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Show Summary
In this insightful interview, Tad Fallows shares his expertise on wealth management, self-managing high net worth portfolios, and the strategic use of asset classes like stocks, real estate, and private equity. Discover how wealthy individuals approach wealth creation, risk management, and the importance of community and education in managing substantial assets.
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Investor Fuel Show Transcript:
Tad Fallows (00:00)
I can tell you that’s factually untrue. we do, we’ve got about seven and half thousand very high or ultra high net worth people in our community. So that’s, you know, called between five and a hundred million for the most part. And probably 70 % of them don’t work with a wealth manager. They manage their stuff themselves.Dylan Silver (01:50)
Hey folks, welcome back to the show. Today’s guest, Tad Fallows, built and sold a SaaS company and today is the founder and CEO at Long Angle, a private equity community for wealth creators. Welcome to the show, TadTad Fallows (02:03)
Hey, thanks very much for having me today, Dylan.Dylan Silver (02:05)
Now, when we talk about managing your own wealth, and I was listening to you on another podcast, oftentimes people scale to a certain point and then are told you can’t manage your own wealth.Tad Fallows (02:20)
I can tell you that’s factually untrue. we do, we’ve got about seven and half thousand very high or ultra high net worth people in our community. So that’s, you know, called between five and a hundred million for the most part. And probably 70 % of them don’t work with a wealth manager. They manage their stuff themselves.⁓ and I think that’s largely because they’re first generation wealth creators, but on the younger side, typically maybe in their thirties or forties. And so I think somebody says, Hey, you know, I went from.
zero to $10 million in a relatively short period. They probably then have a, got to learn about money to make that kind of money if it’s not buying a lotto ticket, but if it’s building a business or something like that. And they often also have a pretty engineering mindset of saying, okay, you might call it 1 % a year. I call that $100,000 a year post-tax. And so I’m willing to spend some time rolling up my sleeves learning how to do this.
Um, nothing wrong. used to have a sort of religious opposition to working with wealth managers saying, Hey, nobody should give away that money. I don’t feel that way anymore. I think there’s a lot of good use cases. Either you don’t have time, you don’t have the money, you don’t have the emotional disposition to do it. Maybe you want continuity for your wife, something like that. But I would say most of the people, um, you know, it’s not actually that much harder to manage $30 million than it is $3 million or $300,000. It’s same principles apply with more zeros.
Dylan Silver (03:40)
You know, one of the things that I’ve noted from working with real estate investors in general is that some of them have this mentality of like, I’m not gonna delegate the wealth creation to Wall Street and I trust real estate and you my ability to flip homes, et cetera, or to build a rental portfolio more than I trust the market. And so they kind of have that almost opposition mindset, hey, I’ve got to find another way.Tad Fallows (04:08)
Yeah. I mean, I’d be curious to your take. My take on this is I have seen people again, across this community make wealth in a whole lot of different ways. I’ve seen people make a ton of money in real estate. Maybe they’ve been in Nvidia as an employee for the last 20 years. And that guy might say, Hey, tech stocks are the only way you should make money. I’m compounding 20 % of the year with zero leverage. You why wouldn’t you do this? I’ve seen people make their money in Bitcoin, in, you know, law firms, medicine, et cetera. I do think real estate’s great. think, but what it gives you isIt has great tax treatment and it has great leverage. And so those things make it a great investment. I think it’s an underlying, you know, the rate of return stocks typically up 10 % a year. Real estate does not typically go up 10 % a year. So if you had real estate kind of leverage and real estate kind of tax treatment on stocks, you know, that, would be a great ⁓ outcome when you bounce it all out. I think if you say those are the only two asset classes, stocks in real estate, I think they’re pretty comparable.
And in my mind, you should then be in both because they’re not fully correlated. And so if you’re in both of those, your average year is going to be closer to that 10 % net rather than one year being plus 30 and one year being minus 20. And then I would also actually probably say to go one step further than that. And there are a bunch of other asset classes that have similarly high expected returns. And I won’t say aren’t correlated at all because nothing’s truly uncorrelated, but have less than perfect correlation. So I think if you look at things like venture capital,
private equity, litigation, finance, oil and gas, manage futures. There’s a whole bunch of these. And if you put enough of those things together, you know, you’ll get similar expected returns, but less volatility.
Dylan Silver (06:28)
You know, I think a lot of people who would have a passion for managing their wealth themselves, right, are going to have the mentality of, need to know where every dollar is going. And so this isn’t going to be something that, you know, would be a burden to them. They’re probably pretty passionate about it. Is that accurate or are some people just so against paying anybody else that, you know, really they’re going to do it whether they’re passionate about it or not?Tad Fallows (06:56)
Yeah, I think it’s all over the board. I mean, I remember for myself, I kind of got into this by a couple of factors. One is my parents had worked with a wealth manager, probably in the dot com bust, and he just did a horrible job and lost them a ton of money. So I saying, all right, just because a professional is doing it doesn’t mean, you know, that it’s going to be done well. So sort of like, if you look at the real estate analogy, I’m going to hire a general contractor to improve my property.but I’m not going to blindly just do whatever he says. I also have to be informed client and know, you know, what, what does flashing look like? What does it mean to have flashing? And, know, if I see a guy hammering a nail through the flashing, I know there’s a problem because it’s going to leak later. So I think that, you know, at a minimum, you have to, you have to be informed in that same way as an informed client. And then I do think it is a pretty high leverage thing when you hear these things saying 1 % or
Dylan Silver (07:19)
Right.Tad Fallows (07:39)
75 basis points. sounds like a very small amount of money, but when it’s across your entire net worth every year, it’s a pretty big amount of money and pretty high leverage point. So I do think for some people, they don’t particularly enjoy it, but they just realize, Hey, if I can spend two hours a month and save myself $10,000 a month, there’s no other job that’s going to pay me $5,000 an hour post-tax. And so it’s good use of time. But then a lot of people do find it interesting, you know, the same way real estate or, or any other asset class.Dylan Silver (08:04)
Now you mentioned two hours a month. I think that may shock some people thinking, well, if it’s two hours a month, what am I paying someone else to do this for? Is there a learning curve or an on-ramp period where you’re really understanding how this process works and you may be putting in more than those two hours a month to start?Tad Fallows (08:23)
Yeah, absolutely. mean, you could go, you would be a, so fidelity. did a study about who are their very best investors who are in the highest returns. They’re very best investors are dead because those people literally did nothing and just left their money in the market through ups and downs, didn’t panic sell. And so they had the very highest returns. So you can spend zero hours a year and do a great job, but it is, as you’re saying that education process of, and you can scale that however much you want. You can read a couple of books about it and say, all right,I’m a believer in a 80 20 portfolio. I’m going to put 80 % of my money in stocks and 20 % bonds. And I’m just going to set up an auto invest for the next 40 years and you will do just fine. Now I’ll say I, that’s not what I do partly because I find it really interesting and partly cause I do think if you spend more time, you can find some more opportunities around the edges to do even better. But there’s, um, it’s that general education. And then it is something where you can get an 80 20, a lot of the
benefits for the first hour or two a month that you’re putting in and then subsequent time beyond that is kind a matter of personal preference.
Dylan Silver (09:29)
heard you speaking on another podcast about there’s risk in some sense if you are taking less leverage and if your expected returns are lower because you’re thinking, well, I’m not going to be able to take advantage of appreciation in the same way. I’d have a certain segment of my wealth set aside for maybe stable growth, but some more that might be more speculative. Can you break that down for us?Tad Fallows (09:57)
Yeah. I mean, I think there’s a couple of things. One, again, I think most people in our community are at a significant level of net worth, so they could either take two approaches. They could say, Hey, I have enough money, so I could, I could theoretically afford to lose half of this. I’d be very unhappy, but it wouldn’t actually affect my lifestyle. And given that I can stomach that volatility, I’m there for getting a crank up the risk profile to crank up my expected returns.Or you could say, have enough money. don’t need good returns. You know, if I can just clip a 3 % or 4 % real return, that’s going to fully fund my lifestyle and there’s no reason to take on that risk. I think those are both fully valid ways to look at it. And there’s, no one right way. I most people end up with that in that first approach of saying, Hey, if I’m in a position where I can stomach the volatility, I want to be paid for that. And I care more about how much money I have in 30 years than exactly how smooth the path is to get there. Um, yeah, I don’t know what you think about that.
Dylan Silver (11:22)
You know, one of the things that I think about this is my perspective as a realtor is we hear this conversation quite often, especially in Texas, where I’m licensed around, what’s the real value of a realtor, right? And one of the things I think they may have already done this is they may be in the process of making the MLS is publicly available to people who are not even licensed or in the process of getting licensed. So then it’s like, well, what’s the value of a realtor? And a realtor would argue, well, you’re going to need industry knowledge.you’re going to be able to have to understand the market on a granular level, like it’s your backyard, you know, even a realtor who is licensed in Texas, if they’re not intimately familiar with Houston, Texas, they probably shouldn’t be listing homes there. And then also the tools of the trade, right. But using that as an analogy for wealth management, I think, you know, there’s a lot of this mentality of you need to have steady, stable growth. Whereas if you have someone who has
⁓ a higher risk profile. There’s not really someone to my knowledge that they can really go to to work with them in that capacity. It really probably is better off for them to do it on their own with the support of a community like what you have.
Tad Fallows (12:39)
Yeah, I think that’s a great analogy. And I would extend your, you know, I would agree with you that whether you need a realtor, it also depends on your situation where if you’re looking at, maybe I own one unit in a 300 unit apartment building, it’s pretty easy to know what the market clearing price is, right? Hey, this other one, two floors up, exact same layout just sold for, you know, 300,000. So mine’s probably worth 290 to 310. It’s pretty clear. But then you get it, you know, if you’re in Houston, like, okay, I’m in river Oaks and I’ve got this unique lot here. That’s, know, this different structure on this street.Dylan Silver (13:06)
Right.Tad Fallows (13:08)
you need the realtor because they’ve got the pocket listings and they have the relationships and all that sort of stuff. And there’s everywhere in between. If I take that analogy to wealth manage or, you know, other kinds of wealth management, would say the apartment building version is like an index fund. If all you want to do is buy S and P index fund, and there is nothing wrong with that. I think that’s a great strategy. If you’re not particularly interested in going deeper, you’ll get good returns. If all you want to doYou don’t really need, there’s nothing a wealth manager knows about the S and P 500 that you don’t know. They don’t have a unique insight into where, you know, Google or Apple is going to go next year. It’s publicly available data. But if you want to get into these more esoteric or edge case things, like if you’re interested in say, litigation, finance, oil and gas, investing, private credit, private equity, venture capital. Those are ones where there is not this full public set of information. There’s not a clear market clearing price and also
you know, the kind of private equity fund that I have heard of both finding a good one and the one that’s willing to take my check. You know, if I just walk up to an HIG and say, Hey, even here’s a million, I’ve got a million dollar check. You know, they’re going to laugh at you. They’re not going to take your call. They’re not going to take your money. You need a, know, $10 million check and you need an introduction. So they know that you are the kind of person you want to do business with. I think for some people, that’s the value you get out of working with a JP Morgan is they’re say, okay,
Dylan Silver (14:25)
that instruction.Tad Fallows (14:25)
great, you Iknow this is coming from JP Morgan wealth management and they’re vetting it and they’re hitting a critical mass. That’s actually what we try and do for, you know, kind of collectively amongst our membership, where, I said, 70 % of them are just self managing their portfolios. And so again, your guy with $10 million doesn’t have enough to go direct into that PE fund or doesn’t want to write a big enough check, but maybe he wants to put in a hundred thousand. We will a couple of times a month do syndicate investments into one of those where we’ll say, okay, we’ve got 200 people who each want to put in a hundred thousand. So now we have $20 million.
And so we can get collectively, you know, for our membership, get access to these funds and we can invest in kind of underwriting them because we’re doing across the 20 million. But then people don’t need to, you know, most people are not going to put most of their wealth into those. Those are going to be a strategy. That’s 20 % of the portfolio. So they can do that. And then the other 80 % of the portfolio, they’re not paying a management fee on because that’s just in stocks or bonds or something straight forward. So, so I think it gets into that, you know, to your question of
Dylan Silver (15:16)
Right.Tad Fallows (16:02)
There are wealth managers who are the right thing for anybody, but it’s much easier to find a wealth manager. As you said, who’s going to run a Monte Carlo simulation and basically try and minimize your volatility because that’s what most clients want. It’s the easiest thing to provide. If you go to, remember, you know, I first told my company, had a conversation with Goldman Sachs and they pitched me, Hey, we can give you half the market return for a quarter of the volatility. said, all right, well, how about you give me twice the market volatility and four times the return. And then you have looked at me like I had three heads like that’s not what we do.And so, you know, if, if, there’s a lot fewer who are going to play that game. ⁓ and you’re right, you probably are more likely a self-management bucket if you’re not looking to minimize volatility.
Dylan Silver (16:42)
Thoughts on real estate syndications and on investors, especially accredited investors going in and investing in real estate syndications.Tad Fallows (16:54)
Yeah. mean, my per I am, I’m also a real estate guy, which you might not guess, you know, from our conversation here, mine has been more of an accidental landlord where every time I move houses, I’ve ended up keeping the house that used to be in and turned that into a rental property, which has worked out pretty well. I’ve done a couple of real estate syndications. I think they are good. I probably, I would think about where does it fit in my portfolio?Like would I do a real estate syndication into class a single family? It’s like, no, that would be silly. Cause I own class a single family. And so I’m not getting, you know, I’m just paying fees there. But if you talk about, know, I think you were mentioning before, you know, triple net, or if you talk about office space or factories, I’m not going to go buy a factory. have no idea how to run a factory and I don’t want to spend, you know, $10 million by a factory. So I think that’s a great use of this syndication. So I would really say, is that an asset class I want exposure to?
And then is that one either, I can’t write a big enough check or I don’t have the time or I don’t have the expertise to do myself. Um, and the answer is probably yes to a lot of these again, hospitality is how I want to run a motel. You know, if I want exposure there, I’m going to invest through a REIT or a syndicate that’s going to give me motel exposure.
Dylan Silver (18:02)
Pivoting a bit here, Tad, for folks who have had a windfall of cash, they’ve sold a company or they’ve just gotten to a point where they have a substantial net worth, how many of those people then go on to the next project simply because that’s who they are versus the folks who say, okay, well, I’m retiring now?Tad Fallows (18:23)
Uh, most of them. And I will, you know, it’s, I think at least in our case, our community is mostly driven by age where again, if you’re a 35 and you sell your company, you probably have two little kids who are at home in elementary school. You’re not going to go travel the world with your spouse. Now you’re like, you’re still gonna be home 40 weeks a year and you don’t want your kids seeing you just sort of sitting around playing golf and you’re probably type a, know, you’re. You could probably tell yourself you were working for the money, but once you actually have enough money, you can’t tell that yourself.that anymore. So I force you to think about why am I really doing this? And then you realize as well, I like the social aspect. I like the, you know, the validation. I like being able to work with my friends. I like the intellectual challenge. You know, I like that feeling of competing and winning. Like I think you see a lot of people who are athletes in high school or college then become entrepreneurs because it’s a chance to sort of compete in a different way. So most people I think end up going back to that. Some, you know, some cousin to what they did originally.
Dylan Silver (19:18)
And then is there a common theme that you see for folks who are looking at managing their own wealth? Is it a bad experience that they’ve had or is it a range of different issues from some just being like, hey, look, this is something that I would like to know more about because I feel like I don’t know anything about wealth management other than what I’ve been told from others.Tad Fallows (19:42)
I think the common theme is that the people believe they can do it themselves. And probably one of two reasons. It’s either because they were an entrepreneur or an executive at a business and they say, okay, I basically spent the last 10 or 20 or 30 years learning about money. It wasn’t as a wealth manager, but I know what a cashflow statement is. I know what a balance sheet is. I know how economic cycles work. so, know, like Warren Buffett is famous for saying,owning active portfolio companies makes him a better stock investor and owning stocks makes him a better manager of his company. And so they’re very overlapping things. So I think there’s a set of people who just basically know business and they say, okay, investing is not that different from business. And I think this again applies to real estate where if you, especially if you’re in the multifamily business, you know about vacancy rates and you know, ⁓ depreciation costs and all that sort of thing. You basically understand business. The other one I’d say there’s a lot of people who bring an engineering mindset mentality.
There’s maybe a factor of, the last 20 years in the U S have been phenomenally good for people with an engineering mindset. If you’ve been working at a Facebook, Amazon, Netflix, et cetera, for the last 20 years, you’ve made quite a bit of money. And I think often how engineers approach things is sort of looking at a spreadsheet and saying, okay, what’s the right outcome here? And they will notice that very big line item in the spreadsheet of, okay, 1 % management fee. That’s going to compound to a gigantic number over time.
And then also I think they feel the ability to do it because wealth management is a lot of just moving numbers around. so, ⁓ you know, something they feel comfortable trying themselves.
Dylan Silver (21:09)
One question, do you see a mistake or a common mistake that wealth managers historically have made? If you look at where wealth managers themselves have gone wrong, is there one common thing?Tad Fallows (21:26)
I think that I would say if I were a wealth manager, I would put much more energy into cultivating the next generation. Like I look at my mother-in-law’s wealth manager every time I try and have a conversation with, I’m not trying to take on managing her stuff for her because she’s going to think I’m getting greedy and trying to get my paws in her assets or something like that. So I’m not trying to do it myself, but I’ve tried to have conversations with them. like, look, she’s getting older, you know, want to understand what’s going on, somehow be involved andIt feel like I really, you know, getting the Heisman there, there, there’s kind of no engagement. And so the odds that we would continue to work with him after that money becomes my wife’s rather than, you know, her mom’s are very slim. And I think if you look at any of the stats, there’s almost no continuity from one generation to the other. And I think there’s a big opportunity for that.
Dylan Silver (22:08)
Yeah.Yeah, I mean, I don’t know what the statistics are. You would probably know better than me, but how many generations does wealth typically last? And probably one of the big reasons is what you’re talking about. Where’s the continuity other than just their point of contact?
Tad Fallows (22:23)
Yeah, yeah, I think that’s right.Dylan Silver (22:25)
We are coming up on time here, Tad. Any new projects that you’re working on, and then as well, what’s the best way for folks to get in contact with your team?Tad Fallows (22:33)
Yeah. So, ⁓ if this community is interesting to anybody, we don’t charge membership fees is just a free community for people in this situation. and that’s generally 2.2 million or above investable assets. So our suite’s possibly five to a hundred million. So just go to longangle.com. if it looks interesting, you’re feel free to apply there and you can talk with the current member and see if it seems like a mutual fit. ⁓ I also do a podcast called navigating wealth, ⁓ in terms of, know, other projects, ⁓That’s probably the main thing is recently launched that podcast. We’ve been doing a lot of interesting sessions on various topics.
Dylan Silver (23:08)
Tad, thank you so much for coming on the show today. Thanks for your time.Tad Fallows (23:12)
Hey, thanks for having me, Dylan.
