The Exchanges

Q Yeah. Um, I'm just thinking, like, in terms of alts in general, are RIAs coming to you asking for access to them, or is it really just for retail?

A So retail, when I think about RIAs, I think about retail because our clients are retail. So, um, that's typically what we mean when we say a retail customer versus like, say, a Robin Hood investor, right? Um, If we think about, because a vast majority of the retail wealth is actually managed with, you know, RIAs or wealth managers of some type, um, RIAs are coming in troves and their clients are coming in troves, asking for alternatives. So platforms like Case and iCapital, um, have taken off in recent years, um, simply as a result of RIAs need access to private markets. But for a while, they've only really been limited for the last couple of years to mainstream Like mega cap managers. So think about that as Apollo, Blackstone, Blue Owls, kind of a new entrant, and it's typically shorter duration credit products. Um, so it's like private credit is probably the most exciting thing. It's why Blackstone paid twelve billion dollars, or sorry, BlackRock paid twelve billion dollars for HPS, um, a similar amount for GIP, Global Infrastructure Partners, because retail wants alternatives and alternatives are a higher fee stream. And, you know, can provide, like, kind of returns that you couldn't necessarily get, um, in the, in the public markets. So, or in, in public fixed income. But it's not necessarily been venture. It's been, you know, mostly private credit or infrastructure or real…

AI assessment note: “RIAs are coming in troves and their clients are coming in troves, asking for alternatives.”

Q I have so many questions on this. First, like what is the range of clients that you have? Like what, where does the band go till?

A So we've got clients that are well in excess of like You know, we've got billionaire clients, but they've got individual accounts well in excess of one hundred and fifty million dollars on our platform. And then we've got client accounts that I kid you not are 200 dollars, like really, really small. Like we want to be able to service all clients. We kind of have this principle of like meet the client where they are. We want to be able to service all clients, all different types of accounts across all asset classes. And it's a really interesting problem because the problem can only be solved with technology. Because if you threw humans at this problem, And said, Hey, I want you to figure out asset allocation for a 10,000 dollar account or a hundred million dollar account. You know, you would throw, you know, a ton of resources at the hundred million dollar account and very few resources at the 10,000 dollar account. Um, and you know, we think that, uh, all accounts should be functionally treated the same.

AI assessment note: “well in excess of one hundred and fifty million dollars... client accounts that... are 200 dollars”

Q trends and investment stuff on the private market side with VC, private equity, IPOs, that kind of thing. Um, But I'm very curious from your perspective, um, including RIAs, let's say, other family offices, I work for a family office, um, wealth managers, and, um, other kinds of sophisticated investors. This topic is really timely right now because the market is so volatile, but how are you seeing portfolios shift?

A So the main way I'm seeing portfolios shift is one, Which a lot of people can point out as a rise in passive, right? So most people, you know, 20 years ago would say they're making all their money in active bets. They're going to pick stocks. They're going to find active mutual funds. They're finding a manager who think they're going to outperform. Um, and this was usually expressed in the form of a mutual fund. And now everyone's realizing the real alpha is just buying the market and holding onto it for a long time. But the, the interesting thing is that buying the market is no longer buying the market. So if you buy the S and P 500, You're not actually buying the whole stock market. You're buying, you know, there's private companies now that are carrying significant market caps that should have gone public, but they're not, they're still private. Um, there's, you know, other types of fixed income instruments. There's all kinds of things. There's private equity, um, that you are not getting in your portfolio. So the key is how do you buy a index like portfolio across the whole market and all the available asset classes? So I think the biggest trend is the merger or the blend of Private markets and public markets coming together in one place in one orchestrated system, which is what we're aspiring to build. We call it the total portfolio solution. Um, and then also trying to un…

AI assessment note: “So the main way I'm seeing portfolios shift is one, Which a lot of people can point out as a rise in passive”

Q Okay, so I'm gonna read this out because you recently tweeted this, but you hit over fifteen billion in platform assets for your clients, a massive unlock in the last year, over 1500% year over year growth with your leanest team ever of 41 people. How did you accomplish this?

A So there's a lot in this tweet, but if we had to break it down, I would state first there was market trends that were kind of wildly in our favor. So when we first started the company, The belief was a lot of financial advisors were breaking away from big institutions, the Morgan Stanley's, the Merrill Lynch's, the UBS's of the world, and creating these independent RIAs. And these independent RIAs were used to having, it was called a managed account solution, but think about it as people at these big institutions that would build portfolios, they would manage those portfolios, they would trade those portfolios, they would do all the work on those portfolios, so those advisors could kind of focus on managing their client relationships. But then when they went independent, they didn't have any of that. So our vision was how can we provide that Shopify like operating system for them to be able to build personalized portfolios at scale and focus their time and energy on kind of delivering the best possible client relationships. The challenge was, well, we were right that this was a huge problem and this was a need. The thing we were wrong was a lot of this trend took place shortly after the financial crisis. So up until the early 2010 and unfortunately I was, you know, 1011 years old, so I couldn't have really captured it at that time. Um, and the advisors started to get really old…

AI assessment note: “first there was market trends that were kind of wildly in our favor”

Q Got it. And then what about the private jets?

A That's a whole other, like, that's, I mean, there's all kinds of different ways people finance these things. Um, it's a little different. Most of the time, most of these people don't own the planes. The companies own the planes. Um, they are, They're deducts. If you buy a new plane, I don't know what the tax rules on this are quite yet, but if you buy a new plane, you can depreciate a certain amount of that plane, um, and offset it with gains in your, you know, public's portfolio or your, your private siliquid portfolio. Um, and then what a lot of GPs do or a lot of managers do is they actually expense these planes or the operating costs from their fund. Um, which is, I feel like a complete scam, but, um, you can basically deduct The cost of operating an aircraft from the actual fund, which will impact your IRR to some degree. It doesn't even come out of the management company. Um, and you know, voila, you can fly private.

AI assessment note: “there's all kinds of different ways people finance these things.”

Q Makes sense. Um, but it does, it seems like you had to learn a lot on your own and not really rely on your investors for much. I'm really curious in your mind, who are finance leaders that you admire most and like, who do you look for, for advice? Like how did you navigate all of this on your own?

A Yeah. I mean, As you shouted out Brex, I mean, I think Michael Tannenbaum at Brex, he was like their long-time CFO, was absolutely incredible, and he's got a lot of, like, deep, in-depth financial understanding. I mean, I think Enrique was an incredible fundraiser, and he was great at kind of understanding some of these things. I think they made some of the same mistakes early on, but, you know, they learned from it as well. Um, I think Pager's been doing a great job at that, so I think all of those people, all of those folks have kind of learned a lot from, um, in that, in that sense. But I think more importantly, um, it's just kind of thinking about problems from a first principle standpoint of like, what do I actually need to do something? Um, like how many people do I actually need? Like if I'm, if you're like putting a gun to my head and saying, how many engineers do I actually need to build this product? How many salespeople do I actually need to go out and sell it? Um, and how much work are they actually doing? Um, you can be a little bit more sober about what you really need versus what you want to have. Um, versus what you think is cool, because it's fun to have a lot of people, at least you think it is.

AI assessment note: “I think Michael Tannenbaum at Brex, he was like their long-time CFO, was absolutely incredible”