Forget everything you thought you knew about traditional investing. In this episode of Success Unleash’d, hosts Zack Ellison and Shawne Merriman sit down with the brilliant Lindsey Sichel Rubinstein, a veteran of alternatives and a family office executive. We’re diving into the future of wealth management—why the old 60/40 portfolio is a relic of the past, the staggering $124 trillion transfer of wealth shifting the investment landscape, and why the least innovative industry in the world is finally being forced to change. If you’re ready to embrace the future of finance and discover how curiosity fuels success, this episode is for you.

Success Unleash’d Principles From This Episode

1.Challenge Traditional Investment Dogma

The long-held 60/40 stock-to-bond portfolio is no longer sufficient. The episode highlights the necessity of diversifying into alternative investments due to market volatility and changing economic landscapes.

2.Embrace the Intergenerational Wealth Transfer

A monumental $124 trillion is expected to transfer between generations by 2048, largely to women and younger demographics like Gen X and Millennials. Understanding the distinct investment preferences of these new wealth holders is crucial for financial advisors and capital raisers.

3.Innovation is Non-Negotiable

The wealth management industry, often slow to adapt, is being forced to innovate. This includes embracing new asset classes, re-evaluating traditional strategies, and responding to the changing needs of investors.

4.The Power of Asking Questions

Don’t be afraid to ask questions, even if they seem “dumb.” Curiosity drives knowledge and expansion, leading to better understanding and more informed decisions in investing and life.

5.The Undervalued Currency of Relationship

In any industry, but especially in finance, reputation, network, and genuine relationships are paramount. As Lindsay states, “One of the most undervalued currencies… is the currency of relationship.” Meaningful connections foster innovation and opportunity.

6.Focus on “Wealth Span,” Not Just Wealth

Healthcare is shifting from reactive to proactive, focusing on “health span” rather than just diagnoses. Similarly, wealth management is moving towards a “wealth span” approach, emphasizing the holistic legacy and long-term impact of investments rather than just immediate returns.

7.Strategic Capital Formation

For founders and fund managers, effective fundraising means clearly answering the “why now” and “why us” questions. Understand the unique value proposition, the market shift making it relevant, and the differentiators that set you apart.

8.Understand the Family Office Landscape

Family offices provide patient, strategic capital and quicker decisions due to less bureaucracy. But they vary widely, so successful fundraising takes research into their preferences, risk tolerance, and network for a warm introduction.

9.Diversify Your Portfolio Beyond Traditional Assets

Think of your investment portfolio like a football team—you need different players. Diversifying across asset classes, including alternatives like real estate, private credit, infrastructure, and even sneakers or wine, builds a stronger portfolio beyond just stocks and bonds.

10.Prioritize Long-Term Relationships Over Short-Term Transactions

While short-term gains can be tempting, cultivating long-term, collaborative relationships built on integrity and mutual value is more sustainable and creates significantly more opportunities over time. This applies to both client relationships and fundraising efforts.

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Watch the Episode Here

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The Future Of Wealth Management With Lindsey Sichel Rubinstein

We have with us our good friend Lindsey Sichel Rubinstein, who’s a family office executive. Lindsey, we’re happy to have you. Thanks for coming on, sharing some of your expertise, and enlightening people on what a family office executive is.

Thank you for having me, Zack and Shawne. It was great to spend some good time with you out in LA. I’m back on the East Coast. I was at a golf tournament, which is one of the things family office executives do, although it was raining a little bit. That’s to provide a little bit of an explanation because you’re not alone. My friends and family who are tuning in are probably laughing with you. They have no idea what it is exactly that I do. I have been working in alternatives for more than twenty-plus years at hedge funds, private equity, and family offices.

What I do translates to a lot of industries or professions, strategy, innovation, and marketing, being able to portray it correctly. Where I am is I am the Chief Marketing and Investor Relations Officer for Opus Capital, which is the alternatives affiliate for a large multibillion-dollar New York City family office, the family office that helped build the World Financial Center. It has very significant, deep roots. I work on their alternatives affiliate, which means alternative investments. It is things that are different from the traditional stocks and bonds that one thinks about when they think about buying and selling on an exchange.

Also, I want to make a quick joke, but not a joke. Several years ago, I met Danny Hughes. He is a good friend of mine. Danny’s a man. He knows everybody in the family office circuit or whatnot. I remember I was going to speak on a panel of one of the family offices, but he said this is an alternative investment. I was looking at him, and I didn’t know exactly what that was. I said, “What do you mean?”

I thought most of the people who were attending were in real estate, oil, or whatever it was. He said, “No, this is alternative.” I didn’t want to seem dumb by asking him, “What does this whole alternative mean?” Like the rest of your family members reading what this is, that was me several years ago, where I didn’t understand. I knew what the family office was, but it was typically because they were big into real estate. They were big into whatever they were doing. When I heard alternative, I didn’t want to seem dumb. I waited until it was over. I waited until the whole conference and I got off the panel to ask Danny what alternative investment was.

Shawne, you’re not alone. The majority of the investment industry, and let alone most industries, do exactly what you do. I know I’ve certainly done it before, which is to wait to ask the question. I’m sure if you were to tell me all about football moves, I would probably smile and nod. That’s my instinctual behavior. Would I gain a lot more from the conversation if I asked you a couple of questions at the beginning, saying, “What is this?” or, “Please explain it to me because I don’t know this terminology.”

It is important because alternative investments dovetail nicely with one of those industries that you were saying, whether it is real estate, whether it is being a professional athlete or entertainer, or whether it is oil and gas. The definition of a family office is that once a family decides to form an entity to specifically designate how they want to invest. That money could come from anything. Lesson number one that we’re all sharing, because I agree with you, is don’t wait to ask Danny Hughes to ask a question. Ask it at the beginning, not the end.

The reason why I didn’t ask is that athletes have this stigma when you walk into anything. The last thing you want to come across is that dumb athlete that comes into this room of people who already may have a stigma of athletes. I’m getting to know Danny. I’m getting to know the family office scene. This is 2017-ish or ‘16, somewhere around there, where I didn’t want to ask the question. It’s so important what you said for anybody to ask.

You say you don’t know much about football, moves, and different things like that. The only reason why I was a pro, I broke so many records, and I had all the accolades, was because I was willing to ask the questions. I had to drop my guard in that regard. I had to drop my guard in that situation to say, “I don’t know what alternative investing is. Could you explain that to me? I know about family offices, but I don’t know what alternative investment is.” It was the ability to sit down. It wasn’t a dumb question, but to me, it felt like a dumb question. Ask the right question.

That’s probably the best way to reframe it. My eight-year-old has a billion questions. She could say, “I’m not smart,” or this or that. I say, “I don’t think you realize so much of what makes you smart is your curiosity and your drive.” With curiosity comes the willingness and therefore the knowledge to expand continually. Some people wouldn’t ask the question and wouldn’t learn.

You’re right. We should reframe when people say, “Is this a silly question, an ignorant question, or a dumb question?” Is it a sincere question? Are you genuinely interested in knowing the answer? Part of the reason I got into the field that I’m in is to help explain or prove that not everything that comes in one package can be the same way. One can be smart, creative, innovative, and be 5’0” with blonde hair. Everything looks and feels different as long as the passion, curiosity, and drive are there.

Defining Alternative Investments & Their Purpose

Lindsey, one of the things I want to do, because most people don’t know what alternative investments are, including many “professional investors” and wealth advisors, is I want to find that for people. I also wanted to talk to you about the trends that are happening in the wealth management industry. I’ll tell you my piece and then let’s dig in.

What we’re seeing is a move away from investments and traditional stocks and bonds. People are looking for other investments that they can make that are diversified from the public markets in stocks and bonds that may have higher returns or that have some other aspect that differentiates them from traditional stock and bond investing.

The way that I’ve always defined alternatives, which you said earlier, but to reiterate that for people, is it’s everything that’s not a stock or a bond. If you make a venture capital investment, that’s called an alternative investment because it’s an alternative to investing in the public stock market. If you make a private credit investment where you’re making a loan to a private company, that’s an alternative investment. If you make an investment in real estate and buy property or land, that’s an alternative. Oil and gas, which we talked about. Investing directly in hedge funds is considered an alternative investment.

It’s a pretty easy term to remember when you say, “It’s everything that’s not a stock or bond.” The biggest pieces of the alternative market, and I want to hear your thoughts on this as well, Lindsey, in my view, people start out with real estate. As soon as they’re done with stocks and bonds and they want some other form of diversification, they tend to go to real estate because that’s what they understand. It’s fairly intuitive. There’s intrinsic value there. A lot of people made their money in real estate, so it’s something that they have expertise in.

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To me, that’s what I call the gateway drug to alternatives or the gateway investment. It’s real estate. They start to see, “This is pretty interesting. My returns are better at the portfolio level because I have this diversification through real estate. Are there other things that I could invest in that provide higher returns per unit of risk that I’m taking?” That’s when they start to think about making loans to private companies. That’s when they start to think about making earlier-stage growth investments in venture capital or later-stage investments in private equity, or maybe thinking about global macro strategies investing through a hedge fund, oil and gas, etc.

What we’re seeing, since we’ve defined alternative assets, is that a lot of the money managers that manage wealth across the country globally are moving away from stocks and bonds towards these other types of investments. We’re seeing a lot of money over the last couple of years. There’s more money and more emphasis on investing in these alternatives. It’s starting to be the big differentiator for wealth managers.

This is what I wanted to get your thoughts on. In terms of what you are seeing, having been in this space for many years and been very successful, what are the themes you’re seeing around moving away from these traditional portfolios towards alternatives? Why is that good for investors? How do these investors access the best private market deals and the best alternative investments?

That’s a loaded question, and I’m happy you’re asking it because we’re getting to roll up our sleeves and get into details that a lot of conversations do not get to go into. Taking it a step back, I’ll redefine alternatives a little bit, and then I’ll go into what I think some of the trends are. I wouldn’t call them trends necessarily, because trends, you think of what’s fatty versus what are fundamental shifts that will be long-term drivers. Instead of putting something in and taking it out, you fundamentally keep those investments in.

Going back, I said earlier about this notion of 60/40. Traditionally, if one were to call up their financial advisor, their accountant, or whoever they get their money advice from, that was the formula for investing. The 60/40 percentage would make stocks riskier than bonds. Stocks are riskier because you’re speculating a little bit on the market, because the price can go up and down.

Bonds are a little bit more secure because you’re theoretically loaning something, and you’re paid an interest payment on something that’s very secure. You’re getting that principal back at maturity. That percentage would change as one gets older and closer. You would tune down the risky stuff and tune up the less risky stuff.

What has happened over time is innovation and a desire to invest and create returns that were not tied to either one of those instruments, but maybe derivatives of those instruments. In the broadest sense of the term derivative, it is something that’s derived from a traditional instrument but wants to create a different type of return, one that is higher, one that is less correlated, and one that offers different elements of return than those traditional investments do.

A lot of the time, those investments have been misunderstood, or there hasn’t been a lot of education about those types of investments. They’ve also been held to a certain level of accreditation. You have to be a certain level of sophistication as an investor to be able to invest in them. A lot of that’s shifting with the market, having more mutual funds that are liquid alternative funds.

The Intergenerational Wealth Transfer & Shifting Demographics

What’s fundamentally been changing in the market is a couple of things. There is intergenerational transfer. The so-called Baby Boomer generation is getting older. I’ll ask everybody to close their eyes for a moment and think. You could put a number to how much money one thinks is transferring hands between now and 2048. Some might think that would be something in the billions. MacKenzie Scott gave away $19 billion. It’s higher than the amount of money that’s changing hands.

Warren Buffett is giving away philanthropically $150 billion more. It’s higher than the amount of money that’s changing hands. $30 trillion, higher than that. $124 trillion is changing hands from one generation to another between now and 2048. That is a huge driver of where investments will be directed. The demographic of how that money is changing hands is also paramount because, as it’s going from somebody, it’s going to somebody.

About $40 trillion-something of that is going to women, whether that’s surviving spouses who are women. Sorry, Zack and Shawne, we tend to outlive you guys. About $40 trillion-something is going to Gen Xers and Millennials. The actual cohort is changing as well. The investing preferences of those groups, women and younger generations, happen to be very drastically different than the Mad Men era of investing style, which used to dictate how that 60/40 was allocated with more impact types of investments, alternative types of investments, such that we described, and philanthropic investments. That’s one.

We need to reframe how we react when someone calls a question silly or dumb. The real question is—is it sincere? Are you genuinely curious about the answer? Share on X

Also, what’s happening is understanding that this is a major amount of money. Those who advise the money are trying to chase that money. You think about the chicken and the egg. Here, it’s the money that’s flowing first. How do financial advisors, banks, and other asset gatherers make sure that they’re the ones who are deemed the experts to advise on that money?

Also, what is happening in this space is a lot of M&A within the industry. BlackRock, for example, acquired this group called Preqin. That’s in an alternative investment database. That was very intentional because BlackRock is very much known as a traditional asset manager, but went out and acquired that asset. There’s a lot of M&A in the industry. That’s two.

The last is more of a thought, with markets being volatile and risky. This whole notion of market volatility risk, the only thing that’s consistent about it is that risk is going to be a known consistency for a long time. Until 2022, we were almost in a 15 to 20-year range where the market went like this. A lot of folks who were in school or coming out of school didn’t need to know the benefits of diversification. If you put money into anything, it was going up.

What happened in 2022 was that stocks went down and bonds went down. Unless you were invested in these so-called alternatives, you were down on both sides of your portfolio. That was a fundamental shift that caused the industry to think about this whole notion of the 60/40 traditional portfolio. I don’t want to say it was broken, but it needed to be revised a bit to face the new world of expectations going forward.

The Demise Of The 60/40 Portfolio & Industry Resistance to Change

I’ve got a quick thought on that. When they took a downturn in the public markets in 2022, I was pretty vocal about the fact that the 60/40 portfolio was a thing of the past and that the smarter investors were going to have stocks and bonds, but they were going to have a much larger percentage of their investments in alternatives, especially private credit and private equity of various flavors.

I got a lot of emails or LinkedIn messages from wealth advisors who were ticked off. They were like, “Stop talking crap about our book. Stop making fun of 60/40 because we’re out there peddling this to people, and you’re making us look bad. We’re not going to invest with you if you’re saying things that are bad about us.” I’m like, “My job is not to talk about why your crappy strategy makes sense. My job is to tell people what I think is the best thing to do.”

In hindsight, fast forward 3 years, I was 100% right. I wrote a paper in 2021, advising pensions in the US to invest in private credit. If they had done that, they would’ve been up 40 points because credit in the public markets in 2022 was down 15% to 25%, depending on the duration of your fixed income portfolio. Longer-dated bonds got hit worse as rates went up. Nobody brings that paper up like, “If we had done what you said, we would’ve made enough in 1 year to generate 10 years of performance.”

The point I was making is that there’s a lot of resistance to change. People say, “This worked a long time ago. It should still work now.” If you think about that logically, it’s a stupid comment. Think about everything else in life. If we say, “Why don’t we do things the way we did them in 1985? This internet thing, throw that away. A smartphone? We don’t need that.

Safer for cars and the ability to do all these things that we never did before, we shouldn’t do that because the horse and buggy was fine. It got you from point A to point B.” One of the things I’ve been pushing on, because it’s of interest to me, is trying to bring innovation to one of the least innovative industries in the world, which is wealth management. I honestly can’t think of an industry that’s less innovative. You’d be hard pressed to find one.

Lindsey, right off of what Zack said and also what you said, there’s a whole page dedicated to women living longer than men. I sent one to a good friend of mine. It was a guy that’s putting his head in the alligator’s mouth. There are tons of those. Off on what Zack said and what you said before, I wanted to ask this. When I first started to do panels and get into the family office scene back when Danny introduced me to a lot of them, I was always big in combat sports, media, and that type of thing. To some of these guys, I was speaking a foreign language.

124 trillion dollars is changing hands from one generation to another between now and 2048. That is a huge driver of where investments will be directed. Share on X

I saw it from 2016 through 2017 with this media streaming live sports. All this stuff was going to be it. Content was king. I was on these panels saying, “Content is king,” and it was crickets. They were saying that I was talking about sports, and sports is cool. I was like, “You guys don’t get it. You don’t understand. It is going to be where everything goes.” People can watch Netflix movies. People can watch anything on TV, and they can record it. If they miss it, they can go back and watch it. Nobody wants to miss good live premium sports in general.

Zack was bringing what you said about being able to be up to date to get with the times. It doesn’t have to be media streaming or live sports. It happens that this is what I do. How can you convince people, “You need to move with the times. You need to get up to date. You need to get what’s hot or what’s good right now, and then where the market’s going.” How do you push on these people in family offices or people who’ve been in real estate? Their family has been in real estate for 50 years or in oil for 60 years. What do you push to get them to open their minds up, because they’ve been so successful in everything else for so long?

I’m going to answer this in a very unexpected way. I’m going to answer it with a quotation from one of my favorite movies of all time, which is The Godfather. I will debate anybody all day if they don’t say it’s one of the best movies ever. It’s, “Leave the gun. Take the cannoli.” Why am I bringing this up to talk about anything that has to do with alternative investing? It depends on what you value.

I’ll answer first to what Zack said about pissing off the peddling investment advisor who was annoyed that you were bumming about his strategy out of some client’s assets. I bet you if you were to go back and ask that person what they’re talking about is important to invest in, it’s probably got a lot more alternative investments.

Innovation and what defines those that cause change versus those that ride the coattails are those that are not afraid to think outside of the box and see the gaps. It’s as you were saying, Shawne, how you saw that content was a gap. You saw the vision. You said, “This isn’t just sports. Sports is the tool. Content is the thing.” That’s what we’re in the midst of.

Perhaps alternative assets, in their own right, might not get somebody there, like that investment advisor. I will tell you for sure what will. It is when their money is going to a different investment advisor because that investment advisor is offering them something that’s not losing money or making more money or different money than their investments that they were hawking a few years ago.

If you’re not causing the change or if you’re not a leader innovator, what gets people to change is often a necessity. Picture Scrooge McDuck on top of a pile of money and swimming through all that money at the pinnacle of all wealth. What causes you to change? Sometimes, it’s nothing. Sometimes, Scrooge McDuck is Scrooge McDuck Jr. That’s where the desire to change comes from. Some of it’s from increasing education, curiosity, or noticing a need gap in the way to innovate right there, and the need to figure out what inefficiencies there are and how to solve them. That’s an excellent question. Across industries, more attention needs to be paid to where we’re not asking the right question.

The reason why I said this is that when you move with the times, different things become a necessity. Back then, there was the traditional linear TV. NBC, Fox Sports, and ESPN go through it. You have podcasts. You have all these streaming networks that are worth hundreds of millions of dollars. This wasn’t the case many years ago because you had to get on a big network in order to be important.

Take a guy like Pat McAfee who’s on ESPN. ESPN licensed out Pat McAfee’s show, which they paid $100 million-plus for. Many years ago, that was not even the case. There’s this upside in media. It doesn’t have to be media, but it could be something else. Media and content in general are as important as anything that we need out here. It is a necessity because people are constantly on their phones. People are on their cell phones all the time. Years ago, social media wasn’t as big as it is right now.

Real estate’s always going to be around. The key things that people invest in, such as stocks and bonds, all those things will always be big. Until you start hitting these home runs, start looking at it, paying a little bit of attention to it, turning your nose up to it, and saying, “This is not what we do,” we don’t even want to look at it. That’s all I’m saying.

The desire to change often comes from increased education, curiosity, or noticing a gap—a need to innovate. It starts with identifying inefficiencies and figuring out how to solve them. Share on X

Tech wasn’t as big. You’ve got the internet. They had a big boom in the ‘80s or ‘90s. They came around then. Now, you have these tech companies that are finding ways to solve a major issue. Someone’s investing $5 million, and they have a $1 billion exit. Those things weren’t available many years ago. Everyone needs to start diversifying and looking at things a little bit differently.

Diversification is important. Another way to think about that is if you were creating a football team, or if one were to create a football team, I personally might want them all to be Tom Brady. One would theoretically not make a football team of all Tom Bradys. In the same way, it is diversification. When you’re thinking of your investment portfolio, you wouldn’t want to put your whole portfolio into one thing.

Where alternatives play a role is thinking about almost building yourself an umbrella that’s pretty much ready for you whenever you need it. A certain part of your portfolio should be out there for rainy days. A certain part of your portfolio should protect your days to make sure you don’t get sunburned or whatever it is. You want aspects of your portfolio not to be correlated. Meaning, not perform in the same way.

If one’s going down, another one’s going up. They don’t interact and react in the same way. That’s a lot of the art and science behind the way portfolios are constructed. Some of it can be done using science, statistics, computers, and all of that. A huge part of it is art-based in its relationship. One of my basic rules, I’ve adapted this from another good movie and a very famous investor. Have either of you seen Fight Club? Probably, right?

Yes.

The number one rule on Fight Club is you do not talk about Fight Club. Warren Buffett has a similar rule. Don’t lose money. I don’t know what he thinks about Fight Club, but don’t lose money. He’s done a good job because he announced that he’s retiring. For me, as I’ve come to learn in my career, rule one is never lose a meaningful relationship. Rule two, see rule number one.

The Undervalued Currency Of Relationships

Another trader lingo is this talk about currencies, such as the dollar versus the Euro versus the yen, which is often heard on CNBC or Bloomberg. One of the most undervalued currencies, not just in our industry but across any industry, is the currency of relationship. It’s reputation. It’s your network. It’s who you are. It’s everything. The value of relationships helps lead to innovation, helps foster innovation, and is truly important.

I’ll pivot a little bit and think about a very different way of talking about one of the fundamental shifts that are occurring in the industry, which are leading folks to want to invest outside of traditional stocks and bonds. When I was growing up, healthcare was reactive. I would fall on the playground and I’d hurt my elbow, or if I felt like I had a sore throat, I’d go to the doctor. Now, people are getting, myself included, proactive MRIs that can find probably way too much than any of us needed to know about ourselves. Why is that? It is because we want to live longer. It is disease prevention in an earlier stage. There are many different reasons.

Compared to many years ago, we are living 60% longer. It is the turn of the century or whatever. That’s living a meaningful amount longer. It’s causing that fundamental shift in the healthcare industry. It’s called, from healthcare, a health span. It is a focus not just on the health diagnoses, but on the full span. A similar shift is occurring in wealth management. It is not a focus on this stock or this bond, but a focus on the legacy as a whole that you’re investing in. It is not the wealth but the wealth span.

That’s a paradigm shift that’s happening in our industry that will bring into more people’s portfolios a desire to invest in not just venture credit, but venture debt, and not hedge funds, but private equity. It is all different types of alternatives. It is not just real estate, but other real assets, too, like digital infrastructure and farmland. Emerging asset classes also include sneakers as an asset class, as well as watches, wine, and liquor as a portfolio.

Navigating Fundraising & Family Office Capital

Lindsey, I want to interject. I want to ask you something that Shawne and I think about a lot and that you deal with every day. That will be super helpful for the audience. This is fundraising advice. I work with many founders who have started great companies. One of the biggest challenges, even for the best founders, is raising capital.

One of the most undervalued currencies—not just in our industry, but across all industries—is the currency of relationships. Share on X

For myself, I built my own company from the ground up. It’s a fund. We make investments. We make loans to the fastest-growing American innovators. The hardest part for me, quite honestly, was raising money for the fund because there were a million reasons why people said no and very few that said yes. They’re all kicking themselves because we’re doing quite well, as you and Shawne both know. Still, it’s super challenging, even for successful fund managers and successful founders like Shawne. It’s hard to raise money.

A big part of the capital base out there that people look to access is this family office capital because it’s oftentimes viewed as being more patient, more aligned, and more strategic in some ways. There are a lot of folks who want to figure out how to tap into that. I want to ask you two important questions. These are the most important questions of the day. The first is general fundraising principles. Whether it’s a founder or a fund manager, what are the steps that you think people should take fundamentally? Question one is what to do there. Let’s start with that, and then I’ll go to the next question.

Think about the saying. I heard it when I was growing up. The tree in the forest, if it falls down but nobody hears it, did it ever fall? You, me, and Shawne, all three of us, could have the best idea, but if nobody knows about it, who cares? I call this answering the why. Why this, whatever the industry segment is? Why is it important?

Why now? What has changed about it that makes it newer, better, different, and more appealing than before? Lastly, why me? Why us? Why this particular entity that one is aligning themselves with? It sounds simple, but not being able to answer all three of them or being stuck on one could be a great investment altogether because it’s not answering those fundamental questions.

Folks have a lot of ways that one can spend their money. I was in Claire’s Boutique with my daughters, who are 8 and 11. I remember Claire’s being a place for earrings, necklaces, and stuff. They were both in there looking for things from their favorite influencers. Times have changed. There’s a why now, Shawne, as you said before, for the power of content or the power of, as our friend Danny Hughes would say, influence and influencer capital. The why now is what helps compel one to give money to you, combined with the why us versus hold it and put it towards something else.

Zack, you said earlier that one of the earliest or the gateway investments is often real estate, but oftentimes, the first thing a lot of people invest in is toys, cars, boats, clothing, or jewelry. Their first pivot isn’t into the legacy appeal of real estate investing. Educating on the why this is more of an education level. It is instructing on why now and what’s shifting in the market.

It is explaining what the statistics are and why it’s not a fad or a trend, but is a fundamental shift, and it’s occurring. What is the different angle? What am I doing? What are you doing? What are we doing that’s different than the other person? Is it because we’re more quality-focused or more diversified? It is whatever it is that differentiates and answers the question of why choose A versus B. Answering the whys is one part.

The other part is what I call the GOTRs, which are Get Out of The Room questions. Another area where efforts fall early on as an entrepreneur is in these early stages, where they’re often called pre-seed, seed, or Series A, which are these early rounds of venture investing, where there may not be an articulated plan for where one is going.

In some instances, it’s perfectly okay if you are small in assets under management or you’re a small fund size of $10 million, $50 million, $100 million, below $500 million, or $1 billion that a lot of institutional acts that managers want to see before they’ll invest. It’s perfectly okay that you’re not using the most well-known, most expensive auditor or lawyer to help draft your documents. It’s having an answer for those questions that is sincere, authentic, makes sense, quite frankly, and not having a different answer 2 minutes, 2 months, or 6 months from now to that question unless something meaningfully shifted about the strategy.

It might be perfectly okay to have a $20 million fund size if that’s because one specific deal of friends and family round crystallizes the concept, and the next fund size reflects the growth in the asset class. Have an accountant who is maybe more regional versus national, because it makes sense for one’s overhead at a certain size. There’s a plan to change at a certain asset level. Answering the whys and answering the GOTRs are some early tools in a toolkit one can have to get out of those early fundraising sand traps.

The second part of the question is for family offices in particular. You work with many. What should people who are fundraising do differently, or what should they expect when trying to raise capital from the family office segment? How do we access that segment most effectively?

Answering the 'whys' is one part; the other is the GOTR—‘Get Out of the Room’—question. Share on X

I have quite the movie kick. Forrest Gump said, “Life is like a box of chocolates. You never know what you’re going to get.” Family offices are like that as well. Every family office is a little bit different with its own flavor. The shift there is the changing demographics of who’s controlling the assets. It’s going to younger generations and more women.

Understanding where those two cohorts are interested in investing is very helpful to be in one of those areas if you’re trying to raise capital. If your widget was somewhere that was very stained and outdated technology, there’s probably not a long future for you versus some areas that are impactful, philanthropically focused, more diversified or holistic in nature, and more patient capital. Those types of legacy investments are the future of what legacy investing is going to look like. That’s one.

Two, in the investment industry, there was this model that’s called the Yale Endowment model. Smart people put together this very smart, studied, and tried investment model that a lot of the university endowments that did not want to lose money on behalf of their underlying parties and constituents adhered to. Once Harvard and Yale did it, other university endowments did it. Other smaller institution endowments did it. Ultra high net worths wanted to have that model. Retail investors wanted to adhere to that model.

What’s happening, and it’s an interesting phenomenon that’s happened in our industry, is something called the denominator effect. If we think about being in Math class, there is the numerator and the denominator. A lot of folks who were investing on behalf of these endowment-type entities were stuck in investments that they could not get rid of.

Let’s say their investment base was five, and they were diversified along a lot of things on top, so it was very low. They were stuck with something, so the numerator became a lot bigger than the denominator. All of a sudden, they’re overly concentrated. That’s not good in terms of having concentration risk and illiquidity risk. Folks were unable to get out of a lot of their investment.

That’s what caused a shift for a lot of folks who are looking to raise money in the investment arena to say, “What pools of capital don’t take as long to make an investment decision to invest more quickly, but also have the attributes that one would like about a pension type of investor, which is long-term patient capital?” Those are investors who can make a decision quickly but will keep their money with you for a long time. That sounds pretty awesome. It’s akin to being a sports player who was told, “We are giving you that 25-year long contract, but we’re going to make the decision by the end of the day.” That’s like having your cake and eating it, too.

Family offices provide that type of solution because family offices typically don’t have as layered a decision-making process. Meaning, if I’m the family office matriarch, patriarch, or next gen, it’s typically a family office type of investment committee. Maybe there’ll be an outside consultant that will help make that decision, but it’s not having an independent board of directors that meets on a periodic basis that has to review and give something a try for X number of quarters, months, or years before they make a change. Decisions can be made quickly. It makes the population to raise money from a lot more appealing for those trying to raise capital.

If you were building your own team or building your own fund, if I were coming to you saying, “How do I do it?” You would tell me, I would hope, to do due diligence on the investments, the players, or what it is that I’m putting my money into to make this the best, highest quality investment ever. In the same way with diligence in that manner, one should do due diligence on the folks that they’re looking to raise capital from as well.

In going to a meeting at a certain family office, in this day and age, do you have any context that you know on LinkedIn or social media together? Did you go to school together? There’s no such thing as a cold call anymore? There should be Six Degrees of Kevin Bacon or whoever. Maybe it’s Zac Efron or Miley Cyrus. Whoever it is, there’s always a warm introduction or a way to form a connection. That’s the power of relationships.

Theoretically, if this is the pool of capital that you’re trying to get to, you know what their investor preference is for risk appetite. Is this a family office that is very risk-averse, and they don’t like to get out of their skis much? Is this a family office that likes to invest in early-stage investments? You know what’s a waste of your time? Like return on investment is important, return on people’s time is important, too. Everybody’s way too busy. Those are some.

Lindsey, those are super helpful points. Unfortunately, we went over by about ten minutes because Shawne and I were listening and taking notes on all this stuff.

There’s nothing wrong with anyone of any shape, size, or age, but having an industry so misaligned with its constituents is a problem that needs to be solved, and that's where innovation comes. Share on X

The first time I did anything with a family officer was around 2016, about 3 or 4 years after I retired. I understood what it was, but also, too, how everyone else in your field looks at it. Even though I know now, because I spoke with twenty of them over the last couple of years, for somebody coming into this space, this information is so helpful. I had to ask the questions. I’m up there speaking with what I had going on at the time. It’s so important when people are trying to get things off the ground, whether it’s raising capital for a fund or raising capital for a business. All this is helpful. I appreciate it.

What I’ll share with you guys is that one of the first times I saw Danny speak was several years back. It was in Newport, Rhode Island, at a conference out there. I was standing in the back of the room. There are a bunch of athletes. I don’t know if you were up there for this. I know you do some speaking with Danny from time to time.

A bunch of athletes were standing at the front of the room. I looked in the middle of the room, and in the middle of the room were old, fat White guys. The 1% sitting on that panel looked nothing like all of the people managing, advising, and innovating. Few looked like me in the back of the room, a woman. That’s where so much of the money is flowing. Younger demographics, minority demographics, and women.

Part of what I enjoy so much about my career and what keeps me passionate is that I have two daughters. I want them to be inspired by what they do. I want the world to be a place where it’s more reflective of what’s accurate out there. It shouldn’t be that, which was completely misrepresentative. It’s not that there’s anything wrong with anybody of any shape, size, or age. To have an industry that is so misaligned with its constituents is a problem that needs to be solved. For me, that’s where innovation comes. It is when you have these moments where it crystallizes for you, like, “This is something that needs to be solved for.” You guys are awesome. You put together a good show. We should do more of these and take the show on the road.

I agree.

I appreciate having you on, Lindsey. I appreciate all the knowledge you have that you’ve shared on this show, but also offline.

We’ll continue to talk through those things as well. Consider me your friend. Feel free to call me anytime.

I appreciate it. Thanks for coming on.

Bye.

Take care, Lindsey.

Important Links

• Zack Ellison on LinkedIn
• Zack Ellison on Instagram
• The 7 in 7 Show with Zack Ellison (podcast)
• Applied Real Intelligence (A.R.I.) website
• Shawne Merriman on LinkedIn
• Shawne Merriman on Instagram
• Lights Out Sports TV website
• Lights Out Xtreme Fighting website
• Lindsey Sichel Rubinstein on LinkedIn
• Opus Capital

About Lindsey Rubinstein

Family Office Executive | Founder | Health, Wealth & Legacy Expert

Lindsey is a family office executive, founder, and health, wealth & legacy expert. She serves on the Global Executive Advisory Board for Apex Invest, the global financial services company. Lindsey has most recently been aligned with Opus Capital an affiliate of a multi-billion dollar New York-based real estate family office as the senior executive responsible for strategic relationships, capital formation and product development for their alternatives affiliate.

She brings twenty years of alternatives experience in both private and public markets through varied economic cycles. Previously, Lindsey served as a founding executive at American Farmland Company, a NYSE listed REIT, a company which she helped build and take public. Prior to, Lindsey has held roles at D.E. Shaw, Goldman Sachs, Robotti & Optima. Lindsey speaks regularly on panels and podcasts regarding health, wealth & legacy, intergenerational wealth transfer and the evolution of alternatives investments and family offices, and emerging managers. She graduated from Cornell University and has two amazing daughters.