they’ll come out with a new one and release it. And you know, they have audited financials in there. You know, they’ve gotta cross their ts, dot their i’s, I mean, there’s a lot of legal liability if they don’t do it right. So, you know, it’s full disclosure. They’re 23 sections within it. There’s what’s called the item seven, where, where it’s your all in investment range broken out. Your item 19 is where they break out the financials, historical financials of franchisees. Now, it would be great if everyone did it in the exact same format. They don’t. And so, um, you know, usually you, you get good information from the item 19. It’s, it’s audited. Typically, you still have some questions after you review it. A franchise order typically does not have their p and l of all their franchisees locations. So they’ll show the corporate p and l to show how the model is set. But then they’ll show the revenue of all their franchisees. And so you kind of extract that proforma on your end as well as getting talk to other franchisees in the system. But no, to your point, there’s a section in, uh, the FDD where they do talk about any openings they had, any closures that they had. They list the contact information for all the franchisees. And so again, you have historical information, but also resources that you can reach out to to learn more. How about. You mentioned, obviously you have an asset that you can sell. What if you’re looking to buy an asset, like buy instead of a skip the startup process? I mean, how does that work? If somebody’s like, yeah, I like the idea of this, but I want to skip the, you know, startup thing, and maybe I’ll get a little bit less return. But that, that, that creates a lot more potential stability. How does, how does somebody do that? So, within the franchising lane, we do handle resales, uh, franchises. It’s a small percentage of what we do, and here’s why. It’s not that there’s not demand out there for the resales, but there’s lack of supply. So what happens is franchisee decides they wanna sell their business. The most likely buyer is another franchisee within that system. It’s what I call internal m and a. They’re going to get first rights, essentially. And, um, that’s a way for other franchisees to expand. So oftentimes those good deals, if it’s a good one, it never hits the open market. The only ones that hit the open market are ones where maybe someone bought and never did much with the business, right? So there’s nothing to buy. And so as a result, we just don’t have a lot of supply, uh, for that. But, uh, internal and m and a is really common. But it’s interesting, there’s so many thought leaders out there today talking about buying existing businesses, you know, buy and build and um, you know, and that can be a great proposition. However, here’s what I see from where I sit. I have people reaching out every day saying, Hey, we’ve been looking for existing businesses for four years, five years. We hired an analyst full-time to go find businesses for us. Due diligence didn’t shake out. Someone else outbid us. I continue to hear the same through lines over and over again. All of that time they could have spent building a business. Right? And so it, it just takes a lot of time to find that right business. And even once you find it, there’s inherent risk to it. You’re assuming everything on paper is gonna continue as is. But whenever you inherit someone else’s team and culture. You’re gonna lose some key employees or key customers, it’s almost inevitable. And here you paid a premium for that business. So it’s interesting. I had conversations with a couple of past clients this past this past week who bought franchises with us two years, three years ago, and are now returning for their next round, their next purchase, to build off of what they’ve already started. So again, they didn’t spend all this time looking. Instead, they got in the game, started building knowing one, that’s not the only thing they’re ever gonna do, but let’s start it with a good foundation that we can always build off of. By acquiring other franchisees, by starting our own business, by buying another business, but they kind of buy some time while building. Yeah. Um, what, you know, uh, the one thing I was gonna ask you is that, you know, uh, you’ve sort of got your finger on the pulse of, of what things seem to be working, whatnot. What, what, uh, sectors of non-food franchising are showing the most promise right now? Yeah. You know, I just finished speaking at a private equity conference the other day where the feedback was, you know, the private equity firms were saying it’s sexy to have a franchise in their portfolio. Now. They, they love the model. Most of them are gravitating towards things like home and property services, sometimes non-sexy, non trendy businesses, things that AI is not gonna replace. Maybe ai, AI will enhance how you do something versus the low bar competition in, in a given niche. Um, there’s just so many niches in home and property services that people oftentimes overlook that they love. And some of the businesses I’m invested in, I’ve got. I have an asphalt paving and line striping franchise. You know that parking lots. I’ve got another one that provides temporary walls around renovation projects and construction sites. Kinda like an equipment rental type business, you know, B2B. I’ve got another one that, um, you know, provides custom shelving, uh, you know, in your kitchens and pantries. And then I have one in the health and wellness arena that provides custom orthotics. So 3D printed orthotics for people. So I would say property services has probably been the number one, um, out there in the market for diverse backgrounds. We have lawyers and doctors and corporate executives with no experience in the space, but saying, Hey, I see an opportunity. I’m gonna follow the playbook that the franchise order provides and go down that path. Um, health and wellness is big. The theme is what are people gonna spend on regardless of the economy? And so it’s everything from kids, youth, soccer and tutoring to, uh, tech grooming to in-home senior care. There are a couple in the senior space that we really like outside of in-home care, where you don’t have to have a large team. It’s more of. Consultative type positions. Like you’re the expert in your community on all the senior facilities. You’re a placement consultant or a senior fitness where they bring you in. Uh, you know, you have a team of trainers that goes around to different facilities and, and trains and, and, you know, helps with stretching and exercise programs. So there’s just all these different niches that you wouldn’t think about it unless you saw him. Uh, yeah. Right in front of you. Uh, and you, you know what I like about what you just said too is I always tell people like it’s. I’m, I’m a former cosmetic surgeon. Right. And people get, I’ve had people go through franchising and stuff like that, and they start looking at, you know, these beauty businesses and stuff like that or whatever, because they sound a little bit more sexy. And then my, my impulse is always to be like, boring. Please keep it boring. Because it’s like you don’t want something that is just people can cut outta their lives as second the economy. Um, goes south or, you know, that they just don’t need, and that there’s enormous competition in. Um, is that, I mean, it, those are the kinds of things that you’re looking at when you’re, you know, when you’re focusing on what to do. Yeah. It, I joke that non-sexy is the new sexy when it comes to business ownership. It, it really is. And that’s what people are looking for. We work with a lot of doctors and physicians and dentists and, um, you know, they, they wanna do something that stretches them intellectually and they love that, you know, idea of, you know, being a business owner and franchising is just a perfect fit for a lot of them. Um, but most of them are not, not looking to stay within health. They say, we’re passionate about this, but we wanna do something different. They’ll get into a restoration business or a gutter business or things that aren’t going outta style. So that is a very common. Thread exactly what you brought up, that we want a business that’s going to do well regardless of the economy. Yeah, yeah. How, um, tell me a little bit about what, you know, today’s macro trends, how that’s affecting everything. We’ve got tariffs, we’ve got high interest rates that might start ticking down, but who knows? We’re looking at a labor market that. Looks kind of very suspicious for recession, uh, recessionary ai or at least, you know, a contraction in, in, in job, the job markets. And then as you mentioned, ai. So what are the macro trends that you think about when it comes to this kind of thing? How do they affect, you know, some of the decision making? I’d say in the industries that we focus in, tariffs haven’t had as big of a play interest rates have, and where I’ve seen interest rates play out, we’ve seen clients do as many SBA loans as ever. It hasn’t really affected that. And of course, that’s tax deductible interest. Where we’ve seen interest rates is real estate investing. Obviously, the real estate market has slowed down. There aren’t that many great deals to be had. We all know, uh, the, the macro story there. We’ve seen so many real estate investors. Saying, where’s another tax advantaged alternative investment that I could participate in? More and more of them are migrating over to franchising, so that’s been a huge trend I would say. Another thing on the labor market. I mean, the Wall Street Journal has an article at least every two days, if not every day, on AI displacing jobs and how these big companies are, you know, broadcasting and proud of how much they’re, how they’re doing more with less headcount. Right? And so where I sit, it’s on the ground in all these communities, all across America. I’m hearing the same thing. I have so many mid-level and upper level clients, they. You have a background in technology or they’ve been in consulting and so many of them are gravitating and saying, Hey, we know our days are numbered. Or you know, all of a sudden we’re having to manage a team twice the size without any increase in pay. We’re having to do more with less. I had a client today that said, Hey, I’ve got a great technology background. I’ve been doing technology recruiting forever. I don’t wanna learn the whole AI space. AI space. That’s a different ball game for a younger man. So. It is interesting. You see these through lines and a lot of them are saying, I don’t want to go work for another firm. I’m ready for a pivot. The P word pivot, and they’re coming our way. So I’d say that’s the other big trend that we’re seeing people looking to make that jump. Yeah. I’m, I’m surprised the SBA loans are, are still, as you know, that they’re hot as they, I mean obviously they’re very favorable in terms of loan to value or I’m sorry, they’re, yeah, they’re loan to value, but. Interest rates, man, I was, I mean, I was looking at acquiring a business not too long ago and I was just like, the sb you know, interest is so high. I mean, all in all, when I was looking at it, it was gonna be close to like 10%. And um, yeah, I’m surprised that doesn’t make people. You know, think twice. Yeah. I, I’d say first it probably did, but really I think we’ve become used to it. Yeah. And maybe we’ve become numb to it. So 10%, you’re exactly right. That’s what we’re seeing out there as well. You know, again, that’s tax deductible. I keep going back to that, but that kind of nets you down to call it six or 7%. Right. In most cases you can pay that loan back early once you’re cash flowing. So it’s temporary in theory. Um, you know, but people like the idea of leveraging. And, and again, a lot of those real estate investors are used to leveraging. Yeah, yeah, yeah. Of course. Great. What, uh, uh, what else have I not asked you that do you think would be useful for this audience? Yeah, you know, I think we hit on a, you know, the macro trends, a little bit about the financials. Um, you know, what I found is it just gets people excited when they start looking at real opportunities, you know? Yeah. Like I said, most of our clients will look at a dozen or so businesses. We’ll share with them, uh, you know, the top ones in their market. Nine times outta 10, they end up purchasing something in an industry that was never on their radar. So I think, again, going back to, there’s so many niches out there, and the challenge is if you start Googling, you’re gonna see a top 50 list or a top 100 list of franchises. Companies are paying to be on that list. And so it’s just so much noise out there. And so that’s where we come in and you know, I think, you know, our model bucket’s entirely free to work with us. We get a referral fee from the brands. That’s passed on to our clients. It’s very much like a real estate broker and, um, yeah, we love helping. So no, I think you did a great job of kind of hitting on all the main topics that I would’ve mentioned. Yeah. How do we get in touch with you? Come out to our website, fran bridge consulting.com, FRAN bridge consulting.com. We’d also love to share a free copy of our book, Non-Food Franchising can be a great resource, uh, to read through. So just share your email address out there and we’ll send you links to the book, uh, to download. And, uh, if you’d like to take a next step and book a call, we’d be happy to chat. Fantastic c Jon, thanks so much for being on Wealth Formula Podcast today. Enjoyed it. Thanks, bud. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. And, uh, again, uh, you know, I think the moral of the story here in the last, you know, episode or two is that you know, if you want a different life, you have to do things differently. If you want a different level of wealth, you can’t do what you’re doing now. Figure out you know, what it is that you want in your life, and then look at where you’re at now and see if you can draw a straight line. If you can’t draw a straight line, then you gotta figure out. Well, what do I gotta do so that at least I have a trajectory to even have a chance of getting to where I want? That is the moral of the story. And that is it for me. This week on Wealth Formula Podcast. This is Buck Joffrey signing off.

If there’s one thing that separates the truly wealthy from everyone else, it’s their relationship with risk. Not blind risk. I’m talking about conviction — the ability to see an opportunity before everyone else does, to lean into it while others are frozen, and to hold through the storm until the payoff is undeniable. The extreme example is Bitcoin. In 2012, when it was trading for less than the price of a cup of coffee, most people laughed it off as internet monopoly money. But a handful of people had conviction.  They understood the asymmetric nature of the bet — the downside was capped at the small amount they put in, while the upside was exponential. Those early adopters didn’t just make returns; many became billionaires. Of course, most people hadn’t even heard of Bitcoin in 2012, so that might not have even been an option for you. So let’s take another example that you almost certainly did live through. Real estate after the Great Recession in 2008 was radioactive. Nobody wanted to touch it. Yet those who bought when fear was at its peak ended up riding one of the longest real estate bull markets in U.S. history.  Data from the National Association of Realtors shows that home prices more than doubled from 2012 to 2022 in many markets. Imagine the rewards of being on the buy side in 2012. I’ve said it before and I’ll say it again: I believe we are in a similar scenario with real estate right now as we head into a descending rate environment following a real estate bloodbath.  Properties are severely discounted, and values are almost certain to go up as rates fall. But you have to see the big picture and not be scared. That’s not easy to do when everyone else is.  Real estate moguls and business owners are the ones most likely to take their wealth to the next level. Real estate is accessible to you — and so is business ownership.  Look at the Forbes billionaire list and you’ll see a pattern: nearly 70% of the world’s wealthiest people are business founders or owners. They didn’t get rich clipping coupons from the S&P 500.  They got there by creating or buying businesses that became valuable, saleable assets. The risk was obvious: most startups fail. But the payoff for the ones that succeed dwarfs anything you’ll ever get in your brokerage account. Now, the reality is that most high-paid professionals never play in this arena. They’re comfortable and don’t want to rock the boat. Some call it the “golden handcuffs” — you make enough money to feel comfortable, but that same comfort prevents you from ever taking risk. And you know what? That’s totally fine. Just know that doing your 9-to-5 and investing into your 401(k) is not going to create life-changing money. If all you’re looking for is life-sustaining money, keep doing what you’re doing. But ask yourself this question: What’s the life you dream about? If it’s the life you already have, then congratulations. If not, are you on a trajectory that even makes it possible to get there? If not, you’ve got to change course. My guest this week on Wealth Formula Podcast has done a great deal of research on the wealthy and has written a book based on what he has learned. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  An s and p 500 index fund would’ve outperformed like, you know, 75% of active managers. These are people who, it’s their job, they’re paid and compensated to try and beat the market, and they can’t. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast, coming to you from Montecito, California. And, uh, before we begin today, wanna remind you. There is a website associated with this podcast. It’s called wealth formula.com. Go check it out. There’s lots of resources there for you, uh, including, uh, a chance to join our credit investor group. Our credit investor group is exactly what it sounds like. It’s a investor club and uh, it’s basically an opportunity to see deal flow where you might not otherwise see. I do think it’s, uh, you know, uh, following, uh, Richard Duncan’s, uh, podcast last week. I think it is something that you really ought to be thinking about. We, I mean, even, even Richard, who generally is pretty negative about, uh, the economy and, and that kind of thing really sees a big boom, uh, and sort of a takeover of the Trump, uh. Take over the Fed by the Trump administration. Forcing rates to go down. Descending rate environment means increasing asset prices. That’s just what it is. And if the Trump administration does what it wants, you’re gonna see rates going down, asset prices going up, liquidity going up, dollar going down. What that means is asset prices skyrocket. Dollar falls. I mean, listen, if you’re not buying real estate, fine. I don’t buy real estate here. If you’re in our credit investor club, you know, we we’re continuously, uh, going after these distressed assets. Um, and, uh, but they may not be your cup of tea. Maybe go buy something yourself, you know, buy some stocks or buy some, uh, buy your own, uh, real estate, uh, whatever, whatever works. But I do think that. Again, I’m not trying to give you financial advice. This is commentary. My commentary is this, is that I think the playbook that the Trump administration is trying to follow is pretty clear. Now it’s possible they, they’re unable to do it, but I doubt it. I mean, they’re gonna fire their way to controlling the Fed and if they can fire their way to controlling the Fed, they can control the Fed interest rates and they can control the bond market through quantitative easing. So, anyway, just a reminder on that. I just feel like people need to wake up on this one. Okay. Let’s talk about today’s show. It’s, you know, it’s about, it’s a little different. It’s about wealth, right? So, um, I wanna talk about generally the idea of, you know, building substantial wealth and, and what does that even mean? Right? Well, I would just say this, it’s the, it’s life changing, right? So that’s gonna be different for different people if you. Are going from, uh, you know, $50,000 a year job and all of a sudden you’ve got a million bucks. That’s life changing, right? So, uh, if you make a million dollars a year and you know, all of a sudden you’ve got, uh, eight figures of wealth, um, that it, that can be life changing, right? Um, or going from, you know, eight to nine figures or whatever. These are life changing things. That’s what I’m talking about. You know, if there’s one thing. That separates those sort of truly wealthy from everyone else. It’s a relationship with risk that is different. Now, I’m not talking about blind risk, I’m talking about conviction. The ability to see an opportunity before everyone else does, you know, to lean on it while others are frozen and to hold through the storm until the payoff is undeniable. Okay, so the extreme example. We’ve been talking a lot about Bitcoin lately, right? So in 2012, Bitcoin was, uh, trading for less than the price cup of coffee. And I think it’s, uh, as of this, um, I’m recording this a little earlier than it’s being released, but it’s at about 117. I think Q4 is gonna be huge. So who knows? By the time, uh, by the time this comes out, it could be greater than 117,000. It could be a lot less, who knows? But anyway. Hell of a lot more than a cup of coffee. Let’s just put it that way. Okay? But guess what? People laughed it off. They were laughing at this stuff. Even through 2017 when I first kind of got into this world myself in the bitcoin world, people were laughing. They thought it was a joke. They called it buffet, called it rat poison. Blah, rat, rat poison squared. It wasn’t just even rat. But guess what? There was a bunch of people, not a bunch, but there were, there was handful of people who had crazy conviction, these Bitcoiners, right? And even, uh, you know, they started off, maybe they had a few hundred bucks or a few thousand bucks they put into it. The next thing you know, they saw that grow into like, you know, six figures. And then they still didn’t sell. Then they saw it had their money go into the seven figures and they still didn’t sell, and some of these folks even became billionaires. It’s crazy. Crazy. What kind of conviction that takes. I mean, I don’t think, man, I don’t think I’d have that kind of conviction. If I saw, if I saw a hundred acts, I think I would kind of probably bail, to be honest. So maybe I’m, you know, I’m not wired to become a billionaire, so who knows? Um. Got many zeroes to go before I could, uh, call myself that Anyway, so, uh, of course, you know, most people and, and myself, I think maybe I heard about 2000 Bitcoin in 2012, but. I think I was mostly hearing Peter Schiff bash it or something like that. So then I completely went the other way. But you know, most people hadn’t heard of it then. So it probably really wasn’t realistic for that to, to use that as an example of conviction, because if you’d never even heard of something, then it’s hard to have conviction about it. So let’s take something that’s, well, I know, I know pretty much all of you have recollection of, and that is a great recession of 2008. And guess what? Real estate was radioactive. In fact, I mean, kind of almost like now, right? Like where, you know, there was this bloodbath and all of a sudden nobody wanted to, you know, people were, people were all over it and then nobody wanted to touch it. Yet those, uh, who bought when the fear was at its peak. Ended up rioting one of the longest real estate bull markets in US history, which really only ended like, you know, 20 22, 20 23. But it, there was a crash. There was a big crash. Now, data from the National Association of Realtors show that home prices, uh, more than double from 2012 to 2022 and many markets. Now imagine the rewards of being on the buy side in 2012. If you had that kind of. Conviction. I’ve said it before and I’ll say it again. I actually think we’re in a very similar scenario with real estate right now as we head into this. You know what, you know what I keep calling this descending rate environment with this, uh, uh, Trump takeover of the Fed. I mean, it’s the same kind of thing. Maybe it’s not quite as extreme as what you saw in 2008, 2009. That’s, that’s kind of crazy times, right? But, but you’re seeing a similar thing where you had this, you know, bloodbath and then now people are kind of. Skittish about getting back in. They don’t know if it’s a good time. And at the same time, you know, assets are being sold at, uh, you know, 30, 40% discounts compared to just a couple of years ago. You know, the prices are reset. They’re making sense at the current interest rates. And then what happens? Interest rates go down. Cap rates compress, boom. We’re off to the races, right? But you have to see the big picture and not be scared. And that’s not easy to do when everyone else is. I get it. But just remember, real estate moguls, business owners are the ones that really, I mean, look at the NFL owners, right? They’re either big real estate moguls or they’re business owners. That’s basically it. Um, you know, real estate obviously is accessible too, but so is business ownership. And if you look at business ownership, the Forbes Billionaire List, you’ll see, you know, nearly 70% of the world’s wealthiest people are business founders or owners. So they didn’t get rich with the stocks, bonds, and mutual funds, and the s and p 500. By the way, I’ve changed my tone on stocks. I am not a hater. Okay? I’m not a hater. I’m just saying, you know, if you want different results, you have to do things differently. These people became billionaires because they were creating or buying businesses, uh, that became valuable. Saleable assets. They, they did the work. The risk was obvious, right? But the payoff for the ones that succeeded, um, you know, dwarfed anything that you could get just by investing in, like most people do. Now the reality is that most high paid professionals never play in this arena. And the reason for that is not because they’re not smart enough, it’s just that they’re comfortable and don’t wanna rock the boat. Some call this the golden handcuffs, right? You make enough money to feel comfortable, but that comfort is a little bit, you know, too comfortable, and it prevents you from ever taking risks. And you know what? That’s totally fine. It’s totally fine if you just don’t really care. You know, just, you know, just know that doing your nine to five and investing in your 401k, it’s not gonna create life-changing money. Nobody ever got rich from investing in a, you know, diversified portfolio of stock sponsor mutual funds. People don’t change their place in the economic hierarchy of this country by doing that. If all you’re looking for is life sustaining money, keep doing what you’re doing, and it’s probably easier if you are not that ambitious. The only thing I’m asking you to do is to ask yourself the question, you know, what is it that you really want in your life? What is it that you dream about, right? As far as you know, you only got one of them, and if it’s the life you already have and you are totally fine with it, you don’t need. Um, dream any further than just keep doing what you’re doing and you can just listen to this podcast and think we’re a bunch of jokers. Who are the dreamers out there? Um, but if not, you know, uh, the, the thing you gotta do is you have to look at your trajectory, right? Like, if you’re doing something right now, that, and, and there, there’s no motion or any sort of, uh, direction. If that could possibly get you where you wanna be, then you gotta change course. Right. Anyway, that’s just a little pep talk for me. My, uh, my guest this week, um, on this week’s podcast, he’s done a lot of research on, on the Wealth. He’s written a book on what he’s learned, and I think it, uh, gives a little bit of backup to what I’m talking about, so we’ll have that right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key, even though you’ve borrowed money at a simple interest rate. Your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to Show Everyone Today my guest is Nick Maggiulli. Uh, he is a Chief Operating Officer at WR Hols Wealth Management. He’s also the author of Just Keep Buying and runs the blog of Dollars and Data where he breaks down personal finance and investing using real world evidence. His focus is on what the data actually shows about building and keeping wealth. And that’s exactly what we’re gonna talk about today. Uh, welcome to show Nick how. Good. Thanks. Having me on. So let’s, uh, let’s start with this. You’ve dug, uh, I guess you’ve dug into, you know, decades of financial market data and from all that work, what are the biggest myths about building wealth that the data, uh, just doesn’t support. So I think the, the one I’m gonna focus on the most is that cutting your spending is the way to get rich or build a lot of wealth. And for some people that’s definitely true, but it’s the, it’s a very, very small minority, a very small percentage of people where that actually tends to be the case. And if you look at the data, overwhelmingly high wealth is correlated with high income and vice versa. So it’s very rare that someone has high income and low wealth. Or someone has, uh, low income and high wealth. Right? So those are incredibly rare, and I’ve talked about this a lot, um, in my work over the years. It’s in my new book, the Wealth Flatter, and the second chapter, I just dig deep on income and I can say I basically take wealth and I break it into these six levels. And then across the levels, within each level, as you kind of move up, the wealth flatter, the amount of income, the median income in each one of those levels just increases, um, pretty significantly as you move up. Mm-hmm. Sure. I mean, certainly I, I mean I’m, you know, I mean, if we’re talking about Starbucks and those kinds of things, uh, for, for high income people, that’s not gonna make a difference. But, you know, certainly, uh, I mean there, there is probably a little bit of that. Don’t you think? I mean, like, if you take the example of professional athletes and you hear these stories about people making a ton of money and then just blowing through it and all that kind of stuff. Yeah, no, those, those definitely are the exception. And once again, professional athletes are. You know, like they’re like the exception of the exception of the exception in so many ways. They’re very visible to us, and so they, it feels like they’re very normal. Like these are very normal occurrences, but they’re, they’re definitely not. And that’s, that’s the thing to keep in mind, right? And so once you actually look at the data, like I think it’s like 95% of people who are, 95% of households that have a income over $200,000 a year have a net worth over $200,000 a year. Now, once again, $200,000 is not a lot of money. Doesn’t mean you’re super wealthy or anything like that. But at the same time, like. That shows that there’s very, very few people that have an income of that high or higher and are broke. It just, it’s rare. It’s very rare. And that if you know, you probably know someone like that. I know people like that, but they’re incredibly rare. Most people that have a good income aren’t going crazy, and even if they are spending a lot, they still have some access to save. Yeah. Yeah. Fair enough. Okay, so if someone earns a high income. Is late to the game of investing. What does the evidence say about how much they can realistically catch up? It really depends. I mean, what is high income? How much time do you have? I mean, those are all, there’s all these levers you have, right? You can really think about building your wealth. You have these different levers, right? You have time. So how much time can you go and, and, and save, right? You have your savings rate. How much can you save, right? And that’s influenced by obviously your spending, but also your income. So the higher your income all else equal, the more you’re gonna save, right? Assuming you don’t, you know, once again, all else equal, you’re gonna just save more money, right? So you think about the time lever, you think about the savings lever, which is both income and spending, right? And involved. And then you think about your investment returns. So those are the three big kind of things you, you can mess with, right? And so. And investment returns are probably the hardest one to mess with. It’s really hard to beat the market so. I’m really more of an indexer. Not everyone agrees with that, but that’s kind of my take on that. So that variable solved. And then the other two are like, okay, what can I do on the savings front that’s spending and income. You have probably the biggest, the most amount of, um, leverage there on those two factors. And then the last one is your time, which obviously if you’ve already, if you spend a couple decades not doing the right things financially, that’s fine. You can’t. Do much about that now it’s already happened. So the one things you gotta focus on are your income and your spending, right? That’s where, if you think about this in terms of a formula, like that’s where it comes back to it. Like that’s the biggest factor. And the one I try and have people focus on is income given the data. Yeah. Yeah. And how do you help people with income? You have to talk about, okay, what can you do to raise your long-term income? And I always mean like, okay, what can I do tomorrow? Like there’s side hustles. Things are out there that are great and you can do some of those things. It’s a long journey. I’m talking three to five years, right? At least, right? At least three to five years of what can I start working on to move in that direction. Does that mean a promotion in my current job? Does that mean starting a side hustle that becomes a business? Does that mean learning a new skill and kind of pivoting to a brand new industry? Right? And so. A lot and we can start getting into this. There’s a lot to discuss in this topic. Um, but it’s the thing I focus on the most because that’s what the data tends to show. It’s like, Hey, you’re not gonna, you know, clip coupons and make your way to wealth. Like, you can make some wealth doing that, but it’s, it’s not gonna be a lot. The real lever is gonna be when you raise your income so much that you don’t even have to worry about saving money. ’cause there’s just so much coming in that it’s just, it’s easy to save. That’s what we, that’s the goal I want for, for everyone ideally. Well, let’s, you know, let’s talk about what you, you know, what you like to talk about. So, you know, give us some ideas on, you know, what do you tell people about increasing income? How do you do that? I mean, you’re talking to a group of, you know, individuals here that typically al are already higher income. Um, generally, you know, professionals generally going to be making over three, $400,000 a year. What, what kind of advice do you have for them? So for those people, I think the, the main thing, if I, if I say how do you increase your income from here? A lot of those people are probably gonna be just high paid professionals. And there’s just like the limits of how much you can work and how much you can earn day to day. The long-term solution to that is how much can you get equity ownership in this business that’s gonna pay off a higher income, especially over time if the business grows. Right? And so obviously it’s gonna vary based on if you’re like a lawyer, you’re like, oh, I’m getting paid X. Well, can you get partnership where one day if the firm grows, you have a bigger book of business, now you’re getting paid. Multiple of X, right? It, it’s, it has to come through some form of equity ownership. There are obviously exceptions to this. There are people who are entertainers or athletes or something where you can get these big salary type contracts. But once again, those are incredibly rare for most white collar professionals. It comes through business ownership and having income, or at least having a business that you’re reinvesting in. And over time you eventually sell and you have a very massive income event. So there’s a lot of different ways of thinking about this problem. You either. Siphon the income off to yourself every year, or you reinvest in the business so it’s gets bigger and bigger. Then you have an exit of some sort, which is a very large income event. And so if you look at the data, that’s generally what people in, let’s say 10 million plus in net worth. That’s how they get there, right? Besides the entertainers, the athletes, et cetera. The vast majority of people in the 10 million plus range, and that’s where I call level five on my wealth flatter framework. Those people are entrepreneurs like through and through. And so if we’re talking about, okay, well what can I do to like raise my income? There’s this framework from, uh, Naval Akan where it talks about leverage. I don’t mean like just borrowing money, like that type of leverage. I mean, there’s different types of leverage and so obviously hiring people in a business where you’re having someone. Do something that earns more value than what you’re paying them, right? That’s the oldest form of leverage in history, right? It’s like hiring people, having them, that’s one type. Another type is using money, so that’s owning real estate, right? Going and you’re, you’re using someone else’s money, the banks, and you’re borrowing it X percent and hopefully that real estate is returning a higher return than X. That’s how you, you’re just leveraging the difference in, in the return versus what you’re paying for your money, right? Which is, you know, the interest on the mortgage. So that’s another type of leverage. And then the two new ones basically in the internet economy are content and code. Content is like kind of what you’re doing right now, buck, you’re putting out, we don’t have to have this conversation with the thousands of listeners or tens of thousands of listeners, one by one where we go to their house and we sit down at a convenient time for all of us. Like this one episode would take like all the rest of our lives just to do. Right. And every time we’d have to have the same conversation hopefully. And you know, so because we can have this once through the internet and distributed networks, right? We can send it out to lots of people at once. And that’s the same thing. That could be true of writing a book, that could be putting out other types of content, right. There’s all sorts of ways you can do that. You’re selling a product on the internet, that’s another kind of scalable thing that you can do. And then lastly, it’s code, which is also kind of related to, it’s not content exactly, but you’re, you’re creating a software that’s like software as a service. That’s why this is such a profitable business model, because the marginal cost of the next user’s basically zero. I mean, it’s not exactly zero, but it’s almost zero. Yet you’re giving them a very valuable thing that they’re paying, you know, let’s say thousands of dollars a month for whether you’re doing business to business or. Even B2C, you can be, you know, getting someone on Netflix, you know, you’re paying 10, 15 bucks a month, but they are just pumping this stuff out and it’s, it’s a very low cost thing to do. The cost really is in the content. That’s a whole separate thing to discuss. But if you just think about this in terms of like code, and what code can do, like there’s, and now with ai, like so many people are like building apps and coming out with different things where like the code can be created for you. Whether or not that code’s perfect and good, and whether you actually still need to hire developers is a separate conversation. But you can see the point, like, these are scalable, right? It’s like every, the whole idea of leverage is I put in one unit of time and I get out more than what I’m putting in, and now it doesn’t necessarily happen right away, but that’s, that’s the long-term goal, is you need to divorce. Your time from your earnings. If you’re a lawyer doing billable hours, right? You are getting paid on those billable hours, which is great, but at some point you need to divorce. How much time you put in with the number of amount of revenue coming in, right? So that’s where you hire other people. That’s where you put out content and brings in more clients. That’s where you, you know, come up with an app or something. I don’t think lawyers would really do something like that, but you can imagine like there’s a lot of different ways where you can use leverage. To divorce your time from how much you’re earning in a given amount of time. I think the moral of the story, and I, you know, you like a lot of different things that you talked about there, but one I think is really important is that as a high income earner, um, who’s not, you know, when we’re talking about, say somebody who’s making half million, 2 million bucks a year. Um, you’re not gonna earn your way into, uh, being wealthy. That is a really tricky thing. I mean, of course, if you’re making, well, gosh, Kirk Cousins, uh, sitting on the sidelines for Atlanta Falcons yesterday making $50 million a year as a backup quarterback. Um, yeah, those kinds of things, you, of course most of us are not gonna have. But by the time you’re done with taxes and all that. It’s extremely difficult, and I can’t tell you the number of people that I’ve talked to, just coming through our own investor group that are making a half million, million dollars a year, and they’re in their mid forties, and I ask ’em what their net worth is, and it might be 2 million bucks. And you know, I mean, that’s a lot of money, but on the other hand, you would just think, well, gosh, how does that happen? Right? Well, think about expenses, think about taxes, et cetera. So for those of, so for, for, for that cohort. It is extraordinarily important to do a num other things in order to get, become wealthier, you know, and, and, and you bring up a lot of those points and, you know, arguably, um, you know, some of the investment decisions that we make, uh, are a big part of that. Obviously, you’re, if you’re going to be the SMB 500, you’re gonna do fine, but you’re not gonna, you know, you’re not gonna get rich just by doing SMB 500 for the next, you know, 20 years. You’re gonna do fine. You’re not gonna, you’re not gonna get super wealthy, right? You’re not gonna get super wealthy. And so it really comes down to, you know, asymmetric bets and investing or, and or, uh, business creation side hustles. Although, uh, I guess that’s kind of what you’re describing, but you’re not all that easy to do, you know, but it, but, but you know, that’s another issue entirely. You kind of have to figure out where you fall into that, you know, framework. Yeah, and I think there’s a bigger question here, and so when I talked about, when I wrote the Wealth Flatter, like there’s this idea of, okay, there’s these levels of wealth and what you’re talking about when you say super wealthy is what I call level five and level six. Level five is 10 million to a hundred million. Level six is a hundred million plus. The, the level I talk about the most, I think, I mean I talk about all of them in the book, but the one I focus on the most is level four, which is one to 10 million. There’s a lot of very successful people in that level. It’s about, you know, roughly 18% of the United States in terms of households. So there’s like, you know, millions and millions of people, like, you know, 20 million people, 20 million households in that level, if not more, right? So you think about that, there’s a lot of people in that level. They’re doing very well. There’s also a lot of them. That’s why the Amex lounge is overrun. That’s why people go on vacations and they have to get up at 7:00 AM to go get a a, a pool chair. ’cause like there’s so many people that have making good money, you know, living a good life and everything is I what I call the upper middle class. And they’re in this exact situation you talk about where someone’s making 500 KA year, that’s incredible money. You’re in the, you know, you’re in the, you know, 1% among households, right? Or actually at least among individuals, maybe not among households. You know, you’re making incredible money, but then after tax, okay, that’s not cut in half. Exactly. But let’s say you make 300 k and then you have expenses and everything, you can see how, you know, maybe you’re only saving a hundred KA year, which is still great. That’s amazing. But saving a hundred KA year, you can see it’s not gonna move. It helps initially, but it’s not gonna move the needle. It’s some point, getting past 10 million is very difficult with that. Right, right. What do you mean when you, when you talk about, uh, just keep buying, what, what is that concept? The concept there is the idea that I, I have a mantra for just keep buying, which is the continual purchase of a diverse set of income producing assets. And so the idea is, if I only had three words to give you on how to build wealth generally, like I don’t, when I, I don’t mean extreme wealth, I don’t mean 10 million plus. So when I say just wealth, I mean get into level four, let’s say one to 10 million. I would tell people just keep buying, right? So if I only had three words I could give you, right? Just keep purchasing assets over long haul income producing assets. And the specific mantra is the continual purchase of a diverse set of income producing assets. That idea. It disproves market timing. It disprove it shows that you can do this with diversification and you have to do it for a long time. Right? And so that’s where I kind of, I, my first book was me kind of showing that in depth, right? It was like one specific strategy and I just kind of proved it by looking at every single data set I could find. Different asset classes, all sorts of things to show all this, um, that this is the right way to go. Then with the wealth ladder, I zoomed out from just that one strategy and I said, Hey, let’s look at the overall framework of wealth and like, hey, that’s a great strategy by itself. But if you wanna get to Extreme Wealth as you say, or um, you know, you need to do something different and that you’re still owning them from producing assets, but you have to control those things. That’s, that’s the difference between like owning the s and p 500 and owning your own business, right? Like you have a lot more control over your own business. So you can kind of chart your own destiny a bit more than just owning the s and p 500. Now of course, there’s more risk there, right? You could lose everything with your own business. It’s very unlikely the s and p five hundred’s gonna go to zero, right? Yep. That’s just the way it is. No risk it, no biscuit is what they say. Uh uh. So based on your research, how should, and that should, we don’t need to be giving advice here, but talking about diversification, what does the data show on the optimal mix? I mean, is it more. There’s a lot of discussion about this, and a lot of times you hear about avoiding concentration risk, but then you have guys like, you know, Warren Buffett and, and, and Charlie Meyer will tell you no, you don’t wanna be just purely, you know, diversified into a million different things. You find the good things and you invest in those. So what does a data show? I mean, the, if you’re trying to compare like, buffet to the ta, like buffet’s, well, I’m not comparing Buffet, but I think, but I think from, uh, from the standpoint of. The standpoint of, of looking at, you know, I mean, what, what do we know about diversification? What, what is the data on diversification? I mean, the idea that you should own a basket of diversified securities like that has generally outperformed, you know, trying to. You know, beat the mar. Like, if you look at like just the s and p 500, let’s just use that. You know, you look at, there’s something called the, the Spiva reports, S-P-I-V-A, and over five, 10 year periods like the market s and p 500. So an s and p 500 index fund would’ve outperformed like, you know, 75% of active managers. These are people who, it’s their job, they are paid in, compensated to try and beat the market. They can’t, only 25% of them can do it over a long period of time. And then the further you go, the the smaller that group gets. Right? And so 25% is like a three to five year period. You go longer and longer, and the underperformance just starts showing up because of fees, especially like, especially after fees, it gets very difficult. So my whole take with this thing is like. Someone’s like, well, yeah, I’m just gonna buy the good company. He’s like, yeah, of course. If we could all just buy the stocks and only go up, this would be very easy. I think it’s, it’s easy to seduce yourself that that’s easier than it is. I don’t think it’s easy as people think it is, and we don’t have, we don’t have a good data set on it. ’cause all we have is the winners. We can talk about the buffets and all the. Successful stock investors. Where’s all the people that said, I’m gonna follow a value approach and then underperformed? They’re not gonna make the news, they’re not gonna make, no one’s gonna write books about them, so you’re not gonna see it. So the truth is, we do not have a data set. I have not seen a data set of, Hey, here’s 100 value investors. They’re all gonna follow this approach, and we’re putting the line in the sand now and this date, and then let’s just see what happens. Let’s see what happens to those 100 over the next 30 years. There was Warren Buffet and a few of his buddies, and they all did well. That’s already a weird elite group in some sense. If you know Warren Buffet personally and you’re a value investor, you’re probably already in some sort of elite, you know, group that’s not really representative of like stock pickers as a whole. And so that’s the only, my only pushback. I’m not saying it can’t be done, I do definitely think it can be done, but I think it’s much more difficult than people think it would be. Like we just got a bunch of kids that. At age seven and said, Hey, these are the best basketball players in the school right now. How many of those kids are gonna make it to the NBA? We don’t know. And maybe, you know, we would’ve had one LeBron James there, and he would’ve made it, but most of the kids wouldn’t have. And I think that’s the kind of the difference, right? Just because someone shows skill at some point doesn’t mean that they’re gonna necessarily have skill for a very long time. Yeah, no, I, I think the point I’m trying to make is this, is that, you know, you’re, you’re talking about sort of elevating from the different levels on this ladder that you have, right? And, and that, um, I don’t personally believe that only buying indexes is gonna ever get you there. I don’t think you’re, I don’t think you’re gonna get up that high. I, I think you have to take some level of risk. Now, your form of risk that you’re talking about is through equity and businesses and stuff like that. Not everybody’s gonna be able to do that. I do think that there is probably a role for things that are a little bit. Uh, a little bit riskier, and that’s where like alternatives come in there. For example, people buying real estate, people, you know, investing in startups. I mean, in, in this kind of space where we have people who can put some amount of money at risk, gives them a real opportunity potentially to see outside gains. What is your take on that? Um, it’s definitely true and if you look at, you know, as you move up the wealth ladder, you tend to see more ownership of individual stocks, not just like reti, not just stocks and retirement accounts, which is why I think we would think of as like the s and p 500 or an index fund, right? Um, but overwhelmingly, and you see this even more so. People own businesses, right? And so that’s if I’m like trying to, if I look through each one of these levels, now, once again, this is a, this is a logarithmic scale, so everything’s moving by 10 x, right? Level four is one to 10 million, level five is 10 to a hundred. Level six is a hundred plus. If you just break up wealth that way and you look like, what, what are the biggest changes from the, for example levels, you know, four to six, what are you seeing? It’s business ownership. Right. So I like Elon Musk probably has 95%. Yeah. But I’m saying like, okay, does that mean that no one’s owning stocks? No, of course not. Does that mean no one’s owning real estate? Of course not. Right. So those are other, other changes that are happening. I just think of those three between like real estate, you know, buying individual stocks that go up a ton. And business ownership. Business ownership is the one that I think tends to dominate, at least in the data. And I, no, and I have this in the, I agree with you. There’s no doubt in my mind that if you, if you want to. Sort of become, you know, you want to take it to the next level. You have to own it. You have to own it, own your business. You have to create an asset that you can at some point that you can sell, that can be valued at a certain amount on a multiple. And people who are high income, W2 wage earners, which is a lot of people in this show, um, they’re just not gonna be able to do that. So that’s what I’m trying to, that’s what I’m trying to get. My head around is like, okay, so what, what practical advice can we have for these, these folks? Right? Yeah. Then the, the thing I would say for them, assuming they’re not gonna go all out on that type of thing, is, you know. Own a diversified portfolio if you want, you can make these one-off bets in startups, alternative things like that. Of course, some of those are gonna go to zero, like expect that, like that is what happens. You’re gonna have, you know, in 10 investments, one of them may like, you know, three or five x, which is great. You know, a couple of ’em will probably go to zero and then a couple would just return your money, right? So that’s kind of, at least that’s what the VC on average type stuff happens. It depends what you’re investing in and how much you know, if you have better expertise or things like that. Besides that, I mean, you can think about like, are there other things you can do in terms of income? Whether that means maybe not, you don’t have to start a whole business, maybe you start a side hustle and you can do on the side, or it’s, there’s different ways of parsing out owning a business, right? Like I technically own a business. I have a full-time job. I’m a COO at a wealth management firm, right? And so I’ve been there since before we had a billion dollars in assets. Now we’re almost at seven, right? So I’ve seen a lot of changes, you know, just structurally within the org. While I’m doing that, I’m also writing, doing content. It’s not my main thing. You know, it makes some decent money, which is nice, but it’s not like my main thing. And so I think people can come up with something else that, you know, ends up being beer money or rent money or whatever it is, and that’s still something, you know, or your mortgage payment, whatever you wanna call it, right. So there’s different ways of attacking this problem. And I, I don’t think they all ne need to be home runs to still be helpful. Like I’m, I would say I’ve hit like two doubles, like I’m hitting a double in in my career and I’m hitting a double in like my content life. And none of them are like home run hits. I’m not like this super, super successful person, but I have two things that are doing pretty good. And so it actually does add up to be quite nice. So I think that’s another way of looking at it. And that’s kinda what, that’s how I approach it, just because it’s what’s worked for me. I’m not saying that’s gonna work for everyone though. Yeah, yeah. Yeah. Um, let’s talk about sort of the in general economies. Uh, you know, you’ve looked at historical data, I understand, uh, and recessions in recovery. What lessons can we draw from, you know, some of that history for today’s environment? I think the biggest takeaway is that the market’s gonna price all the stuff in before the headlines do, and so. For example, COVID was getting worse in April, 2020, and the market was already on its way back out. Right? It’s like the market’s like, oh, well that’s gonna happen, and that, and people just, all that information just hits the market immediately. So you’re gonna be in a, a case where, you know, the market’s already rising. It’s already moving past what the, the, the, the train wreck that’s currently happening, which is such a weird thing to say, but that’s exactly how it works. Like real estate prices didn’t bond, I think until. 2012 in the United States after the, after the GFC, the market bottomed in in March oh nine, right? So it’s like the market was already on its way back up and re the real estate thing was still going through. So markets move a different. Different speeds. I think real estate tends to move slower than the stock market, just in general ’cause of the liquidity issues, right? Like selling houses is not easy, you know, buying and selling an index fund or individual stocks is pretty straightforward. So I think the liquidity, and so you’re gonna see that in crypto. You’re gonna see that in, in. Inequities, it’s gonna move a lot quicker, and that’s gonna tell you a lot more. So if you’re like, Hey, I’m just gonna see what happens and oh, if the, if things are looking worse, like that doesn’t mean that the market’s gonna get worse. The market could have already priced that in and could already be on its way back up. And that happens so many times. So I would not say, oh, well the headlines are getting worse. If the market has to get worse, that doesn’t necessarily happen. So that’s the thing I keep in mind here. Yeah. So you’ve done a lot of research. Um, what’s the most surprising thing you’ve found, and I guess. Something that would have changed personally, how you handle your own finances. Yeah, I think it’s this idea of once you get in, the things that get you into level four, which is one to 10 million, are very different than the things that get you out. And I can just, let’s just do a quick thought experiment. So we’re gonna just use the, you know, you said someone’s earning 500 KA year. Let’s say they’re saving a hundred thousand after tax and, and expenses, whatever. So let’s say you just hit a million dollars in, in net worth. Let’s just assume it’s all in a portfolio just to make this thought experiment very easy, right? You’re saving a hundred KA year. Let’s say it’s earning 5% a year after inflation. So I’d say it’s a relatively conservative, not, not too crazy of a return. Right. How long does it take you to get to 10 million, you know, with, you know, start a million, a hundred KA year? 5%. The answer’s 28 years. So that’s 28 years of you earning, let’s say $500,000 a year. A very good income. Right. And you’re, you know, obviously you have to, you’re sacrificing ’cause you have to save a hundred KA year. So even though you’re, you might be spending a decent amount of money, you’re still saving a hundred k. It’s still, you have to do that for 30 years. That’s after you hit a million. It could have taken you 10, 15, 20 years to get to a million as it is, right? So you can think, you start doing the math on this, you’re like, wow. Like, yeah, this, this W2 thing. It’s great and all, and you can high paid W twos great, but at some point. It stops moving the needle, right? Like when you have a, when you have a million bucks, a hundred KA year, that’s 10% changing your wealth, right? A hundred thousand over a million, it’s 10%. By the time you have 5 million bucks, it’s 2%. Like you, you don’t move the needle anymore. And there’s nothing wrong with that. That should happen. But I think the main takeaway, the thing that that spoke to me about this when I’m writing about this, is. Do I keep my foot on the gas or do I kind of relax a little bit and enjoy all the other parts of life that aren’t money? And I said like, maybe I don’t need to get to 10 million. This is an arbitrary figure anyways. Like I don’t need to be in the, you know, upper class. I can be fine to have an amazing life in the upper middle class. And I think what happens is a lot of people get caught in this level four, like, we’ll call it the no man’s land. It’s not a bad place to be, but it’s just, you know, you’re making good money, but you’re really like, oh, I want to get to the next level. And like thinking through that. I think you have to realize that maybe that’s not the right decision and maybe the right decision, the rational decision is to say, you know what? I can take a step back. I don’t need to accumulate another $5 million to live a good life. And I think that is the, that is the big unlock that needs to happen and that I think a lot of people, especially this audience. Probably are not thinking about, ’cause I wasn’t thinking about it. And so that’s what I would say to this audience. Like, hey, a lot of you’re probably, if you’re in that range, you know, one to 10, especially if you’re like the upper, you know, over five, you probably don’t need to keep accumulating wealth. And I, and, and I think you would’ve to make a very hard sell to prove to me that you do, because I bet you don’t. And that, that just, I, trust me, I work with wealth management clients, like a lot of these people are like, oh, I’m spending. 200 KA year. It’s like you have, using that 3% rule, you’re making 500 K. Like it’s, it’s the math doesn’t math in any way where like you’re never gonna spend down your wealth. There’s just no way this could happen. And yet people keep wanting to accumulate more and I, I don’t know where that comes from. Yeah. So is there, uh, any data on striking that balance between savings for tomorrow and living today? I don’t know if we have like, good studies on this type of stuff. Yeah, I think it’s just really a question of like. What do you really want and what are the things you’re gonna do to get there? And I think the framework, I really like Sahil Bloom in this book called The Five Types of Wealth, and he talks about all the other types of wealth besides financial I, I obviously focus on financial because I’ve been writing about it for so long. But he is like, you’re probably chasing more financial wealth, which you’re already like at the 99th percentile on to go and give up health or to give up. Mental health or to give up, you know, relationships, social wealth like or time wealth. You’re maybe you don’t have any time ’cause everything’s being taken up by everything else. And so what are the trade offs you’re making and are, do, do those make sense? I don’t, I don’t think there’s. Any point in getting to 99th percentile on one metric, and then you’re like in the bottom 25% on everything else, or even on a few metrics, right? I don’t think it’s, it’s worth it to have the, the bottom 25% in, in hell just to have the top 1% in wealth, in financial wealth. I think it’s a crazy trade off, but I think people do make that trade off all the time and it’s something they’re probably overlooking. Good stuff, man. Uh, well, tell us a little bit about where we can, uh, learn more about your work. So my blogs of dollars in data.com. Um, you can find me on LinkedIn at Nick Maggiulli Instagram, Nick Maggiulli, and yeah, I have my books on Amazon Target anywhere you just search my name, you can find all my stuff. And, but, and I also, I answer every dm so feel free to DM me on Instagram or LinkedIn and I’m happy to, um, to chat about that. Great. Thanks so much for being on the show. Appreciate you having me on Buck. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, again, I guess the moral of the story is no risk. It no biscuit, uh, I can’t remember is the name. Uh, that was the, it was a old Atlanta Falcons head coach who said that. I can’t remember. He is like some guy from New Orleans, but very, very true. And, uh, but again, if, if you don’t, um, if you’re not interested in the. The biscuit, then don’t, don’t worry about the, the risk. Um, but if you want to invest differently, start doing. So. Just a reminder, you can start investing differently by going to wealth formula.com and, and signing up for Investor Club. Uh, and, uh, we’ll see you next week. This is Buck Joffrey signing off.

Richard Duncan, an economist and author renowned for his insights on global financial systems, breaks down the current seismic shifts happening within the Federal Reserve under the Trump administration. He discusses how Trump’s influence could reshape monetary policy, promoting interest rate cuts and quantitative easing to flood the economy with capital. While this may boost asset prices and create perceived wealth, Duncan warns of rising inequality and potential risks to the dollar's value, painting a vivid picture of the financial landscape ahead.

When we think about investing, our minds usually go straight to stocks, bonds, and real estate. But some of the best opportunities come when you stop thinking of investing as something separate from your everyday life. What do I mean by this? A lot of the things we buy are treated as expenses when they could be investments. You might wear a watch or jewelry simply because you like them, but you avoid spending too much because it feels frivolous.  Yet what’s better—paying $250 for a decent watch that will be worthless in 10 years, or $5,000 for a Rolex that could be worth twice as much over the same period? The same idea applies to cars and even furniture. I have a good friend who lives by this philosophy. For decades, he’s chosen to invest in the finer things rather than the ordinary, and it has become a cornerstone of his personal investment strategy. It’s about thinking differently—turning what most people see as expenses into assets. Art falls into that same category. I’m not a huge art guy myself. Sometimes I’ll buy a piece off the street because I’ve never thought of art as an investment. Yet for centuries, people have purchased art for its beauty, cultural value, and emotional impact—and often made a financial killing in the process. Today, art is recognized as a legitimate asset class—something that not only enriches your life on the wall but also diversifies and strengthens your portfolio. This week on Wealth Formula Podcast, we’re going to explore how fine art has evolved into an investment category in its own right, and how you might think about incorporating it into your wealth strategy. Learn more about Philip Hoffman and The Fine Art Group: www.fineartgroup.com Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  If you donate a hundred million dollars of art, you can probably get a tax rebate for the full amount of the donation. Welcome, everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Uh, today before we begin, I wanna remind you again, there’s, um, a website called wealth formula.com that you should check out. Um, one of the things on there is, uh, the ability to sign up for our accredited investor club now really do, um, suggest you check it out if you are an accredit investor and potentially get onboarded, uh, with our team. Uh, because as we enter into this fourth quarter here, we have a number of, uh, potentially interesting opportunities, um, that involve significant tax, uh, tax mitigating type investments. Usually using depreciation, whether that’s, uh, related to, you know, apartment buildings, sometimes in commercial aircraft, things like that. But if you are an accredit investor, I think you should at least get onboarded so that you can check out the opportunities that are out there that are coming your way. This is, of course, a private group, so that. Um, you will not get access to these, uh, opportunities unless you are part of investor clubs. So go to wealth formula.com and sign up for our credit investor club if you, uh, if you are one. Uh, let’s talk today a little bit about a shift, uh, in thinking. Uh, you know, we, when we think about investing, you know, of course we’re usually going straight to. Whatever it is that we’re typically thinking about, whether that’s real estate, stocks, bonds, whatever. But some of the best opportunities come when you stop thinking about investing as something separate from your everyday life and you start thinking about the things that are in your everyday life. So what do I mean by all of this? Well, a lot of things, uh, we buy, um, are treated as expenses. When if you kind of shift your mindset a little bit, they could be thought of as investments rather than expenses. So here’s an example that’s kind of obvious, right? Many of you wear watches, many of you wear jewelry because you liked them, but you might also say to yourself, well, I like them, but I’m not gonna spend that much on it. Otherwise, it’d be frivolous. So. You, maybe you buy a, a nice watch for 250 bucks. Um, but here’s the thing, what happens, uh, with a watch that’s probably 250 bucks that you bought in the mall. It’s probably gonna be worthless in about 10 years. Now, what if you actually paid like five grand for, you know, a Rolex? I might pay a little bit more than that, but let’s say you paid $5,000 for a Rolex or some other brand that has notoriously increased in value, that’s really hard to get your hands on. Um, well, in 10 years, that $5,000 Rolex or that $10,000 Rolex or whatever, it, it’s probably gonna be worth more than when you bought it. At some point it will, if you look at the historical numbers on watches, for example, and various types of jewelry. That’s just what happens when you buy the really nice stuff. The same idea applies to cars. Of course, you know, those of you who are car buffs, you know, that, um, you know, uh, you may, you may not, uh, you may not be looking for the most, uh, reliable whatever car you may be looking for something that you really want to drive that’s, uh, kind of a classic car that you know is gonna go up in value. But you can even get that in things like furniture. I have a, I have a friend who lives by this philosophy and he’s. You know, for decades, he’s chosen to invest in the finer things, uh, rather than the ordinary, and has become, um, really a cornerstone of his personal investment strategy in some, you know, so it’s really about thinking differently, turning what most people see as expenses into assets. So, you know, this particular interview we’re gonna do today is about art. Art falls into that same category, you know, especially for those of you who love art. I’m not a huge art guy myself. Okay. Sometimes I’ll buy a piece off the street because I’ve never, um, because I like it, you know? But I’ve never really thought of as an investment, and maybe this is not an area that I love enough to make part of my investments, right? But some of, some of you will. Um, you know, I mean, for centuries people have purchased art for beauty, cultural value and emotional impact, and then. As a side effect of that, they’ve often made, uh, they’ve made financial killings in the process. So, you know, today, um, art is recognized as a legitimate asset class, something that. Not only can enrich your life on the wall, but also diversifies and strengthens your portfolio. So that’s what we’re gonna talk about on this week’s, uh, wealth Formula podcast. We’re gonna explore how fine art has evolved into an investment category in its own right and how you might, uh, think about incorporating it into your personal wealth strategy. We’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate. Much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Well, formula Podcast is Philip Hoffman. He’s the founder and chairman of the Fine Art Group, a global leader in art investment advisory and finance. Philip spent years as an executive at Christie’s before pioneering the first art investment fund, effectively creating a new asset class for investors. And today the fine art group oversees more than 20 billion in, um, advised assets across 28 countries. Philip, welcome to program. Lovely to be here. Welcome from Sunny Lee, the Alps. Very nice. It’s, uh, very appropriate, I guess, for the art world to be coming from some nice places like that. Um, well, let’s, let’s get right into it. Uh, you know, you, you started, uh, uh, at Christie’s, uh, and, uh. Then ended up, um, getting this situation in place where high income professionals can start thinking about, uh, art as an investment. What, tell us the story. What, how, how did that happen? So, I got into the art world completely by accident. I trained at KPM. And as a CPA and then by accident, got asked to be CFO of Christie’s when I was 27. I was the youngest board director by about 20 years. Uh, I had no interest in joining Christie’s ’cause I thought he was a antiquated company selling, uh, with, with old fashioned people selling Rembrandts a little did I know that there was one and a half thousand staff involved that, um, they were trying to sell Basquiat and. Picassos and Renoirs and, and, and everything from colored Damons to vintage motorcars. So it was a fascinating business to join when you are 27. And, uh, but I didn’t wanna be CFO, I wanted to actually get my hands dirty and find out what the business is all about. And that was my first exploit, was to meet a client who had bought two pictures, one a can leto for about 50,000 pounds and a. Monet for around the same amount in 1976, and we went to the warehouse to look at it with my experts, and we recognized both were genuine and both, uh uh, what is it, 30 years later were worth. Between one and a half and 3 million each. So I suddenly tried to work out the maths and worked out, Hey, is this a good investment? And, uh, it looked like a staggering investment and better than real estate. And then I asked a few more questions of that particular client and he said, oh, I bought a prince by a very famous artist called Domie for about, um, 10 cents a print. And I said, what are they now worth? And this was, uh. 30 years later, 35 years later, worth a thousand dollars a print. So that’s a good multiple. And I suddenly had the idea that art was more than just fun, that it was investible. Um, the challenge is understanding what is good art, what is bad art, what is risky art? Outed by the art, uh, and I’ll give you some insights as we go. Yeah. Um, I mean, and in those, those, uh, those anecdotes are, are obviously very encouraging for people who are, uh, interested in, in, in investing in stocks. But when you look at the big picture of art, and I don’t know exactly how you, you come up with these indices per se, but how has art performed historically compared to stocks or real estate? So I would say that art has probably underperformed in general against the s and p 500. So in broad outline, uh, you would be better off buying the s and p 500 as a, as an investment than buying art. But art has the added plus. That there are in the US significant tax advantages over stocks. So if you look at most of the major families, they have donated their art collections to major museums. And of course there’s a huge tax benefit when you, if you donate a hundred million dollars of art. You can probably get a tax rebate for the full amount of the donation. Uh, so suddenly not only do you get the return on the art, but you get the tax, uh, refund effectively on your other income as an offset. There are not many countries that offer that attractive term other than the us They’re probably half a dozen countries like that. But, but so in, in the US it’s particularly attractive. And then if you are clever and you have the right advisors, yes. There are times when you can double your money. You can make, you know, my, my view is you can make 10% per year return if you are clever and well-advised. If you are badly advised or dunno what you’re doing, you could probably lose 10% per year on your investment. So that’s why, uh. I, I think that art is a particularly niche investment and it’s gotta be well understood and well advised. And the fine group who’ve been in this space for nearly uh, 30 years, and I’ve been in the business 35 years, have advised probably for 50 of the Forbes 500 and, uh, work with some of the top investment banks in the us and that’s because we’ve. Seen how to do it, and we’ve seen how not to do it. I’ll give you an example. So one of my friends, he rang me up. I was doing a presentation with one of the biggest family offices in America. They said, look, let’s get you on a, on a video with our top family friends. And one of the friends was watching my podcast and I went through the 20 do’s and don’ts of buying art, and he was listening to it and he rang me a couple of weeks later and he said, Philip, your talk resonated with me. And I said, why is that? He said. I bought a painting by an artist called PORs and I bought it in Los Angeles, um, over in California from a great dealer. And I got it shipped to my house in Georgia, uh, and it had a cost of $250,000. And he said when UPS delivered it, uh, it arrived on my front lawn. I was away for a week’s holiday, so it was left on the front lawn, it rained the rain d um, completely destroyed the crate and destroyed the artwork inside it. When I rang the gallery and said, Hey, um, once the insurance on this and am I gonna get my money back? They said. You didn’t insure with us, you insured through UPS rang UPS, and they said you only insured the crate and the packaging, so we can reverse you $250, not $250,000. So that client said, Philip, next time round, I need the fine art group to help me get it right. And. And I, I give you one other story of how to mess it up. Uh, one of my, one of my friends had a a a $1,000,005 Damien Hurst Meds sink Cabinets. It’s a sort of meter and a half long meds sink cabinet with lots of bottles in it, all displayed in random rows. And Damien Hurst that auction for about 1.5 million, about 10 years ago. And he hung it. He hung it behind his desk in his office and uh, he moved offices and he said to a shipping company, can you get it moved for me? Uh, and they said, yeah, that’ll be $4,000 to move it. And he said, I’m not paying $4,000 to move this 200 yards from my old office to my new office. He said, I’m gonna get Burt, my driver to do it for me. Of course Bert said, look, I’ll get it done now. And he said, no, no, no. It’s a valuable item. Do it carefully, do it slowly. And, and, and, you know, take your time. He came back from lunch and Bert was standing at the front entrance of the new offices in the Gerkin in London, and he said, uh, governor, the uh. The Damien Hurst medicine cabinet looks better than ever. And he said, well, it looked pretty amazing in my office before. What do you mean it looked better? He said, come and have a look. And he went up and bur the driver, not only, uh, reorganized every single bottle into sending order, but got rid of the empties, threw them away. So this was not. Damien Hurst medicine cabinet, but bur the driver’s medicine cabinet went from worth one and a half million dollars to about $5. Uh, luckily they had a photo and they kept it. So the do’s and don’ts of buying and investing are, are, are hundreds of stories of what not to do, and probably 10 lessons of what to do. So, uh, we’ve been talking about some, you know, very expensive art and for, you know. High net worth individuals we’re not necessarily ultra high net worth individuals. They may be thinking, well, gosh, I’m not gonna, I’m not gonna put a million dollars, um, in one piece of art. And what kind of, you know, that kind of risk. So what are some of the ways that, you know, if you’ve got money, but you don’t have millions to spend on art, what are, what are some of the main ways to invest, uh, uh, without buying, uh, you know, a Picasso outright? So you can, there are, there are options to buy, uh, but like a horse, you buy a syndicate in pictures and there are one or two vehicles that offer that in the United States. And I warned clients, um, on that front to look at the, uh, the, the critical factor, which is fees, fees and fees. Um, and when you’re buying a stock and you spend, you buy a million dollars of stock or a hundred thousand dollars of stock, the fees are maybe a hundred dollars, $200, $500 when you’re buying art. Some of these products charge somewhere between, uh. For every a hundred thousand, they’re charging somewhere between 20 and $40,000 in fees over a 10 year period. So stay clear of those, those funds and products that charge huge fees. ’cause you’ll never recover that 20 to 40% cost uplift. Um, now. My recommendation is there are certain artists I think, that are super interesting to buy in the secondary market. So what I mean by that is buying at auction bought or buying privately artists that are well known that have perhaps come down in price quite considerably. And I could name you 10 or 20 artists. Super interesting right now that were maybe a hundred thousand dollars, $200,000 now down to $60,000 and. I would say those are gonna, we’re gonna see those coming back with a vengeance over the next three to five years. But there are other artists, so going into a gallery and just sort of picking an artist you like and somebody saying, look, I’ll get you a 20% discount. That’s a meaningless, meaningless thing. I mean, uh, so the key is. Is there art to buy at $10,000 that you can make a big profit on? Probably not. Is there art to buy at a hundred thousand dollars to $200,000? Definitely, yes. So my, my entry point would be somewhere in the 60 to a hundred thousand dollars level, maybe a bit lower, but not at the $10,000 level, and I would put. If you’ve got good advisors, like the Fine Art Group, they’re probably, they’re probably 10 in 10 or 15 in the world. Remember, there are about 4,000 people who call themselves ARS Advisors. And, and probably most of those have done about a year, about as much education as you have done. Um, but they just put the label on the back of their envelope saying Art Advisor, because they walked into Sotheby’s and spent a, did a three month course there, or Christie’s or something. But you know what? What, what somebody like the fine art group brings is a hundred people with average of 20 to 30 years of expertise each. And that type of information is critical in understanding before you buy. So critical in buying art is understanding the fees, understanding the margins. Um, buying an auction is not always the best thing to do because the cost of buying an auction is typically 20 to 30%. And unless you are buying something that’s deeply discounted where there’s a real opportunity and we think the artist is gonna get much stronger over the next five years, you’re better to buy privately where no one knows what you paid for it. Because everything that’s sold at auction is then publicly available knowledge. And if I wanna buy, if you buy a. Um, a Picasso work on paper for $50,000 and I see it. You bought it at Christie’s. Uh, everybody will know that you bought it at Christie’s. Everybody know you bought it for $50,000. So anyone who’s buying it off, you would say, Hey, you bought that for $50,000. Why should I pay you $250,000 for it? You’re joking, I’ll pay you 55,000. Whereas if they dunno what you pay for it privately, uh, they dunno where to stock. Yeah. Um. You know, you mentioned how there’s some art right now that is, um, at a discount. I’m cur, I’m curious how art moves. Does it, does it typically. So moving independently based on what’s in vogue or you know, how do you, how do you determine that something is undervalued and that it will have greater value later? So there are certain artists that will. Stick around for the next, uh, 150, 200 years. There are certain artists who will stick around for the next 30 years. There are certain artists who will stick around for the next three years, and there are a lot of artists who will stick around for the next three months. So it’s differentiating. There are probably a million artists that will stick around for three months and there are probably. 2000 artists that will stick around for the next, uh, a hundred years. And then of those 200, of those thousand or 2000 artists, um, there are some on the periphery, but you’ve really gotta focus in and avoid. Uh, avoid an awful lot of the art world. And then if you look at the long term trend, you’re not gonna make money in general in one year. You, this art is not the market where you buy something for $50,000 and sell it a month later for $65,000. It’s typically you buy it for 50,000, you hold onto it for three, four years, and if you know what you’re doing and you’ve got the right team, you might be selling it for 75 and maybe even a hundred thousand dollars. You’re never gonna get is really, really rare. It is one in one in 10,000 times you’re gonna get five times your money or 10 times your money. So this sort of theory that you bought something for $10,000, you’re gonna sell it for $150,000. It is extremely rare and very few professionals even then get it right. So, um, many families have put a sort of 5% of their wealth into art. A, because they enjoy it. B, because they’re well advised, and trust me, lots of people say, well, I bought this, I bought that. There’s always a very smart advisor behind all these big families who said. Who do all the homework and give you the risks, the rewards, the upside, the downside, I, when we do a due Dili for every work of art that we buy for our clients, we do like a 20 page due diligence document. A bit like analyzing a company. So when you go and buy. If you go and buy a stock, if you put $500,000 into a stock, you’ve done all your homework, you’ve looked at the analyst reports, you’ve looked at the cash flows, you looked at the, uh, what the market reading is and, and, and, and what you think the balance sheet’s like, and you get advice as to help go through it. When people buy art. 90% of the world who buy art do it in about 25 minutes, right? They go in, they spend a hundred thousand, 200,000, 25 minutes. They like the look of the picture. The dealer tells them it’s 25% discount, that it’s a great deal. Best opportunity for lifetime. The. Boom, the deal’s done. Instead of a hundred thousand, they buy for 75,000. And then they get annoyed when we come in from the fine art group and say, oh, you could have bought that for $25,000 somewhere else. Um, so we try and do that homework for our clients, give them all the information and give them the. Terrain. So for instance, if the artist is coming up for big shows in museums, that’s a plus. That’s gonna help the artist succeed if the artist has been bought by major collectors. The right sort of collectors, like. I don’t know. The biggest collector in, in California, the main collector in Paris, the main, the main museums in London or New York, that’s gonna massively help. So if a young artist gets picked up by the Tate in London, or by the Whitney or by the Guggenheim, that’s gonna have a big impact. And if there’s gonna be a big show of an artist, so let’s say you own an Ed Roche, you bought Ned Rousche from Gian or one of the galleries, uh. A, a, a few years ago, and if you hear that there’s gonna be a big show at, um, the Guggenheim or in, in Abu Dhabi or wherever, that’ll have a big knock on impact on the pricing of that art upwards. So, so, and sometimes the death of an artist has an impact. So there are about 10 or 20 things that matter. One of the most important is, is it Right? There are a lot of fakes out there. So I see, I see one fake every day. And that’s just distilled down from what my company sees. So we probably look at a few billion dollars of fakes out there. So there are certain artists that easily faked, certain artists are not. So that’s number one. Number two, buy your art from a reputable place, just because it’s too good to be true. It probably is too good. Too good to be true. Again, it costs you nothing to get, it costs you very little or nick to nothing to get some advice. Um, but without advice, you’re spreading dangerously. So is it genuine? Is it in original condition? So a lot of pictures have been robbed or been damaged or being in the, in the light and therefore the paint drops off or being. Or had water damage or fire damage, and suddenly the value of that impact can knock a picture from a hundred thousand dollars down to $20,000. I mean, I saw a picture by a major major artist called Can Leto from the 1740s. It looked fantastic. When you looked at it, it should have been worth 3 million uh dollars. But when you look close up and put an ultraviolet light over it, you realize that most of it had been touched up in the last 20 years, and it was probably worth. 250,000. So 10% of what it, what, what it would be worth if it was in perfect condition. So there are, there’s a checklist of items that you’ve gotta go through. Then you, then, my recommendation is you buy for a reputable gallery or, or get a reputable advisor to help you. Don’t buy at these sort of remote auctions where they tell you this, Andy Warhol will give you a certificate with this, and it’s going at at 20% of what it would make at the big auctions in New York because one of my clients spent a million dollars on 10 works that should have been. Worth $10 million and they’re all fake. So he bought a million dollars of fakes. So rather than getting a discount of 90%, he lost a hundred percent of his million. Um, so then he brought in the professionals to help advise it. Um, when you think about art in general and, and prices going up and prices going down, do the markets in art as, as a general rule, track other economic cycles, other markets, or do they tend to be, uh, uncorrelated? So art. Art in general has shown a steady upward trajectory. If you bought the index of the top thousand artists, you’d probably find probably a, a circa 8% compound return. Pretty, pretty reasonable. Um, but that’s over a, you know, you’ve got hold over a 10, 20 year period and that assumes very little transaction costs. Um, but, uh. Interest rates have a big impact on art. So high right now. Interest rates are, yeah, we’re looking at sort of, uh, the, the, the, the, the bank, the rates are 5% to 10% to borrow money, and that’s probably too high to give a boom to art. So when interest rates were close to zero and people were borrow at two. That really kicked art off big time. And we think the, when interest rates start coming down, now, maybe that’s not gonna happen in 2025, who knows? Um, but if they start coming down from the four to 5% level down to the two, three, I think we’ll see a. 10 to 20% uplift in the price of art. But so long as interest rates stay heavy, uh, I think art will have a tough time over the next few years. So you mentioned, um, I guess for somebody who’s already diversified, um, the slice of portfolio that makes sense for art. Can you talk a little bit more about that? Yeah. I would say that if you’ve got, again, good advice. And you’ve got a big enough portfolio. So I would say, you know, really. You need a portfolio of about $5 million, and I would put probably 250 to $500,000 of that into art. So I’d put five to 10% of your portfolio. Now, if you are richer, let’s say you’ve got a hundred million dollars, I would say you could take 10 to 15% of your portfolio and put into art because there are two. There were two or three aspects. One is. In America, you’ve got a huge tax advantage if you gift it to a museum. Um, secondly, you’ve got a, um, huge enjoyment factor. You can hang the pictures on your wall, but beware there are, uh, state taxes. If you buy a picture, uh, ad auction, let’s say in. Uh, tax free in Switzerland or in in UK and ship it out to the us. Uh, you’re gonna have to pay, uh, sales tax when you bring it into your state, which could be, you know, six, between zero and 10% so that that has a knock on effect. And in Europe there are taxes that can go anywhere between five and 20% when you hang it on your wall. So quite a lot of investors put. A high value art into warehouses and they don’t actually hang it on the wall, and sometimes they put a copy on their wall so that they can enjoy it and know that they own it. Um, the, the negative side of art is that you can’t really split it up. I, if you’ve got three kids and one work of art, it’s rather unfair to say, well, that, that one work of art goes to my eldest son, or my youngest son, and the others get nothing. So quite often what happens is clients with big collections. Maybe they have 20 pictures worth a hundred thousand dollars each, and then they have one picture worth 2 million because they bought a basia. You know, I had a client who bought a Basia. Uh, 25 years ago for 250,000 today, that’s probably worth 20 million. Um, and that’s disproportionate value to his, to his, um, rest of his art collection. So what he wants to do is he’s gonna get us to sell that work, um, realize the 25 million, redeploy some of it into, uh, other artworks and give some of that to his kids. So, um. Uh, but my view is that I would allocate at the bottom end 5% at the top end 15%. And if you’re very wealthy, plants in the billions of dollars sometimes put 30% of their wealth into our, because their, their disposable assets are so enormous that are starts taking a major feature. Um, but I would say don’t buy art below $50,000. And, um, don’t buy art if you are very, very rich, um, you know, stick in the, don’t go much above 10 million or if you are super rich, then there’s the, what I would call the mega game, which is the sort of 80 million, a hundred million dollars plus. So there’s a, there was a big, um. Middle Eastern country that invested circa uh, $30 billion in art over the last 10 years. And that collection is probably worth 300 million, 300 billion now it’s probably gone up 10 times. ’cause they bought discreetly at the very, very top end of the market. The rarest that the rep. But it’s, uh, it’s not an easy, you know, it’s, it’s, it’s a complicated thing and. You know, it’s not always about art. You could buy vintage motor colors. You could buy wine, you can buy, um, jewelry. You know, some of our clients collect Cartier jewelry. Again, if you’re gonna buy jewelry. Be careful. A, is it genuine? So you’ve really gotta have the right experts on your side. And B, if you’re gonna buy jewelry, buy signed pieces, buy the big names, car Shave Van Cleef, perhaps graph, um, and, and just avoid the unbranded jewelry. That looks great because that’s done really badly. And the Cartier pieces from the 1920s and the 1930s and later. Have done incredibly well. So you might have bought a Cartier piece for a hundred thousand 20 years ago. It might be worth. 1 million now. Um, so there are other avenues of buying. Right now. Wines come down by 20 to 40%. Vintage cars come down by 20 to 40%. Uh, some of them, although some of the Ferrari’s have held their value. Uh, and, um, you know, some of the, some of. Uh, Picassos or Ed Roches, Bridget Riley’s, these big name artists, they’re probably off by 20, 25%. Uh, and that’s why I think now is the best time I’ve seen in the last 25 years to buy art. If you’ve got, if you are cash and you’ve got the right advisors. So I told. My richest clients, my less rich clients, that now is the time to research, get comfortable, allocate a portfolio, and look at buying art. Because some, even there, there’ve been some artists that were 40,000, they went up to 200,000, real speculative, sort of like penny stocks and they come back down to 40,000. Uh, so there’s a rollercoaster in the young contemporary, uh, some interesting, some stay away. How liquid are these markets? Obviously, if you are putting in, you know, 10% of your, uh, portfolio, um, the event that you need to get out quickly, I mean, how, how liquid are the markets? You cannot get out quickly. Okay. So stocks, you can do a sell and get out in 20 minutes. Um, art, my guess is the fastest you could get out is probably a. A month, 30 days, and the slowest is three years. So 30 days to three years. Uh, on average. My instinct is if you buy now, um, you’ve gotta hold for three years, three to four years, and you could probably get out. There’s a chance right now that you could double your money in a three to five year period because there’s so many great artists that have come off in price and there is an opportunity. Um, but if you have to, if you bought today and you suddenly said, no, I need the cash. I need to get out, you can. You can, there’s gonna be a, a, a discount for, for, for getting, getting out of it. So anybody who needs that liquidity, don’t put it into art. You’ve gotta put this money aside for three to 10 years and, and, and as look at it like that and don’t look at it as a one year investment. It’s very, very rare that you turn the money around in a year, if ever. So, uh, tell us a little bit more about how your company works and you know, how people could potentially. Reach out to you and, um, you know, so our company’s called the Fine Art Group, www.fineartgroup.com. I run it for, uh, 26 years. I’ve been in the art market 35 years. Uh, there’s close to a hundred people involved in our business worldwide. So we’ve got offices all over the US and, uh, headquartered in the Rockefeller Center in New York. Uh, our clients do, our, our clients do five things with us. So some clients inherit collections of art and we help them. We do an audit. So it’s a bit like, uh, you know, your, your, your grandfather dies and they leave you the whole contents of the house, and some of it’s fantastic and some of it’s not very good. We will come in and do a valuation and then we will tell you. Those 10 pictures are fantastic and the rest is not worth having. We recommend selling that and keeping those 10 and in five years time, those 10 could be worth five times it. So we give you an in insight into what we would do with a collection number one. That’s a very, very useful service for people who inherit sort of next generation or families that have bought art over the years and, and then suddenly get thinking, what the hell do I do? I’ve gotta downsize my house, or I want to hand over the next generation. What do I do? And we help them gift it, do charity donations, philanthropy. We do all that. Number two. We lend money against art. So you said is art liquid? Well, we make it liquid because we take, let’s say you’ve put $2 million into art, we’ll lend $1 million against that. And you can borrow that in like, uh, within like. 20 days. So you can say, Philip, I’ve got $2 million of art. Would you lend me a million dollars in in in three weeks? And I’ll say, yes, we can. And we will. And we could, you could borrow that money for 1, 2, 3 years and that helps pay. Estate taxes, it helps take tax bills, it helps. Let’s say you wanna give some money to the kids or whatever it is. So there’s another avenue. So our financing is a very, very interesting business, and we have investors who like to invest in that, and that gets a yield for our investors around. 10% net. So it’s a very interesting product for clients who are looking to get a sort of bond yield with a fantastic product where we’ve had no capital losses and uh, a quarterly dividend. So clients get a two point half percent dividend every quarter and a 10% yield. So that’s quite an interesting money. So that’s something that, uh, that accredited investors can participate in as well. Indeed, indeed. And, and I would say that’s almost sexier right now than, uh, you know, if you, if you’ve got a lower risk appetite, it’s, I would say that’s a very low risk product with a very nice, steady yield. And we’ve run a business like that for 10 years. What kind of, um, minimum investments are, are those? It, it’s, uh, unfortunately it’s a bit higher, so it’s sort of 500,000 per million dollars. Um, but it’s locked up for three years. So you, you have a three year commitment and you get out, so it’s, it’s, and it’s di you know, so million dollars is yielding about a hundred thousand dollars a year, so it’s very. Interesting return in this current economic climate and, and we had no credit losses and no, uh, no capital losses. So I like that. Number three is we help clients who’ve got a little bit more money to set up private funds, so the. Let’s say they’re a bit wealthier and they’ve got three to $5 million to invest, we will run a private fund for them. So we will help them buy, hold, and sell. And that’s, I, I think, very neat. And they can have the art on their wall, they can have it in a warehouse. We can run it tax efficiently. We can run it in the us, we can run it out of warehouses. Uh, in, in, in. Tax free jurisdictions like Delaware, um, and you know, you can borrow the art and hang it on your wall for a time. You could buy and sell and you can have the top advisors doing that. So that’s an option. Then we help clients, um, buy art as pure advisory. So some clients say, look, I’ve sold my company for $10 million and I bought a house for 2 million, and I wanna put $500,000 of art on the wall. We help clients do that, and that’s a really nice product where clients get advice, they know what they’re doing. They send us a WhatsApp saying, I’ve just been into this gallery, or this auction, or I’ve been to Sotheby’s or Christie’s. I like something there. What do you think? And within. Anywhere between an hour and 24 hours, we come back to you and say, here’s all our comparables. This is why we’d buy it. This is why we wouldn’t buy it, and we give you advice. But at the end of the day, you might say, you know what? For $50,000, I love it and I don’t really care what your advice is. I wanna buy it because I love it and it’s not about a financial investment. So that’s the next product. So, so I’ll invest and then we will. We plan to come out with investment funds where people can go. We used to run Delaware Limited partnerships where people could invest 250,000, $500,000 into a limited partnership with a typical fee of like one and a half and 20 over six, which is like a private equity product, standard product. But most of these, um, types. They’ve, that’s a low end type of game for, from, from what there is in the retail market. So I just emphasize to clients, there are products out there with fee loads of 20 to 40%. Don’t touch them and do your due diligence. And quite often these documents have 130 pages to read and clients can’t be bothered to read them. And in on page 90 and 120 is where they set out where their 20%, 40% fees are. So just avoid them like the plague. They’ll come back to haunt you. Um, but so the five products we have in our business are art investing, art financing, either to borrow money or to invest in the borrowing fund. Um. Art, valuation, art, audit, and philanthropy. So helping clients review their collections, sell them so we can sell, save clients a fortune on when they sell on the fees they they pay. So if you didn’t have our help, you might pay 30 to 40% in fees when you sell. So you might sell a picture, you might sell a collection that you inherited for a million, and you might only get 600,000 after. After transaction fees? Well, with the help of the fine art group that may be down to, uh, instead of 400,000 transaction fees, we might be able to get that down to less than half that, or even less than that. Um, you know, it can get as low as 5% as opposed to 40%. So that’s a big help and we can help give people an idea of. The current state of the market. You know, is it good time to sell blue dins? Is it a good time to buy white dins? You know, one of the challenges in the jewelry world is these synthetic manufactured dins, and that’s had a big impact on the white dins. And then, you know. Um, quite often you go to, you travel abroad, have a lovely holiday and you know, like I do, I say to my wife, I’d love to buy you a nice sapphire ring or something. And I, I made that mistake 25 years ago. I was in India. I saw something that looked like it should be worth three to $5,000. They said, look for you, sir. It’s only a thousand dollars. Well, I found it was a colored stone. So even experts like me. You know, I didn’t take advice at, at that level. I knew I should have, but I took a view of it. It, it gave my wife enormous joy and I’ve never really told her that I messed, messed up. So even the professionals mess up, but it was a thousand dollars, not a million dollars. Well, very interesting stuff. Uh, Philip, I, uh, appreciate all of your insight into this space and, uh, obviously if, uh, people are interested. They can, uh, check out the website and it sounds like there’s all sorts of different ways to participate. So, uh, thank you. Thank you again for joining us. Thank you for inviting me. I’d loved it. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for, and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator. It can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, you know, uh, what I try to do on the show ultimately is just try to make, make you think differently. And, um, you know, I mean, again, if we’re talking about art, like, you know, we just did, uh, in this interview, that’s one thing. Maybe art’s not your thing, maybe, but you, maybe you like watches, maybe you like really nice furniture. I mean, all of this stuff has a niche where you start going out of the. The world of, of, uh, expense into the world of investment. And if you love stuff like that, I mean, hey, why not? Uh, think about, think about buying stuff that goes up in value and enjoying it while it does. Uh, that’s it for me this week on Wealth Formula Podcast. Uh, this is Buck Joffrey signing off.

We all know technology and geopolitics shape the world, but there’s a quieter, less obvious force that dictates the flow of wealth and opportunity: demographics. Where people live, where they move, and how populations grow or shrink — these are the currents that ultimately drive economic gravity. That’s why all of the multifamily investments you see through Investor Club focus on areas where there is job creation. Where there is job creation, there is population growth, and people have to live somewhere. Scale that concept up to a global level, and you start to see why migration, climate, and demographics are the real megatrends of the century. Take China — decades of the one-child policy have created a demographic cliff. Contrast that with parts of Africa and South Asia, where populations are booming. Add to this the wildcard of AI, which could either amplify the advantages of youthful nations or offset aging ones. For investors, entrepreneurs, and anyone thinking long term, the key isn’t where the puck is today — it’s where the puck is going. That’s the topic of this week’s Wealth Formula Podcast. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  If a place is attracting young people, it must be doing something right. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Before we begin, I wanna remind you that there is a website associated with this podcast is called wealth formula.com. Go there and uh, check out some of the resources we have, including the opportunity. To join our accredited investor club. Uh, this is a. A group, uh, for a credit investors to see a potential deal flow that you wouldn’t see otherwise, uh, because they are private, uh, private nature. So the process is easy. If you are an accredit investor, go ahead and sign up and get onboarded. Then basically wait to see what kind of deals are out there and see if you’re interested. Check it out. Wealth formula.com. Okay, so let’s start. Uh, let’s talk a little bit today about something that’s really important, maybe not appreciated as much. You know, we know that technology and geopolitics shape the world, but there’s a quieter, sort of less obvious force that dictates the flow of wealth and opportunities. And that is demographics, um, where people live, where they move, and how populations grow or shrink. These are the currents that ultimately drive economic gravity. And that’s why all of the multifamily investment you see through say investor club, uh, focus on areas where there’s job creation. Why? Because where there is job creation, there is population growth. And guess what? People have to live somewhere, right? So that’s something that you might be familiar with already, but scale that concept up to a global level and you start to see why migration. Climate demographics, they’re really the sort of mega trends of the century. All you have to do is take a look at China, right? Decades of one child policy have created essentially a demographic cliff for them. And you contrast that with parts of Africa and South Asia where populations are booming. And then you add to this, the wild card of ai, which could either amplify the advantages of youthful nations or, or potentially offset. Aging ones like China, as we mentioned. So for investors, entrepreneurs, and anyone really thinking long, uh, term, the key isn’t necessarily where the Pak is today, as the Great Gretzky once said. It’s where the puck is going, and that is the topic of this Week’s Wealth Formula podcast, and we will have that for you right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investment. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key, even though you’ve borrowed money at a simple interest rate. Your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments visit. Wealth Formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today I’m joined by Parag, Dr. Parag Khanna, a globally recognized strategist, bestselling author, and founder of Alpha Geo. His work focuses on some of the most important forces shaping the future of wealth, opportunity, uh, wealth, opportunity, migration, demographics, climate and technology. He’s advised governments, global institutions, and even military leaders on how to navigate a rapidly changing world, and his books, including Move the Future is Asian, have become. Essential guides for understanding where people capital and power are headed. Uh, welcome to show up Pak, how are you? Thank you. Great. Great to be with you. And, uh, thanks again for coming all the way across, uh, the world from Singapore. Uh, I just got you off your, uh, ice bath and, and tea, so we should be ready to go right now. Ready to rock? For sure. That is the best way to start the day. So I wanna talk to you about things that, you know, you’re, you’re an expert on. Um, one of the things that you talk about is, uh, migration as an investment signal. So you’ve written that migration is, is a driver of growth, which makes intuitive sense. So what migration trends should investors be watching closely as signals, uh, for where capital will flow next? Sure. I mean, there’s many reasons to talk about migration and you know, just backing up for a moment, it really is the original globalization. So when we think of globalization as a force for good, a force for prosperity, a force for comparative advantage among nations and so forth, well migration, it all began with a single step. Now, the reason this is so important today is because not only do we have the mass migrations of today, which can be both. Enriching and also destabilizing. Right? It’s not merely an unadulterated good look at the politics of the United States right now, for example. Yeah, in Europe. Yeah. Migration, turning migration off or on literally has a significant measurable economic impact. Right now, for example, already economists are debating how. The extent to which cutting off inflows of migrants is going negatively impact GDP as we head into a recession, right? Among other things, right? So will it be wages or is it simply going to choke the innovative capacity? In the productive capacity and just the output of key industries. Uh, so that’s something to, to dig into in a, uh, for a bit. But the real, one of the big reasons why I wrote the book is because. Unlike the last a hundred plus years where the world population was going like this, right? Quadrupling over the past century. Now we’re reaching a plateau, as you know, and this is why Elon Musk and everyone talks about, yeah, you know, peak humanity and civilizational decline and low fertility rates. I mean, he’s, he’s late to the game, quite frankly. You know, those of us who work on these issues have been talking about this for a very long time. We’ve also noticed that it’s too late. A lot of people on social media are still kind of saying, let’s get, let’s have more babies, or These rich people have babies, right? I just need to remind everyone so we’re on the same page. It’s not enough. It’s not nearly enough. There are not enough children. There will never be enough children. You need humanoids in robots or whatever the case may be, to take care of the elderly and the young. At this point, there’s so few young people. So migration matters because where young people go in particular, take millennials, gen Z, gen Alpha, take everyone between the ages of five and 40. 35 years, or they’re up to 45. So a 40 year block spanning a couple of generations. Everyone today, who’s young, where they go, they vote with their feet, whether they’re moving from California to Texas, right? You know, LA’s loss is Austin’s gain, or San Francisco Boulder, Colorado’s gain, or you know, Boise Idaho’s gain, right? It’s zero sum when you don’t have population growth, right? My people, I lose. You gain people, you win. So the zero sum nature of demographics and migration is what’s new because up until the present, every place was just having more and more children. So it’s like, oh, well a million Indians left India, like no big deal. Right? Um, but once, once you stop having population growth, it’s, it’s zero sum. So in other words, why does it matter for investors? It’s three words. Follow the people. If a country, so you know, you and I can sit here and pontificate and we can say, oh, Europe is finished. Europe is dead. Well, I mean, look, go to Lisbon, go to Berlin. Go to Athens. Yeah. Those places feel dead. No, they’re attracting young people. So it’s not necessarily at a country level. Right. But city by city, place by place. It’s, you can boil down all the complexity of the world. Geographically into this one thing. If a place is attracting young people there, mu it must be doing something right. So, so in that regard, pro, so who, who are some of the winners and who are some of the losers when it comes to, at the city level? So here’s a place that everyone’s heard of Dubai, right? The United Arab Emirates, right as a country and Dubai as a city. But there’s multiple Emirates. All of them are doing great, uh, to greater illustrious the UAE as a country. Fun fact, I, I grew up there as a child until the early eighties and um, it had 200,000 people. So it has more than 12 million today. So it’s the, by as a percentage of its own population, it’s grown, uh, by a factor of 60. So, you know, it’s the fastest growing population in the history of the world. By, by far. Right. So, and it continues to grow and grow and grow. It’s the number one destination for new millionaires. So it’s also relevant in that sense. Ultra high net worth individuals are choosing to ditch Country X and move to the UAE, right? So it’s, you know, Singapore, where I live right now, uh, it’s another winner, right? It’s very, very selective. It’s not about the total number of population increase, but rather the value add in terms of wealth. Invested in the economy, in real estate, in consumption, in financial services, and so on. So Singapore is also a clear winner since COVID. You can tell that places like Lisbon, like Berlin, like Bali, right in Indonesia, you know, they call it silicon Bali. Now, it’s not really a hotbed of innovation. It’s just a place for digital nomads to go. But wherever you’re seeing young digital nomads show up and plant roots to the extent that young people plant roots at all. You know, you’ve got a winning place, and that is a place where you might look to increase your exposure in some way, shape or form. So who, who are the losers that maybe there’s some, uh, I mean probably like Los Angeles or something like that, right? I mean, what. No, you know, I mean, I, I come to LA all the time and I, I get some of the macro dec declines data that people point to, you know, like net population outflow from California and LA is a source of that. But they may not be fully considering new inflow, you know, new arrivals. They’re not seeing economic diversification, you know, and, and these kinds of things. So I, I’m still okay with, with la, um, as a whole being America’s second biggest city, you know, an enormous GDP. The California turnaround in general, that is kind of, you know, being, um, enacted, uh, right now that that’s underway. Um, so let’s think more at, if you wanna look at the US for different reasons. Florida is not. Kind of, I don’t wanna say peak, you know, I don’t wanna call the peak, but you’ve seen a significant outflow now, or at least homes being sold because of the climate crisis and other kinds of issues, cost of living issues and so on. So I think, you know. Florida is gonna be balanced out by other places. Um, so I, I mentioned climate, you know, the Gulf Coast of the US obviously, but let’s look globally, you know, places like Italy, places like Korea, places like Russia that are in just terminal population decline. These are the places where they’re selling. They used to just sell a single home or a villa for one euro as a gimmick. Now you can buy an entire town, you know, for like a hundred thousand bucks. So there, you know, these places that are in structural population decline are gonna remain in structural population decline. Their entire geographies are gonna be backfilled and sold off to private investors to turn into resorts. That kind of thing that that’s what’s happening. Almost a remapping of the world in light of these dire demographic changes. So I, I guess the obvious one that comes to mind for me when I think about big players, uh, in the global economy is China and you know, obviously with their. One child, um, laws that they had enacted for, you know, decades. And then on top of that, there’s, there’s not really any immigration. I mean, what, what’s going on in China? Right, so China actually ha doesn’t technically need immigrants in the sense that you would say, how can the second largest population in the world behind India need immigrants? But it’s not about the number. In the end, as I mentioned, it’s about the functions in the economy. So when you have what’s known as the 1, 2, 4 population pyramid where a young, young person has to provide for their two parents and their four grandparents, that’s just a big burden on the young, you know, breadwinner, right? Or earner. Especially at a time of, you know, financial stress because of the cost of living in major Chinese cities. So what they do need though, is more El is more caregivers for the elderly, right? So China is importing people, but specifically, you know, uh, Filipino nurses or Burmese nurses and just young women even, even brides. Of course they have their gender imbalance because not only the one trial policy, but the male preference, uh, led to an imbalanced gender divide, just like India has as well. So you wind up in a situation where you do need to import certain types of people, like elderly care workers, nurses, and uh, and and so on. But they, but China is more rapidly automating through robotics. Some of these functions even faster than Japan. So in Japan, you don’t have enough of an acceptance. You have a cultural acceptance of technology, but you don’t have a mass deployment of technology to take care of the elderly at a communal level. You don’t have telemedicine, right? And these kinds of things as rapidly deployed in Japan as you do in China. So China has a technological sophistication that’s allowing it to kind of, you know, circumvent some of the pain of this demographic adjustment. Interesting. And, and then the other thing that I think you’ve alluded to a couple times, um, I, I really think about quite a bit is the role of robotics and, and artificial intelligence. Um, which is likely to be probably more rapid and a bigger impact than we. Can imagine right now. How, how do you think of that as I guess somebody who looks at, uh, through your lens? Well, there’s no question that it already has, having that impact and people are debating so much what the magnitude of that impact is. Um, and that’s because they are looking at one particular industry, one particular country. If we’re gonna talk about this globally, what you really want to create is something of like a matrix where you say, okay. What is the specific technology? What are the sectors that you’re applying it to? In which countries is it deploying at what pace? And then measure what impact it’s gonna have because that’s how things go in the. Un full, uh, unfold In the real world, there’s a lot of fiction in reality, right? So you can say, oh wow, we’ve got, you know, uh, full, you know, full self-drive vehicles. But okay. In some countries, the regulations, the roads, the uh, and so forth are amenable. In other places they’re not. Right. In some countries you can afford those cars. In some countries you can’t. So think about the friction in it. So people have said it for a long time. Well, truck drivers, that’s gone, right? But guess what? Humans are still driving trucks so. Maybe instead of teams of two, you have, you have one, you know, or you have different kinds of shifts and so forth. And these things still play. They play, maybe it’s gonna be, um, you know, long haul rather than short haul or media hall. Right. So, you know, look, you have to really, really splice and dice every sector to see the impact. So lawyers, right. Well, people thought it would hurt, affect blue collar people more than white collar people. Turns out it’s the lawyer that’s redundant. Right. Or the paralegal that’s redundant. Whereas the plumber. We’re gonna need plumbers for a long time. Right. So I wanna see a robot contort himself to get underneath your bathroom sink and fix the plumbing. Right? Well, ain’t gonna happen. Right? So, so that’s the, the, in terms of robotics. It’s gonna play out in that very, very jagged, um, non-linear, bumpy way. And of course, those among other things are powered by ai. So you’ve even got software engineers now who are needed, look at the jobs crisis for some of the most highest, best educated young computer scientists, right? So yeah. Never had such a high rate of unemployment. Among us computer science grads at the same time that America’s finally Amer, you know, we’ve been saying stem, stem, stem, right? And lo and behold, Americans are finally churning away from humanities towards stem. Yeah, they learned the code for no reason at all. And now you can’t get a job in stem. So this is the level, uh, pace and intensity of disruption that, um, that, that we’re facing. So AI is a key upstream driver of these downstream impacts on fields like robotics, which then impact the labor market. Um, but again, there’s lots of new jobs to be created in. Building more electric vehicles and more, you know, the, the, the key components, you know, you know, the cameras and, and sensors and so forth that those vehicles need. So the question is, where are those gonna be built and what skills need to build those? And, and, uh, and are we gonna have tariffs on those sectors to encourage those components to be built in the us? So again, the knock on effects ripple through supply chains, um, from every new technology, every new, you know, innovation. Yeah, the, you call this sort of Asia’s, you know, is Asia’s century. Um, you, you argue that Asia will ultimately sort of dominate the global economy. What sectors or regions in Asia in particular and, and, and, and why? Well, so Asia is obviously a huge, uh, uh, mega region, right? And then that’s sort of, you know, actually the map behind me is, is one of my maps of Asia. So a lot of people when, when. You say Asia, they think only of East Asia, the Pacific ri, and Greater China and Japan. In reality, there is not a debate among geographers what Asia is. Asia literally reaches the Mediterranean Sea and the Red Sea. Right? So Saudi Arabia, which we think of as the Middle East, is actually west. Right. So that’s how far West Asia goes into the east. It’s Japan to the south, it’s Indonesia and even Australia. You might say though, Australia, you could say it’s Oceania, but economically it’s very tethered to Asia and to the north it’s Russia. Right. So that’s Asia, right. This sort of, you know, diamond shape, set up powers and everything in between them, such as India, of course. And Southeast Asia. So Asia has many drivers. Japan is the original Asian economic miracle. Then you have the tiger economies, as they were called in the, in the sixties and seventies, South Korea, Taiwan, Singapore, Hong Kong. Then China itself has become the largest economy in Asia and and the world. And now you have a new wave of Asian growth from another sub region. Which is, uh, India and Southeast Asia, right? The Ian countries like Indonesia, Thailand, Vietnam, Malaysia, uh, and so on. So you, Asia is vast. Asia’s five and a half billion people. Most human beings on Earth live on this map behind me, quite literally, and that will always be true for the rest of our lives, our children’s lives, our grandchildren’s lives, our great grandchildren’s lives. Most of the human species, like a substantial majority of the human beings on Earth, live inside this rectangle. They do not live outside of Syria. You in LA are in a great big city, but you are in a small minority of the human species. Yeah. Just so that we understand geographically what we’re talking about. Yeah. So Asia’s got a long way to grow because it also says most of the world’s young people. Let’s tie it back to our very first topic, right? Most of the world’s young people are also on this map, and if you don’t have young people, you don’t have workers, you don’t have taxpayers, you don’t have innovation, you don’t have growth. So I’m bullish on Asia, despite all the geopolitical tensions and so forth, because of some of these fundamental demographic facts, economic facts, infrastructure, investment, middle class growth, wealth creation, technology, capital industry. It’s all here. Yeah, I mean, you’ve mentioned a couple areas. I mean, certainly when you, you’re talking about, uh, you know, growth cities, um, you’re talking about Dubai, even Singapore, but there’s also, you know. A variety of, of other issues that come with a number of these countries, like laws and immigration restrictions and all that. How is that all gonna play out? Do you, do you, do you anticipate some, some changes, uh, to various immigration patterns based on the needs of nation? For sure. You know, when I wrote the book Move I, I. Almost realized they should have titled it moving because it’s not really a one way ticket. And we’re seeing this in the US obviously right now. Look at all the people that came to the US and have been deported, right? Or, you know, have, uh, their visas canceled even if they were legally in the country. So on over the cancellation of H one B, uh, you know, uh, policy as the Trump is threatening and, and the way Indians, you know, and Indian Americans are being treated right now. So that’s just one example, but it’s really a, a pinball game. Migration has literally become a pinball game of billions of people, billions of lives. And that was the essence of what I was arguing, is that, you know, you can only. Politics in certain countries, whether it’s Britain or America, or Canada or Germany, uh, or Japan, you know, are gonna have an impact on the directionality, the vectors of migration. But just remember you squeeze a balloon in one place, it expands somewhere else. So literally, you know, right. Right now we’re having Indians and Chinese think about leaving the United States because they’re not feeling welcome. But right now, the um. Uh, the German foreign minister, the Indian Foreign Minister, I believe is in Germany or, or vice versa, signing a bilateral agreement to expand immigration. Right? And so one of the things I wrote about in the book was that, um, you’re, you have, you have a, such a fast, the fastest growing student population and professional population in Germany is Indian. You never would’ve imagined this. I, I actually went to high school in Germany. I lived near Hamburg, and I was the only Indian guy, an Indian American, but ethnically Indian guy for like, you know, hundreds of kilometers. And now I hear Germany all the time, and it’s like Indians everywhere, right? So in, in the, in the blink of an eye, you have new migration vectors forming as people relocate to geographies where they’re welcome geographies of opportunity and so on. So. One of the things as a general statement, we just never had this volume of migration between regions of the world as we have today. You just get on a plane, you don’t have to take a ship, uh, like the, the Puritans in a land on Ellis Island, like, you know, early 20th century migrants. Um, you literally just get on a plane. Just think about the volumes of people moving. Every single day, but the directions in which they’re moving. So you’ve never had so many Asians in Europe, rather than they’re having America as their default preference. You’ve never had as many Asians in Central Asia or in East Asia as you do today, as many Africans in Europe, as many Latin Americans in North America, but now some moving back. So again, think of it as a giant pinball game of very thick vectors of migration that are, that are changing direction all the time. I dunno if you have any views on this, but it, it’s interesting to me that within all of the positive things that come from the immigration in various countries, there’s just like escalating tensions across the world, a lot in Europe, obviously in the us uh, as a reaction to globalization. Well, how, uh, what’s your take on that? So a couple of things. You know, blaming globalization or scapegoating globalization for domestic policy failures is a worn out or not so worn out, apparently political game, right? Yeah, you can still hear JD Vance and Elon Musk and whoever blame the globalists, right? The globalists get blamed for everything from liberal agendas like high tax and mass migration to being warmongers and wanting to perpetuate the Ukraine war, and so on and so on, right? So every, everything that’s global and globalists is a convenient bogeyman. To deflect from the fact that the US has not had sufficient trade adjustment assistance, not retrained workers, um, you know, not, not, um, redistributed income. All of these not built enough housing, right? You know, you can blame globalization for everything because globalization doesn’t have a constituency, a voice to defend itself, right? Um. So, so I want to be clear that just because you hear people talking about the anti-globalization backlash, it doesn’t mean that A, you know, globalization is B, that globalization is actually to blame, or that C bashing globalization will actually make it better, because in reality, globalization always wins. Globalization, whoever, whoever it is, is sitting there laughing because in the end we always turn back to globalization. Otherwise we wouldn’t be in this world that we’re in of hyperconnectivity, of transportation, of communications, of capital flows, of all of these things. Right? In the end, we always, you know, you and I are old enough to remember the nine 11 terrorist attacks 25 years ago. Then you had the global financial crisis, then you had Trump. In 2016 and Brexit, then you had COVID, um, and, uh, and so, you know, five or six episodes in just 20, 25 years, and every single one of those episodes, what did the headlines say? It’s the end of globalization, right? Every time. Every time. And it’s always been wrong. So we need to, if you want to have a serious conversation about this, and now I’m speaking obviously about our politicians and, uh, whether it’s business leaders or or political leaders, they need to get serious about the fact that the world has been remains and will be globalized in many ways. That it is their duty, their responsibility to harness those forces for public domestic benefit, for their constituents, for their citizens. If they don’t have the capacity to do that, they should be the ones to step aside, not the globalists, quote unquote. Yeah. Interesting. Um, what, you know, obviously a majority, probably 90, certainly 95% of my audience is in the United States. What do you, when you look at the world through your lens again, where do you see the US headed and, you know, what are, what are some possible, uh, impacts of that? Right. So, you know, uh, it may sound like I’m some kind of, uh, dec declines, but I’m actually very bullish on North America as a continental mega region, and America within that. If you rank the regions or continents of the world by their degree of self-sufficiency, like having enough land, labor, capital, industry, talent, technology, you know. We natural resources, right? North America ranks number one by far, peace and stability right? As well, which is not to be discounted. So there are not just small but massive structural reasons to be very pro North America and to be continental list. And, and I am, that’s the kind of geopolitical tradition that I have trained in and written about in, in my books and so on. And Ida potential is very much still there. That by the way, includes, I might add, you know, Greenland as a future member of a North American Union or part, part of the United States. No, no, no. Just part of the North American Union. Right. A or, or. Let’s create a milder term for it. A Federation of North American states, right? And the United States is a sovereign state. Mexico’s a sovereign state. Canada’s a sovereign state. Greenland’s a sovereign state, uh, but for members of this federation, right? And, and I think that’s effectively what is happening in what will happen. We’re already in that in many ways, right? If you look at the functional reality, again, the trade flows, the supply chains, the capital flows. Again, fun fact for your listeners. What are the two most busily, trafficked borders of Le legally not, not even illegally, legally traversed borders on the planet Earth? I, I mean, I’m kind of giving it away, right? Right. I think everyone should know. Right. And we need to appreciate the US Canada relationship. The US Mexico relationship are fundamentally stable, right? These are the two busiest borders on earth by this much, right? And there’s not a third place that is even remotely meaning. And so we need to really, um, you know, kind of, you know, be, be grateful for it. Harness it. So I’m very bullish again on, um, on, on North America and, um, and I think the US is actually gonna sort itself out. I’m also long on this reindustrialization, you know, industrial renaissance kind of paradigm too. It can be done. There’s no, you know, rule that is so steadfast that can’t be modified. No technology so arcane that we didn’t already invent that we can’t re domesticate. Nothing that we can’t produce cost effectively through technology on shore that we have to get from offshore. It can all be done. It’s happened with oil and gas and shale energy. It’s happened, it can happen with semiconductors. Um, and, and on and on it goes. Yeah. Um, any particular areas in the US that, I mean, if you narrow in on, uh, geographically, you know, I know you mentioned sort of the sort of peaking of, of Florida, but. Is there is particular areas within the US that might surprise us in terms of, of, of growth possibilities. Um, it kind of just, yes. I mean, the short answer, yes, it’s the Great Lakes, right? And so this is how I began the, the, the opening chapter of the MO book because when I was writing that book, it was the kind of post-industrial, post global financial crisis tail end of the already. De industrializing wave that had hit the region and it was on its last legs. And you know, Detroit was bankrupt and so on. Yeah, yeah, yeah. But if you look today, there’s already green shoots of an industrial revival. You know, people are moving in, home, prices have come down, and then you have the climate resilience, right? So the combination of hitting rock bottom. Attracting, you know, re and revitalizing industries, um, and attracting young people are all, and climate resilience, all of those things favor Michigan, right In the Great Lakes region. Wow. Okay. So, you know, I first wrote this right after the financial crisis. So in 2010, um, I wrote an article titled, where Will You Live in 2050? So when that came, when that was, um, published, it was like, what Michigan? Are you joking? And I gave all the reasons why. And so then the book move came out a decade later and I used those passages as the opening chapter of the book because it, it really already started to come true. And now in the post COVID. Landscape as we look at, again, the industrial renaissance in the US and some of these patterns and of course accelerating climate volatility affecting places like Arizona to Florida and so on, you that amplifies and accelerates the Great Lakes, uh, stories. So I’m more bullish than ever on that region. And, and as Alpha Geo is a software company that does geospatial analysis on these geographies, um. We brought that to life with our data where we kind of correlate every new factory that’s being built, where tax receipts are increasing as people move in. The inflows of people housing, market stabilization, climate resilience, and models, new infrastructure spending. We put all of that literally physically as pin drops on maps and uh, and again, Michigan is looking good, so, so what kind of growth are they seeing? Um, in Michigan? I, it’s like a shell big surprise to me actually. So, well, it’s not so much the growth rate because that’s gonna be, you know, sort of that’s gonna. Very significantly potentially year on year. But again, it’s, it’s the reversal of negative trends and it’s the, it’s definitely a marked year on year increase in population, right? And, uh, and, and therefore again, tax receipts, people buying homes, uh, and and so forth. So, um, I guess one more question and, you know, sort of a world shaped reshaped, I guess, by climate migration, demographics. Do you have a sense of what asset classes you think might win because of some of these, you know, major shifts? Yeah, for sure. I mean, you know, we could, we could run through the whole gamut, but right now we’re in the middle of a major global CapEx boom, right? The investments in, in mobility, transportation, the investments in, um, energy, obviously everything from, from still LNG to, to nuclear and wind and solar and, um, and, and, and hydrogen infusion, right? And of course, uh, digital. Right. So everything from internet cables to data centers, to AI training models. So you know, the, the, I call it the connectivity asset class that encompasses transport energy communications, right? The overall infra asset classes are all doing well. You have to. Manage your exposure, whether these are privately driven or public, private driven, you know, or backstop kinds of ventures because of the long and CapEx cycle. But I’m obviously law on infrastructure and that’s been a big theme, you know, in, in, in my work, uh, certain commodities, obviously because climate volatility is accelerating. Geographies of food production are gonna shift. Um, then I’m big on anything that is urbanization when it comes to the top 30, 40 cities in the world that are gonna be the magnets for talent, right? So that’s gonna be everything like around, um, real estate, but from like a rental, from an asset standpoint, right? So multifamily mixed use. Kinds of developments that are, you know, last mile, very convenient. Have retail medical education, um, you know, multi-generational housing, walkable. Um, all of those kinds of, ask all of those types of functionalities that you would ideally see if you were to start from scratch and design livable communities. Well guess how many of those exist in the whole world today? Like zero, right? Zero. Yeah. Yeah. Here we are. You know, and this is a great way to wrap it all up. Here we are, 8 billion people, soon to be 9 billion people, but probably peaking around there ish that are moving and relocating ourselves to concentrate in anywhere from 50 to a hundred or more. I mean, there’s a long tail of smaller cities, right? But the places that people wanna be, where you’re gonna have economic growth and dynamism and resilience and innovation. 50 really important cities. Not forget 200 countries, right? 50 important cities. Where those who can afford to, who are allowed to relocate and move, are gonna migrate to those places, and those cities are gonna thrive economically. And so you want to be investing in the infrastructure, in the talent, in the skills, in the fixed assets and in the, in the businesses of those people in those places. So yes, you can understand it from the standpoint of asset classes, like I could say, sure, I’m super long on Asian emerging market equities, right? Um, or, you know, super long on, on digital connectivity, but I’m also long on certain geographies and you just wanna have exposure to those. Yeah, yeah, yeah. Fascinating stuff. Well, uh, tell us a little bit about, uh, alpha Geo. So we’re a geospatial software company, AI powered from top to bottom using AI to downscale very large data sets like climate models and other kinds of market data and put it all together into one map based plane and run scenarios and simulations on how economies are gonna perform so that you can, we can guide investors, especially real estate infrastructure, data centers and so on. So real estate is a huge area for us. So, as I mentioned before, whether you’re the outliers like Michigan, or whether it’s what neighborhood of Manhattan, uh, or la our models help, uh, you know, corporate investors and real estate investors kind of pinpoint where they wanna locate their assets. So, you know. Specific Palisades fire tragic, uh, event from last year. Um, where do you wanna avoid fire risk in the future? Where can you buy a home where the insurance premium is not likely to go up as much because of the fire defense measures or the resilience of the location? Proximity to water supply, avoiding drought. So we calculate all of that and we tried it. Our clients, everyone from high net worth individuals, like n of one or two, you know, I have one property, I have wanna buy two or three, four more properties or the world’s largest sovereigns and pensions are also customers of ours, and they also use the data in the same way. Fascinating stuff. And again, the, the, the, uh, latest book is It’s Move, right? That’s the name of the book. Yeah. Move in a and that can be, uh, found pretty much everywhere, I assume. Uh, Parag, thanks so much for being on the show today. It’s been a, uh, very interesting conversation. Lovely. Really a pleasure. Thank you so much. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Hope you enjoyed it. Uh, interesting stuff. I think, uh, you know, we’ve talked about population demographics, uh, on the show before. Uh, it is, and it, it continues to be a very, very important, uh, variable when it comes to, uh, wealth. And so I think it’s something to pay attention to. As I emphasized before you see this, when we have. Opportunities coming through our investor club, for example. We often see, uh, you know, we often have deals, for example, in Dallas-Fort Worth, massive growth in Dallas-Fort Worth. And that’s why you have, you know, companies coming in. Uh, you have, uh, you know, lots of new jobs, people moving there because tax, same thing goes for Charlotte or Phoenix or any of these places. But that’s one of the things you really gotta look at. When you make your investment. So anyway, that’s all I have this week, uh, on Well, formula Podcast. This is Buck Joffrey Signing off.

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I’m not a big stock guy. However, there are some companies out there that you know are just going to change the world, and it would be nice to be able to own part of them—especially before they go public. That’s why this week on Wealth Formula Podcast we’re diving into a topic that’s been on my mind for quite some time: the world of pre-IPO investing. If you’ve ever felt like by the time a company finally hits the public market it’s already ballooned in value and you’re basically buying in at a premium, you’re not alone. I personally had my eye on a company called Circle, which deals in stablecoins. As I’ve talked about on the show before, I think it’s going to be huge globally. But as soon as Circle went public, the valuation shot up to a point where I felt like it was way too expensive to jump in. If I had access to those shares before the IPO, I would have definitely taken the plunge. Now, this isn’t just about one company. We’ve seen this story play out with others, and right now there are some major game-changers like SpaceX on the horizon. SpaceX, one of Elon Musk’s ventures, is one of those companies you just know is going to have a massive impact. But how do you get access to those deals? If you’re an accredited investor, I have good news. Getting a piece of the action before these companies go public isn’t just for the ultra-wealthy insiders anymore. It’s becoming more accessible to accredited investors who want to get in earlier and potentially see greater upside. That’s the topic of this week’s Wealth Formula Podcast. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  If you are purely investing in the public markets, in many cases, you’ve missed the majority of a company’s growth cycle. Welcome everybody. This is Buck Joffrey Wealth Formula Podcast, coming to you from Montecito, California today. Before we begin, as I always do, I will suggest you visit walt formula.com, which is the, um. Primary Home of Wealth Formula podcast, and it’s also where you can get some resources outside of the podcast, including access to our accredited investor club, otherwise known as investor Club. Uh, that is where you can get, if, if you aren’t an accredited investor, you can get access to opportunities that you would not otherwise see because they are not available to the general public. Um, speaking of. That kind of investment that’s not typically, uh, available to the general public. Uh, that takes us sort of to the topic of today’s show. That is, um, well, you see, I’m not a big stock guy, as you probably know, if you’ve listened to this show before, I’m not, you know, listen, I’m not anti stock. It’s just not, you know. Generally what I’ve invested in my life. However, there are some companies out there that you just know are going to change the world, and because of that, it’d be nice to potentially be able to own part of them, you know, especially if they, if before they go public. That’s why this week on Wealth Formula Podcast, we’re gonna dive into a topic that’s sort of been on my mind for some time. The world of what’s called pre IPO investing. Basically investing before a stock goes public. Now, if you’ve ever felt like by the time a company finally hits the public market, it’s already ballooned in value and you’re basically buying at a premium, you’re not alone. Again, this is not something I do often, but I had, um, as you know from my previous shows, I believe heavily that this whole world of stable coins is going to be enormous. And I had my eye on a company called Circle and then trades with CR Cl, uh, which deals in stable coins, uh, which is a, a really big player in stable coins. I think this is gonna be huge. Uh, but as soon as Circle went public, the valuation shot up, like just took off where it was kind of ridiculous and. At that point, basically it was just too expensive to jump in. It just didn’t make any sense. Now, if I’d had access to those shares before the IPO, and if it, you know, started where it actually started, I definitely would’ve taken the plunge and I actually would’ve made a lot of money. But that didn’t happen. Now, this isn’t just about one company. We’ve, you know, seen this happen several times, uh, before people know there’s this big private company that, you know, all the. Insiders are gonna make a bunch of money on IPO comes bang, they all cash in, right? But there are some out there that are in that pre IPO phase right now, such as SpaceX, um, you know, Elon’s, uh, one of Elon Musk’s companies. Um, you know, they are out there traveling space. They also own starlink, uh, all that kind of stuff. So, you know, that company’s gonna have a huge impact, at least. I mean, you know, I guess you don’t know for sure, but. Shown us one thing before he, he can, uh, he can build extraordinary companies. So that’s something I would be interested in. But how do you get access to those deals, right? If you’re an accredited investor, as it turns out, I have good news on this show. Getting a piece of the action before these companies go public isn’t actually just for the ultra wealthy Silicon Valley insiders anymore. It’s actually becoming more accessible to accredited investors who want to get in early. Potentially see greater upside. So that is a topic of this week’s show, and we will have, uh, that conversation right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investment. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key, even though you’ve borrowed money at a simple interest rate. Your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments visit. Wealth Formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today my guest, uh, on Wealth Formula podcast. Christine Healey, she’s founder of Healy Pre IPO. Which is a, uh, boutique brokerage firm that gives high net worth investors access to some of the world’s most exclusive pre IPO opportunities. Companies like SpaceX, open AI and Stripe long before they hit the public markets. Uh, she’s closed over 600 million in private market deals. Previously held leadership roles at firms like Destiny Tech 100 and Forge Global. She’s built a white glove concierge level service for investors who want insider access to vetted late stage private companies without the corporate red tape. Welcome to the program, Christine. Thank you, buck. Great to be here. Well, um, let’s, let’s kind of start with, so we have a lot of, you know, retail investors, accredited investors. This may not be something, uh, that, that they know much about. So for investors who only know about public markets, uh, those types of stocks, what exactly is the pre IPO market? How does it work? So I see a lot of high net worth investors that may hold, um, very skilled professional jobs. They might be doctors or lawyers or small business owners, and they see companies like SpaceX constantly in the news with these amazing milestones. Or they might use open AI’s product chat GBT every day in some cases. But they’re seeing these amazing technological innovations as a bystander. A lot of them are saying, um, I’ve worked hard to build an amass some wealth. I’ve got a high income. I wish there was a way to actually financially participate in these stocks. Sure. So investing pre IPO is essentially a way to invest in these companies while they’re still private companies in a bespoke privately. Brokered transaction where you might be matched with a private seller, like an early employee, or you might be matched with an early VC that’s looking for liquidity and you can actually get in before the IPO. So we’ve seen a lot of IPOs recently be very choppy, very volatile. Mm-hmm. In many cases, um, a lot of value in a technology company’s lifecycle is accruing purely on the private markets. Since these tech companies are waiting longer and longer to IPO in a lot of cases. So if you are purely investing in the public markets, in many cases, you’ve missed the majority of a company’s growth cycle. So what I do is help investors, um, that are accredited to get into some of their favorite companies that, that they love, that they believe in. Mm-hmm. That they’re inspired by. And to navigate the private market, which is very tricky, in some cases, messy and requires a lot of bespoke, um, process. Yeah. And, and I think, um, one of the things that I have noticed sort of, kind of sniffing around this pre IPO space, there’s obviously a few companies who, who do this and um, you know, one of the questions I always have when I’m looking at it as a retail investor is like. Yeah, this is an interesting company. I hear about, you know, ripple or I hear about like Circle before it happened. Um, and the issue there becomes like, how in the world do you know if it’s a good price? Because, you know, the valuations, um, that these things are being offered at often look significant, right? They’ll say the, there’s like a, uh, the last valuation was, you know, uh, literally, you know, half or. 25% of what, what the valuation based on the stock price that they’re trying to sell. How do you possibly navigate through that? I personally believe it’s one of those things where you get what you pay for, and if you actually go the extra mile to hire a pre IPO broker that specializes in this space, one of their core jobs is to help you contextualize pricing. So I. Um, if you’re getting an offer at a certain price, they’ll help you understand how does this relate to the latest, uh, primary round of the company. But not just that, how does this relate to the market right now in that company to recent deals, to recent bids and offers by other buyers and sellers in this space? So that’s. That’s really like going in with, uh, you know, an army of information and power and, and support by your side versus going in alone as a retail investor. So I believe that makes a lot of difference. Um, in my personal information, there’s more access to pre IPO than there has ever been, but it’s actually a lot of mediocre access, a lot of, um, unreliable parties, a lot of people that are really new to the market and lack the kind of nuance and experience in reps to. Perform really well for their clients. And so it, it’s kind of foggy out there and a lot of people that are used to purely public investing, um, will have a really negative experience at first because they don’t even know which brokers they can trust or which platforms, or they try and do a deal, it falls through and they’re so discouraged. Or like you’re saying, they have no way of contextualizing the pricing they’re seeing. Retail investors are really the most vulnerable to price exploitation or fee exploitation when it comes to these very actively traded names. Um, and so I think that’s what separates really a, a good or a great broker from these run of the mill platforms or crowdfunding, uh, you know, websites. They’re gonna help you go into a negotiation with a seller, armed with information so you know what you’re getting and you can decide yes or no. I think one of the companies you mentioned was, uh, SpaceX. And it makes me think, uh, it’s obviously one of Elon Musk companies, um, believe it or not, despite, uh, how much we hear about Elon, Tesla is really the only public company and everything else is private. How do we know Elon’s even gonna go private or go public with his stuff? Uh, you know, I think he, he seems to not necessarily think of it as advantageous. Is that one of the inherent risks in investing, you know, in, in a company, uh, like this, that, you know, listen, you may just not wanna go public? It’s a great question and really yes and no. So yes, there’s an inherent risk in investing in private stocks that they are less liquid. There’s no shying away from that. But the interesting thing is that. Um, I personally don’t think for the average SpaceX investor, it may matter that much, whether SpaceX does exit in five years or in 10 years. Um, Elon is really the poster child of a, a founder, which historically hasn’t seemed to want to go public. He’s not a huge fan of operating and, and, and reaching moonshot goals in the public eye. Um, but why I say it may not necessarily matter. Is that as the secondary markets grow and as liquidity grows, um, someone investing in SpaceX today could potentially be able to resell on the private market in, in several years to another private buyer. Now, of course there’s no guarantee that assumes that there’ll be a replacement buyer in the market when you’re looking to sell. Regulations also require you to buy to be a long-term holder. So typically you wanna be holding for at least six months, but ideally longer to kind of have that, that provable intent to have housed long-term. But in general, there is the possibility of reselling. Even if the IPO is is still further down the road. So I think that’s when it becomes really, really interesting because you can still invest in SpaceX if you believe in its growth, even if you believe that the IPO might be a decade away, let’s say, or, or even more. Give us an example of how this has worked out positively for a client. Um, you know, from soup to nuts. Like what process? Somebody came in, they were interested in this, they bought that, and. They went to I PPO companies that went to IPO. I mean, there’s, there’s a number, there’s rubric, there’s Unity, there’s Pinterest, um, there’s, um. There’s a number. Um, there’s also, ’cause I’ve been in this industry for so long, since 2018, you also see some of the companies that are still private and how much their valuations have grown on the private markets during that time. So there was a lot of investor activity around, um, 20 19, 20 20 in SpaceX, for example, where valuations were below. Below 50 billion, give or take. Um, and now SpaceX just came out with their new tender, uh, priced at roughly a 400 billion valuation. So there you’re seeing, you know, astronomical growth for companies that are still private and still potentially have growth left in them as well. What have you seen on the other side of this? ’cause obviously there’s risk. You know, these aren’t startups we’re talking about SpaceX and, you know, Stripe or whatever. Uh, but. Compare the risk profile of something like, you know, investing in these pre IPOs versus public stock. Yeah, I mean there, there’s certainly risk. You see cases like 23 and Me, which was actively traded when I first started, um, for MA many years really. Um, 23 and Me is now going through bankruptcy or liquidation and it’s kind of a mess. Um, you also see companies like FDX, which we’re approaching, I believe $40 billion, and of course completely imploded. So there’s also no shying away from the risk in this asset class. It’s not for everybody. How I see investors dealing with the inherent, um. Risk around liquidity risks around these businesses, even, even existing, um, in the future is, um, either diversification, which is a natural way to, to manage risk or what’s really common in this asset class is, um, a flight to quality type effect or, or hyper concentration where investors are cutting down their lists of names to ones where they have the highest conviction. So an investor that’s looking for, um, more of a track record of growth and price marks on a regular basis, that investor might be attracted to SpaceX because they’ve had these tenders that, um, have marked up the stock at, you know, incrementally higher valuations roughly every six months, which is really unique for, um, for a private company. Or you could have, um, you know, a number of other reasons to look to different companies based on your particular thesis and your profile and what you’re looking to see. Mm-hmm. So would you say that this from a portfolio standpoint for, um, you know, somebody who’s, uh, an accredited investor probably should be in their, I don’t know, maybe an asymmetric risk category? Yes, I would say so. Yeah. What, um, uh, you know, when you, what’s the process of, actually, I know you said this is from like, people who are trying to get, um, liquidity and stuff. Um, what’s the process of actually finding that from your side, like as a broker? Like how do you find these people? So first I figure out what’s the best fit for the investor. So one of the main things is size, whether you’re investing at a hundred k, whether you’re investing at a couple million, um, whether you’re, you know, accredited or whether you’re a qualified purchaser, which is a higher level or a qualified investor or, or anything in between. So we’ll look at your particular timeline needs. Profile, et cetera. Um, and then figure out who to match you to. So typically if you are a more retail investor, maybe you’re trying to invest a hundred k. You’ll end up investing in a, in a fund vehicle where you’re pooled together with other investors to together take down a block that could be a million or 5 million or 10 million. So that’s what you should really expect when you are, um, coming in at say, a hundred k. You’ll go into some sort of. Fund, you know, for the most part. So I have a network of a ton of different counterparties, and if we’re looking for a fund, that’s where I look at, um, maybe family offices, VCs, specialty secondaries funds that already hold stock from previous rounds or from, maybe they’re getting an allocation in an upcoming primary from the company. Sources like that. Um, and I, I talk to those parties in the network to see if there’s a relevant opportunity for my buyers. Yeah, so talk us a little bit about your due diligence process. Yeah, it’s important that as a broker, I’m not a fiduciary. I don’t hold that type of role. Um, where I come in is really to help source the deals for people, help them understand the structures, contextualize pricing, um, understand the, you know, the terms and the conditions of the vehicles they’re getting into. Help them negotiate to see if we can cut fees to see if we can optimize, um, the economics, and then to help streamline closing. So, I. I am actually prohibited from giving too strong a view as to you should buy this or you should not buy this. Mm-hmm. But I can help arm my clients with, um, secondary market information and make sure they are really informed about what they want, about, um, how the pricing compares to other opportunities, and then they can make the decision. So it’s really important regulatory wise that I’m not too pushy or opinionated, um, but I help my clients in a number of other ways to optimize what they’re already seeking. So you’ve, uh, you’ve closed, I guess 600 million, uh, in private deals. So, you know, what patterns have you seen in the most successful pre IPO investments? I mean, you know, I know you’re not in a role to be advising per se, but just, you know, as, as an individual who’s, uh, observing this happening real time, what lessons, um, could, would you take away as, as somebody who’s investing in this space? Yeah, that’s a great question. I think in recent years we’ve seen hyper concentration. So there’s been a very small number of companies like SpaceX, OpenAI, Stripe, Andel, which have accounted for the vast majority of activity. So that can make it tricky if you’re trying to sell an asset that’s outside of this, you know, top 10 or top 20. Um, on the other side, it can also be advantageous if you’re a buyer in a company that is less active, you have a bit more leverage with the sellers. So it does depend on personal preference. You know, if you’re looking for a less active company and you wanna get a great discount, that’s a great, um, en environment and a backdrop to be in. Um, if you’re looking for. A bit more confidence in terms of future saleability. You might look for a more liquid opportunity, um, in a company that’s historically had a, a very active market like SpaceX. So personal preference always, but I think one thing that’s important to keep in mind is, is that possibility of selling down the road. So if you are going into a deal today, it’s worth, um, speaking to the broker, speaking to the, the selling investment manager whose fund you’re going into. Do you allow resales? How would that actually work? Will you charge me a fee if I want to resell in future? Or some of those things, um, or even the terms of what you’re buying. How would that play out in a future, uh, resale transaction? So, for example, um, investments that do not have carried interest or management fees on it, which we call zero zero, are much easier to resell in future. So as with most things, it’s just kind of thinking through all the details, how they will play out and how. How much, um, autonomy you’d have in future if you, if you wanted to, to do something with that asset. So that can, that can really make the difference really, um, in terms of liquidity down the road, even on the private market still, Phil, you know, I know, again, just going back to the fact that you can’t necessarily give advice, like how do people get, I mean, how do people educate themselves then, like at any given particular investment? Because again, you know, my limited experience on this is just seeing things on platforms. Getting valuations and such. And again, if you’re not really allowed to say, this is a good deal, this is not a good deal, who do we get that information from? Yeah, I mean, I can’t say this is a great deal, you should do it, but I can flag, um, you know, this is a discount to where recent deals are getting done or, um. If this is roughly in line with the pricing of recent secondaries or some of that data, so you can kind of put two and two together and, and figure out if that qualifies as a good deal in your opinion. Um, and that’s really it. But one of the main challenges for this type of investing is relatively limited information. Compared to what public market investors are used to getting. So there’s some amazing companies like Klarna, which just put a lot of information out there publicly for anyone to see in terms of their financials and stuff like that. Yeah. But that’s quite uncommon for these pre IPO companies. You have very kind of private companies like, um, SpaceX, like Open ai, like Impossible Foods, which are very protective about their information and almost never release. Um. Tangible data points around the financials publicly. So, um, I think that’s why a lot of investors, especially institutions, have held off for quite a number of years on going all in, in this asset class, because you don’t have the same underwriting ability, you don’t have the same analysis, um, due to the, the limited information. But on the other side, you see. Some really interesting success stories, um, in terms of gains and, and the wins. And now a lot of institutions and investors are saying, well, this might be a different process than I’m used to for public investing, but I’m gonna have to figure out a process around these, these private companies because I don’t wanna miss out. So you can look to, like I mentioned, secondary market data. You can look at what the caliber of, um, institutions that have got involved. You know, do they have, um, tier one VC backers, um, all that kind of stuff. How has their momentum been in terms of funding rounds, in terms of tenders, et cetera, on a number of other data points, which helped. Create a picture where otherwise we don’t have as much of a a data picture as you’d see with a publicly reporting company. What are some of the most interesting companies out there right now, in your opinion, that are in the space? You mentioned SpaceX. I’m relatively specialized in the sense that, you know, if the market itself is specialized in 10, 15, 20 names, that’s where I’m gonna focus my time as a broker. So I spend a lot of time in names like Andal, Neuralink, SpaceX, OpenAI, Stripe, anthropic, um, and several others just based on where the demand is coming from my clients or where the sell interest is coming from. My seller clients too. So those are the companies I see as being very interesting. Um, very active right now. And that’s really where I spend a lot of my time. Whereas some of the, the crowdfunding and the other platforms they talk about, we cover 300 companies or we’ve traded in 400 companies, and I’m saying, well. That means you’re not necessarily an expert in the ones that really matter to. A lot of investors right now are those platforms that we see on the, uh, internet. Are they trying to do the role that you’re doing, but doing it sort of on mass, because you always see a broker fee on there. So essentially, take the platform away, put the human in. That’s you. Is that. Is that how it works? Yeah, pretty much. I see. You know, this has been such a lucrative industry for a number of years now that you’re seeing. More new entrants, more new platforms, more new funds. Everyone trying to get a piece of the pie. And for the majority, they’re trying to take over the market. They have grand visions of centralizing everything. Everything’s gonna run through them. They’re gonna be a $10 billion company. And when all these companies are going left, I’m going right. I’m saying I’m not trying to be a $10 billion company with hundreds of employees. I am trying to stay a small business to spend the majority of my time with my clients and on on the best deal flow possible for them, and really stay disciplined in that. So I’m not optimizing for scale, I’m optimizing for quality and performance. Um, and I think that’s a differentiator when all these companies are trying to go huge and, you know, hiring like crazy. And some of their agents have only been in the market a year, been in the market two years, and I’m on, you know, seven years or so and counting. Um, and so yeah, you alluded it to as well in terms of scale, but that’s, that’s a huge differentiator and we all intuitively understand the difference between a, a large business and their approach. Versus the small business approach. Um, I know many of your, your listeners are small business owners as well, so what you’re getting with me is a small business approach backed by years of expertise in this market. Right. Right. Hey, before I forget, and one I was curious about was, um, you know, there was a stock I always following, which was circle Internet. I mentioned it before, because, because of the, uh, us, uh, US dollar coin, this stable coin. Um, my personal belief that this is, you know, just to, I mean, this is gonna revolutionize everything with the stablecoin world. And I’m curious, so now I’m looking at Circle Internet right now, and it’s priced at, well, it’s actually come way down. It’s like at $162 right now. It had gone well into the two hundreds, 215 year, 250. Um, do you recall like what that was trading at in the pre IAPO space? Just, just to get some sense of like, you know. The differences, uh, that sometimes these things make in public market? Yeah, I, I don’t recall if there’s been any kind of split or reverse split, um, since they went public. Maybe you, oh, the IPO was only like, gosh, just a few, like, um, two months ago. So yeah, I’m not a, I’m not aware of any kind of split or anything like that, so hopefully I’m speaking on an apples to apples basis. The market for circle leading up to their IPO was, I would say around $30 per share, give or take. Yeah. Yeah. So maybe there’s been some split action and we can verify after that. But in the absence of any kind of split, that’s obviously a huge, huge, huge, um, jump from where trades could have gotten done on the private market, even in the months leading up to it. Wow. Yeah. Fascinating. Well, uh, Christine, how do people get ahold of you and your company if they’re, uh, interested? I’m very active with educational information on LinkedIn under Christine Healey, H-E-A-L-E-Y. You can also find me on my website, healeypreipo.com. And I have a mailing list there too, where I send market insights, occasionally live deals, depending on suitability. Um, and I’m happy to speak to anyone and, and help them learn more. Great. Thanks so much for being on the program. Thanks so much. We’ll be right back. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up, and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator. Can help. You amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. And, uh, again, I mean, listen, this is, uh, uh, again, the same kind of concept as we have in our credit investor club. Investor club is basically giving you access to stuff that generally you don’t see in public. This is the same thing, except this isn’t like tech companies or other kind of, you know, companies that have. Tremendous value and have not gone public. You can essentially potentially buy stuff as a private investor, get unfair advantage because you’re a credit investor and ride these things up. So it’s a really interesting concept. I mean, are they all gonna work? I don’t know. I, I’m not in this world right now, but it sure sounds like something to look into if it is of interest to you. And that’s all I have this week on Wealth Formula Podcast. This is Buck Joffrey signing off.

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