Navigating the Family Office Landscape with Carol Pepper.

0:00 Hello, Welcome everybody to another episode of Arthur's Roundtable. Super happy to have my friend, longtime friend Carol Pepper here with us. Carol's an icon in the family office space. We're really glad to hear about her journey and what's going on in the family office world from her perspective. So Carol, really appreciate you doing this. It's been quite some time since we've seen each other in person, but I'm so glad we're doing this here today. Thank you, Arthur. It's so wonderful to see you as well. And I value our long term friendship for sure. And your podcast has been doing great things. So look forward to this conversation that we're going to have today. Great. Thanks for saying that. Yeah, it's, it's, it's a nascent podcast podcast.

0:41 We've had some really interesting folks, including you, and so we'll see what happens as it grows. So let's start at the beginning. Carol, tell us about your journey, how this all started and how you got weeped and so nicely into the family office world. Sure. Well, I started my company Pepper International actually 25 years ago, February 1st in 2001. So this is my big 25, which is very exciting. And prior to that I had a long career in private wealth. I worked started as after studying philosophy and Russian language at Bryn Mawr College. So true liberal arts girl. I went to Salomon Brothers as the only girl in the MA department in 1984 to 1986, which was quite a shock after Bryn Mawr to get, you know, which has a very feminist all female school to the den of iniquity, the lion's den on Wall Street at Solomon. But that was an amazing experience. And after two years there, I was hired by JP Morgan and they put me through Columbia Business School. And then I had a long career in private wealth at JP Morgan Credit and Citibank.

1:46 And then I was hired by the Rockefeller family where I managed over a billion dollars for them and then started my own company, Pepper International, as I mentioned 25 years ago when the Internet came into existence, because that was really the catalyst to allow the beginning of all the virtual work that we see today. That's really when it began. And, and I, I forgive me for just going off a little bit here. First of all, I lived in Villanova and and I had dear friends that went to Bryn Mawr and Haverford, which they were sister campuses, right? And so I've spent a lot of time I brought up my kids in Villanova for it was a great place to bring up kids, great lifestyle was wonderful before I moved to New York City.

2:35 And then the other question I have for you, that wasn't a question is, I want to know if you played Liar's Poker when you were at Salomon Brothers with all the boys. I didn't, but there were strippers on the floor every single day. There were some woman when I'd come into work, taking off her clothes. Cocaine was being snorted in the bathrooms. The traders would, you know, trade all day and get on a plane to Atlantic City and gamble all night and come back again. I was somewhat insulated because I was in the M and A department and but because we were doing work with public companies, we were on a different floor than the trading guys. But I was the person they actually would send down to the trading floor when we had to get information on public companies.

3:18 And I remember very clearly sitting on the trader's desk and not moving until he gave me what I needed. Meanwhile, you know, phones are being thrown like projectiles and a lot of screaming and yelling is going on. It was, it's absolutely crazy, but you had to learn to be cool under fire to do well at Salomon Brothers, and they were incredibly smart people there at that time. I mean, it really was an incredible group of people and a completely shocking environment after how I had grown up. So it's really interesting. It's kind of the, some would say the good old days, but all that stuff not happening anymore and you go to jail, forget about the illicit drugs, it's all the hookers and all that kind of stuff doesn't. That stuff was real. Like I was there and, you know, we didn't have cell phones back in this.

4:03 They they didn't exist. Yeah, we did. For example, we did our spreadsheets with an HP12C calculator on massive sheets of paper that would be then turned into a typing center, and the women would type it into these huge sheets. We'd correct it multiple times, and then we had to cut and paste those sheets down into a size to fit into a book so it could be presented to companies. And one of the skills we had to learn all night was actually repairing copying machines in the middle of the night. And we'd sleep on a couch, get up, get the next version out of word processing, Jack everything. Once it was clean cut and paste and put it into a deck. And that was going on all night with about 20 of us from the MA group. And they replaced us with 100 analysts, 2 boys. Actually, I was the only girl.

4:50 Two boys actually had a nervous breakdown and had to leave in the middle of that two year program. But I figured if you could survive that, you could survive anything. It really was like GI Jane and those. That is old school New York, right? I mean, you would do, you would trade a institutional bond, you'd make an institutional bond trade and make more than enough money to lose 400,000 in Atlantic City and come back and do it all over again, right? Yeah, I was definitely in the wrong side of the house. If I had become a trader in those days, I think it would be a much wealthier woman today. Yeah. Super fun talk about that. I wasn't there during that, but I've had a lot of friends that were so and played a lot of Liars Poker with them. So tell us what is really Pepper International and why you started that and how it all evolved and the the Rockefellers were essentially the first family office that anybody ever knew about, right?

5:47 And that publicly. So was it a outgrowth of your experience there? Well, yes, exactly. It was working at the time. You know, I was reproached by Egon Zender and which was a big head hunting firm and they said the Rockefellers were looking for someone who was both a technical person who could do analysis of investments, etcetera, but could also talk to clients. Because the back then the stereotype was, OK, if you're a portfolio manager, you hate people, you just want to sit in the room and manage investments. And if you talk to clients, you're kind of dumb. You can't really do portfolio management. So they were looking for a person that could do both. So I said to them, well, you know, I'd love to try. And for whatever reason, they hired me. It was absolutely fantastic.

6:35 I had known of them many years ago when I first had my first job back in the late 80s, early 90s at JP Morgan. Of course I had known of them, but I had a beautiful office at 30 Rockefeller Center when they were there. And back in those days a family office was a very physical operation. So you had 200, around 200 family members at that point. You had 200 employees, but 99% of them were back office. They were accountants. They were in the back doing all the bookkeeping that was required and investment reporting. That was all very manual back in those days. And then we would literally, again, you know, manually be assembling these books. So if you were the beneficiary, 5 trusts, we'd be putting all the various documents together for your five different trusts. Each trust had different beneficiaries. Now you do all that stuff with the push of a button, but in the old days that was all very much manual labor, so. Were you there when they started Rock and Co? When they really started?

7:31 Yeah, they were. Just they just started Rock and Co. So they had the family office and then they had a few friends, very large, very prominent families that were also clients. But it wasn't widely marketed. It's just kind of getting started. Larry Grant was was the head of the organization at the time that I was there and and it was fantastic. I mean, I learned so much from that family. I referenced them often in my work today because they are the epitome of a good family office and a family that has made it through 9 and 10 generations still having all their wealth. Everybody is doing fairly well. They are extremely well respected. You know, they are the perfect example of what you can create if you decide to actually go down this path of creating multi generational wealth.

8:21 And much of what I learned, I learned from the Rockefellers. So I'm forever grateful. I still know many people in the family and at the office and I'm forever grateful for the time I spent with them. So do you have any idea what the number is, how many beneficiaries there are now? No, but I believe it's quite a bit higher than 200. So the family has grown, they've always had lots of children, which is wonderful. And you know, they're they're still committed. They made very smart decisions. This was public. Anything I mentioned about them is public information. So for example, Justin Rockefeller was one of the founders of Adapart. Adapart has now become one of the most wonderful systems that that I implement into many of the single family offices that I helped create today. So even though back in those days it was a very manual family office, they're in the forefront now of how to deliver technology to make it easier to run your family office. And hands down, they have the best customer service of any of the technology providers because this is their DNA. They did it for their own family and now they do it for the other customers.

9:25 He also was the person who decided to sell oil for the Brothers Fund. This again is public information, which was one of their large foundations. And he sold at the peak of oil. So I'm sure, you know, at $150.00 a barrel, that's when they sold out of oil and went to it into alternative fuel. So they've always been extremely forward thinking. You know, they founded Eastern Airlines, they saved the main woods, they saved the island of Saint John and made it a, a State Park. So they've, they've always been very ahead of the times, very smart, very ahead of the times and always thinking, I think not only about themselves, but about the culture and society in which they live. So they're, they're just an incredible family. And yet when I knew Justin originally, he was a little guy, you know, and yet the DNA of that family was absolutely imprinted in him.

10:15 And you see it in the decisions that he's made us he's become an adult. So it absolutely works. There are processes and procedures that you need to go through if you would like your family to be like the Rockefellers, if you would like to have highly respect, respected family members, multi generational wealth, be able to do lots of charity. By the way, a lot of it's still done anonymously. They're, they're very modest relative to the impact that they have the medical research that they fund, you know, the, the they, they help one of the family members help build the Native American Museum in Washington, DC. So I mean, there's just so many in there, you know, that actually burn Mar College had a Rockefeller dorm that was funded by them and they also paid and helped start Spelman College education for female African Americans and back when no one was educating them.

11:04 So if you want to be one of these highly respected families that is highly successful after 9 to 10 generations and more, there are things you do to make that happen. It doesn't just happen by magic. It's absolutely based on thoughtful processes and procedures that start when children are very little and then continue on through their lives so they grow into the kind of adults who are literally global leaders. It's really inspiring, isn't it? It really is. I can tell you a brief story that I think you'll appreciate. This is in the I wrote a book called The Seven Pearls of Financial Wisdom, A Woman's Guide to Enjoying Wealth and Power. And in that book I talked about how to raise children, wealthy children, to be wealthy or to handle wealth when they grow up.

11:48 And I referenced a document that was again, from the Rockefeller family. It was published in the Smithsonian Magazine. So this is public information, but at the time, John D the Third, John D Ralph Rockefeller the second was the wealthiest man in the United States and he had a 15 year old son, John D the 3rd and he made an allowance contract with John D the third. Now this is the wealthiest guy in America. He gave his son $1.50 a week of an allowance, which was a normal allowance of a kid, a normal kid if you will in those days, not a massive allowance. He had to put 20% to charity. He had to put 20% to savings. He could spend 60%, but he had to write down all of his spending and his father would personally review his spending every week. So his father was taking the time to make sure his son actually recorded what he was spending. That's how it was for him to make sure that his son developed this habit.

12:43 If the son voluntarily gave more money to charity or savings, he would match fund that amount. If the son did the accounting correctly, he got a raise of $0.10 a week, and if he didn't, it was Ding $0.10 a week. Now that's something anybody can do. Anybody can start their children with an allowance that's a reasonable amount, force them to have some in savings and charity and monitor their spending and give them more money if they if they follow certain rules. And that practice which was started by John D, the second I think you see in, you know, Justin's generation and the younger generations coming after that, so. It's really interesting. One of the things that we can count on is incentives work, right?

13:27 Yes. And they seem to have worked in this case, but just the construct makes sense, right? Yeah, well, first. You always have people go off the rails, but whatever, right? Right. Well, if you're tough from when you're really young that your money goes some to spending, some to charity and some to savings. Your brain is developed that way. So I tell people from the first time you're giving them 1/4 for the tooth fairy, when they lose that first tooth, you give them three piggy banks and you divide up that quarter maybe a dime, a nickel and a nickel. And you start this practice from the very first amount of money and you make it fun. So help them count it, help them see how it grows. Have them and their siblings work together to decide how they're going to give their money away. That's for charity.

14:10 You know, there's a lot and help them invest. I have, in fact, I have on on YouTube, I have something called family office boot Camp. And there I made all these videos of eight and nine year old kids talking about money. I made skits of them and we talked about how how it was better, for example, to buy GoPro stock than to buy a GoPro camera or buy Apple stock than to buy, you know, another Apple one. Yeah. And so the and my daughter and a couple of her friends were in those videos. So little kids today at 8-9 and ten can understand the concept of investing. And so if you stardom young enough, by the time they're grown, they're saving money, they're helping others and they're managing a budget. And that's a wonderful gift to give any child. Because most people don't learn that. I mean just they don't teach that in school. They don't.

14:57 It's got to come. And also if they see you doing the same things, they know you keep a budget and you help others and you save money, then it's becomes part of their DNA. It is the best gift that costs zero money that you can give your kid to have them be financially organized and not chaotic. It really is. I think that when I was first had children, somebody very wise gave me some advice and it worked. And I'll tell you what it is, but it largely has to do with people. The kids watch what you do. They don't listen to what you say, right? And So what his recommendation was is when you're trying to get your kid not to do something or to do something, but they say, well, I'm going to do this, you don't.

15:40 You go in and defuse the situation by first saying you're not going to listen to me, which is their position in general. So now they're listening to you. You're right, I'm not going to listen to you. What do you have to say? Right? And so you defuse that so you get them to listen. So you're not going to believe me, but it's very likely if you do the chosen path that you want to do, it could end up like this. And so that whole words matter, right? And so my kids to this day catch me doing that and they go, Dad, you're doing it again, right? Yeah, I mean, it's really true. I think. I think as much as kids roll their eyes at us, they do watch what we do like a hot and that's the most the biggest gift you can give to them is what you communicate not with your words but with your actions for sure.

16:31 So is this some of the stuff that you tend to focus on in Pepper International? Yes, I mean, so when I formed Pepper International in 2001, I did it because the Internet had just come alive really in 2000. That's when we really started to get the Internet and I realized the way that we had done it at Rockefeller, although amazing, was going to change because now it could be even more amazing. For example, at Rockefeller we had, you know, in house lawyers who were just supervising external lawyers. That's all they were doing. And now instead we would be able to just hire the best and brightest for whatever need a family had, use them for that task, and then not have them be full time.

17:12 You know, necessarily because we only used it for one particular. Yeah. Totally. That was a brand new concept back in 2001. And just like Al Gore invented the Internet, it was actually, as far as I'm aware, the first person to start talking about a virtual family office because I could see where it was going to go. So I was very excited by that because I knew at that point I had been working for a long time already and I knew a lot of wonderful experts, whether they were tax people, estate planners, great investment bankers, it, you know, people for a rehab if your child's in trouble, all kinds of experts. And I could see that now we were going to be able to run all this. Virtually everything was going to be as it is today. I mean, 20 years ago it was a dream.

17:52 Even consolidated reporting in some ways, which we started working on around the year 2000 is only coming into it. So I'm now, especially with AI allowing you to do much quicker analysis. My God, it's not like the old days, you know, we had our HP12C calculators and we had to do everything by hand. Now you throw your spreadsheet into ChatGPT and they do the analysis for you. So you know a lot of the. Grunt work. Was was going to be taken away by having the Internet and now we're going to come into the next level of taking away the grunt work that does not substitute for human ingenuity or making your own decisions. I think that's very important that people use these things as tools and not look at them as gods that are going to tell them what to do with their lives.

18:35 That's where you get into trouble. I totally agree. Yeah. Did Atapar become an outgrowth of Roc and Co? Yes, it did. Yeah, it did. In fact, Bill Wyman started Atapar with another family office. He and I had worked together at Rockefeller and Bill's an amazing guy and. We. I know, Bill. Yeah. Yes. And out of part is a fantastic example. But back in 2001 we were dreaming these things up. It was brand new in those days. And so I dreamt up this concept of doing two things. One was to help people set up or improve the operations of their family office as because I had seen so many of them at that point and that.

19:17 And then secondly, to act as an external CIO, but at a high level, really overseeing the big asset allocation, helping the clients interface with all of their banks, because most clients have 5 or 10 banks, they have all these statements. They don't have consolidated reporting back in the day. So actually having a satisfying relationship without giving control to the banks to do all your asset allocation was very challenging and it still is today, mind you, which is why I have very strong opinions about how family offices should manage their wealth. Meaning they should have an independent chief investment officer who's only paid by them and does not take kickback from the products to manage their funds. And then they're paid and you know, with base and bonus or assets under management, lots of different ways you might get paid for that.

20:07 But most importantly, you don't work for the money managers, right? And the reporting system also should not be at Fidelity, even though they get everybody to use a free system or JP Morgan. That should be an out of part or another independent system, because again, if you suddenly don't want to have your. Your money at Fidelity, they have all your data. That's dangerous. So having your data independent, having your CIO independent, then you go out and use the banks, Oregon, the money managers as supermarkets and you shop on their shelves and you put together the right portfolio, finding the best providers from each of the banks and use what they're best at doing. So that way you at the family level stay in control of your destiny and you can have an investment committee with experts to advise you.

20:54 Again, all these people should only advise you. You should always stay in control and make your own decisions. And my experience over doing this now for 25 years, when you set up your family office investment that way you stay in control and it meets your requirements. Because there was a lot of people during the crash of 2008 and 2009 who were getting very antsy before the crash. And they would call JP Morgan or they would call Goldman just to pick on a couple of them and say I should I get out of the market. And of course, all those guys, but no, don't worry about it, stay in the market and people lost massive amounts of money because by the time the big houses told people to exit, they had already lost a lot of money. Then on the other side, they also waited a long time to tell people to get back in.

21:39 So people lost money twice. They exited late and they came back in late. Whereas the people that followed their own instincts, which was to go to much more cash. One of my major clients at the time, we went to 75% cash because he he did not have taxable portfolios. He was able to do that is not AUS person and and then we waited and then we could go back in earlier than everybody else was prepared to go back in because we were following our instincts and what felt right, not the herd of Wall Street. So it's very important to use the street in the way that that it works for you versus the way that it works for them. You know, it's the assets under management business is a really good business because it's recurring revenue and it's a pain in the ass to move right. It's not easy.

22:28 You know, there you could do it, but it's it's unpleasant. And so when people from the outside looking in this, I've seen a lot of it recently where a lot of private equity is, is jumping into buying investment advisors because they see the recurring revenue and it's sticky. I mean, there's all kinds of reasons why it's going to compress and so on and so forth. But I'm wondering, one of the things that I found, for example, to switch back to the outer part discussion is that almost everything that I've seen recently, a lot of companies and investors that have put money into companies that want to do the data aggregation and reporting for family offices. I mean, there's a ton of investment that's been made in that.

23:12 And almost in every case, they're all using at a par. And so part of their gig is to say, we're going to help you integrate at a par, but at a par is almost at every equation. And so I'm just wondering, and I'm wondering what you're thinking is that what do they bring to the table? I don't know. I mean I think you go directly to out of part. I don't know that you need anybody else out of part is going ahead and making decisions about who they want to integrate with. So for example, another system that are very much like is Sumitas. It says Sumitas is a system. That's Bill, right? Yeah, that's Bill. So you can take Sumitas, that's where you can keep all your documents, you DocuSign inside of a vault that's very safe and protected etcetera. So I love the fact that Sumitas and out of part are now connected.

23:58 So so I can go on Sumitas and now all my monthly statements that are being generated by Atapar have been loaded up into my personal vault. So when I go on Sumitas and I'm, you know, beneficiary Carol, beneficiary Carol on her page sees her documents, sees whatever I'm supposed to see about the family companies. Maybe I see the social events coming up. Everything is there in one place and I'm sending emails or I'm docusigning inside a secure and safe vault. So they're all do all the, honestly, in my opinion, the best systems are finding each other and integrating. So either you can go to Sumitas or you can go to auto parts, Some of these very good long term systems and that particularly in my opinion that have come out of the family office space, those are the ones that work best for family offices.

24:46 There are others, I don't want to disparage anybody on your, on your podcast, but there are others that say came out of the institutional money management side, etcetera, or the trading floors. They, they're terrible. They, they have 0 customer service. They're extremely frustrating. And I have a lot of private conversations with people trying to, you know, who got them because they maybe were a hedge fund, another family office. And like this system just doesn't work for a family. It it worked when we were trading the hedge fund for the institutional people, but it doesn't work for the family members. So we don't need to linger on this, but I just want to get your opinion, if it's OK with you. For years now, the challenge has been I've got all these spreadsheets and I've got a team of people working on the spreadsheets and we know how they work. But somebody's come in to me and said I need to automate this because there's too many people and too much money and too many chances of errors.

25:40 And so somebody comes in and says we're going to automate it and it the, the ROI on the automation is almost impossible to calculate. And then it goes from a million two to get it done over 2 years to 3,000,000 / 5 years. And then when it's finally done, it doesn't work. And then you have to try to unravel and go back to spreadsheets. I haven't had that experience. I mean, all I can say is the implementations I've done going from spreadsheets for example, of consolidating on spreadsheets to consolidating on out of part. It hasn't been a problem because out of part just goes in and grabs the feeds right off of the from the nowadays. I mean earlier it was different, but now literally everything is coming directly that ports into all these banks and what happens suddenly you have visibility into fees you never knew about because those fees were showing up on the statement, so you never saw them.

26:33 You start seeing hidden fees you get basically what these systems do is they put all the securities getting them all priced on the same system. So if your Goldman account or your credit, you know, cred Swiss back in the day or your UBS account or your Merrill Lynch account, suddenly all the securities are priced off of 1 system and all the returns are priced similarly. So they, the, the look throughs through the portfolios to see what your true position concentrations are, are available to you with, with, you know, simple clicks of a button. So at least I, I don't, I can't comment in general because I haven't had that experience. I think it depends on the system that you pick. And ideally, if you've never done it, you know, have a consultant help you with that integration.

27:17 Even though you have hired out of PAR, I still help out of PAR design a report that I know those family members will understand because they don't know what they will or will not understand. And if some of the family members are not financial people, but they're important people, you need to create reports that they can understand as well as the technical report, let's say for the CIO. What I hate to see at a family board meeting are all these board people looking at their phones going. When is this? It's going to be over, Please God. And some consultant or CIO up there showing them spaghetti charts and charts that they can't understand, talking about vexity and talking about standard deviation, all these things that mean absolutely nothing to a human being, normal person.

28:01 You have to be able to speak in plain English. As you know, we learned to Bryn Mawr, if you will. You know, we have to go back to the basics. If we can't translate, we, the professionals can't translate this fine financial jargon into something that's common sense. We are not doing our jobs. It's on us to translate for these families. So then they make the decisions about their money. Totally. You've seen nothing but gobbledygook and no one knows what to do, and so they do nothing right? Yeah, I mean, I can't tell you how many times I've sat in a room, literally with some very stern patron from Latin America sitting there next to me. And on the other side of the table are 25 guys from Goldman Sachs with books this thick.

28:46 And they flip, and they flip and they flip and they talk and they talk. And he sits there, stone face and he gets, they get up and say, thank you very much, Sir. And out they go. And the guy turns to me and says, what did they say? I mean, no family member will ever say generally to the bankers or advisors. I don't understand what you just told me. It means nothing to me because they don't want to look stupid and they're afraid that they'll get even more taken advantage of if they admit that they don't understand what this person is saying to them, though, that's the role to me of the family office advisors or the CIO has to be the person. That's what I try to do. The translator between Wall Street speak. Having spent my time the.

29:29 Buffer the interpreter right? And the interpreter, because it's their money, it's not my money. But they need to know what tricks are being played on them. They need to know what assumptions went into that model to show them something they need. I mean, I remember very clearly when I was at Rockefeller and, you know, Madoff came in to pitch, right, because we were putting together the very first hedge fund for the family. Part of history, Carol, Part of history. It's really true. I sat in the room when Madoff was pitching and we were making a fund of funds of hedge funds. So we were interviewing all these very various people. But we knew back then the ethics, the morality and the style of the family, which was their extremely well, they're low key and they're not stupid, OK.

30:12 And when Madoff came in being very arrogant when you asked him questions and just name dropping, that did nothing for people from the Rockefeller family office. They did not invest with him. They didn't make a big deal of it was just like, Nope, you're not our style. I mean, that kind of bravado and that kind of name dropping and that kind of stuff doesn't fly with successful secure families, right? So it's about actually getting to the bottom of what you're selling me. What are you actually selling me and what are you actually charging for it? I'll give you another example. The Swiss, when I worked for Credit Suisse were great at this. They would sell you an American secure technology security portfolio, and they're charging these poor people, you know, for the tech stocks back in the day, they're charging them three and four and 5% fees for their structured product. Meanwhile, an ETF could do the exact same thing for, you know, a few basis points.

31:07 So they they try to song and dance you and make you think that somehow their structuring is making it worth you paying 3 and 4 to 5% when in fact there's no difference. If you say, well, please run me an analysis of your portfolio's performance versus the ETF. They don't like that. So you have to know, you have to have somebody that knows how to ask the questions that get to what you really want to know. Totally. I haven't. Important. I have dozens of Madoff stories, but my favorite is I was asked to sit with somebody in New York City, in Brooklyn who had sold his lifelong company of knishes like he he made a real business. He had $10 million cash sold the company. And he was asking, somebody asked me to sit down with him and suggest what he do with the $10 million of cash. And it was at the time when Madoff was still there. And he said, hey, you know what I'm going to do? I'm going to, my sister has a slot and I have access to Madoff and I'm not sure how long it's going to last. And so I'm going to put it all in that. And so it wasn't my place.

32:13 My place was just to say what I would do. And I said, well, I wouldn't do that if I were you because you know, you've got $10 million. That's your lifes work. You don't want to put it all in one place. First of all, forget about the Madoff thing, right? Yeah. And he did. And he basically, I mean, he recovered because a lot of people that put money into Madoff got their money back on some level. But I mean, he, he, he felt because he was an unsophisticated investor, not an unsophisticated person, but an unsophisticated investor. And he just felt like it was FOMO. His sister had a slot and so he had to take advantage of it. And so he went all in and had to live through that nightmare.

32:54 Well, we're seeing that again today, right? We're going back into kind of, it feels very frighteningly like, lady, these early 90s right now. I mean, there seems to be less focus on risk. There seems to be more focus on, you know, oh, give money into SpaceX. You have no idea. There's no financials, but you can get a slot in space. XI just got called about that. You know, when, when, when you're selling pre PO, pre IPO shares from you know, employee number 30 and you know, there's no real disclosure on how much money because it's the bid and ask, right? Yeah, that's probably not a good idea. Yeah. So, you know, we, it's very the AI craze right now. For example, where should you invest in AI? What part of AI makes sense?

33:41 How do you figure that out? How do you actually get down to figuring out earnings? These things are, you know, these are real questions. And some families handle that by saying I'm not doing anything like this is just too hard. Yeah, others are saying, OK, I'm going to have an overall allocation to technology and some percentage of it or the, you know, the beautiful 7 or whatever number it is today and I'm going to give them some money and you know, let's let it ride. There's nothing wrong with momentum and letting it ride. But as you say, let's not put 100% in once one AI stock or worse 1, you know, private AI thing that's going to go public maybe, maybe, right? So I think again, common sense at the end of the day is your friend, what your grandmother did, what your grandfather did still applies today. It doesn't matter that we have AI, nothing has changed. What is AI anyway but a large learning language model of everything humans did in the past. Think about that.

34:35 It's the pipeline, but you just want to make the same mistakes as everybody made in the past. It's it's it's really, really fast. Auto complete, Yeah. Exactly I. Mean that's really what it. Is the best thing I ever studied in my entire life was philosophy at Bryn Mawr and Haverford colleges, because that was a course where you have the Socratic method and you had to learn how to critically think. And that is very much missing today in a lot of people's education. And there's a lot more about razzle dazzle. And oh, he's the expert. I should believe him. Oh, Elon, so rich, I should give him money. Forget all of that. God gave you a brain. Use it, you know, Learn what critical thinking means.

35:16 Learn how to think. That's what philosophy teaches you. And that's why. I totally agree with you. I don't know if you know this, but I'm Greek. My parents were born here, but I have a real affinity for my culture and the Socratic method and the critical thinking is how I approach everything. And it's not because I'm Greek. It's just that that's how I learn. And I think it's woefully absent in a lot of the current generation. And the last two perhaps even it's really easy for somebody to attach themselves to an idea or an ideology that validates how they think they feel and not do the work to figure out whether it makes any sense. Right?

35:57 I'm just talking about ideology for a minute. But it's anything like, wait a minute, you just told me it sounds like a great idea. Let's unpack that. And they just don't bother, right? And part of it's people are busy, part of it, they don't care. Part of it's there's a whole bunch of reasons why, but critical thinking serves people well. 100% And if you think of what a lot of guys are going through right now, men in our generation, they're in their 50s, sixties and 70s, they've got these kids coming up. Maybe they've made 100 million, maybe they've made a billion in their real estate or their companies. And the number one conversation I have with them is should I give this business to the kids or should I sell it? Are the kids going to be able to take it over or aren't they?

36:38 You know, and so walking through the steps critically and logically of how to make that one of the most important decisions of your life, what to do with this business that you built. You know, like your fellow who sold the money, sold his business and had the cash, that that's what many, many families are facing today. And critical thinking is your friend. Because the first question you have to ask yourself is do I keep do does the, does anyone want to run it or, and then if yes, is anyone competent to run it? And depending on how those two answered out, you decide is it better to sell it or to keep it? I'll give you an example. One family I work with from Latin America, the businesses were extremely successful, successful in Latin America, but the patriarch moved the whole family and the kids all grew up in the US and they've never worked in the Latin America.

37:26 In fact, in their country, you have to go around with guns and armored cars. They have no interest in running the business. There's nobody except for him who can sell it. He has to do that now. He may drag his feet or worry about what's going to happen when I suddenly have two or $3 billion liquid, you know, and these kids go to blow it. But the truth is if he leaves it in the companies and thinks someone else is going to handle it in the future, a huge mess and family, the family will never realize the value that he could realize if he sold it. And that's true in some of the US I've talked to real estate families, especially in New York where you and I, let's spend a lot of time, they're like, we've never sold a building. If we sell our buildings, it's going to kill us.

38:06 It's going to kill us with taxes because our bases is so low. But none of our kids wants to anything to do with this real estate. They've never set foot in the office. They don't want to work hard. In fact, they think we work too hard. They hate our lifestyle. In fact, they have a really nice lifestyle now that we created for them. But what are we going to do so these things we can. I know. That. I have one of those kids. You just can't. You just can't put that decision off. You have to really take a hard look at it and say, OK, what are my choices? OK, I could be the one who sold everything. I could do a lot of tax planning. There's all kinds of creative things you might be able to do on that. I could create it. I could throw this on a dynasty trust and put a bunch of professionals in to read it forever and ever. That's what some families do.

38:52 I could liquefy it and create a long term dynasty trust and none of these my lovely but incompetent children are going to run it. I'm going to get professionals to rent it and a board of people I trust to rent it and they will get income because that's really what. And hopefully, God willing, one of my grandkids will be entrepreneurial like me and will come to the family and take some of this money and start again, right. So there, there's different things you can do, but one thing you can't really do well, you can. But the, the worst thing you can possibly do is not use the brain God gave you to make your business to, to really think seriously, back the question and then explore if you've never had a family office, what would this look like if I did sell it?

39:33 Now I got all this cash. Now what do I do? And I call that rich person 101. There are so many times I deal with folks who, you know, they may exit and get 100 million or more. They've never been wealthy like that. They've been upper middle class. They always, you know, had enough money to pull out of the business to have a nice lifestyle, but they were not wealthy. They didn't have $100 million that they had to suddenly deal with. And there's no shame in that. There's nothing you inherently know about managing that money. If you've never had it, how could you know that, right? It's a art in of itself. So I urge people, if you sell the business or you're scared to sell it because you're not going to know what to do in the next step. There are good people out there, you know, you know them, I know them.

40:14 Good reputable people that will help you organize it in a way that it will not all go down the drain into one bait off investment for. Example. It's true. There are very, very good, good people and I think we should say that out loud. There are very good people that have your best interests at heart, get paid to do it well, and will will represent you well and give you good context. Yeah, and and the best. Decision making. Yeah, and you know, look at people that have won awards, look at people that are writing about things. Read what they write and see if you agree with their philosophy. You might agree with one person, you might disagree with another, but you can find good hearted people, people that really are not there to RIP you off, people that are really there to take you on this journey.

40:58 That's a new journey for you and certainly for your children, You know, and then if you're a person, I mean, I deal with a lot of young couples right now, which which is wonderful. And they say to them, OK, guys, right now you have $50 million. That's amazing. But when your little babies who are two and four years old are your age, you and you keep going like this, you're going to have 100 million. You're going to have 300 million or maybe more because money grows much faster today than it did in the 80s and 90s. Money can just explode so quickly nowadays. Are those children going to be able to handle what you're creating? And if not, there's lots of people out there who know how to prepare your kids so by the time they are adults, they can have a relationship with this money.

41:41 And that sounds like a funny thing to say, but you see some kids who just, you know, flip out, kill themselves or become anorexic or become drug addicts because frankly, they don't know how to have a relationship with their own place in society as a wealthy kid in a grounded way. And that's something parents are very worried about. But it can be trained. You can teach kids to be able to handle it. You know, that's why I made my videos on family office boot camp to kind of, you know, we talk about what happens when people are hitting you up for money and you're a kid in high school to invest in their company. What happens when you want a date and you're trying to find a spouse, a husband or a wife? You know, how do you make sure they're after you and they're not a gold digger?

42:23 You know, I, we could go on for hours about that problem that families have. So preparing your kids and then helping them to manage friendships and then helping them to get married and then helping them to either come into the business or have a great life doing something completely different, but not go off the rails, frankly, from the money and from what they're exposed to with the money to other families that are letting them do whatever they want and get into terrible trouble. Frankly, you know, I don't believe in this business. You know, high school kids at home in the mansion and Greenwich unsupervised, having parties with only the poor nanny there to supervise, that's a recipe for disaster. You have to be an involved parent. John D the Third, it was OK because Johnny the second actually was involved with his son. Even he you know, the equivalent of Elon Musk in the day, you know, the wealthiest man in his cut in the United States. He was involved every week with his son. He didn't just I'm.

43:18 Not, I'm not, I'm not blaming Elon, but I mean, look what happened to one of Elon's son. He went off the rails and he's basically doesn't exist because he went down the trans thing, whatever that was going on. And I don't know if that had anything to do with him not being a good parent or whatever it is. But one, one thing I do know, Carol, and I think you'll agree with this is rich people have the same problems as poor people. They just are exacerbated, right? And so we all have potential of the kids going off the rails doing stupid stuff because kids do stupid stuff no matter what. And it it just, it, it you have to pay attention because if you're not paying attention, they will do what kids do. 100%, And they'll do what their friends do because they're looking for that. Yeah.

44:05 I mean, I always say love is in the core of every family, right? I mean, it sounds like an obvious thing to say, but with some of these wealthy families, if the parents are just jetting around the world and the dad is always working and the mom is attending all the social events and the kids are being raised by the nanny, where's the love for the children? And so that when your heart is empty of love, you go looking for it and generally you find it in the wrong place. Yeah, from people that are your same age, that have the same issues that you are and are not developed right. I've done. I've done made lots of interventions of kids, you know, who are on drugs, girls who are dying from anorexia, boys who are on drugs and, you know, taking so many drugs. The parents think he's mentally ill, but in fact he's just having flashbacks and hallucinations. I mean, this is these are billionaires children's. We're not talking about kids without resources. So, you know, you're absolutely right. But having said all of that, if you, if you make some effort and you go find, you know, sensible people that help you, it doesn't have to be like that.

45:05 It's money is not the issue. It's, it's how the human beings are, how the human beings behave. Is it, as you say, exacerbated by the money? Do you what, what's your opinion on this Michael Dell contribution to kids putting money into kids accounts? So when they're of age, they'll have some some money to back them up. So sort of a safety nut, you know what I'm talking about? No, I'm not. I'm not familiar with. It no, Michael Dell just committed a billion and a half dollars or more. Maybe it's a lot more than that. I can't remember what it was. But yeah, he did a big pomp and circumstance with Trump and basically said, my wife and I are going to put money that we're going to give to the government.

45:48 And the government's going to give it to kids. And they're going to put it into account that they can't trust. They're going to give up the $3000 or $1000. Can't remember what it is. Sorry to be unclear about it, but it's some number. And the idea is that Michael Dell is sharing his wealth and saying we're going to give kids $1000, that by the time they're 21, it's going to grow to whatever it grows. And they have a launching pad to do whatever they want. Oh, that's a lovely thing to do. Good for him. I mean, this is a country where their education is not free. This is a country where Healthcare is not free. This is a country where there's very little support for you if you're poor. So anything that puts some support in place for people, especially that don't have means, I think it's a wonderful gesture and good for him. I mean, you know, if it can support more kids getting it. I'm a big believer in education.

46:37 You know, who knows what education will look like in the future. But you know, I am personally the product of philanthropy. I got to go to Bryn Mawr because women at Bryn Mawr had a scholarship for me, nice high academic grades in high school, and that paid for half of my education. A foundation in my hometown paid for another quarter because that was a childless couple That's that gave money for to support the education people from my town in Massachusetts. And then the rest I borrowed and I worked 40 hours a week while I was at Bryn Mawr's. You know, I was thrown in the fire early in life, but I wouldn't be where I am today without philanthropy from people like Michael Dell. So I think that's a beautiful thing to do. Yeah. So we have all this interesting Nexus here where in Massachusetts? Sudbury, which is 20 miles West of Boston. I went to high school.

47:25 I was born in New Hampshire and I went to high school in Western Mass outside of Springfield. Longmeadow. Oh wow. You know, Bay Path, the whole thing, you know, Bay Path Anyway, so that's, we have an interesting connection between Bryn Mawr and there, yeah. My my dad was a was an engineer at Raytheon. In fact he came back after World War Two. He survived 5 beach landings in the Pacific which is unbelievable. He actually worked with General MacArthur in his tent as an attache because he got malaria and he couldn't be out on the frontline anymore. And, and then he came back and went to Raytheon. And he actually helped Spencer Percy build the first microwave ovens for what you and I used today. My dad helped create those. And he worked in Raytheon his entire career in Waltham, Mass. But, you know, we did.

48:12 He had a good job, but not a lot of money. And so I was the beneficiary of philanthropy. I had an uncle that worked in Raytheon. He lived in Tyngsboro, outside of Lowell. I have relatives in Lowell. I have all that sort of New England connection. Yeah, wow. Very, very hard people to fool. New Englanders are very down to earth, totally. They're not impressed by anything. And they're the salt. The salt of the earth really describes people from New England for sure. Totally. So what if somebody had to say, crystallize for them in their mind of how you could be helpful? What What? What's a good profile of somebody that you think you can be helpful to?

48:55 Well, there's probably three kinds of people they could be helpful to. 1 would be a family that doesn't have a family office. Maybe they have a family business. And as I said, they're facing these tough choices and they need to do something and they don't even know how to think about the problem. I'm your girl. I can help you look at what you have. I can help you in the corporate finance side to figure out what to do with the business or who to help you with the business and then what to do with the proceeds. If you decide to choose to sell it or you want to get your kids ready, even if it's earlier and they're younger and you want to get your kids ready to take it over in the future and create a multi generational wealth for your family. I'm your girl for that. If you already have a family office, but it's frustrating you and you feel it's too expensive and it's not doing what you wanted it to do, I can help you diagnose.

49:41 I do sort of a 360�� assessment and help you diagnose. Why isn't it working and what do we need to make it work for the family rather than be an expense that the family sees as unnecessary? And then finally, if you have assets to manage and you were not a money manager yourself and you need a CIO who's independent, who can come in and help do that translation job and help you oversee and put together a structure and a process to grow your wealth from multiple generations, I can help you with that as well. So whether it's setting up, improving or managing the wealth, those are the three main areas. Or if you haven't done family governance, you have a family office, but you never did a family constitution.

50:25 You never figured out, you know, how do we make important decisions as a group in our family? I can also walk you through that process. If you've never done family values, you know, if you've never actually gone out there and figured out what do we really stand for? If we want to be like the Rockefellers, if we want to have a family Crest, if we want to, you know, be able to teach our children and our grands and our great grands who we are, help us articulate that. That's another very, very meaningful and, and I feel very honored when I work with families for that because that that's work that lasts for generations. And your great, great grands. Well, thank you for doing that work. So that's super helpful. Thanks for saying that. I was asked recently, I'd love to see your perspective on this by our friends at Bessemer to talk to somebody that was an in house CEIO at a very large family office in New York, single family office.

51:22 And the conversation was around negotiating compensation and career path. And I have strong feelings about the career path in family offices, especially a single family office. I'm wondering how you feel about the career path. And I know that there's many different single family offices and I get that. But there there seems to be a sentiment among people that there's a similar career path in single family offices that might be in an in, in a commercial family office that gets paid based on AUM. How do you feel about that career path in contrast? You know, it's interesting.

52:04 That's a really great question. I really think the family has to think long and hard about what type of person they want to have as the CEO or the CIO of their family office. And let me tell you what I mean by that. If some families, and let's talk about the billion dollar plus family for a moment, because these are big families, they could have any kind. Of this isn't far in excess of that, Yeah, in this case. So generally those folks are advised nowadays by big head hunters, let's say, to go out and get often institutional money managers, guys that have worked generally guys, but sometimes women, but mostly guys that have run a hedge fund or that have worked at, you know, in the institutional money side. The the, the thought as well, we have the same amount of money as the institution.

52:48 We need institutional practices and therefore we need an institutional guy to run this OK. Now the institutional guy for this kind of money is going to want multiple millions of dollars of compensation. He's going to want Carrie and all the deals and most likely within three to five years he's going to be pushing you to let him launch a fund, right Yet other families to come into that fund and. He's very. Good on that saying. Oh, but we'll all make, you'll make money. You won't cost you anything now to have your money managed because I'll go export what I do for you to other people and you'll make money on that. Is a person who should not in my humble opinion, be at a single family office to grow multi generational wealth.

53:29 OK. That, as you say, is, is a person who's used to a commercial environment, wants to maximize his earnings every chance he can get and indeed wants to probably launch out on his back out out on his own to a hedge fund after he establishes a track record with your money, by the way, so he can then become Ron Baron, you know, or whoever. So that type of personality, if you get that kind of personality, you have to understand what you're getting. You're getting him for three to five years. He's going to demand a lot of money. He's going to force you to launch a private fund for him to run most likely, right? Do you want that for your multi generation money? Is that really what you want? Or do you want a person whose personality is I want to stay with the family.

54:12 I know I don't know everything, but I can build a team of experts to support me and I'm going to understand what the family needs. And I'm going to start and I'm going to the best tax people around because I'm not institutional. I'm after tax. These are individuals who pay taxes. And I'm going to help you figure out the right jurisdictions and tax strategies to maximize your your after tax risk adjusted return over multiple generations. That's a very different mandate than I'm an institutional guy who's used to maximizing billions in a tax free environment, right? So I always say to people, if you do the family business, the business plan and your values first, quite frankly, and you know what you want him to do, then you can hire the right person.

54:56 Because if you just get that super ambitious guy who just wants to leverage your money into his next hedge fund, yes, he ran $10 billion and you only have two. So you think you're you're doing even better because he knows that aren't even more money than you have. And he might even hint at you that he's going to turn your 2 billion into 10. Let him allocate some money to him in a fund, you know, even see them in a fund if you love him that much. But know the nature of the the person that you're dealing. With So, what's the right person for that job? The which job? The the. So being the consiglieri for the family. How do you find that person? What does he look like or she? Well, they, they tend to come out of three areas, right? They're either from the money management side, they're a lawyer and a state planning or a lawyer site type, or they're an accountant type.

55:42 Generally they come out of those three areas, the Consiglia areas often was the CFO of the family. He's about to retire. He knows all the secrets, he knows where the bones are buried and they give him that job, right? Which could be fun because he has trust, but he may have 0 technical expertise on your money as a multi generational family. He had a lot of technical expertise on your business, right? So he may or may not be the right person. Maybe you pair him with somebody who's had the family office experience and background and you, you get someone to drill into that person to figure out, you know, how good were they? And, and by the way, I will tell you a secret a lot of people don't know. There seems to be an honor code among families because I've done a lot of placing people into family office jobs. And if I call the principles of this big family and I'm calling on behalf of another big family, they get on the phone and tell me exactly what that guy was like or that girl was like, that person was like, and why they have them and why they left. And they're very blunt about it because we all have kind of an honor system, if you will.

56:44 Not only that, they're not right person. Placed in the right job. Yeah. And they're not subject to all the nonsense that a big corporation would be hedging to tell the truth, right? Correct. I mean, you know, the headhunter can't tell you anything about the age of the person, their personal relationships, if they had problems, you know, But the person that they work for can tell you because he's not, he's not constrained in the same way that a professional headhunter is. So. Yeah. In that and flip it a little bit in the description of the person that you said might be, for example, let's say the CPA, is that a career path? To be. The head of the family office, yeah. Yeah. I mean, they're single family office for 2530 years.

57:27 Most likely they've done something else. Generally they get into that job at least 20 years into their career. So they've already done something else. They're ready to have this steady assignment that's got lots of different facets to it and they're going to stay there until they retire. There are a lot of people like that now. What's happening right now is a lot of those people are retiring, right? There's a lot of single family offices right now where their beloved counselor, their person that guided them and guided the knew their kids when they grew up and now their kids are about to take over. That guy is going to retire because he's 75, he's 80, some of them are 85 and still doing that role because if can't family can't bear to let them go, you know.

58:07 So the harder part for families is replacing that first guy often. How do they, what kind of person should take that job on? And ideally, if the person loves the family, which they all do, the ones that have been long term like that, he is well advised to get that person in five to 10 years before he's going to have time. Yeah, get that person in. And pay 2 salaries it's. Nothing. It's a drop of the bucket compared to your wealth, so that by the time your beloved person retires, your new person is now beloved as well. And you've had enough time to know that it's the worst. Like you've been with Bill forever and Bill retires and now you got Jane and Jane just came in out of nowhere. She doesn't know where the bones Berry Bill Bill's not retired in Palm Beach or whatever. And Port Jane is like kind of hated because she she's not Bill, right.

58:55 So you really have to unless you've got the next generation issue, right? Yeah. And you've got a. Next generation issue too. And they a lot of times don't know what they don't know. God bless them, we love them, but they need a lot more motherly or fatherly help than they may think they do. Even when they say okay, boomer and they don't like to hear from us boomers. Actually boomers have a lot to teach you believe boomers to their phones. I can't even. Believe I'm a boomer. We're. Thinking about that, right? Yeah, Carol, this has been. Amazing and we. Truly, truly appreciate you doing this. How does everybody get a hold of you? Well, you can give me an e-mail. Carol at pepperinternational.com. You can look at me on LinkedIn.

59:37 I'm on Bloomberg once a month talking about the markets. You can read my book, The Seven Pearls of Financial Wisdom. You can get that on Amazon or you can you can also look at Family Office Boot Camp where I have about 40 videos, free videos on how to create a family office, how to find love and how to raise your kids. So it's all there. And I'd love to speak with anybody who has questions in this area. And thank you, Arthur. This has been a delightful conversation. It's been my pleasure. Really, really glad it's been. I don't know. I think the last time I saw you in person had to be 5 years ago, something like that. Right before COVID, right? Yeah, I think we're at lunch in New York exactly at. Somewhere at some nice restaurant to. Remember that but.

1:00:19 Great to see you and keep doing what you're doing because this is very helpful to people to have a chance to listen and gain experience and learn from other people that have done it for a long time. Yeah, it's super appreciated, Carol. Great, great. Wisdom, really appreciate it and thank you everybody for joining us today. So please feel free to to share this and dial in and listen in when it makes sense. Thank you, Carol, really appreciate it. Thank you, Arthur. Take care.