Why Managing Wealth Without a System Is a Losing Game

Steven Weinstock (00:00) My guest today was twenty six years old, a former Marine Corps captain with an eighteen month old toddler at home. Then his wife had triplets, four kids under two at the time. He went to his financial advisor asking how to protect his family's future. The advice he got was to max out his 401k, fund some 529 plans. That answer wasn't good enough for him. Frankly, not good enough for me either. So he spent the next twenty years studying how the ultra wealthy families actually structure their money and eventually built something most entrepreneurs never had access to, their own version of a family office. He calls it Wealth OS, operating system. And today he's going to break down exactly why managing wealth without a system is a losing game. Welcome back to another episode of The Wealth Clock. I'm Steven Weinstock. And today I'm talking with Dave Wolcott, founder and CEO of Pantheon Investments, a virtual family office that helps high income entrepreneurs convert business income into generational wealth. Dave served as a captain in the Marine Corps, spent twenty years honing his game. Dave, welcome to the show. Dave Wolcott (01:52) It's a pleasure to be here, Steven. Thank you. Steven Weinstock (01:54) No problem, no problem. You were a captain of the Marine Corps before any of this. What did that experience teach you that still shows up in how you run your company Pantheon today? Dave Wolcott (02:03) Yeah, I learned so many things in the Marine Corps, Steven, outside of wealth building. In fact, I actually grew up in a middle class family right around the corner from you in Connecticut. And I was told that the recipe for success was go to school, get good grades, you're gonna get a job, and life would just work out, right? That was the only really middle class path that we had. And in fact, my dad actually worked in the city, he commuted two hours each way to New York for over a decade. And we never really talked about money much in the family, but all I knew was dad was working really hard. We never had enough. Money doesn't grow on trees. And so I followed down that path and getting into the Marine Corps after college was an amazing opportunity to actually serve my country and then learn some of those things like leadership, teamwork, and integrity that they really just don't teach you anywhere else. Being combat tested, actually being shot at at the age of 26 years old when I was in Somalia right after Blackhawk Down happened was quite a world altering perspective and really changed my viewpoint forever, as well as traveling and working with some amazing people. So I take those leadership principles, the things I learned in the Marines, and really try to convert them into how we're managing money for investors today, how we're looking at investments. But after that experience in the Marines, Steven, as you said, I had an 18 month old, and then on October 24th, 2000, we literally welcomed triplets into the world. And if you can only imagine, I know you have seven children, which is amazing, but can you imagine holding three babies in your arms at the same time? I mean, it was the most profound experience you could imagine. And for me, that paternal instinct just really took over. And I'm just looking at these babies and thinking, the first thing on my mind was, how am I gonna provide financial security for my family? It's a million dollars to raise a kid. Maybe I'll retire somewhere along the way. And I wanted to live a big life. And I just realized at that point, after seeing my financial advisor, that I missed it. Investing in the stock market at a seven percent return, and all the volatility, was just not gonna cut it. So I started looking under every rock, reading every book I could, getting involved in the private markets. I started investing in real estate, literally raw land, single family, multifamily, office buildings. I got into oil and gas. Started looking at alternatives in the private markets. And private markets were very nascent back in 2000, right? It was very early days, and it was all about who you really knew. So fast forward 20 years, I built a phenomenal portfolio that just continues to grow and create the freedom in my life and my family's life that I'm looking for. And now we're trying to help other people not only understand the real estate asset class, but all of these really sophisticated things that happen as your wealth grows, so does your complexity. So you need to start looking at advanced tax strategies, estate planning, risk management, how things fit into your portfolio from a purpose driven perspective, and really truly kind of think like a centimillionaire family does. Steven Weinstock (05:35) So other than the advice he gave you, which really is just standard advice that anybody gives anybody, it's more cookie cutter, one size fits all, maybe max out your 401k. Yes, these are all good things. What about it specifically did you not like? Was it the seven percent earning potential if you look at the average of the overall stock market? Was it not having liquidity? Was it feeling the need to withdraw during certain down years? What about it did you really turn away from? Dave Wolcott (06:10) I mean, I specifically, again, I have all these kids, you mentioned, thank you. I don't believe in 529s. I think the concept of 529s coming from the government and instituting it, whether it's by state or federal, is a nice thing because otherwise you have a lot of people just not saving and not doing anything. So create a vehicle for them, maybe they could throw a few bucks in, that would be great, especially for people who are not intentional about saving. But once you're really intentional and you have a plan, a lot of these cookie cutter advice methods are not optimal. Steven Weinstock (06:50) And you obviously saw that right away. How'd you notice that? Did you hear about other opportunities? What really got you thinking in order to make a move? Dave Wolcott (06:58) Yeah, it was really a couple of things, Steven. And first of all, it's really just being entrepreneurial and just saying, you know, challenging the status quo. For instance, let's just talk about taxes, right? Financial planners, typically, their version of tax strategy is doing tax loss harvesting and doing things like, okay, well, you can reduce your taxes this year by putting money into a qualified plan. Well, I started to ask the question, does that really make sense? Because in reality, I'm actually kicking the can down the road and I'm going to be paying taxes on that in my later years. And by the way, the government controls what the tax rate is. So likely I'm actually going to be paying more taxes in the future. And I don't know about you, but I'd rather pay taxes on the seed rather than the harvest. So I started very logically trying to break down some of these myths. Taxes was one. Now, another one that's really interesting, right, that not many people have really thought about, but it's a complete paradigm shift, is the fact that Wall Street and typical financial services companies are built on what's called the accumulation theory, which is save for retirement, build a nest egg. And let me give this a real simple example for the audience to really break down how simple this means. And I know as real estate investors everyone's gonna get this, right? But let's just say you go down that traditional path and you save four million dollars, and typical planning advice is maybe that's like a seven percent return. And then you'll withdraw four percent. It's actually less these days, but let's just call it four percent, right? And by the way, that's before taxes, fees, and inflation, the seven percent, right, which is really eating on that right now. But you have $4,000,000. Let's say you have $4,000,000, so 4% of that, $160,000 when you turn 65. Then you're paying taxes on that money. So maybe it's about like $110,000 to support yourself and your family after toiling away your entire career. Now let's take investor B, right, which is the real estate investor, the alternative investor that's investing for cash flow. That same $4,000,000 could realistically achieve an 8% return portfolio return that's leveraging bonus depreciation on the asset. So that 8% return can likely be tax free. So now you're talking about $320,000 that's tax free. So you're netting $320,000. And this is a really important distinction. We're actually not killing the golden goose by taking away 4% of the portfolio every year. Your portfolio value is continuing to accelerate. So at age 66, the value has actually gone up. And now the $320,000 goes up maybe ten percent in the year. And this is how you can actually create generational wealth and pass that on to the legacy. So that's a very fundamental shift in a different framework, but Wall Street wants you to think that their way is really the only way under accumulation. Steven Weinstock (10:29) You call Pantheon a virtual family office and Wealth OS the operating system for it. In plain terms, what does Wealth OS actually do that a normal or regular financial advisor doesn't? Dave Wolcott (10:39) So, Steven, I spent over 20 years looking at all my different real estate investments, all my alternative investments, syndications, you name it, and I had 38 different spreadsheets. And it was impossible to normalize a portfolio and look at true asset diversification, creating passive income that's coming in from 18 different streams of revenue. How do you look at that? How do you forecast that from a portfolio perspective? So Wealth OS is actually a family office command center where, with AI, you can literally take any one of your private investments. It could be an Airbnb, short term rental, long term rental. You could be a GP in a multifamily, you could be invested passively in a syndication. Put all that together immediately through AI. And now have one single operating dashboard with which we can make better decisions around asset allocation. We can forecast our passive income, know where you're going to be. You can create goals and strategic planning. You have full balance sheet, income statement visibility into this, and then truly manage your wealth like a business. Steven Weinstock (11:49) You talk about the private capital flywheel. Some research I did, I had some AI help me, and that's something that came up. It's how the wealthy compound capital using private markets. Can you break down a real example of that? Dave Wolcott (12:07) A hundred percent. So this kind of goes back to traditional markets and, as a sophisticated investor, looking at choices in terms of how to invest. We really align with, let's say, the Yale endowment model or the Tiger 21, right? Which is a much more diversified approach of portfolio allocation that includes private equity, includes real estate, businesses, other different asset classes versus just straight global equities and bonds. So in this case, what we're doing with the private capital flywheel is to actually, let's say we buy a multifamily apartment. You could be active or you could be passive in that investment. But what you're gonna get with that investment is what I call a trifecta. So you're actually going to start creating passive income, right, immediately. That passive income, you're going to do a cost segregation on the property and get bonus depreciation. So you're going to be able to get that income tax efficiently. And then we're also going to be driving growth into the asset. So you have growth potential as well. So literally that's three different ways to make money in that asset class versus, let's say, global equities. Let's say you own a hundred thousand dollars of Tesla stock, the only thing that you're actually hoping for is for it to go up in value. But you can't predict whether there's geopolitical issues, what happens with management, what happens with interest rates that affect different things. Things are happening in Asia that actually impact the stock. So it's very linear and we have absolutely no control. And you're paying the highest amount of taxes on it. So that's why our thesis is strongly compelling on real assets that truly create this flywheel of capital to really accelerate your wealth. Steven Weinstock (14:15) For those of you watching, in the background you might see a bed that's not made. And I'm just noticing this now. I guess the background didn't show up, but this is my twenty year old son who is home for the Jewish holidays. We're recording this in between the holidays of Rosh Hashanah, the Jewish New Year, and Yom Kippur. He's home. I guess I'm sort of in his room, but really I'm in my spare bedroom, which is an office, and we're lucky to have that with seven kids in the house here in New York, to have a spare bedroom. But maybe we'll get AI to fix the background. But if not, you could blame it on my twenty year old son who did not make the bed. It looks like I'm just noticing it now behind me. But that's for you video listeners. So anybody listening on audio, you could rush to YouTube and see how my son does not make his bed. Steven Weinstock (15:00) Okay. That being said, tell me about your background before real estate, even before the military. Was that the first job you had, entering the military? Was this done right at eighteen, or out of college? Dave Wolcott (15:18) It was, yeah, right out of college. I did the ROTC program. So I actually did training during college, went into that right after college. So I had a job. And like I said, I learned some phenomenal traits and characteristics, because now, we don't do active management of people's portfolios, but we think of a virtual family office as someone who's actually quarterbacking your wealth, right? And looking at it from an entire three hundred and sixty degree perspective. Like we provide a fractional chief investment officer to help you diligence opportunities, to understand portfolio fit and construction, and then also coordination between different advisors, with CPAs, with estate planners, with risk management, life insurance people, really trying to get that integrated coordination. So again, you can kind of create your own family office. But some of the things that I learned over the years from the ultra wealthy have really led us to create this model because, frankly, I think there's a big market that's underserved. For people with net worth that's less than a hundred million and can't afford a full time family office, but you can still think like that. You can still take advantage of a lot of the tax strategies that are out there, a lot of these strategies that are involved in real estate. And of course we've seen, look how many real estate sponsors we've seen grow their wealth like literally overnight, just exponentially. But the more your wealth grows, so does the complexity. So we believe that it's really important to actually create an end to end system and a whole framework and governance around which you manage your overall wealth. Steven Weinstock (17:00) Wow. So a lot of my audience is not in the hundred million dollar class. A lot of them are not in the five million dollar plus net worth. How could some of your expertise, whether they reach out to you or they don't reach out to you, help? Somebody's doing well, they're making combined two, three, five hundred grand a year, they're paying lots of taxes, chances are it's income. Maybe they have some sort of small business where they could have some tax write offs. What could they do to really get this velocity, capital velocity, tax efficient investing, other than sticking it straight into the S&P 500? What could they do? What setups could they do? Dave Wolcott (17:46) Yeah, it's really important to note, Steven. So let's take that scenario. Let's say you've got, if any of the listeners, maybe you're a high income earner, but let's say your net worth is a few hundred thousand dollars. Maybe you're just starting out, right? But you have a high income. If you literally look at how it can compound over time over the next ten to twenty years, you will be in the eight figures before you know it. So the quicker you can actually create this end to end wealth system. And what we do typically with our clients is actually create what we call an investment policy statement. It's not a financial plan, right? It's an investment policy statement that comprehensively talks about everything from, what is your legacy and your vision? What is your detailed tax strategy? What does your risk profile look like? What does your portfolio allocation strategy look like? And then we can put that all together and create governance over your overall strategy and how you're going to implement that. And so now you have a framework, you have an approach, you have a system, and your net worth starts building and starts growing. And also we're not just focused on net worth, but we're looking at tax strategy. We're looking at income. How quickly can we actually get to financial freedom? Let's say your nut is 100,000, 200,000 a year. How quickly can we get there? Where maybe I can get there in eight years where I'm financially free and work becomes optional. How powerful is that, right? So we want to focus on things that are really purpose driven. And you'll find that once you can kind of put this system in place, everything can be optimized together and then you can scale that much quicker. Whereas most clients that we run into literally just have a series of investments, could be a 401k from different companies here, I did this rental property here, or I invested in a syndication. There's no true cohesive strategy or architecture. All right, Steven, let me actually give another real tangible example. So let's say someone has a five million dollar portfolio and that is running at a certain rate, maybe it's a seven, eight percent annualized return, right, over time. If you literally just optimize that portfolio performance by three percent, the impact of that over a 20 year period is $17,000,000. I mean, it's literally massive, right? So the law of compounding is so powerful, and that really underscores how critical it is to get this system in place. People might think it's not that important, right? But again, as your wealth grows, you've got more and more investments. You've got more and more entities to manage. All of these different things. And if we're investing in real estate and alternatives, it's harder to keep it all together, right? We're not just getting a statement on your entire value. So that's why this system is critical. Steven Weinstock (20:45) Dave, I have a question for you. You're doing this a while. You're hobnobbing and elbow rubbing with rich people. You recently spoke at a conference here in New York City. Why isn't anything like this being taught in high school? Just imagine you have a twelfth grader, they don't have to know everything, but just imagine they know a little, or they really hammer it down, what compound interest is. Forget about stocks and crypto and, yes, diversify. We could all talk about diversifying. But just something like compound interest. If they know this at 18, any money they save from working summer jobs at eighteen, nineteen, twenty years old, or maybe earlier even, and they put that away, the amount of money that turns into when they're 60 or 55 is so massive. And it's not even the money that's massive at the end of the tunnel. It teaches these kids, these people, the concept of saving and being intentional. And once they know a little about what's going on, you'll have a lot of these kids who go further and maybe I'll spend less and save more. Maybe I won't get that second credit card and finance my Starbucks. It can only have a net positive effect. Why can't you be giving this podcast an interview, tailoring it towards our young ones and really changing the country? Dave Wolcott (22:25) You hit the nail on the head, Steven. And frankly, this is what gives me so much passion about the work I'm doing, is to try to create impact. And every family that we can help with education is going to impact future generations, and those families and communities that they know. But you're a hundred percent right that the systemic issue around building wealth really starts from education. And as I mentioned, when I was raised, we never really talked, it was kind of taboo frankly, to talk about how much did mom or dad actually make or how are we spending money or any of these different things. And everyone just learned from the generation prior to them. That's all they really knew. So most of us, we grew up with a scarcity mindset. And so much of this is a mindset, psychology about how you even think about wealth, and how you can do it. But how is it different that some people are able to generate tens of millions, hundreds of millions, or even billions of dollars, and then others are just scraping by, paycheck to paycheck. And a lot of it starts from that education, that mindset. I actually had Sharon Lechter on my podcast. She was the CEO of Rich Dad and actually really helped Robert Kiyosaki create some of the initial learning frameworks. And I really credit them, it's one of the most popular books that really changed so many people. I know everyone in this audience took the purple pill as well, but they did a phenomenal job in terms of educating so many people. People learn that and there need to be more programs to be able to do that. We actually run a mastermind community as well to help educate people. And it all starts with education, you're right. Steven Weinstock (24:25) You mentioned Robert Kiyosaki. So in the mid nineties, I'm about forty eight years old, so in the mid nineties I didn't have cable TV at home and I had my own little TV like in my bedroom. And at night, it's either watching infomercials or, I didn't have cable. And they had these infomercials for Robert Kiyosaki's book. I don't know if you remember this. Remember infomercials, get it, set it, and forget it, all that stuff. And you had these forty five minute or thirty minute commercials for different products. And one of these was this new book at the time. And I remember, and I've said this on the podcast many times, by the time I read his book, I was ready. I own lots of real estate, but the book itself, being on that infomercial, this was like the YouTube shorts of the day. I literally got an education watching these 30 minute infomercials about Kiyosaki's book. And it wouldn't be all the same. I guess they would recut it and re-edit it. And there was probably two or three versions of it. And I heard it over and over and over again about the concept of two dads, one who owns a business, one who works a nine to five with the W2. And it really flipped in my brain, just as a kid or a teenager, the concept of earning my hundred grand that I earn is not necessarily the same as the hundred grand that you earn. And it flipped so much. That brings me to, I know you mentioned you're from Connecticut, I'm from New York. I don't want to talk about politics because most Connecticut, most New Yorkers vote a certain way. But one of the best things politically that happened in the last many years is something called the Trump account. Some people like the name, some people don't. These Trump accounts, maybe you're familiar with it or not, but it's basically, I'm not just talking about the thousand dollars that he's giving away to kids who are born during his term. The Trump account lets kids effectively have like a Roth IRA or maybe it's a standard retirement account without having to earn money. And parents or others could easily contribute to it. There's a max of five thousand per kid. I have a bunch of kids. None of them were born during this term where we got the free thousand dollars. But for all my kids who are under eighteen, I opened this account and it's a very easy app. The app is me, I'm the parent, and I could pick and choose all the kids. And I gave all my kids the login from their phones. And they could see that every time they earn five dollars, I tell them, let's put it in here. And they log in and they see the five dollars it is in, just a mass mutual fund. Right now it's an S&P index. Good investment or not, obviously it's a good investment. They can't touch it for many years. I think the education that my kids got by looking at this app literally every day, and they just, I earn two dollars, should I spend it on candy? Let me put it in, use your debit card, put it in. I have some older kids who worked in the summer and they max it out and they look at it every single day. And the education that they're getting, forget about what it turns into when they're eighteen, what it turns into when they're sixty years old. The education that they're getting because of these accounts is almost priceless. It's priceless. And one of my kids now says he wants to max it out every year till he's eighteen. Which is phenomenal. Even if he never saves another dollar from eighteen, by the time he's sixty, this money is a real asset. And if he does continue to contribute, then great and phenomenal. I think the audience out there should look into this. It doesn't cost money. It's not a gimmick. It's great for kids. It is a max of, I think it's 5,000 per year. I want to get your opinion on it. But you might get more nuanced based on and maybe roll it into other investments. I hear you. But as far as the education that kids and families are learning because of it, forget about all the benefits that maybe it saves Social Security in fifty years from now because you have all these kids putting money in maybe for the next forty, fifty years, that by the time social security hits for them, they don't have to rely on it if it's still around. Tell me your opinion on that. Dave Wolcott (28:45) Well, first I'd say I thought you were gonna talk about bonus depreciation coming back to a hundred percent, for this audience for sure. That was another great thing that happened. And before I comment on that, just again to make this as valuable as possible to listeners, another one of the biggest opportunities people have that they're really missing is tax. And I've actually had Tom Wheelwright on my podcast as well. He's Robert Kiyosaki's CPA. And if you recall back to the cash flow quadrant, right, with the four quadrants, you've got the E, the employee, the self employed, and then the business owner, and then the investor, right? One super important distinction is to know that anyone who's listening to this right now is a business owner, they can be paying 20% or less in taxes. If you're paying any more than that in taxes, you have a big opportunity. If you're an investor, you can be paying 10% or zero or even less in taxes. So just think about that. I mean, you live in New York. If you're paying city taxes, New York State taxes, you're a high income earner, you're getting crushed by taxes. So if you could reduce your taxes by ten percent, twenty percent, thirty percent permanently, and then compound that over the next ten to twenty years, in addition to investing in real estate and other great asset classes, this is how you can really accelerate your wealth. So I just wanted to leave that out there because that is something I truly wish someone would have taught me when I came out of college is how the tax code actually works and to make the shift from understanding that taxes are not a penalty. Taxes are actually a roadmap of incentives for entrepreneurs and investors who know how to leverage them. So that's why we invest in real estate, because the government wants us to provide housing for this nation. They credit business owners because we're providing jobs and supporting the economy. And if you're in oil and gas, we've deployed probably almost $40,000,000 in oil and gas in the past five years. And the reason being is because you can actually offset active income. So if you're a high income earner, there are strategies to reduce that and create passive income as well. So just wanted to kind of put that out there because I think it's just a huge opportunity for most people. And yeah, I love that account, anything to do with education, I think is phenomenal for the next generation to really learn these simple things like paying yourself first, not spending more than you make. The laws of compounding are just so valuable. Steven Weinstock (31:50) Dave, it was a lot of fun talking to you. Where are you based out of now? You mentioned you're from Connecticut. Dave Wolcott (32:05) Yeah, I'm in West Palm Beach. Steven Weinstock (32:10) Yep. I spent quite a few, I used to spend Passover there. I would say from two thousand and three till about twenty seventeen I was in West Palm. It's a very nice, beautiful part of Florida. Had a great time. I can't imagine why you would leave the northeast and go to a state like Florida. But I fully understand and I hope you're having a good time. Dave, tell my audience where they could reach out to you. I will put everything in the show notes, but go ahead, list it all. Dave Wolcott (32:33) Yeah, what I wanted to do for your audience, Steven, if any of this resonated for anyone, I wanted to give a free copy of my book, which you can just go to holisticwealthstrategy.com. Get a free copy of my book there. Happy to have a conversation any way I can help. That's really our mission. So open to that for sure. Steven Weinstock (32:54) Yeah, sure. I'm gonna put that in the show notes. And it reminds me because I just put out a book, my first time ever. I said I was gonna put it out for years and years. Things got a little easier these days with the help of self publishing and all that. It's on Amazon. There's a Kindle version for 99 cents. There's a paperback version for, I'm not sure, maybe about twenty bucks. It's the minimum that they allow me to sell it for. For me it's not about making the money on the sale. So please just buy the Kindle. It's more of just sharing my story. I do share some stories of people who I've spoken to on the podcast, as well as my 25 years in the industry. And again, I'm new to being an author, so I never even thought to promote it on the podcast. You just reminded me. So if you're listening, take a look. The title is called The Wealth Clock, same as the podcast. I'll put that in the show notes as well. And Dave, thank you so much for breaking down everything. I appreciate it. I'm gonna put all your contact in the show notes. And if you like this episode, share, subscribe, like it, listen to it, comment on it, and please reach out to Dave, get his book, and I think we're out. Dave Wolcott (33:51) Thanks so much, Steven.