Going the Extra Mile for Wealthy Clients

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Hello and welcome to The Way Forward. I'm Ross Snell, news editor at Barron's Advisor. And today I have the distinct pleasure of speaking with George Perez, a co-founder of GenTrust. That's a Miami-based wealth management firm that also has offices in New York and Puerto Rico. George, thanks so much for joining us today.

Pleasure, Ross. Thanks for having me.

So George, GenTrust is coming up on its 10th anniversary, but some listeners might not be familiar with your firm. Could you give us a brief introduction Sure, Ross.

Wow, 10 years. It's really a blessing in celebrating our 10th year anniversary. We started back in 2011, 3 advisors coming out of Merrill Lynch, myself, Jorge Herrera, and Guy Sakaris, along with our partner and CIO, Jim Biso, who was coming out of a large macro hedge fund in Element Capital. To form Gentrust. In describing our firm, I like to say we're what we call an investment management firm built inside a wealth advisory practice. If you look at our firm internally, there's 32 employees, 11 of them are on the investment team, which is kind of different if you look at other RIAs in the space. So, we're really focused on this high-touch investment management component. Along with everything else that comes with an advisory practice, financial planning, estate planning, family office, and lifestyle services that come and complement everything else we do.

And so, I understand that you guys last year in 2020 had your largest ever annual growth in assets under management. And that was even as COVID was obviously raging. Was that simply a factor of the market's impressive rally following the deep sell-off of February and March last year?

It's a little bit of that and new clients, to be honest with you. We had, going into late 2019, we were working on several large relationships that were going to come on board in 2020 that did come in early in the year. I think January and February was when most of those assets arrived. So that and the fact that if you remember in 2019, markets had rallied, we were taking a more conservative approach. We were a little underweight equities. So, when pandemic hit and we had the big selloff in February, March, we were in a good position to keep to our discipline, rebalance our portfolios. And then what happened next was to our advantage as the markets recuperated fairly quickly. Hence, the large asset gains that we had in the portfolios.

And were you also able to bring in new clients over the course of 2020?

Oh, yeah. Oh, yeah. Like I said, in January and February, we brought in two of— well, actually, three very large families that came on board. And throughout the year, clients were adding also assets to their portfolios.

And how has growth been so far in 2021?

In 2021, the big difference in our growth has been we, right around the time the vaccine started coming out, our investment team led by Jim Bisaw took a real aggressive approach on what we call recovery trades. And those turned out to be very well, right? Well, you know, leisure, hotels, you know, hospitality, I should say. And airlines. And so that helped also with the growth of 2021. Besides that, you know, client, you know, client referrals continue to come in, and that's part of our business.

And how do you guys target new clients? Do you rely mostly on word of mouth from existing clients? Do you engage in specific marketing activities?

Uh, we do, you know, things like this. Uh, we have several of our colleagues that speak, you know, regularly on, uh on some of the— whether it's CNBC or Bloomberg. But to be honest with you, Ross, most of our client referrals are coming from existing clients, right? And I tell this to younger advisors, they're your biggest fans. If you do the right thing and you're servicing them well and you're performing well, they're going to be your biggest cheerleaders. And if they have somebody that they know who's looking for an advisory firm, they're going to refer you. So, to me, asking clients sometimes, which a lot of advisors don't do, is there somebody who could use our services is something that's undervalued or sometimes advisors don't go that route and they should in my opinion.

You had mentioned something earlier that was really interesting. You talked about how you built GenTrust as this investment management firm inside wealth management or inside an advisory firm. And that's interesting. Interesting because some RIAs have gone in another direction, which is outsourcing some or all of their investment management. I wanted to ask you about the thinking behind that decision in structuring your firm.

Yeah, that's a great question. When we came together as a team back in 2011, by default, I think we're all contrarians. We tend to be contrarians and look at things a little differently. We wanted to build something and keeping our clients always in mind, right? Every decision we've made at the firm is centered on what's best for our clients. And if we were going to go this route, I mean, the RIA independence world, we wanted to create something that, A, it was going to be best for our clients. So, when establishing this, what some people call the seasoned in-house investment team, was to bring that institutional mindset to investing, right? And by doing that right away, that means cutting layers of fees for our clients. We like to call it sophistication without conflict. And that's really worked. At the same time, we reinvested in a robust technology, right? Where early on, some of our hedge fund portfolio manager clients were like, well, talk to me about your risk management systems.. And I remember Jim telling us, well, we're building. And they were like, well, call us back as soon as you have it done. Right. And later on they all became clients. But, you know, that's what we focused on. Let's reinvest in the business. Let's do what's best for our clients. And that by default led to other opportunities where we had RIAs, some regional banks and other folks reaching out to us for TAMP services. So it's been a win-win for not only our clients, but for us as a firm.

In building that capability, you developed a really deep bench of former Wall Street pros with a lot of experience on the institutional side, right?

Correct. I often say, put us in front of anyone. I'm super proud of the firm we've built, great folks with great pedigrees and real good people. I mean, culture is all— When you look at RIAs, I often say to other folks, it's all about the culture. And if you had that right group of folks working together, sky's the limit.

George, so given what you said about your in-house investment management team, I assume you have some pretty interesting alternative investment offerings for your clients.

Yeah. Listen, it's part of our asset allocation. I think my partner, Eli Cohen, who spearheads and runs all the alts, for our company and for our clients says it best. And he says, the portfolio is all about getting the cake right. And when you look at— and what he means by that is getting that right asset allocation and focusing on low-cost, tax-efficient, and returns available to the liquid markets. Alts are the icing. You should never— it should never— and this is somebody who does this for a living, right? It should never dominate the conversation. It should be a complement. To what the asset allocation is because it is illiquid, it's not tax efficient, so it's not for everybody. So, with that being said, we've put together or he has put together a pretty robust team where we do our own due diligence in-house in sourcing some of these funds or managers. And it's been successful. We've looked at railcars, We've looked at biotech, you know, a couple of strategies internally that we know that focus on mispricings in volatile markets. So we are, we have the offering, we're equipped to, I think, to do something that some of the larger firms can't do. I mean, the larger firms, you know, they have access to those top managers. Us being a little more nimble, we can access and bring in some real value to our client portfolios in choosing the right managers that we see in the alternative space.

Preston Pysh: So, you mentioned something that's very cutting edge, biotech, and then something that's very traditional economy, rail cars. And the rail cars stand out as an interesting alternative.

How does that work? David Sherman: Well, I won't get too much into it, but the best way to explain it, it's a tax-efficient strategy that offers a stable high yield. It's illiquid because these rail cars have a lifespan, But it's work for our clients who I call it, it's a boring part of the investment, but practical as well.

George, that's interesting. So, are there any other alternatives that you want to talk about that you're offering to clients right now?

I mean, that's pretty much it. Every client is different. And like we say, the interesting part about Gentrust clients, no portfolio looks alike. So, it all depends on the client, the risk appetite for the client, et cetera, that we implement different alternatives.

Now, your headquarters are in Miami, and I was wondering what advantages that provides to you as a firm.

That's a great question, Ross. Years ago, I would have said besides the weather, it was the gateway to LATAM, right? Every business from Mexico, Brazil, Central America, and the Caribbean kind of filtered through Miami, right? But what's interesting enough is after this pandemic, the amount of folks we're seeing from New York, California, and other places of the United States— I mean, real estate here has gone, like in some other areas, has gone berserk. But the wealth that has come into this area has been astronomical. I mean, in fact, not only the wealth, but we're seeing a lot of the talent following that wealth. So, for a firm like ours who's constantly looking for advisors to bring on or good internal investment folks, we've become a pretty interesting landing place.

So, both the advisors and the clients are pouring into Florida?

Oh, yeah. Oh, yeah. We're seeing a lot of that. Hence, the high real estate prices.

You mentioned that Florida has been this gateway to Latin America, obviously, for years. To what degree are your clients residents of other countries or at least have ties to other countries?

Yeah, for the most part, all our clients are US citizens or residents, but with ties to, at least on the international, on the Latin American side, with ties to their countries, whether it's in the Caribbean or South America. But for the most part, they're all US citizens.

And what are the specific challenges or opportunities in serving that sort of client?

I tell you, Ross, it's a great question, and I look at it a little different. I usually say they are international advisors and there are advisors that have international clients, and I'll explain both and what the difference is. That international advisor that travels to the region, that has that has, you know, what I call boots on the ground, has some type of office space there, is there visiting all the time, is involved in the community, understands the culture. I, you know, I talk to younger advisors at a mentorship level, and I often say you have to understand each culture because although we might all speak Spanish, speaking to somebody from Mexico and speaking to somebody from Puerto Rico might be totally different. And the cultures are totally different. So, to be an international advisor, you really have to understand that market. Hence, why you see some of the best or the largest international teams, whether they're from Brazil, Mexico, or other regions, they tend to be from that country. Although they might reside here in the States, they tend to be from that country because they're involved in the country club, they're involved in all the events going on in that particular region. Where what I call myself is an advisor with international clients because I'm not doing what I just said, but we do have a lot of clients that are international. It's funny, you know, I travel to Puerto Rico a lot and some people say, well, that's, you know, you're an international advisor. I go, first of all, Puerto Rico is— they're all US citizens. That's number one. And number two is, yeah, and I've been traveling to Puerto Rico for 20 years on a monthly basis. And that's why I've been successful there. So, once again, having international clients like we do doesn't make us an international advisor. If you're asking what my vision is for GenTrust, I would love to create what I call the GenTrust International Division and bring in 2 or 3 advisors for that business that will spearhead real international advisory services, in my opinion.

Well, you say that you're not international advisors, but at the same time, if we're talking about Latin America, there's quite a number of folks at Gentrust who are of Hispanic or Latin American origin, correct?

Yes, correct, correct. Besides myself and my partner, our COO, Zulay Labra, and several other folks that have joined the firm who are bilingual and are of Latin descent are part of the firm.

So that would seem to give you a real edge. You talked about understanding culture and how culture can vary between different Latin American countries. That background among your staff would seem to give you a real edge in terms of understanding where folks are coming from.

100%. Most of these folks work with different clients from different parts of Latin America and understand the cultures. The likes and dislikes of each particular culture. I call it even the religions of each particular culture. And it's something important to understand and to better service the client. So it does definitely give us an edge on the international front.

And you mentioned Puerto Rico and how you've been traveling there for years. I wanted to note that GenTrust now has an office in Puerto Rico, and I wanted to ask you about the impetus behind that. And how that business is progressing.

Yeah. So like I said, I've been traveling to Puerto Rico for about 20 years, two decades now. It's tough to even say. And visiting the island monthly. I've had— we have a great client base in Puerto Rico. The Puerto Rican client base we have have been loyal, phenomenal, really great folks that, you know, we've been around for a very long time with. And for me, and I often say it and I've said it in several other interviews, the Puerto Rican investment community has been underserved by different factors, right? One being, and everybody knows the debacle of the bonds and the closed-end funds that happened there years ago and the loss of wealth that attributed to that in Puerto Rico. The new approach that I've been servicing my clients with and I want to bring to the island, hence why we opened up an office there, It's a fiduciary approach. But with that being said, is there are a lot of— there's a lot of good advisors on the island that are fiduciaries that are— that might be sitting at a wirehouse. And those are the ones that I'm talking to now to partner up with us and bring this— bring this change to the island. Like I said, there's a great opportunity there. The client base is great there. And I'm super bullish on, on Puerto Rico.

George, could you provide us with a bit of a breakdown in terms of how much advice on the island is commission-based versus fee-based advisory?

Sure. I mean, we came in and I've been practicing there, like I said, for 20 years and it's always been fee-based. On the island, you tend to see a lot of commission-based products being offered. You see a lot of what we call annuities with commissions. You're seeing stock picking, et cetera. So it is a commission-based environment, although you are seeing now after the debacle of what happened with the closed-end funds, a lot of advisors have shifted their practices to more of a fee-based practice.

And you mentioned how you guys are looking to partner with some of the wirehouse advisors in Puerto Rico.

What exactly do you mean by that? I believe they are very good advisors sitting in the wirehouses and that similar to what happened to us many years ago, have outgrown that platform and they, and they want to look for something else that's better for their clients. And in doing that, they're going to look at somebody like us, a structured firm that is going to be able to provide their clients and them that solution. We are solution-driven, not product-driven. And that's what a lot of these advisors we're actually talking to as we speak to see if we can bring them on board and join us as partners.

In Puerto Rico. George, you also have another interesting client demographic, which is pro athletes and professional entertainers. And I was wondering whether you could talk about that group.

Sure, Ross. Listen, I mean, our client base is very diverse. I mean, we have from hedge fund managers, we have portfolio managers, we have managing directors of some of the top financial companies in the country. Business owners who've had entrepreneurs who've had early exits, even a central bank as a client. One of the niches early on that we had along, you know, that my partner Gys Akaris brought to the firm was working with some of the highest-paid Major League Baseball players in the country. But I always say we never looked at them as athletes. We don't like to put our clients in buckets. We just looked at, looked at them the way we looked at every other client. And that, to me, is what helped us expand in that particular niche. We never consider ourselves a sports shop or anything like that. We have a, call it a sports division. But to us, all our clients are treated the same way and looked at the same way.

You talked about generally getting new clients through word of mouth. And has that also been the pace the case with professional athletes?

100%. Going back to where we came from, which was Merrill Lynch, when you're working with, call it, high-profile clients, they want more than just stocks and bonds, right? They want that, what I call that, family office service or value, right? They wanted more than just a bull, like we joke around sometimes at the firm. So, we had to implement that. As part of our value-add.

And can you provide some specific examples of that high-touch family office service?

Sure. I'll tell you the best story. We had a client recently, actually last year right before the pandemic, we helped him purchase a racehorse, first time buying racehorses. Great story here. So we had to literally buy— what's that book? Dummies for Racehorsing, because how much did we know about racehorsing? But all kidding aside, So we end up purchasing this horse. Horse happens to qualify for the Kentucky Derby. Can you imagine that? The first horse you ever purchased ends up qualifying for the Kentucky Derby. Pandemic comes, gets pushed out till September, and in September, right before the race, the, the horse, uh, catches a light fever while in Kentucky and gets scratched from the, from the race. So it's a bittersweet end, but, uh, it was quite an experience. But we were involved from everything from purchasing the horse, finding the, you know, the right place for the horse to be stabled at, etc. And those are services that go beyond, you know, your typical advisory service.

Yeah, I imagine back when you were at Merrill Lynch in the '90s, you had no idea that one day you'd be involved in helping to purchase a racehorse or cattle for ranch owners, etc.

No, exactly. But it's once again the key to this business, and I tell young folks is It's— you, you got to be extension of the family if you want to be really good at what you do as a financial advisor. You have to be an extension of your client's family.

That's a great insight. And I have to say, for newbies, you guys did pretty well with your, with your horse selection. Did they qualify for the Kentucky Derby?

What? Hey, we're one-hit wonders. But no, it was, uh, it was a blessing. And a client— the client experience, although the horse never raced was amazing.

Now, turning back to Florida, obviously the state tragically has seen a sharp surge in COVID cases in the past couple of months. Has that forced you to backtrack in terms of in-person meetings or working from the office?

So, we had our plan. I mean, schools here start a little earlier, Ross. So, mid-August, our compliance team and our COO had said, we're going to shoot for on August 15th to get back in the office. Most of our firm is, if not all of it, is vaccinated. So we all felt comfortable in that decision. But wow, then we had this Delta surge that just shook us to the core. I mean, this thing just— the numbers were astronomical about a month ago. We're seeing the— we saw kind of like the peak. Numbers are getting a little better. But we keep a close eye on two numbers, which is the positive rates, the percentage rate, and the number of people testing positive. And we try to— we're gonna probably make a decision once that positivity rate goes under 10%. So we'll play it safe, you know, business as usual, things haven't changed. But getting a full team back in the office, we're gonna put health first. We want to keep everybody safe before we make that decision.

Okay, George, there's so much more that I'd like to ask you about today, but our time is Almost up. Well, that was pretty quick. So in typical Barron's fashion, we like to end with an actionable idea.

And I was wondering what idea or ideas you have to leave our listeners with. Sure. In continuing in the culture conversation, I think for RIAs and even for the larger firms, culture is very important. What we've seen with this pandemic, folks working from home and not being together, I think has affected the culture. So one of the things we've done besides having weekly Zooms, et cetera, and I'm very proud of this because it was spearheaded by some of the younger folks at the firm, is the book club, the Gentros book club. And what that has done is the team chooses a book that everybody reads, obviously, and then come together on a weekly basis to discuss that book. And that's really been a win for the firm. And it's that whole— what's the word I'm looking for? It's that it once again, it just keeps everybody together having a common conversation. We surprised the team last week with— Eli actually knew one of the authors of the book that was that particular month. And so they got a little surprise when the author came into the Zoom and was part of the discussion. So that was a win-win for everybody.

Can you name some of the recent books you guys have been discussing?

Sure. The one I'm speaking to you now, it's The Emotionally Intelligent Investor by Robbie Meta. That's the latest one we read. So, they're all kind of finance-driven, but like I said, everybody's engaged, everybody across the firm and in all positions. But the younger folks have really excelled with this. Wow.

It seems like a great way to keep communication going between spread out remote fellow employees?

I love the fact that it's spearheaded by the young folks. Keeps them engaged and excited. Once again, it's— we're still not fully back, and there's folks that have started at the firm that really haven't seen a full office. So this keeps them connected. Anything else you'd like to add? That's it. As we get closer— and I could add one more thing— is as we get close to the 20th year anniversary of 9/11, And once again, letting people know, we shall never forget, right? This is something, at least in my lifetime, that everybody who comes from that Wall Street background was shaken to its core. So, I just wanted to once again mention that as part of the closing. Thanks.

Yeah, it's hard to believe it was 20 years ago. Amazing. Amazing. Well, George Perez, we appreciate your time and we look forward to talking to you again soon. Thanks, Ross. Pleasure. To our listeners, thanks so much for joining us. Tune in next week for another edition of The Way Forward.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.