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Stride 2 Freedom Speaker Series: Wealth Management Gets Personal and Professional

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On this week’s episode of the Stride 2 Freedom podcast, we spoke with Chris Welton, Wealth Management Advisor at Northwestern Mutual. What impresses me about Chris the most, is his background in investment banking which gives him the ability to understand and bridge corporate strategy and finance with individual wealth management. Chris is equally nimble in discussing finance strategies and partnership structures which you will get a glimpse of in this episode, as he talks about individual asset allocation and insurance coverage.  The reason I wanted Chris to join us today is because business owners typically wait too long to engage an advisor or coach to help them manage their assets.  As Chris so aptly shared, “You can never be too early, but you can be late.” 

We also spend time in this episode talking about the power of having a plan and the importance of putting one together. “Hope is not a plan,” as Chris let us know. Financial planning and investing can be tough topics for a lot of people, but Chris makes it his number one priority to put his clients’ needs above all else.

Chris focuses on the “triangle” of business, personal, and legacy to help his clients build a financial plan. Whether it be a small business owner, or large corporation, Chris treats each client with the utmost mindfulness and vigilance. As a business owner himself, Chris brings a relatability to the table you will not find anywhere else. Listen now.

Who should I interview next? Please let me know by clicking here.

 

In this Freedom Speaker Series episode with Chris Welton, you will learn:

  • The importance and value of a wealth advisor
  • The simple power of a plan and checklist 
  • How to establish a strong client / advisor relationship

Listen Now
 

We are fortunate to have Chris available to spend time with us on this edition of Stride 2 Freedom. If there is a speaker you’d like us to interview, click here and let us know. Stay well. Stay safe. Stay healthy.

Show Notes and Links From Episode:

Chris Welton LinkedIn
Northwestern Mutual

Episode Transcript:

Russell Benaroya: Hey, everyone. Welcome to the Stride 2 Freedom Podcast. My name is Russell Benaroya, and I’m the co-founder of Stride Services, a virtual back office, bookkeeping, and accounting firm serving hundreds of clients around the United States.

This podcast is designed to help small business owners focus on growth and innovation. In other words, focus on those things that inspired you to start your business in the first place. We call it your genius zone.

We do our job on this podcast when business owners feel like they have the trust and confidence to build the right team of partners around them that will help them grow. Thanks for joining. Let’s go.

This week, I am excited to welcome Chris Welton, from Northwestern Mutual to the Stride 2 Freedom Podcast. Welcome, Chris.

Chris Welton: Thank you, Russell. Thanks for having me.

Russell Benaroya: Such a pleasure to have you here. Chris is a wealth management advisor who leads a team of people to provide high net-worth individuals with a plan to help them achieve their goals. I’m going to let him talk in detail about how he serves and the capacity and services that he provides.

The reason I really wanted to talk to Chris today, he’s really good at explaining things simply, and in a fairly entertaining way. I find this category of wealth management to be particularly opaque. And I think for many business owners and CEOs, they’re not exactly sure how to dip their toe into accessing some of the expertise that Chris and his team provide.

I also wanted to talk about the importance, today, of a plan. And as Atul Gawande, physician and author of books like Being Mortal and The Checklist Manifesto says, “Hope is not a plan.” In fact, he wrote an entire book talking about the power of a checklist, a guide, a series of steps for how hospitals and surgeons get things done. And I suggest that if it works in cases of life and death, it should work in cases of financial management.

So the power of a plan does not mean you control the result, it means that you’ve done the thinking upfront to get control of the inputs that you believe will drive toward your intended goal. I know Chris is going to talk a lot about planning and the importance of a plan and following a plan. So let’s jump in. You ready, Chris?

Chris Welton: Absolutely. 

Russell Benaroya: Chris, you’ve had a pretty interesting and illustrious career, which I’m interested in hearing about. As you look back on your professional experience if you had to give yourself one piece of advice to your younger self today, what would that piece of advice be?

Chris Welton: I would think about trying to bring the experiences I have personally and professionally into a story and making that all play together. I wouldn’t focus on any one moment too much. That’s something that I probably did a little more when I was younger, but being able to go and really understand the broader context.

Deals, roles, jobs, are really part of a continuum. So you have to see that as that evolves. It’s not even necessarily about the immediate skills that you learn there. It could be about the people you meet, or about the organizations that you’re working with, or about the industry that you’re in, or the clients that you’re impacting on that.

The biggest thing I would say is to look for ways that compound, like compound interest or compound growth, that one can build on another and build on another. Look for opportunities to do that. 

Russell Benaroya: Cool. Tell us a little bit about the work that you do at Northwestern Mutual, how you got there, why you’re doing what you do, and why it matters.

Chris Welton: I began my career in New York in the 90s. After college, I took a position working at a very large investment bank in Manhattan and worked on very large deals in the global power and utility industry. So electric utilities and big gas transmission companies.

I eventually moved over and did minority investing for private equity and venture investments for the firm’s portfolio. I had a number of opportunities very early in my career to work with different leaders, different business lines, and different industries on that. That gave me a really good sense of what it takes to achieve what investors look for, what why Wall Street looks for, at a really high level.

For those roles, we were working with wealth management professionals at the firm and understanding how they serve their clients, what the clients were looking for, and what their needs were. We were often working with some of the most successful people in the country, if not the world in some cases. So we got to see that at a very high level and what that entailed.

What I learned was that they’re really, at the end of the day, just people. They have more complexity. They’ve probably got more money. But really, there’s the need for emotion, there’s need for clarity, and in many cases, the need for brevity to work with them and to come up with a plan that they can act on concretely and remember when they go about the rest of their very busy lives and engage as they go forward.

I then spent about 10 years working in corporate environments. I worked for a couple of companies that we’ve invested in, mainly down in Los Angeles. I had some great experiences there working for fast-growth entrepreneurial companies with very successful entrepreneurs. And I saw that from the other side, what that looked like in terms of the other side of the coin from the inside of the company, and how we could support and deliver for that.

About 10 years ago, I made a decision professionally, that long term, I really wanted to compound and build. We talked about that theme earlier. So I went back to our mutual alma mater, UCLA Anderson, and did an MBA there. I also did something at the same time called the CFA, which is three exams over three years, and only 10% of the people, I’m told, typically pass eventually. Generally regarded as a very difficult designation on the investment side.

I pursued both at the same time to really dive into learning. I didn’t know exactly where it’d go, but I wanted to combine my passion for helping people, serving people with technical skills and expertise. Being around markets and finance, I always came back to the subjects I really enjoyed. And that was my passion—if I could take that and apply that to get great outcomes for people. I couldn’t really think of anything better, frankly.

For personal reasons, we moved to the Bay Area to San Francisco. My wife works in technology and that’s where things are at up here. We started building a practice. I joined Northwestern Mutual as we were going through the interview process, looking at different firms and opportunities. I was struck by the ability to build an independent firm backed by the strength of Northwestern.

Northwestern is often known as the quiet company. People perhaps know that it’s a life insurance company. It’s great in that area. What not a lot of folks know is that it’s also one of the top five independent broker-dealers and has a thriving and growing financial planning practice, and a really deep sweet spot working with small medium-sized business owners and entrepreneurs.

Our arrangement is that we’re actually an independent contractor. We’re not employees of the firm, which is very important. That was important to me. There’s no boss of the bank telling me what to do or how to serve clients. My first duty is to take care of my clients properly and correctly. To do that and to have the independence to look across everything in the market that’s available. 

As we went through that, what we discovered is that it was a great way to serve business owners,  and we were increasingly attracted to working with owners of small-medium businesses, for a couple of reasons. One, just a personal level, I really feel an affinity with them. I really gravitate to them, I can feel their problems. I’m a business owner myself. I understand the demands of customers, cash flow, payroll, growth, juggling, trying to do 30 hours of work in a 24-hour day, and get some sleep, and the family in there.

On a personal level, it’s folks I really like helping and working with. On a professional level, what we found is there’s just a lot we can do. If you think of three rings that overlap like in a triangle, we think about, with business owners, there’s the business, there’s the personal, and there’s the legacy.

We’re at this very unique time, now more than ever here in 2020, where those areas are becoming interesting and perhaps even more relevant than they ever have been. Particularly, as folks start thinking about how they’re going to transition, how they might retire themselves, in terms of saving, how they might ultimately transition to business. We have a very unique situation here, and not to bring too much politics into it, but with the election coming up, we could get the same or we could have a different Congress, we could have a different president.

So we’re finding that there are many questions that folks are having about setting up estate plans to gift assets to the next generation. It’s a particularly powerful time now because the interest rates that are used for valuing that are at all-time historical lows. You combine that with the potential for the estate tax exemption to go away, to be lost. Individual, today might be a little over 10 million, whereas if we had a Biden presidency and Democratic Congress, it could go to as low as 3.5 million based on proposals. There could be other changes in terms of estate taxes, gift taxes, etc.

Our most successful clients that can foresight are actually putting in place plans where they can be strategic and they can be flexible. So they’re not forced to give an extra one or two or 3 million to the government, when they could be giving it to the family, or taking care of a special needs family member, or gifting it to a charity or cause they’re passionate about. It’s a unique time in our profession. It’s a unique time, in so many ways, in the country. It’s a unique time for business owner clients. Now more than ever, it’s a powerful time for that.

Bringing it back to your reference on Atul Gawande, I love The Checklist Manifesto and The Power of a Checklist. Our first step of any client is we sit down and we do a lot of listening. We do a lot of discovery. We write everything down. Oftentimes, clients will comment, “This might be the first time I felt really listened to cohesively, coherently, in one chunk.” I’ve said things out loud that I hadn’t realized I was thinking or hadn’t put together in the same thought together. In a safe, trusted environment, we sit with them to listen, and to put that together, and to articulate that. 

Then we use our expertise on the planning side to go and put together the analysis and distill that from the thoughts and the numbers, paper, and the disparate statements into a coherent set of analysis and a plan. Ultimately, we have a 68-page plan and some clients like to go through that. But really what we’re proudest of is we have the one-page checklist: here’s what you need to do, here’s when you need to do it, here’s what the impact is going to be for you. Here’s the bottom line. 

When we put that in there, we’re able to walk that through clients and have some really powerful strategies for them, personally and professionally. If we go back to those three circles, when we talk about the estate, we talk about financial planning, if we go back to the business. 

One of the other powerful things we’re able to do is to help business owners in a very tax-advantaged way to the greatest extent possible, but staying very much within the mainstream of what is possible out there—helping them save for themselves and for their families. 

That might be things like using certain kinds of what are called qualified plans. 401Ks, for example, profit-sharing plans can be very appropriate. It could be using things like cash balance plans, which are a surprisingly powerful tool for deferring taxes and saving for retirement with perhaps some guarantees inside of there, and in a way that is much more so than folks really had realized before. 

The last level can be thinking about how to really secure that business and secure themselves. So depending on the company, one of the things that we can look at is doing what’s called non-qualified deferred compensation. A big word, but what it means is that we’re able to put in place compensation plans where they can attract, retain, reward, recruit, and perhaps retire, key employees. 

So they have control over retention and that helps build enterprise value for the business, which helps make their business ultimately more attractive if and when they’re ready to transition either the family or employees or to or to a sale to a third party. 

This is the toolset we bring. We have a fantastic team and we have many years of experience in doing this. We’re able to draw on a couple of key strategic partnerships as well to really bring this in and bring the best of breed approach to build the right team around individual business owners and their teams as well as their families and provide amazing support for them.

Russell Benaroya: There’s a lot of information; I’m going to unpack a little bit here. What constitutes a high-net-worth individual? When should they be thinking, “This a good time to talk to a guy like Chris.”?

Chris Welton: A great question. In terms of thinking about it, we talk about clients really as having an affluent mindset. So it’s less about the money in the bank. I think none of us really likes being seen as a number or dollar sign. We certainly don’t like to look and don’t look at clients that way. 

We tend to think, instead, about an affluent mentality and mindset. What that means to us is, it’s someone who has some of the challenges that come with great success. That can vary depending on the person, but it might be, they have a business that’s generating 4 or 5 million a year of revenue, or 50 million a year revenue, 100 million a year revenue. They might have key employees they want to retain. And they have some complexity in the business structure. 

Then in terms of income and the balance sheet, having a mid-six-figure, seven-figure income tends to put you into a tax bracket where you start to have a lot more tax problems. That’s an area where the strategies that we do on tax-favored income generation can be particularly valuable and effective.

Russell Benaroya: Got it. Many of the listeners of this podcast and certainly many of our clients at Stride are running businesses in that $3 to $8 million in revenue range. Their business is their single biggest asset. They haven’t realized a liquidity event, they may never do that. It might not be a particular business that has those characteristics. 

It is not uncommon if I had to project my own experience, to kick the can down the curve, for a long time when it comes to engaging somebody like you. What advice would you give to me or to those business owners that are slugging it away in their mid-size business that really don’t feel like they’ve earned the status or right to sit down and talk to somebody like you and actually plan?

Chris Welton: That’s a great question. I know it can be so hard in the day to day to make time for this and feel it’s really relevant and a priority. Sometimes it is and sometimes it isn’t. Here are a few thoughts. One, I think my favorite mantra in this area is you can never be too early, you can be too late. And too late is usually missed opportunities and maybe a little slapping yourself on the head, “Ah, if only I’d known. If only I’d done that. That would have been so valuable.”

In our line of work, what tends to happen is that missed opportunities tend to have really big dollar amounts associated with them in terms of losses or opportunities avoided. The way you’d see this as a business opportunity, I would say sitting down with a financial advisor and planner is an opportunity. 

The second thing I would observe in there is, very often, the conversations we have, the comment that comes out of there from the client is, “I didn’t know what I didn’t know. I wasn’t fully aware of the options that were available. I feel I have a much clearer picture that really helps me solve a few strategic problems and perhaps be a catalyst for that which I want to achieve.

One of the things we’re able to bring across around that is our breadth of thinking and knowledge across the entire ecosystem, helping them brainstorm and solve critical business challenges around that.

You mentioned the point about exiting a business or having businesses and industries and may not have a clear exit path, perhaps a service professional, for example, things like that. One of the things we’re able to do is talk about brainstorming that, talk about how to develop that, talk about the right people who might work in that industry. It might be other professionals or consultants.

I’m a member of a group called Provisors, which I know you’re familiar with, and we dive into that very frequently as a wonderful network of folks who can add very specific value. One gentleman, I work with or I know of his work, he works with law firms of a certain size—2 to 10 attorneys—and helps them develop scalable plans for running the firm, scaling up, recruiting mid-senior associates, developing partners, retaining them, etc.

So that’s an area that we can talk with clients about. Not that directly, but we can make them aware that there are growth strategies and people out there that do things. And talk about how that fits back into their financial plan and their goals for the exit.

On the exit part, there may be more options than they realize. There may be more ways to develop people to do that, and there may be financial structures around that, that enable them to achieve. We find it to tend to go hand in hand.

Russell Benaroya: Once somebody commits to working with you, what does that mean? Are they moving their assets under the Northwestern Mutual banner? What’s the ongoing relationship that you aspire to have with your clients?

Chris Welton: We aspire to have lifetime relationships. That’s how I’m wired. That’s why I got into this. I want my clients to feel free to call me anytime. I’m very frequently talking to them in the evenings, on weekends, and helping them just be there for them. We find that in the service area, the clients really appreciate going that extra mile on things to help them.

These days, there are a lot of clients who are moving up to Tahoe, for instance. It’s competitive to get a house up there. So we’ve been fielding calls from folks who need to get cash out and make an offer, and get their house or so they’re not in San Francisco for the next year in a COVID environment.

Working with us, we try to make it really easy. In general, we’re always happy to give 20 or 30 minutes to anyone, for a call. It’s our way of giving back. It’s our way of being a part of the community. Just walking through a call with them, brainstorming, doing some strategic networking, being a part of their day that just helps them spend 30 minutes and just take out a whiteboard and dream big for a little while and talk about what they want to achieve and what they want to do, and how they want to feel once they get there. 

Most often, the place we get is what would help them feel really fulfilled and really great about achieving that in terms of life, business, and ultimately about money. We’re always happy to do that anytime. In that call, typically, we’ll figure out if there’s anything that we should keep talking about. Sometimes there is, sometimes there isn’t. Sometimes there is, but it’s not yet the right time, which happens quite a bit as well.

Now, when clients do come on board, there are up to three ways that they can engage us. They can, ultimately, bring us on board to help them manage some of their assets. Usually, we’re managing a relatively small subset. They often have assets and other things that, for compliance and regulatory reasons, we can’t manage. Things like 401k plans and stuff like that. But we’re always planning and aware of the whole picture. We’re always aware of the entire plan on that.

We charge a very reasonable percentage of assets under management typically, for that in a fiduciary-advisory relationship. Fiduciary is, I must at all times work in your best interest on the investments. So we’ll do that in a fiduciary-advisory account there. We do work around protecting the business and we do work around the insurance.

Insurance could be things like reviewing buy-sell agreements, if you have partners, often, tragically inadvertently overlooked part of planning, which can have an enormous impact and hugely negative consequences with unfunded buy-sells and ongoing obligations. Really, you can just overturn the best-laid businesses and business plans on that.

We often like to start with a review of that to see where that’s tracking. It’s super easy to take care of. It’s super simple to solve, typically. We’ll do work around thinking about life insurance planning and life insurance for protecting the business owners, life insurance for some of the tax deferral attributes can be helpful in certain contexts. A lot of ways that we can apply that always prudently always for the best benefit, as part of it.

One of the teams that I partner with, they will actually do a fee for a plan for the client. They will charge a fee and the client can know that they can get a plan, and just the plan—just advice. We will not stop working until they are happy and satisfied with that plan.

Some clients like to come in and know that they can simply get that super deep dive to know that they’re secure, know that they’re okay. Other times, clients say, “that’s okay, let’s do a lighter weight, higher-level version of that,” which we typically waive the fee on, and we work complimentary. We don’t need the depth. Then we can work with them on a couple of the other elements long term.

Long story short, we try and make it really, really easy for clients to work with us and be very flexible on that. We just explore with them where they’re most comfortable in terms of hiring us, much as they would with a contractor, vendor, or customer in terms of developing a business relationship.

Russell Benaroya: Spoken with a number of wealth managers, what seems particularly unique about your practice is the triality, the duality of, we’ll look at your personal circumstance, but you’re particularly adept at architecting instruments within the business itself. That feels a little bit different.

Most of the folks that I talk to are like, “Let’s focus on you, the individual, and your family.” They don’t get as much involved in the roll-up-your-sleeves intricacies of business instrumentation.

Chris Welton: It’s a great observation and it’s great feedback. I’ve noticed that in the marketplace. It all comes from being a business owner myself. I wake up every day scratching my head; you really can’t separate it. You can’t come in the way with my wife and say, “Okay, well, how much did you earn last year? What are your expenses? How much do you save your 401k?” and put that into a plan. It just doesn’t work very well.

Business owners are all over the map. They have tremendous opportunities in front of them, but tremendous complexity, and tremendous amounts of risk and change that can come at them. So as we’re going through that, you really can’t separate the two and you shouldn’t. We want to be able to combine that.

Now, the challenge in the financial advising and wealth management space is that’s a higher bar in terms of knowledge and skills. You have to invest more personally to do that. One of our conclusions is that we’re fairly uniquely positioned in terms of intellectual capital, in terms of education to achieve that for our clients. So we thought we’d put that to use as well for them.

There are bodies of knowledge behind here that are very technical in terms of each of these particular areas. We’ve invested in the partnerships and the skills to be able to do that.

The last thing I’d say is the connection with Northwestern Mutual, other than their triple-A financial strength, which is rock-solid, and clients appreciate, especially now more than ever, it allows us to have a bit of a different viewpoint than a pure investment-only competitive manager.

There’s a long heritage there of estate planning. There’s a long heritage there of structuring and working with business owners and using instruments. There’s a team of attorneys that’s available for us at the home office to consult with, who can give us a second look. They won’t track any documents or anything like that, but they’ll talk to us in terms of ideas, structuring, and so forth. Also, give us a look at what all the other clients just like ours across the country are doing and thinking about now, in terms of that.

Russell Benaroya: What do you think is most misunderstood about the work that you do? What don’t people get?

Chris Welton: Unfortunately, I think this type of industry tends to be very heavily marketed. It’s an old industry and the predecessor industry, be it stock brokerage, life insurance, financial planning have all been around for a really long time. Most folks, particularly if they’re approaching retirement, have had some experiences with that good, better, and different. They’re in professional groups. They’re probably approached on a pretty regular basis.

They probably have had an experience where it all sounds pretty good, but they don’t know what they don’t know. They don’t know how to tease that apart from things. What we like to do is change that dynamic a little bit, and just walk alongside them and help them tease apart all the, often confusing, information or approaches that they see in the world and be a partner.

I think it’s misunderstood, but we’re really here to be on the side of the business owner, to be a partner, be an analytical resource, a trusted resource for them. Unfortunately, as an industry, there tends to be many financial institutions who tend to think of it more as what’s good for the financial institution, “Now, let’s go and talk to the client.”

We like to turn that dynamic upside down and say what’s good for the client and good things for us will follow from them. We firmly believe that and found that to be true.

Russell Benaroya: Chris, this has been terrific. Is there anything I didn’t ask you, or you wish that I had asked, or something that people don’t usually ask that you wish they did?

Chris Welton: This is a great set of questions and very comprehensive. You really covered a lot of the key areas. If we’re thinking about the Stride audience and the business owners that are out there, I would say if you’re listening to this podcast and you’re a client of Stride, you’re almost certainly someone that we can have a very interesting conversation with, and be helpful.

Simply by being in that mix, there’s a pretty good qualifier that there’s a good conversation to be had there. I would say, don’t limit yourself in terms of too big or too small. Many of our clients are high-income solo professionals, or they might have one or two employees. They might be in areas like real estate, or medicine, or law where they can earn significant incomes and have challenges there and a lot of good planning work.

We also have clients that work in businesses with several hundred employees, which can have its own somewhat different challenges. So I’d say, open the horizons and be open to learning new things and the opportunities that arise from that.

Russell, I just want to thank you for the opportunity for being able to be here. It’s a pleasure to talk with you and to describe the family. 

Russell Benaroya: It’s terrific to have you. I’m impressed with and admire the depth of your intellectual capacity across personal and professional circumstances for business leaders. That’s a level of expertise that is different and I don’t run across it quite as often. So it’s super to have you on.

We wanted to talk to you today about wealth management, but also the importance of a plan. I think you did a really nice job reinforcing, not only the importance of a plan but quite frankly, the simplicity of a plan—the one-page plan, have a plan. It’s amazing what you can accomplish by having a few boxes to check, and certainly, having a partner like Northwestern Mutual, that helps create a little bit of accountability to help people be successful.

Thank you so much today for helping paint a picture of how business owners can better secure their long-term future, not only for themselves but also for their employees. I appreciate you spending time with us, Chris. Thank you so much.

Chris Welton: You’re welcome. Thank you, Russell.

Russell Benaroya: All right. Have a great day, everyone. Bye-bye.st

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