The Experience Factor

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Hello and welcome to The Way Forward. I'm Jack Otter, and I'm joined this week by Michael Bapis, a managing director at Vios Rockefeller Capital Management Group. I have more questions, Michael, than we have time, so I'm just going to jump right in. But I do want to start with a very quick background for listeners. How did your group become part of Rockefeller?

Yeah, well, thank you very much for having me. I appreciate the time. It's interesting. At the time, about 2.5 years ago. I had known Greg Fleming and Chris Randazzo from our prior firms in our prior lives, and we kind of got reconnected. They mentioned that they were starting a firm alongside the Rockefeller Family Office. And so that was intriguing to me. It's— the uniqueness of it is it's basically a startup at a family office has been around since the late 1800s. And so there is kind of a uniqueness to that story. But once we got talking, once they were explaining to me the vision of the firm and what it was about, and they asked me to come in and help them build it out. I was the first team to— our team was the first team to come to Rockefeller about 2.5 years ago after they had started it, say 6 months prior. And look, I think the leadership is intriguing. Wasn't— at that time, the leadership was very intriguing. The model and the vision was something that I aligned with myself, but most importantly, I think our clients. It could be a differentiator for our clients and future clients. And so, you know, many meetings and a lot of time spent and a lot of due diligence spent on both sides, and we came to an agreement. And I've really been happy. I think it's a model that has a lot of legs for the future. And our clients have really appreciated being, you know, on this platform and this model. And it's something that's important to note is the third-party custodian. You know, our assets are custody and cleared through Fidelity, which, which is an important component to the safety of assets as we are a bit removed from the financial crisis. But it's still in everybody's mind. And I think that's a component that helps us as well with customer and client safety of assets as well as comfort.

Absolutely. As a journalist, I always told people if they were looking for a financial advisor, that was one thing to look for, a third-party custodian. I got to ask you, Tom Brady is fresh in our minds. You have as a specialty serving athletes. So I just wonder if you can briefly say what it takes to serve that group. How do you attract those clients? And I know Rockefeller has some good connections in that world, but is it becoming a bit of a crowded trade for other advisors?

Yeah, you bring up some great points. I mean, I think, look, Tom Brady, what he's done is probably once in a lifetime for many of us. The fact that he's been excellent and at the height of the game for so many years is just, you know, it's a testament to his focus and his drive. But as it relates to athletes, I was fortunate enough to be around athletics my whole life. I played Division I golf. At Utah, and then I ended up playing a little basketball in Greece. For me, it's twofold. It's one, obviously creating a business around it, but I'm very into literacy for just in general, but also for athletes and entertainers. I mean, a lot of what you see in the media today is so frustrating to me that these players and entertainers perform at such a high level, and then you end up seeing them in a position to lose a lot of that money because of bad advice. So I think it starts with obviously education. It's most important. And, and, but for, for us, it's, it's, it's a passion to help educate literacy, but also to preserve, uh, wealth and preserve the capital with some growth over time.

That's great. It is heartbreaking to see some of those guys get, uh, poor as quickly as they got rich. Uh, so it's good to be there to help them out.

And, and, and early on in my career, I heard, I heard someone say— I guess it was about mid, the middle of my career, uh, I heard somebody say to me, look, we want to be with someone in a firm that has money, uh, we don't want to be with someone make their money because I'm making money. And I thought that, that, that resonated pretty well with me. And, and then, and I think I've, I've kept that in the back of my mind for, uh, the whole time that I've been doing I want to ask about Rockefeller's specific role here.

You have a fairly well-known former professional athlete uniquely involved with your firm, Derek Jeter. How did that come to pass? And what role does he play in all this?

Greg Fleming has known Derek for quite some time. And they are obviously— I mean, this is all on the record, but they're part of the Marlins together. And I think they've built a great relationship. And Derek is a— professional that has excelled at the highest level for many, many years. And I think that's what our goal is at Rockefeller with the Rockefeller family, as well as people like Derek, to be excelling at our profession and being the best that we can be for our clients. And you have two— you know, we have many leaders in our firm obviously who are excelling at the highest level, but Derek brings an element to that Greg has had for his career, and obviously Derek had for many years and will continue to have in his next ventures.

So let's step back a little bit to looking at your industry more broadly. You have, if not a unique, a somewhat rare career in that you've been at Morgan Stanley, you've been at Hightower, now you're at RIA. How do you see those various models evolving and what are you doing specifically to transform your business in COVID and all the upheaval that's changing the advisory business?

I can probably talk forever on that because there's so much that's been put into it. Fair enough.

Too big a question.

No, I mean, look, I think, you know, I learned a lot when I started at Morgan. It was a great firm. I still think it is a great firm. I then took the route to go independent, and that's where I learned the other side of the business. It was going from a big bank to an independent was quite a jump, but it really helped me understand the business and the due diligence that's necessary for our clients. That is good for them from the beginning to the end, and also a platform for advisors that works for the longevity of careers. And, you know, so we are a hybrid firm. We do have a broker-dealer. That's how we— one of the unique benefits of being here is the element of private deals where we have access to private deals. That are unique to Rockefeller. And I think for our clients and going forward, that's something that differentiates us from the rest of the street or from others on the street. And, you know, to the pandemic world, I would probably say the most difficult part is connecting with clients. I mean, frankly and very candidly, I had never done a Zoom in my life. I'd never done a Teams in my life prior to last March. But to our credit and to those companies' credit, they were able to pivot rapidly to be able to accommodate folks like us who are such an important component to what we do is connecting with our clients. And so, I'm somewhat Zoomed out, but I embrace and video conferenced out. But, you know, I think it is definitely a component that's important. To, uh, now and will probably be for the foreseeable future. It is nice to be able to connect with somebody, you know, looking at someone and seeing their face as, as, as, uh, in person is, is obviously the, the most effective way to get to know and trust somebody. But this is probably a close second to what, uh, what has been created over the last year. And I think, uh, it still comes down to one thing touching base with the clients, being connected with clients, building trust with clients, and have them trust you as much as you trust them. And it's creating the vision and the long-term perspective that doesn't get rattled by the crazy volatility we've seen over the past year.

So, I do want to ask you more about that, but sticking to Zoom for a minute, let's talk about what it's like internally. You're calling me from your office right now, but I presume you're not fully staffed up there. What's it like leading a team, maintaining team culture when you only see each other on the Zoom screen? And how have you had to approach your role as a leader?

Yeah, I mean, you ask a great question, which is we pivoted early on and was something that was important to us, not only from a business standpoint, but from a social standpoint. Much of our team has been together. We did start coming back to the office after a few months because much of the team lives in close proximity to the office. But I would say prior to that and doing now, we set up morning calls with everybody having to be on the screen. We set up weekly, you know, a little bit longer meetings, and we even structured, you know, social aspects of Zoom to just stay connected, especially during the time when the first few months of this when people were basically not leaving their homes aside from going to, you know, to, to necessary places. But, but, Steve, it's the, the team structure which I try to, um, really focus and keep focusing on is a professional atmosphere that is, is with an attention to detail that also there's a social component to it that, that we like to be around each other, we like to have fun with each other, and that resonates to clients. I mean, if Clients can sense if the employees are happy and the team is happy. And I think that helps them feel comfort, as it does help employees be happy in the workplace. Because look, it is, you know, the most time you spend with people, as much as anybody, is the people you work with. And we have a great team in place. I'm proud of everybody, the way they've handled through this and have been so supportive to not only our team, but also to our clients that, you know, alongside of our management has done, you know, an amazing job as well as the technology aspect of our business. That's important. I mean, technology matters more today than ever. And many times I speak about it publicly outside of this conversation that, you know, we're in a technological revolution that is going to last, I don't know how long, but it is something that people will look back on 200 to 300 years to say, wow, that was something special, as was the printing press, or as was the first car, or as was the first airplane. I think this is what's happening now. And to think that growing up, I didn't have a cell phone. My daughters can't even— I don't even think they even comprehend what that means. They just look at me like, "Yeah, okay, whatever, Dad." Yeah, I know exactly what you mean.

So, Michael, we've heard from some principals that everything is great. And then, when we talk to some people on their team, they'll say, well, COVID has been kind of tough. And to your point earlier, anytime you engage with a team that is happy and everyone's psyched and pulling oars in the same direction, you could just feel it. And if that's not happening, you can feel that too. So what do you do to make sure that everybody at every level is managing through COVID okay?

It's very difficult to make sure that that is the case, but I feel like we've done a lot to do so. And I think there's an element of the personal side of it and the being there for our employees. I mean, from the beginning, I said that everybody will keep their jobs. I said everybody does not have to worry about 2020 and 2021. As we're in this, thankfully, we were able to get through what I think is almost over. But it's basically wanting our team to feel connected as we would like our clients to feel connected. And I think our clients can recognize that we're all working together and have their— meaning the client's interest in mind as well as each team member. Team members' interests in mind. Look, it was very difficult in the beginning. I mean, we were all locked up. We— people were not getting out from a family standpoint, from a friend standpoint, from, you know, something as simple as going to lunch or dinner or travel. And so I think the being there for each other and being there for not only personally our families, but also from a work standpoint. And that resonated into our clients. And it comes, you mentioned, like from a business standpoint, but it comes with communication. And I think our most focused piece of our business is communicating with clients and managing our CRM in a way that allows us to keep contact with clients and let them know that we're always there for them, not only on a regular basis, but anytime that they have questions for us. So it's not easy, and it's something that we're always focused on. And I think it's something that we always have to be focused on for the time that we are in business and we are working with clients.

Yeah, just as you said, we're going to remember this era from a technological perspective for a long time. I think we're going to remember it from a COVID and personnel and personality perspective as well. But let's pivot to the investing side of things. It really, it's starting to seem like nothing can shake this market, which is a scary thing to think, but valuations keep on climbing despite the pandemic and meme stocks and rates are creeping a little bit higher. What are your clients' top concerns and how are you mitigating their fears?

Anytime you have volatility like we have today, that's part of the client's top concerns. But you also saw such a market that was— there was such a divergence between growth and value towards the end of the year last year. At one point, there was between a 30% and 35% difference in the Russell Value versus Russell Growth Index. We're talking like, you know, up, up, up 18 to 20 and down, you know, 13 to 15 on the value. And, and I think that was something that was, that was very unusual. You did see the companies across all sectors that were able to, uh, pivot to an e-commerce model and a technologically focused model. And, you know, including us with our clients, that once Once these companies and advisor groups adapted to that, that became what got many of us through this past year almost in at least somewhat of a positive fashion.

Yeah, no question about that. So in terms of dealing with that huge divergence between growth and value, looking at some valuations that are kind of tough to justify other than momentum. Are you adjusting your portfolios? Are you telling your clients they might have to pull back from the wonderful FANGs? How do you address all that?

Yeah, we put a lot of work into the managers we use. We have very good relationships with the principals as well as the portfolio managers as well as the people on the sales side. And I think what we try to focus on as one of our most important components to investing is the fact that there's not a style drift in the manager. They're not chasing the hottest dot. And I do believe with the money that the Fed has pumped into the system, there is some room to grow on these markets. And especially we talk about valuations. Look, certain companies have outrageous valuations, but many other companies, they're pretty, I would say, reasonably priced. And I do believe this is a bit of a stretch, but I do believe that technology has changed even the way we evaluate companies. I mean, I think historical P/Es and historical trends, they'll always be there. History always repeats itself, but there is an element to the world now that um, you know, it's— it may not look exactly how it looked previously. And, and, and with that, there are companies out there that have value. I mean, look at energy, look at financials, look at, you know, even some healthcare, uh, components to the, to the business that you— there is, there is value there. And, and with rates where they are, would you rather own, uh, a value or a GARP, growth at a reasonable price, company and strategy with a dividend yield of 2% to 5%, 2% to 7%, and a strong balance sheet, strong cash flow, or would you want to own a 10-year Treasury getting 1%, around 1%? And I think that's what everybody's dealing with right now. And there was such a flight to safety last year that obviously driving Treasury rates to probably the lowest, that's another thing that I don't think ever see again in our lifetime is rates where they are.

Well, according to Merrill Lynch, that was a 5,000-year low.

I didn't hear that.

Yeah, there's a Bank of America analyst actually traced it back to like ancient Egypt.

I mean, that's an interesting perspective, and I think there's something, you know, it may sound a little bit outrageous and emphatic, but I think there's something to that.

So let's talk about alts. I know that's a specialty of your firm. Some people are thinking, given the craziness you're alluding to in the equity market, maybe it's good to allocate a little bit to that space. But, you know, liquid alts have had a lousy decade. Alts is tough, tough space to analyze. What are your thoughts?

Yeah, look, I think it's just the beginning of first or second quarter of the alt investment theme. We definitely believe alts are important component to the asset allocation. We advise 20% to 25% alternatives for many or most of our clients. And it fluctuates between liquid and illiquid alts. We try to find alternatives that, again, we do the same due diligence on these managers and on the leadership team because to me, it matters who's managing the money. To me, it matters to be able to sit across the table and look at someone in the eye and trust them. And just like our clients, I'm sure, do with us and we try to do with them, that alternatives are going to play an important role, especially over the next 10 years as these volatile markets continue to go where they are, whether it's liquid or illiquid. It's the same, it's the same strategy, the same component, the same due diligence that we do on it. And, and look, as volatile as these markets are, we've had a few alts that have really performed well in a way that, that has limited volatility and gotten some growth. So, you know, and it goes alongside what we discussed about the interest rates previously, that, that if you can get low vol with a decent return, you know, it's almost a fixed income alternative or a way to get a fixed return or somewhat fixed return with less risk. And so, that ties back into, okay, making sure we understand our client's risk component, making sure we understand their long-term vision, and then structuring a portfolio that goes alongside of that.

Any particular areas of vaults you can identify? I've heard some people nosing around commercial real estate because it's so battered. They're looking for some opportunities there. Anything you can identify?

Yeah, most of our clients frankly do their own commercial real estate investing. So regardless of whether it's attractive or not, that's really not somewhere that we invest. But I will say in that space, the global macro side of it is something that intrigues us. The market-neutral component to it as rates rise, because eventually, obviously, they will rise. Who can take advantage of that in a market-neutral type of a strategy or a global macro type of a strategy. And then look, one of the advantages of our clients being at Rockefeller is we have created a pipeline of private deals that we have access to or our clients have access to that are unique to only us. And I think that adds value as someone can have a 3 to 5-year time horizon, maybe 7-year time horizon, and be open to private deals that eventually we believe are going to limit the volatility on the portfolio and be an important piece of the asset allocation and capital preservation and growth for their portfolios.

One more investing question for you, and that is that Greg Fleming has said that sustainable investing is important part of the firm's practice, going right back to the Rockefeller roots for obvious reasons. How are you integrating ESG and how important is it to your clients?

Yeah, I'm glad you brought that up. I think it's going to be very important going forward. It is now, but it'll even be more important going forward. You have a component to the business that we started our own— Rockefeller has its own ESG strategy an ESG-focused portfolio that many of our clients are starting to ask about and starting to invest in. And it's something that is only going to grow as I think our environmentally conscious world grows. And look, frankly, the Rockefeller family was ahead of this. They have been focused on philanthropy and focused on ESG type of thought process for generations. And I think that's—

Long before it was called ESG.

Yeah, exactly. Yeah. I was just trying— that's a good point. That's what I was going to say.

Well said.

Okay.

So let's just get back to a little bit about your specific practice. All of your peers are wondering what is the strategy in the near term for growth? How do you prospect in in this environment? And then longer term, what does the trajectory look like for your business and your industry?

Well, I think at some point, hopefully sooner than later, we'll get back to a more normal way of growing business, which is in-person meetings, in-person events, even if they're smaller. So, Look, if we feel, you know, we feel if we do a good job for our current clients, they will recommend other people that they know in their network that would benefit from our services. And on the athlete and entertainer front, we have a few different sources of referrals of people that trust us, business managers who trust us, and know that we're going to treat their clients as well as they treat their clients. And that gives us a way to build a business. We've also partnered with, in the process of partnering with, for example, a gentleman like Darius Butler, who was a former NFL player, and he has become close to our group and our firm. Someone like that is working outside of our group, but also trying to help educate financial literacy for athletes. And so we're doing different things to be able to grow alongside people. But it's more, for me, it comes down to one thing. It comes down to building good relationships with trustworthy people and eventually doing not only something good for the world and for, for, uh, the— I keep bringing up the point, but it's probably the best word and phrase we can come up with at this point— is the financial literacy of society. And, and that to us is, from a business aspect as well as a, a educational aspect, are two of the most important components. And, and I came from, you know, my mom was an educator her whole life, and growing up with an educator, you know, Everything starts with education, and you see it in, in the what's going on in the world today. The more educated people are, the more they understand and will be likely to succeed with whatever they're doing.

Yeah, yeah. Financial literacy, it's so easy to make a small mistake that can turn out to be a huge mistake. And just teaching people even the low-hanging fruit is going to be very important. Michael, I could keep on asking you questions all day, but I'm wary of time. Fleeting. So, one more question for you, big long-term view. What is your strategic vision for the firm over, say, the next 5 years? And what do you think the biggest challenges will be toward achieving those goals?

I'll say I'll speak first on our group. I would say the biggest challenge for our particular group and our business and our clients is keeping up with the changes in technology, the rapid changes in technology. I mean, our world. I think that's what keeps me up at night is ensuring that we're moving forward in the right direction as times change and as the business changes. And I think it's just happening much more rapidly than it used to happen when I first began my career. I mean, look, late '90s, you were chained to your desk. You were at, you know, on the 7:15 AM research call and you stayed there till 7, 8 at night. And I think it's almost the flip side to that. The hours are still probably have gotten longer because we're always connected. But, you know, I feel like I'm wasting time if I'm in the office too much. And it's more about being in front of clients. It's more about reaching out to clients. And I think technology is the biggest driver of that. So from our group standpoint, that's the most important thing is our clients and continue to gain their trust and have them trust us and, and also performing at the highest level so that they do trust us and they do look to us for guidance and capital preservation and growth.

Thanks for that. So as you know, Barron's has a tradition of asking our guests for one final actionable idea that listeners can put right into practice. What is yours?

Look, it sounds a bit cliché, but I would say I'm going to answer that question with two parts. The first part is we are so caught up in volatility and the hot minute, the hot second, what's going on right now. And what is selling today is, oh, the volatility of the markets, you know, talking about daily stuff, hourly stuff, minute stuff. And for us, I just think it's, you know, keep focused on the long term, keep focused on what the goals are in mind. Get a grasp of your risk tolerance, whether it's, you know, as an advisor or as a client. Get a grasp of your risk tolerance. Get a grasp of the long-term plan and just, you know, follow that plan through. And too much of what's talked about today is what's going on right now, immediate. And that's a product of the technology too. I mean, I see it. We see it with— you're expected to get back much faster to someone than you used to be. People want things much more quickly than they used to ask for things. And I just think our society has lost a little bit of focus on the long term. And what is important in this business is the long-term plan. And look, it was all about the election. And well, that's over now. It's all about the— it all passes, and there's going to be another election in 4 years. There's going to be another Congress election in 2 years. There's going to be something else that comes about. And I think if we can just allow ourselves to remove the noise, focus on the plan, and focus on the structure that we have in place, that is— it sounds so simple, but it's so difficult for all of us to do in today's society. And I would just recommend that that is actionable of an idea that I think I try to follow daily, but also, you know, it could help society.

I think that's great advice, and no doubt the market will throw us a curveball one of these days. And so being in the habit of thinking long-term and not about that day's or that week's or that month's moves will be very helpful. Michael, thank you so much for your time. We really appreciate it. Great to have your insights.

I really appreciate having you on here, and I look forward to the next time.

And thanks to everyone for listening. We'll be back in 2 weeks with 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.