It is often said that you should save more and spend less so that you can sit back and relax during your later years. But sometimes, your current expenditures and plans are compromised just for the sake of building good retirement savings. Matt Reiner joins Elliot Begoun to share his mission in guiding entrepreneurs and investors in finding the right path towards financial freedom. He explains why focusing on your retirement years must not push you to sacrifice today just for the sake of a life that’s still decades away. Matt Reiner also showcases his expertise as a wealth manager in discussing how startups can easily find financial success right now.

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Matt Reiner On How To Build Your Retirement Savings The Right Way

This is a cool episode because Matt is a man with two brains. On one side, as somebody who is a wealth manager, probably pretty logical, linear and planful, but then he’s also an entrepreneur. He is the CEO of a tech startup. That comes with the appropriate degree of craziness and a little bit of creativity. It’s always good to have those two ends of the spectrum contained in one person. Matt, thanks for joining us. Why don’t you introduce yourself? Give people a bit about your background and then we’ll dive in.

Elliot, thanks for having me and thanks so much for that background. I always like to be told I have two brains. I wish that was the case because one may be smarter than the other. My background is in wealth management. I grew up in this space. My dad started a wealth management firm many years ago. I grew up watching him build that and joined it when I was out of college, managing individual assets. I started another registered investment advisory wealth management firm. They’re both still going concerns and growing well. Many years ago, I took the leap into entrepreneurship and technology. We started a technology company that was focused on helping our two wealth management firms become more efficient, scalable and ultimately, a unique client experience for our end clients. That technology company has taken a life of its own. That’s where I spend the majority of my time now. I’m born and raised here in Atlanta. I have a family here. I’m happy to be on this conversation talking about two things that I’m passionate about with wealth management and entrepreneurship. Thanks for having me.

What was the impetus? What was the problem that was so palpable that you decided, “I’ve got to solve it for myself?”

We were two firms that were growing at a good pace and we were running into capacity challenges. In our industry within wealth management, there are many headwinds that we’re facing. We’re facing margin compression because we’re having to deliver more services, increase our service offerings, and increase our value to our clients. That means that we have to hire more people. That’s the way that we’ve always done it.

The second headwind is that we are using more and more technology and our clients are expecting us to use more technology, but none of it talks to each other. It’s antiquated and it’s not integrated. We were having challenges where we were bringing on in one of our firms about twenty new households per month that we were having to open paperwork on, get them through the process, get the accounts funded and ultimately trade it. We were doing it in a very manual way. We had one person that was dedicating 95% of her time doing that one process. We were about to go and hire another person. I said, “We’ve got to find another way of doing this because this is unscalable.” We didn’t see an end in sight of our growth. We had to solve it without having to solve it with more people.

That’s when we started to find a way on how do we integrate with these technologies in a unique way where we can bring all the data into one central location like a data warehouse and be able to execute tasks. We started to do that within this one specific process. As everybody says in the startup community, “That was our a-ha moment,” because the young lady that was doing that role came to us and said, “Are you going to let me go? You’ve taken away 50% of my job.” We said, “No. We’re going to elevate you to do more sophisticated work.” That’s when we saw that there was something there. It was the need of integrating the technologies together, the need to streamline our processes and make things a little bit more efficient so that we could do more with the same number of people that we have.

I’m going to take a little bit of show prerogative here and ask a question two ways, similar question. The first is how has being an entrepreneur made you a better wealth manager?

The main point is cash is king when you’re an entrepreneur. Your idea dies on the vine if you don’t have cash and revenue coming in. As an entrepreneur, early on and still to this day, I look at our cashflow day in and day out, and make spending and budgeting decisions based on where we’re going on that. We have budgets that are based on proforma by cash rules. When you’re a wealth manager and helping families save retirement, especially younger clients that are going through many life experiences, cash is king. It’s being flexible and understand how do you create different scenarios and different stages to where they get what they want.

As a company, we want to continue to grow and you have to sometimes spend money. How do you spend money and then find other areas to save money and being very cautious of that? It’s allowed me as a wealth manager to go in and say to clients, much more deeply in their cashflow and in their ability to save and spend, balance the two. As opposed to just go and save everything, knowing that you have to sometimes spend to enjoy life and also building a business, how do you fine-tune that? As an entrepreneur, that mentality has helped me be a better advisor to clients as well.

Let me ask the flipside question then. How has your experience as a wealth manager made you a better entrepreneur or a more effective entrepreneur?

I’ve learned a lot from my clients that were entrepreneurs. The biggest way is more direct to me and the technology that we do. We’re building a technology solution for wealth managers. It’s allowed me to better understand the problem that we’re solving because I experienced it, and also be able to better relate to our clients of Benjamin. I can go in and I’ve sat in their seat, and I can help them better understand the technology and the solution, and help them see the ability of it. It’s also allowed me from a product side to be able to build the product in a way that I know is going to be adopted because if I wouldn’t have adopted the technology, nobody else is going to adopt the technology in our industry.

That ability to understand what they’re going through, the challenges they’re facing in both up and down markets and how to handhold the advisor to help them get through with their clients makes us a better company and a better partner with our clients. It makes me a better idea person inside of our business of how do we want to continue to build this product to deliver the most value potential to the industry. We’re reshaping the industry and technology. We’re creating a new category and it’s all because we saw a problem by sitting in our own chair and doing it ourselves. That’s how it’s made me a better entrepreneur.

That’s not an unusual origin story. Many founders started by solving a problem for themselves first and then realizing that the solution had a broader application. It also brought them closer to that problem. It adds more empathy and awareness. Sam’s already chiming in with a great question. He’s like, “Do you know any of your clients who would make good Angel investors?” That’s always the challenge for so many startups, the funding gap has grown. The challenge in this vertical, in this space, in the natural products industry is that there’s a lot of money that’s come in. A lot of the venture capital funds, the VC funds have gotten bigger. Their check sizes have gotten bigger, which means brands and entrepreneurs have to be further down the road before they reach that institutional money. There’s a growing dependency on Angels. There are a finite number of Angels who meet the accredited investor limits.

One of the things that we’re seeing and I’m curious if this is something that you’re seeing or that you’re talking to clients about. That is self-directed IRAs and things along those lines where people can make direct investment and private placement investments in businesses, sectors and areas that they feel they either have a passion or the ability to personally derisk. What are you seeing in that space?

The Angel investor side is a challenge. In a lot of companies here in Atlanta, you’re starting to see VC funds that are starting up that are just looking to write $100,000 checks because there’s such an opportunity there because the market’s moved up. Within the self-directed IRAs, there’s a huge trend coming in wealth management within alternative investing. Right now everybody thinks of alternative investing as private equity investing like Carlyle and Blackstone. These large firms that you can’t get into unless you’re putting the $1 million checks in. The real opportunity in wealth management is how do you scale alternative investment to the masses, to this person that can only maybe write a $100,000 check but wants to create a diverse portfolio.

We build diverse portfolios with growth, equities, income bonds and cash. That’s how you build an allocation, but the idea of how can you do that now with alternatives. How can you give by aggregating up more investors to give them an ability to go and get a diverse pool of alternative investments, so that they could go do some VC funding, private equity, multifamily or whatever it may be? They can create this diverse allocation of alternative investments or ESG that is more direct. As opposed to going into a fund, how can I go and get more direct placements? We’re seeing that as a trend in our space because if you have $1 million as a retiree, you can’t go to Blackstone.

There are now solutions that are coming up. We started another firm called Altera Investments and Altera Advisors that is allowing for exactly that. You can write $50,000 or $100,000 checks and start placing into direct investments and creating an allocation. You know exactly what you’re buying, whether it’s a self-storage direct placement fund or it is a venture fund that invests in specific companies. We’re figuring out how to scale alternatives. That is a trend in wealth management that we’re going to see that’s going to help. It can help companies because it’s going to be a new way of funding startups and venture capital that’s unique. It’s also going to be great for the investor because they’re going to be able to get an asset allocation to alternatives that are diverse. They’re going to know and be able to touch and feel what they’re buying. That’s what it’s all about. As opposed to just buying a fund and not knowing what’s in there, now you know the specific investment that you’re going into on an alternative private side.

The other related question is around this blossoming of SPACs. I’m curious as to your thoughts about those and any call-outs either to the positive or to the cautionary.

SPACs had been around forever and they were a high pre-2008, then they went into a lull. They got regulated a little bit more. Now they’re finding a way back in. The thing is that for many investors that are out there, they’re fun and exciting, but when it comes to the public market, you’re a little bit late to the game. The people that make the real money on the SPAC are the sponsors of the SPAC. The initial investors in it before it gets to the public markets.

One of the things that we try to do on this show is not to use industry-specific terms without taking a moment to identify and define what they are. Tell the readers what a SPAC is and the mechanics behind it.

A SPAC is a special purpose vehicle. It’s a blank check. A funding source comes and says, “I have $1 billion and I am going to have a blank check.” It’s a quicker way of going public. They have 24 months to go and spend that money on a company and merge it into the SPAC or the vehicle itself. If you were to go public in an IPO now, you have to go through a whole bunch of due diligence. It’s expensive. The SPAC founder starts it out, funds it, goes to find a small company that has maybe $20 million, $30 million of revenue. They merged together and because the SPAC is already trading publicly, now they do a merger where ABC company becomes a traded company.

It is a very confusing process and this is why it’s very hard to explain in a simple way. I’ve always told people that if you can’t understand the entire process yourself, I would stay away from investing in it because there are people that understand it a lot better that is going to make money off of you, as opposed to you making money on that investment itself. I would sum it up without giving through the specifics of it. It’s a way for a private company to go public without having to go through the regulatory hurdles that are there for an IPO.

We’re also seeing now aggregated or multiple companies falling into a single SPAC, which begins to look a lot more like a fund. It’s growing in this space. I would agree with your advice. If it’s something that you don’t understand, then don’t invest. I think that’s good advice. This is why I came back to the question around self-directed IRAs. I’ve had a lot of conversations with people who are in the public market, but they have no idea what they’re doing there and why they’re investing there. Yet there are elements or industries specific to ours, the natural products industry, where they have a strong understanding and ability to actively participate in derisking. They want to do that but so much of the average individual’s investible wealth is often tied up into their retirement accounts. They are limited in terms of being able to write $100,000, $50,000 or $25,000 check to participate in a convertible note, a safe or even a priced round. With the self-directed IRA, we’re seeing more people be able to do that.

Self-directed IRAs are starting to come up more and more. The challenge of them in the past was who would be willing to custody the assets? There are not many like Schwab or Fidelity as a custodian. They are the person that holds the money. They are responsible enough fiduciary. Their responsibility is to ensure that if you want to buy and sell, your money is always there. That’s their responsibility like the bank. Self-directed IRAs are a lot more difficult because you can’t price them every day. That responsibility and that risk are elevated for firms like that. Many custodians shy away from it.

What you’re starting to see to your point specifically is that more and more people are demanding self-directed because they want to go and diversify outside of public equities. You look at how much the equity pool has shrunk. There are not as many public companies as there were in the past. You started getting reversion of the mean and self-directed IRAs are starting to become more and more commonplace at custodians. It’s exciting for younger investors and all investors to be able to have that flexibility.

We’re seeing companies do it like Vantage, interest group and others. I don’t represent myself in any way, shape or form as a wealth manager. What I do want to encourage is in any industry of startups or a lot of startups, the founders that have been the recipients of good luck and success are often best-suited to be the ones that help fund that next group. Trying to create and knock down barriers to get more Angels into this space who can afford it and meet the accredited limits are important. I want to change the topic to your book. The title is very interesting as is the subtitle, Ready To Be Rich: Smart Financial Advice For People On The Way Up.

That speaks to a lot of our readers. The vast majority of them didn’t get into this wild ride for the money. They got into it to solve a problem either for themselves or that they saw an unmet need, but the hope, benefit and pinnacle of the journey is seeing the financial windfall, the fruits of the labor and so forth. As a lot of entrepreneurs who enter this space are ill-prepared to be entrepreneurs, oftentimes, they find themselves ill-prepared to understand or manage their newfound wealth. Speak to that a bit and some of the advice and some of the things you share in the book that might be germane to the startup community who are reading here.

The challenge that we have as a society is that there’s not enough financial literacy in the country. Understanding and helping people to understand how to handle money, how to save money and how to build wealth is what spurred the book. You go and talk to any person about financial advice or wealth management and you’re 25 or 30 years old, they’re going to tell you, “Save for retirement. Put all the money away for retirement.” The difficulty in our minds when we’re younger is, “You’re telling me to save for something that is a lifetime away. I’ve only lived 30 years and you’re telling me that I need to save something that I won’t be able to retire until 60. That seems forever in my mind because it is my forever. My whole life is 30 years. You’re telling me to save for something 30 years away.”

Challenge in this industry in my mind of helping the younger generation save is a few things. They have their preconceived notions of how their parents did it and what they saw early on, but then secondly is the difficulty of balancing saving and spending. In our early years, we have a lot of spending needs. We’re making a lot of large purchases. We’re buying homes, getting married, having kids, sending kids to college, and we are in our early years of working. If you’re an entrepreneur, you don’t have much cash. If you’re working and you’re getting a paycheck, you’ve got some cash coming in but it’s not your peak earning years usually. That’s the challenge that we have of juggling all of that when someone’s like, “Save for retirement.” You’re like, “I need some money to eat. I want to go out and take my wife out for a nice dinner once a month.”

That’s what I wanted to get across in this book. How do you balance living your life while also changing the conversation about how you save for your future life? That’s what Ready To Be Rich is all about. It’s being real and being direct with the readers about how to do that. The way that I did it when I was getting started had those big purchases, getting married and having kids, my wife and I did something called the Daily Spend Limit. It all stemmed from this idea when we’re doing Weight Watchers. We were doing it as a couple just to try it out. It was this point system. I was like, “This works.” I am so much more cognizant of what I’m eating because I had this point system that I’m making decisions to do or not to do because I have that in my mind. I said, “How can we take that and bring it into financial advice and helping people save and budget more effectively and simply?” It’s all about simple and the Daily Spend Limit is just that.

We look at all of the expenses that we have coming in. What are our actual expenses? Mortgage, rent, food, utilities, and then what do we have coming in from income? Then we say, “What’s the difference?” If I have $2,000 coming in from income and I have $1,000 worth of expenses or $1,500, then I have $500 a month. How do I now play a game, gamify it and be able to track it without having to go to a spreadsheet or go into an app? It’s very simple. The Daily Spend Limit takes what your net is and divides it by 30 days, and that’s your Daily Spend Limit. If it’s $30 a day, you can go to Chipotle and spend, live and go have that bowl because it falls within your Daily Spend Limit, but it doesn’t mean you can’t go out and spend more than $20 for dinner.

You’re now making these decisions in balancing the idea of living for today while also saving for tomorrow. The big root of what we talked about in Ready To Be Rich is all around how to do that and how to use the Daily Spend Limit to help guide your decisions both from a psychological standpoint and how it works from a money standpoint. This doesn’t have to be complicated. Saving is very simple. Too many people make it too complicated. We were trying to make it less complicated in the book.

To our audience and the entrepreneurs, where are the mistakes being made? What are the people not understanding the impact of today on tomorrow?

It’s a psychological barrier. Here’s the real root of it. My next book is all around the psychology of investing and why I believe that you need another human in your life to help you with wealth management because we are our own worst enemy. There are two things that I see in it. One is what I alluded to earlier, the timespan. If I’m saving for something 30 years away and I’ve only lived 30 years, it’s hard to wrap my head around it. That’s why most of the people that come to see us in wealth management tend to be 48 to 55 or older. The reason is that now they’re seeing themselves needing to stop work in a span of time, call it 10 or 15 years that they remember what they did fifteen years ago and they can see how quickly time goes. It’s this reality check that says that they need to be motivated to go do something. When you have younger individuals, it’s like, “I’ll make up for it at the end.” We can’t wrap our heads around the time aspect.

The second point is around the idea of compounding. Compounding is a great thing. The challenge is it can be deflating at times too. If I’m saving $100 a month. I saved $1,200 over the year. If my portfolio grows even 20%, that means I’m getting $240. It’s amazing, $240 is good but over a year, that’s not good enough. If I had $1 million and I earn 20%, that’s $200,000. There’s a demotivator because everybody’s worried. Financial advisors talk about percentages. The reality is that I look at monetary and what the real money dollar value is. It doesn’t map up so I get de-motivated.

The challenge is you have to change the mindset of saying, “I’m going to put it away and not look at it, as opposed to seeing how much I’m growing.” Even if you grow 100%, that’s not something that you write home about because it’s $1,200. It’s not life-changing from that standpoint. You have to help people get over that by balancing and helping them say, “Go save a little bit, spend a little bit and focus on the spending, but automate the saving.” That’s the ultimate goal that you have to do to overcome that challenge.

This is one of the questions coming through the group here. When you’re a founder, many of them are truly hand or mouth. They’re betting so much of their future on the success of the business, many of them, which I’m against this. In the early days, sometimes we have no choice but as soon as you take on investment, your choice has changed. That is not taking a salary. I think every entrepreneur and every founder should pay themselves for two reasons. One is because you should appropriately fully burdened the business to make it reflective of what the business is for investors or understanding the business long-term, and you need to make sure that you have a living wage. That’s what it should be. It shouldn’t be a market wage. It should be a living wage because you are going to be the beneficiary of the potential upside. When you’re an entrepreneur and you’re in that mindset where it’s hand to mouth, how do you begin to prepare yourself for that? What do you do when wealth is a little bit ungraspable at the moment but is palpable because that’s what you’re spending every day working towards?

Most people would say, “You should save some of it and then you can go spend and spend less.” When you’re an entrepreneur and you’re in the early stages of it, you’re investing in yourself. That’s a great investment to make. You’re investing in yourself and you should be paying yourself a living wage that allows for you to go and keep a roof over your head, keep food in the pantry and keep your family safe. That’s what you need to be able to focus on. You shouldn’t be trying to balance saving for retirement and building a business because you’re trying to build a business to help you build your retirement.

If it fails, that’s fine. You go get a job, then you should start saving and you know that you have to build it back up. In reality, in your early days, your focus should be on building your business because you’re investing in yourself. You are your asset. You should be focusing on building yourself and your business to build your retirement until you get to a point where you have an income that you have more than you need to live on. Be very cautious of what you need to live on versus what you want to live on. When you get to where you have more than what you need to live on, then you can start thinking about how to save for retirement.

I would encourage you as an entrepreneur to think about how you can help your employees save for retirement with a 401(k) plan and all that type of stuff, and helping to motivate them to start saving as well. That’s when you start to build that well. Early on in your entrepreneur days, it’s not real that you can think about saving for retirement and living when you’re investing so much time and energy into building your business and you being the asset.

The reality is to think of it exactly as you just said, that you’re investing in yourself. That’s where you’re making that investment, and that delta between that living wage and what the market wage could be if you’re out there. It is ultimately the investment that you’re making in terms of the physical. You can call bullshit on this, but one of the things that we talk a lot about with the brands in our community is quantifying that delta and knowing that that’s the opportunity cost of instead of being the founder CEO of an emerging brand earning X, you would be a director of marketing, whatever that other title would be earning Y. That delta between X and Y is the fundamental investment that you’re making month over month, year over year in opportunity cost in doing that.

If you feel that that investment is a good one because there’s so much upside potential in your business, that’s great. It’s also a way because one of the things for a lot of founders, there is internal tension that exists. Let me give you an example. We have founders that are married and by making this decision to go from Y down to X or go from Y to nothing and take all this risk, it put tension in the house. It puts tension on lifestyle and so forth. By being able to create some type of quantifiable delta or understanding about the investment they’re making in real dollar terms now for the potential of the return long-term, not to mention the passion for doing the project and the desire to solve a real problem. Is that a reasonable approach?

That’s spot on. That should be the fire that drives you to continue to build the business. The faster you build the business, the quicker you close the gap. That gap shouldn’t be there forever. If it’s there for an extended period of time, you’ve got to take a look at whether you’re doing the right thing with the business. Your ultimate goal should be to continue to close the gap between what your livable wage needs to be and what market wages so you can build the business to get you to a market wage as quickly as possible. That should be the driver of it.

You have to see and be realistic. The problem with entrepreneurs and I’m the same way. I built many pro forma where I’m very optimistic about where we’re going to get to, and then sometimes we do but sometimes we don’t. Most of the time we don’t because it’s way over-optimistic. You have to be realistic about how you’re going to grow your business. You’ll be able to see if it’s going to take you five years to get to that market wage where you can start paying yourself a market wage, and you’ve built up this equity value in your business, then you have to determine like, “Is this something you and your family need that you can do?” Your spouse or your significant other has to be part of that conversation. My spouse, I remember we were just starting dating. I was like, “It’s going to be two years and we’re going to be out. I’ll be back, be good and have more time with you, but let me work on the weekends just for two years.”

Eight years later, we’re still grinding, still growing the business, and I’m still working the same number of hours. She was committed because she saw my commitment to it. You have to have that discussion with your spouse, but you have to look at how quickly you can close the gap to be able to get yourself to market wage, so you can see what the true opportunity cost is over the period of time. Don’t let that equity value. What is the equity value you’re going to get, which then goes into your decisions of how you raise money? If you raise money and give up tons of equity, you could potentially be lowering your equity value and what the return on your investment is in yourself that you have to be cautious of.

The opportunity cost lost if you had that delta and you invested it in another opportunity where it could be met. There are two things I’ll say. One is I’ll go back to my friend, Gary Herzberg always says that entrepreneurs are pathologically optimistic. I do think that that is appropriate. It’s also appropriate when you model something out to try to put yourself in the mindset of a naysayer. I always say every entrepreneur needs a good contrarian around them to tell them how things might be different.

It’s also important to make it a math equation sometimes because passion doesn’t get included in math. It’s a fundamental way to create a more objective, non-emotional method or means to evaluate what it is that you’re doing and the risks that you’re taking because you’re quantifying. If I’m paying myself $80,000 a year, I could be earning now $180,000 a year. I could be taking a portion of that $100,000 and build a portfolio through my retirement. Five years from now, I should be able to be at $180,000 and I have that upside equity but also the risk. All of those things become good ways for you to evaluate and have a conversation. Not a plug for Matt here, that should be a conversation with a wealth manager.

Something you said resonated with me. You said that many people come to a wealth manager for the first time when they’re midway through their career or beginning to see their own mortality or at least their career mortality. They’re starting to think about retirement. That’s in their mid to late 40s to early 50s. That’s probably what I would have done as well, except when I was in my early 30s, I crack the executive halls and part of our executive package was the introduction and support of a wealth manager. Every executive in the company was assigned an independent wealth manager. I wound up working with a wealth manager in my early 30s. That made a difference in my journey. Even though I didn’t have much money and certainly not much disposable because we were young with kids, it started the process, the question, the automation of savings, putting money away, and the compounding started earlier.

I was going to say two things. The point about us being always optimistic as entrepreneurs is spot on, but we also are very good at rationalizing our decisions because we put the optimistic glasses on. The thing with using math is it’s a great way of moving away from that. As you’re saying that, you didn’t ask a question, but I’ll answer a question. That’s one of the things that hurt me as an entrepreneur because I am so linear in thought from my wealth management mindset of using math like A + B = C, 1 + 1 = 2. It’s not 3, it’s 2. It’s very simple. I had to overcome that as an entrepreneur because that linear thought doesn’t help you as an entrepreneur because you’ve got to be creative and outside the box.

That was something that I had to learn. For the entrepreneurs that start out as entrepreneurs that need to go back to the linear, using math will help you get back to that point from being creative, in the clouds and visionary to get back to reality because numbers don’t lie. That’s just the nature of it. It’s a good way of thinking about and something that I’ve learned from the challenges that I’ve had to overcome as an entrepreneur coming from wealth management.

I was joking about you being a man with two brains. I always consider myself to be a person with two competing brains. One is that logical, linear side and the other is that creative out of the box side. Sometimes they’re at odds with each other. What I’ve learned over the years and I’m in my 50s is to let the two sides be data points and then sit with those two data points as just that. One isn’t right and the other one wrong. When you’re an entrepreneur and you use what I suggested, which is hard math about the opportunity cost and what you’re sacrificing, that’s a wonderful way to quantify it to the people who don’t understand the non-logical, linear side and who don’t see the passion and think it’s crazy.

I’ve been working with entrepreneurs every day, day in and day out. One of the changes to my thinking is if you were to ask me before I started doing that years ago, I would’ve said to you that entrepreneurs are high risk. They’re extraordinarily risk-tolerant. What I’ve learned is that it’s not the case at all. For the most part, their level of risk tolerance is similar to everybody else. Some people more, some people less. The difference is most entrepreneurs see risk differently. They see risk in inaction versus risk in action. Non-entrepreneurs see the risk and taking action, starting something, doing something that’s frightening to them. The entrepreneur thinks of not seeing this problem, seeing this opportunity, and not taking action. That’s a huge risk because I’ll always wonder, “What if somebody else does it? What if that’s the next big exit?” That’s fundamentally different.

I’ve not met an entrepreneur who doesn’t have that “Oh, shit” moment about making a mortgage payment, saving for their kids’ college funds, or wondering if this is a good decision. It’s no different than anybody else than somebody who’s making a salary. It’s that difference in that fundamental question. This is a turn on the conversation, but the rules here on TIG Talks is that the entrepreneurs lead the conversation. Sarah asked an important question. This is something that comes up a lot in our space. I’ve never asked anyone in a role of a wealth manager or a financial advisor this question before. Often the earlier stage entrepreneurs who are going to take on debt, even if it’s convertible debt, are asked or required to sign personal guarantees. I have a strong opinion of those based on my experience and also my paradigm. I’ll give you mine after you go ahead and share your answers. I’m not asking you for direct advice. What would you suggest a founder think about before deciding whether to sign a personal guarantee or not?

Personal guarantees are easy to sign, but the real issue with them comes with what hits the fan and it has to come to reality. This is my personal opinion. We’ve raised money on convertible debts and never have had to sign a personal guarantee on any of that debt. I’ve been in the fundraising game for a while. I’m always in the fundraising game. I get the struggle that entrepreneurs go through to fund their business. I also got some advice from an investor once and he said, “It’s a dating game.” Too many times, entrepreneurs go into it to say, “I need you.” It’s a one-way street. They are trying to just woo them as opposed to the investor trying to woo the founder both ways. It should be a marriage. You’re married together for a while.

I say that story because you got to find the right investors. If they’re getting a convertible debt, they’re getting a great deal, gaining early and have a ton of upside. If they don’t understand the investment, they don’t understand the potential, and they want a personal guarantee along with that, I don’t buy that because they should be investing in the business and you. If they don’t understand the risk associated with it, they shouldn’t be doing convertible debt. There’s a public market that you can go get debt and have the guarantee of the business or the government behind it. You can’t have your cake and eat it too. I know that that’s a hard way of thinking about it. It sometimes means that you have to say no to people that want to give you money.

I would stay away from personal guarantees. Starting a business is difficult. It’s hard, especially when you’re at the debt stage. When you put a personal guarantee on it, you could be owing that person for years past if you have to shut the company down. If you’re putting enough sweat equity in an effort, that I would shy away from a personal guarantee. That’s how I would think about it if I was going out and raising money. If someone says, “I want a personal guarantee on this debt,” I tell them, “I’m going to do the best that I can to make sure that you get money back in any way I can.” I did that.

I had a company that we had to fold and I told every investor, “I’ll figure out a way to pay you back. I’m not giving you a personal guarantee but I’ll figure it out. You’ve got to trust me. If you don’t, then this partnership is not going to work in the first place.” We had to fold the business but I was able to find a way to get them their money back. I was a person of my word. That’s what this comes down to when it comes to private investing. You have to understand your risk. I would tend to shy away from personal guarantees because the longer term bites you in the butt.

It’s very hard to say no when you desperately need the money and so deeply believe in the mission, project, brand and what you’re doing. There are a lot of headwinds being an entrepreneur and many of them aren’t in your control. There’s luck, timing, regulation, the whim of the consumer and changes in consumer behavior, and all of those kinds of things. When you sign a personal guarantee, you could be left with that albatross around your neck, which could prevent you from maybe starting your next project. What I would do here is find either that logical, linear side of you or somebody who can be that logical, linear side and say to you, “You have all this upside but what you’re about to sign means that if things don’t go as you hope, you’ll be spending the next whatever timeframe paying this off.” You’ll have a second or third mortgage and that’s a lot of added stress.

I sometimes call personal guarantees instruments of divorce, because a lot of times when things go wrong, it ends a relationship and it’s sad. The same holds true with trying to fund too much of your business on credit cards. One of the better and smarter things that have happened from a governmental perspective is that we create this ability to separate your professional and business assets from your personal assets because it gives people the impetus and the motivation to take a swing to take a risk. That’s one of the other reasons why there’s a requirement that the investors that are investing in you are accredited because they not only should be well aware of the fact that they’re putting risk capital to work, but by being accredited, you’re assured that they can withstand that risk and be wrong.

The personal guarantee is an accelerator on your opportunity cost as well. If your opportunity cost is X and you calculate it to be $400,000 over five years and you have a personal guarantee, you’ve got to expand that and make that larger. That now is not $400,000. That opportunity cost could now be $700,000, $750,000 because your ability to start saving if your endeavor fails is now stalled as well until you get the personal guarantee paid off.

I always look at it as to give them something else. Can they get maybe a better interest rate on the debt? Can you give them a better conversion rate? Can you give them a different cap? Can you tell them that, “You’ll get into something else of mine?” I know a lot of entrepreneurs, their one thing fails but the investors that were here gave them a piece of the new endeavor because of their relationship. There are a lot of things that you can do, but it would change your opportunity cost drastically if you have a personal guarantee.

Let’s talk about a non-personal guarantee. I was thinking about friends and family rounds. The other thing too is to make sure in that round, the people that are close to you, that they understand its risk and can lose everything and lose their investment, and that you understand what it would be like if that happens if you do it. If either side can’t live with that opportunity, then don’t take that money because when Aunt Flo invests in you and you lose her money, it changes Thanksgiving.

One of my best friends wanted to invest in Benjamin, I said no because I believe in the business but I don’t want to have our relationship change from that standpoint.

How the hell are you so passionate about wealth management? Your dad did this so you probably watched, but what feeds the passion for you?

I grew up knowing it and that was the only thing I knew. That’s one. My personal life makes an impact beyond my lifetime to have a positive impact. I believe that this industry can change people’s lives. I’ve seen people that didn’t think they could retire actually retired. I’ve seen people retire on less than they ever thought. I’ve seen people in retirement travel the world and experience their families. I’ve also seen the heartbreak, people are not able to do things, people losing loved ones.

I truly believe that wealth management has a stigma of it’s only for the wealthy. I believe that the benefit of a wealth manager to the masses is powerful and can change the trajectory of retirement savings and outcomes for individuals. The biggest impact that I can have in this world is if I can create access to wealth management and financial advice to more individuals, I truly think that people will be able to have more money and live a better life. That’s the way that I am mathematically wired that we can do it. I want to be able to impact that because I’ve seen the successes. I’ve seen it work.

Money isn’t everything, I get it, but money can help provide for philanthropy and giving back to your family and your future family. If we can help more people understand that and we can provide access to more people to get that at a reasonable cost to where they’re not getting finagled and that they can save for themselves, that’s a worthy cause to go after. It’s something that I can have a drastic impact that provides for others from that standpoint. I see it as a service but I’m passionate about changing people’s lives in that way.

I’ve always been the person that I never care if you have money or you don’t have money. It’s about the experience that we have together that’s worth more than anything. I want to help people have those experiences with the people that they care about and that they want to have it with. I can do that with what I know. I’m not that smart. I know one thing and that’s wealth management. I can do that for more people if I can provide more access to wealth management where they have experiences with the loved ones that they love and they want to be with.

What an awesome way to end this episode. I love that and I get that. It’s Maslow’s hierarchy of needs. I look at money and I’ve learned this over time. I spent a lot of my early years chasing money, thinking that was going to lead to happiness. It doesn’t. Once you hit a certain point, it’s up to you to create real happiness in ways that are much bigger but having the security of that money, having the ability to use that money to do good and to create. I say this to our three grown kids all the time and what I’ve learned is that there are only three reasons in my mind for money. The first is security, the second is to create experiences, and the third is to do good. If you can do those three things, if you can be secure to create experiences for yourself, with the people you love, for others and if you can use it to do good, then that to me is the definition of being rich. Thanks so much for being here. I appreciate it. This was a great conversation. It’s something that we don’t talk enough about in this space. We talk about the journey of getting there, but there’s a big part of planning for that success personally and planning for maybe the lack thereof.

Thank you so much for having me. I enjoyed the conversation and I look forward to another conversation here soon.

Thanks. Take care now.

Important Links

• Matt Reiner

• Carlyle

• Blackstone

• Altera Advisors

• Ready To Be Rich: Smart Financial Advice For People On The Way Up.

• Benjamin

About Matt Reiner

I’ve been fortunate to be around the wealth management business for over 25 years. Now, some of those were in my younger days, but being able to watch my dad build a successful (and now managing multiple billion in family monies) helped to shape the way I think about the business. After graduating from Arizona State University (I’m a huge Dawgs fan, but wasn’t able to get into the Harvard of the South!) I came back to Atlanta and joined up with the family business. I got my CFA designation within three years of graduating and quickly after passed the CERTIFIED FINANCIAL PLANNER exam. I started managing individual family monies and managing our investment committee.

In 2014, I began to take over the reigns of our other wealth management business (Wela Strategies) that was focused on providing a personalized investment experience to individuals and families with under $250,000 of investable assets. In 2015 we began building our own technology solutions for Wela. We eventually built a direct to consumer application that allowed users to track their net worth, open investment accounts and set goals within both a desktop and mobile application. We grew this user base to over 40,000 users and have been able to build our wealth management assets to over $150 million.

As we continued to see the innovation within the space, we continued to see the greater need of helping current financial service providers better integrate technology into their business to stay competitive via efficiencies, but also digital client experiences. The technologies that we had developed for our direct to consumer business, were applicable to the other financial services business. Our solution, Benjamin, is a platform that enables financial advisors and insurance agents to better communicate with prospects and clients to make it more scalable (and profitable) to grow your revenues. Given our experiences of building two wealth management firms, we were able to architect Benjamin to not only be efficient technology but to have the financial service provider’s processes in mind along the entire development cycle.

I’m fortunate enough to be married to an amazing and supportive wife, Hillary. In my free time, we enjoy traveling, trying new foods (big foodies), spending time on the Beltline or in Athens for Gameday and taking our pup on walks around the neighborhood in Virginia Highlands. You can also find me out on the golf course or watching any golf tournament, as my love of the sport continues to grow (even during those rough days on the course). Along with my passion for the Dawgs, I’m a huge Braves and Falcons fan. I’m an Atlanta homer and am always open to talk about the great things happening in our city.

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