#28: What Wealthy Families Know That You Don’t

How can successful business owners ensure their wealth strengthens their family legacy instead of tearing it apart?

In this episode Mason sits down with Brandon Henry, founder of Mosaic Advisors, to discuss how business owners can strategically plan for long-term wealth and family harmony. Brandon reveals practical steps for managing advisors, reducing taxes, and avoiding the biggest mistakes that cost entrepreneurs millions.

Topics we cover:

(03:49) – Why every entrepreneur needs a “wealth quarterback”
(06:59) – The #1 mistake that destroys generational wealth
(16:37) – Estate planning pitfalls that bankrupt families
(29:17) – Habits of entrepreneurs who succeed long-term
(34:23) – Hidden tax strategies for business owners


Connect with Brandon Henry:
🔗 LinkedIn: https://www.linkedin.com/in/brandonrhenry/
🌎 Website: https://mosaicadvisors.com/

Connect with Mason: https://www.linkedin.com/in/masonbrady/

Visit BradyCFO: https://www.bradycfo.com/

If you enjoyed the episode, please be sure to rate, review, and of course, SUBSCRIBE!

LEAVE SOME FEEDBACK: If you enjoyed the series, please rate and review!

Have a business growth question you'd like Mason to cover in an upcoming episode? Email: info@bradycfo.com

Transcript

Mason Brady (00:01)
All right, well, welcome back everybody to another episode of Brewing Business with Brady. Today's guest is Brandon Henry of Mosaic Advisors. Wonderful to have you on the show, Brandon. Doing good, doing good, Yeah, Brandon and I are both Houston locals here, but at the same time, what's great is Brandon and I also are from California, so we have stories to tell him that regards of trying to become Texan, and we have an opportunity for Brandon to share a little bit more about that, but.

Brandon Henry (00:10)
Morning, we're from Mason, how are you?

Very good.

Mason Brady (00:29)
For the audience, I'm really excited about having Brandon on the show today because what Brandon does is he provides wealth management services in his firm for really wealthy individuals, wealthy families. But Brandon is on a mission to make sure that that information is democratized for people that don't quite have that level of wealth and don't quite have that level of money. And really what are some of the best practices that people, know, especially for our audience, lower middle market business owners that

You know, we're talking about businesses between five 75 million in revenue. ⁓ you know, for owners of those types of businesses, what can they do with Brandon's advice, ⁓ to better manage their wealth and to grow it too. And so really excited for the audience today. Well, I'm going to dive straight in Brandon that, ⁓ you know, this is brewing business with Brady. So we always like to ask our guests what your go-to morning brevage.

Brandon Henry (01:19)
Yeah, well unfortunately I'm a pretty boring guy so no coffee or tea for me. I'm not caffeinated. 445 is a protein shake every morning, seven days a week. Nothing exciting.

Mason Brady (01:29)
Fair enough.

Yeah, we've had a couple of those guests that's like, yeah, those health, know, the healthier ones like yourself that it's, yeah, the rigidity and then the protein shake that I think at some point I'm gonna have to change my diet from four cups of coffee today, you know, to do a protein shake as well. But I also feel like you are the ultimate underestimator of yourself that.

We were just talking about all the vinyl in the back and he says, I gotta be cool, I guess, right? I gotta have something to talk about. But 445, so you're an early riser then.

Brandon Henry (02:04)
Not by my natural tendency, just fortunate to have a lot to do and so try and pack a little bit into the morning time.

Mason Brady (02:10)
Fair enough, yeah, fair enough. Well, like I said, like I intro'd that you and I have both spent a pretty significant part of our lives in California. We definitely wanna get into the advice for our audience, but we'd to really get to know our guests and have our audience know our guests well. But you spent some significant time in California. We're both in Texas now. What's the most Texan thing you've done that has finally made you feel like you're Texan?

Brandon Henry (02:37)
Yeah, so I've been here since 2005 was snookered into move into Texas based on a Money Magazine article that said Sugarland was the best city in the country to live and even in the early 2000s California's was just so incredibly expensive. I knew I wanted to make a move east. I didn't know I was gonna move quite this far south. So now that I've been here 20 years, I'm officially allowed to say y'all and I've slipped that in twice in 2025 and so starting to feel pretty Texan.

Other than that, a little cowboy cosplay once a year on Go Texan Day, only time I break out the boots and that's about as Texan as I get. I own a home here, own a business here, I employ lots of folks here, so I'm here to stay. I got here a little before the most recent rush. I feel like most natural Texans don't give me quite the side eye that some other Californians get.

Mason Brady (03:16)
Fair enough, yeah.

No, no, not, yeah. You've been here long enough that yeah, you shouldn't get crap for it. was, to that point, I was so excited the other day that about a month ago, you know, we've been here for about two years, but my oldest, my kids are bilingual and you know, my wife's size is Chilean, or Chilean, I should say. And, but.

All of a sudden my seven year old, my wife and I were on the couch and said, Hey, what are y'all doing? was like, yes. Okay. We, we, we've officially made it that she can call herself Texan now. So good deal. ⁓ well yeah. ⁓ you know, to kind of get into the business side of things a bit here, you know, what inspired you to find, ⁓ to found Mosaic Advisors that it's a pretty boutique niche firm and what you've created and really would love to get some background on what, you know, the origination story behind it.

Brandon Henry (03:49)
Yeah.

Fair enough.

Yeah, so it's easy to look backwards and connect the dots. It sure hadn't felt like it was all well organized and planned living it forward. So today we serve about 35 families, all first-generation entrepreneurs. Most of their wealth is in their operating business and we charge fixed fees for advice. So we don't manage money, we don't sell any products, we don't draft or prepare legal documents or returns. Our job is to quarterback and orchestrate all of the various professionals that these families require.

kind of the general contractor model. And before we went out on our own, my partners and I were employees of a big bank. We travel around the country doing tax planning for business owners. I would know these families for approximately 11 minutes before I'd get on a whiteboard and draw some boxes onto a whiteboard and hopefully sound smart. I would leave. They would have no team or infrastructure to actually implement the plans. And the idea was that we would add value and maybe a family would make a bigger deposit or take out a larger loan with the bank.

And in 2011, they came to us and said, it's a nice service, we get good feedback, but we don't charge for this. And as a consequence, it's not profitable. And Brandon, you've been at 111 round trip flights this year. It's pretty expensive carting you all over the country. So we're going to shut the division down. So we were put out on our butts. We didn't have a long business planning cycle. We didn't have any clients. When we went on our own, we were intellectual capital of the bank. So we literally called, picked up the HPJs, booked a list and started cold calling successful.

families got lower middle market family-owned businesses and the pitch was You're rich your your tax plan sucks. Give us a chance to prove it if we can't we'll give you your money back and and that really seemed to resonate and the reality for us was and continues to be that These successful families lives are super complicated. They have this whole cadre of professionals They don't know what questions I asked and how to hold them accountable. They don't know what good

ultimately looks like and they feel like most folks are conflicted whether it's asset under management fees or insurance commissions or hourly billing from CPAs and attorneys. So if we can inject ourselves in the middle we're not competing with any of them so we get to learn from them but we're also hopefully serving as a force multiplier for good and so the real short answer is crushing insecurity. I didn't want to go build a business where I had to compete with the Goldman's and the J.T. Morgan's and the northern's of the world.

I want to build a business where can refer to them, collaborate with them, and learn alongside of them. so that's the business we've got today, kind of 14 years later.

Mason Brady (06:40)
Walk me through, you said something in there that

think will really, that does resonate with our audience, quarterback and general contractor model. That, you know, there's obviously IP and what you do and, know, the value and the services you provide, but can you detail out that a little bit further for our audience?

Brandon Henry (06:59)
Yeah, most families don't need a fancy slide deck, right? But there's a good ideas or a dime a dozen and the families that we serve, they can afford the very best professionals that money can buy. The challenge is the connectivity between these professionals. How do we know which questions to ask? How do we know how to hold these professionals accountable for delivering whatever their work product is on time and on budget?

How do we ultimately implement these great ideas to see them to fruition? And then when dealing with the complicated intersection of financial capital and family capital, how do you maintain this? This is a living, breathing entity, if you will, and it requires care and feeding. And most plans are static and rigid, and they're designed to meet a very specific application. And there's great investment managers out there that handle a subset of their clients' needs. But if your net worth is 90 % plus illiquid, tied up in the operating business and the real estate that supports the business,

If I charge assets under management, I have no way to monetize a relationship. So those families are ignored. If a family is not interested in or not eligible to buy life insurance, now those families are ignored by another subset of the advisory community. And if a family has an allergic reaction to calling an attorney, I just got an engagement letter for a family yesterday from counsel. Rates go from 15.75 for associates to 26.75 for partners. This person was going to be $19.85 an hour.

Family is very nervous about letting those professionals, as competent as they are, simply back up the truck with an unknown number of hours for an unknown work product to receive a bill that will make their eyes water. And so our job, it was and continues to be to speak enough legalese and taxese and investmeneese to make sure that all the professionals are doing a great job. And we get to pull from dozens of families to understand what good looks like and then hold them accountable for delivering that.

A huge component of what we do is just project management at the end of the day. clients are used to pinballing back and forth among all these professionals. It's exhausting. They don't have the time and they're not doing a great job of it. And so this isn't about replacing the existing advisors. It's about making the family more successful by empowering these advisors. Because the reality is these families are gorging on

like high calorie, low nutrient information, right? Podcasts books and television shows and magazine articles and TikTok and LinkedIn. There's a million things that people should be doing. How do you know what actually fits for the family? And then how do you go get that information to the right professionals to do a good job and then implement and maintain it? And so for us, a huge component of this is not coming up with proprietary strategies. We don't have any of those. It's layering well-worn paths together and making sure that all the professionals that serve these families are doing a great job. So we embed ourselves

into their family, into their business, and into their advisory team and get to be that force multiplier.

Mason Brady (09:52)
Yep. Makes sense that, ⁓ I kind of related to like,

you know, we have one of our clients that, ⁓ they've just loved their personal CPA for years, but at the same point in time, ⁓ for their corporate or for their business, they need CPA reviews, et cetera, et cetera. And, ⁓ so we, we entered into a new CPA relationship to get those CPA reviews, those third party assurances done. And, but they weren't ready to move things over on the personal side of their personal tax returns.

Well then yeah, you know, our CFOs are having to quarterback between those two because those CPAs aren't going to talk to each other. You know, when it gets busy, they have a million clients to take care of that, you know, once they've done their part, they're done, you know, and they don't want to, you know, they're not worried about the inflow. ⁓ and so I kind of relate to that, that, you know, it's like you said, it's a project manager, it's a general contractor. You're trying to bridge two experts in their respective fields.

and trying to get the best solution for the client ultimately and for them to feel comfortable too. So yeah, it makes wonderful sense that.

Brandon Henry (10:52)
Well, and so much of this is just information sharing. We have a full-time person here who's a CPA out of PwC and sole responsibility is make sure that the information that needs to be at the CPA's firm is doing their tax returns and doing the quarterly estimated payments is there on time. It is comprehensive that there's context and then frankly we're holding them accountable for responding to it. I mean the black hole that is emailing your professional getting no response and then getting surprised you have a big bill due the day before.

You have to write a check is frustrating for everybody. And so we've invested a ton into the like broccoli eating portion of just administering successful families. It is not sexy to a larger it's not sophisticated. It's about focus and persistence and for the families that we serve their business is the economic engine like all of those other assets is the financial exhaust. I don't want to diminish the importance of their investment portfolio, their insurance products or frankly the second home in Aspen.

But those are rounding errors in terms of what's actually gonna propel the family forward. And so let's focus on the things that actually move the needle and then let's do a good job and be competent with the rest. But let's really pay attention to the things that if we can make incremental improvements, not only to pay for ourselves, but set the family up long-term for success.

Mason Brady (12:05)
Makes complete sense that, yeah, I mean, I, you know, just the nature of, ⁓ I worked in financial services, ⁓ right out of college for a little bit. And, know, you're learning and, you know, you have to have this personal financial advisor and then you have to have this estate plan attorney, then you have to have your CPA. And, you know, without a service like yours, a business owner is expected to play that quarterback role amongst all of them. And yet they don't have an expertise in it. That's why they're reaching out to the experts and they're trying to bridge gaps between the two.

It's important, I definitely feel for them to be knowledgeable to ask and push the right questions. But at the same point, it's again, you're expecting somebody to be an expert to quarterback things between two parties and that they'll actually get done. that just, it just feels like a hair pulling experience, know, just like you want to rip your hair out. Yeah, there you go. You do it on behalf of everybody.

Brandon Henry (12:53)
That's why I don't have any... There's

a little bit of a misconception that you can have a succession plan or you can have a business plan or you can have an income tax plan. If you're a business owner, it is all smashed together and your business plan affects your investing strategy, it affects your income tax planning. I joke, you don't know where the conference room table ends and the dining room table begins. It's just one continuous planning session.

Mason Brady (13:06)
Well.

Brandon Henry (13:23)
And what ends up happening is people, they resist the complexity and the sophistication associated with the interconnectivity of these plans. And so they handle things in silos. They work with professionals on an individual basis. They have individual standalone planning components. And each one of them might have been well thought about and well conceived, but when they are stitched back together, the plan doesn't work at all. And that's frankly the biggest area that we see.

for improvement is families go and they attack the inherent complexity of being a successful entrepreneur with a bunch of individuals that don't talk to each other, with individual planning structures that don't talk to each other. And then when they have to go take down a bank loan or they're trying to transition the business from one generation to the next, or they've got to make their income tax bill, or they're trying to kick cashflow out of the business. All of these things that should be fundamental to any successful entrepreneur's life become

very, very complicated and that rigidity causes frustration and frankly ends up having families just get tired with the whole enterprise. Like there's no question if creditors went away tomorrow and all kids were grounded and hardworking and estate taxes disappeared, like none of the planning infrastructure, LLCs, partnerships, trusts, all that stuff would evaporate overnight. Like this is a necessary evil.

Mason Brady (14:41)
No, 100%. I know that there's firms that try to provide a lot of services in-house, but I still feel like it's a lot of the same thing that the old adage that you're a generalist of many, but a specialist of none, right? And you're not promising that in your service, that you're not promising to be a specialist, you're promising to create cohesiveness. But yet, you know...

Like you need an estate planning attorney that is really great in these particular situations for these types of families with these types of business assets, et cetera, et cetera, et cetera. You need, you know, a wealth advisor that, you know, is really great in these particular areas that will work great for this particular client. That's the absolute expert. mean, you know, it's funny because even in our business, ⁓ you know, I, I thought that we were pretty niche of, know, Hey, we, focus on a lot of ag and construction clients.

We went to a wine grape growers trade show conference and I met a fractional CFO firm that literally only did wine, like wine, you know, did wineries and, ⁓ you know, vineyards and that's all that they did. ⁓ and so you can imagine, I mean, that's great for somebody that's in that area, but, ⁓ again, them talking with everybody else and, know, and being able to offer everything else is going to be really tough. And so I, I really enjoy your model of the fact that.

It's not, you're, bringing in experts, but you're bringing cohesiveness in a, in a better plan overall. ⁓ so it's, great. ⁓ you know, you know, kind of deviating away from the business model, but here, ⁓ you work with some pretty successful families. ⁓ you know, and I, I, what's really interesting is you mentioned there, you work with first generation on entrepreneurs. What's one common mistake that you find that costs them millions that, you know, a common thing amongst entrepreneurial families that.

Brandon Henry (16:18)
you

Mason Brady (16:28)
It's just, man, if they just took care of this, this would be such a game changer for them building wealth. And what can they do to avoid that mistake?

Brandon Henry (16:37)
Yeah, I'll answer it two ways. The one that fits into an Excel spreadsheet and the one that doesn't. So the most obvious footfall we see when we get to know a new family, it is that their approach to planning has been disjointed. And each one of these individual silos works in a competing fashion. And you're right, we get to work with families that have reached escape velocity financially. These are some of the most successful families on the planet. We start

out of $100 million in net worth. And I've gotten to saying that I'm totally uninspired by talking about people's goals. What I care about are their priorities, because every successful entrepreneur has the same goals. And it doesn't matter if you're generating $5 million of top line or $5 billion of top line. You want your kids to be productive, hardworking members of society. You want them to talk to each other. You want to try and reduce the amount of income taxes that you pay.

if at all possible, and you don't want the estate tax to evaporate all of your hard work, and you don't want creditors and predators to confiscate your family's success. That's the underpinning of every one of these families' goals, regardless of size. And so they approach each one of these very tactically, reactively, and then address them in silos. And then the plans don't work together, and it ends up causing really significant challenges. I'll give you a quick example. We had a family we still work with today that pursued estate planning.

very dogmatically, I don't want to pay any estate taxes. They had met a great estate planning attorney. They had done all of the planning that you would expect a high quality estate planning to do. The plan was exceedingly effective from an income and estate tax perspective, but it wasn't a great business or life plan. It was very rigid. They transferred 60 % of the company outside of the estate and the types of planning they put in place, mom and dad were always going to pay income taxes on behalf of the trusts. 10 years after the plan was put in place, the family decided, kind of a surprise, they wanted to sell the company.

valuation of the business was a couple hundred million dollars. When we ran the numbers, the mom and dad were gonna pay all the taxes on behalf of the transaction and they were gonna be left with very little personal wealth. The kids were gonna be made filthy rich and the mom and dad were gonna be left with a small percentage of what it would take to maintain their lifestyle. They got so frustrated, they pumped the brakes on the transaction and the business cycle changed and the value of the business went from let's call it $200 million to in the nadir during COVID, $50 million. Now they've climbed their way back up.

And a lot of this wasn't their fault. There was some weather related issues as well that attacked it. But imagine that that peak to trough experience, all because they put a rigid estate tax plan in that was supposed to amplify and help the family ended up forcing them to make really bad business decisions. without question, it's the rigid siloed nature that people attack planning that causes millions of dollars. These structures don't talk to each other, but they influence each other. The less quantifiable, but without question, the larger

multi-generational issue is planning happens to G2s and G3s and not with them. And so like there's no trust structure, there's no will, there's no legal agreement that's going to replace parenting, right? If you've modeled being a spendthrift and you've modeled reckless abandon for your financial affairs, there's a decent chance your children will have picked up on that. And no matter how rigid your plan is, that's not going to change it. But when you talk to families that have had a bad planning experience,

Almost never do they say, man, we missed this little income tax structure. We didn't earn the extra 50 basis points on our portfolio. They say, my plan was too complicated. I didn't understand it. I was too overwhelmed with what it would mean for my family if I ever talked about it. So I never did. And then eventually it was surprise. Guess what kids? Not only are rich, but you have responsibilities and expectations that you never prepared for. This idea of going to the gym and picking up the 10 pound weights before the 50 pound weights, we're thrusting families into making these decisions.

when they're their most vulnerable and when they oftentimes are their most frustrated. We're putting business, our siblings in business together. We're putting mom and or dad in business with their children. And all of it comes from a great idea, which is protect assets from creditors and estate taxes. But it has this unintended consequence. And if we're not gathering the family and we're not regularly talking about what those expectations and those opportunities and the responsibilities mean, it causes family chaos a quick.

story there, we had a client whose daughter did all the things that he wanted her to do. She went away, she got an undergraduate degree from a great school, went and got a master's degree from a great school and pursued her vocation. Well, she got a master's in French and she was teaching French at a private school here in town. She was making about $30,000 a year, but her lifestyle was not $30,000 a year. So mom and dad were supplementing her and they were getting very frustrated that they were having to supplement her. Why wasn't her lifestyle congruent with her earnings? But she didn't ever grow up.

with a lifestyle that would fit $30,000 a year. And very sadly, dad passed away in his early 50s. Daughter was in her late 20s. And when dad passed away, she was thrust into being the CEO of a very large manufacturing company. She had no interest in being the CEO. She just happened to be the eldest child. She had no experience. She resisted all the way. And she was ultimately put in business with her mom as well, because her mom had some ownership. Mom and daughter fought like crazy because the business went into structural decline.

daughter had a nervous breakdown, business ultimately was sold for pennies on the dollar. That could have been avoided with regular ongoing communication. Daughter would have been very comfortable saying, don't have any interest in this. Mom would have been very comfortable saying, I don't want to work for my daughter. But yet the tax plan was really strong. They crossed all of the I.R.T.s and dotted all the I's, but it wasn't a good family plan. And we see that all of the time. And that happens at

$5 million of top line revenue and $5 billion of top line revenue. These are the same kind of universal challenges.

Mason Brady (22:25)
Yeah, I was,

I was talking with a estate planning attorney the other day and she mentioned, just said, you know, she just wished more clients would sit down with their kids and say, what do you want? You know, like as simple as that, what do you want? ⁓ and you know, to plan around that, but I completely understand what you're saying that, ⁓ yeah, I, I, that, that is just a really wonderful example. And, ⁓ you know, I think that there's all the best intentions behind it, right? That, you know, you're wanting to do right by your family and to carry on the wealth, et cetera. But.

⁓ like anything, you know, especially if they're adults, I mean, whether they're kids or adults that they're still making their own life decisions. And, ⁓ I've seen even my own family that, ⁓ you know, had grandparents that passed away and, ⁓ yeah, money, money changes discussions really fast. ⁓ you know, money changes, motivations really fast and, ⁓ money can destroy relationships really fast. And all of those things that, ⁓ might be unintended, ⁓ you know, do end up happening, but.

Brandon Henry (22:57)
Thank you.

Mason Brady (23:23)
Again, I kind of, you know, I'd like, you know, going back to a bit of mosaic advisors, like I, I like what you all are doing because even from personal experience, like we've, we've seen and been a part of, ⁓ you know, business owners that are selling their company. Like you brought up some really good examples of, you know, companies going through transactions and those dynamics changing, but also the reality that sometimes,

You know, Hey, investment bankers are an absolute necessity. You know, when you are bringing in &A advisors are an absolute necessity when you're bringing your business to market. But let's, let's be honest, right? That they also have an incentive to, right? ⁓ you know, having you all as a part of the team and having these third parties that are seeing different scenarios of how to make it work. And, know, you're not influenced by whether that business sales or not, and whether that transaction happens or not.

you're simply going to be part of making the best decision. I think that that's really fundamental. I don't think that everybody always sees it that way that there's a lot of the term advisor thrown out, but yet if you look at the fee structure, it's like, you incentivized as an advisor or are you incentivized to sell me something? And sadly, a lot of it is incentivized to sell something. And so it's important that they still may be an expert in what they're doing, but

you kind of got to have a third party oversight as to making sure that, you know, hey, this is kosher that they are going to tell you everything good about what you're doing, but not see, you know, not help you see all the negative consequences because every decision in life has a pro and a con. Everyone, right? Everyone does. And yeah, I just, the discussion of the cons isn't always brought up enough. It's always about the pros of the decisions made, right?

Brandon Henry (25:11)
So there's one of my favorite quotes from Buffett is, wouldn't ask a barber if you need a haircut. We believe that incentives are perhaps the most powerful force in the universe. And when we organize Mosaic, the one differentiator that we had then and we still have today is we charge flat fees for advice. We're agnostic as to the complexion of assets, whether the family buys or sells, whether they take down debt, they reinvent. It doesn't matter to us. Our jobs help them make better decisions. And you're right, everybody in the client's ecosystem, including us,

Mason Brady (25:17)
Yep.

Brandon Henry (25:40)
has conflicts, they happen on a continuum. One of the terms that we hear all the time is that, quote unquote, I'm a fiduciary. Well, not everybody's fiduciary status is the same, right? If our goal is to neutralize as many conflicts as possible, then you have to look at the way that the individuals get paid and to pick on, but not intentionally, to pick on the investment advisory community specifically.

There's been an evolution from stockbroker to financial advisor to financial planner to wealth manager to now oftentimes referred to as family office. And with the designations like CFPs and CFAs, we have people who are legally and financially obligated to recognize conflicts of interest and to do what they can to err on the side of caution for the family, not for themselves. But they haven't staunched the conflict of interest completely. It's still there. It's just simply saying if there's a jump ball,

I'm gonna do my best to make sure it's tipped towards the family and not tipped towards myself. But families recognize this even if they can't articulate it. And so one of the regular questions that we get, and here again, life's about trade-offs, so this is universal throughout the whole entrepreneurial ecosystem, is how do I think about using debt in my business? We're having a conversation right now with a client who's got about a $10 million outstanding facility. The business is doing fabulous. And he's having a conversation with us about should I pay it down?

I know it's not the best way to generate excess returns, but I just don't like having it. It's just a kind of an emotional thing. And the investment advisor that manages the portfolio that we work with and ultimately reports to us, his strong inclination is to keep the debt outstanding. And he was able to come up with a justification, hey, you're borrowing at X, you're deducting Y, and the portfolio is gonna grow at Z. And so over time, you're probably gonna have more wealth. And I think he's right. If you're solving for that bottom right-hand Excel, you know, so he's absolutely right. But the client just feels uncomfortable.

And our advice was, and it's pretty unsophisticated, you're rich. Do what you want. Like your kids, kids have got plenty of money. We don't care one way or another. I can justify you keeping the debt outstanding, because it makes mathematical sense. But if it's causing you an ounce of discomfort, and if you're even remotely interested in transitioning this business to your spouse, if something were to happen to you, and you know for sure she would be uncomfortable, and who knows what the environment is at that time, let's pay this down over the next couple of years, which means that your advisor's not gonna get the next

$10 million to invest, right? So we gave them a $50,000 haircut over the next several years. They're motivated to do a great job for the client narrowly focused on their investment portfolio, right? Our job and others like us is to have God mode. Like how does it fit into all of the various pieces from the top of the mountain? And it gives client a lot of confidence when we say pay it down, they feel the sigh of relief.

Because their advisor came up with a fancy Excel spreadsheet that justified keeping the debt outstanding which academically is perfectly correct But we're messy humans. We're not all profit-seeking automatons

Mason Brady (28:30)
Yep. No, %

that, yeah, we're emotional creatures, right? And that stuff has to be taken into account that, you know, a part of, think, you know, creating these plans is letting, making sure that the business owners also can sleep at night too, right? That they feel comfortable and they feel safe and that's a big part of it. So I'm glad that, you know, you all see that and are trying to guide decisions that way. You know, we've talked about something that business owners, you know, mistakes that they can make.

Brandon, I'm interested to understand if you work with 35 families and very wealthy families, what are some of the traits that are really like the standouts that, hey, these folks are doing this and this is a wonderful thing that they're doing. What does that look like?

Brandon Henry (29:17)
Yeah,

it won't be a surprise that it's the inverse of the things that families struggle with. It's a combination of being an information omnivore, just being obnoxiously curious and trying to solicit new information and integrate it into their world, but holding on to their convictions very loosely because the world is so dynamic that it requires always not just striving to do better, but then communicating the reasons why we're doing the things that we're doing.

and the purpose behind the plan to the people who will ultimately benefit from it. And it's not just the shareholders, but it's the stakeholders. so one of the things that I, it's really neat that I get to do on a regular basis is interview non-family executives that are coming into these family businesses. And they always ask the same types of questions. And they're around like, I, is my personal and professional career going to get knee capped because somebody with the right last name is going to be installed in front of me? What's the family doing with this business? Is it a personal piggy bank?

Are they zeroing it out the end of the year or are they reinvesting and treating this like a real asset? So even amongst the professional team, can we communicate and can we over communicate? so delegate like crazy, constantly strive to improve, be really patient, over communicate. Those are some of the key ingredients in the soup that ultimately lead families to compound over time. And then at end of the day, like, you know, if we're thinking about things through the lens of a capital allocation investing, diversification is way to stay rich.

Betting on yourself is, and concentrating risk is the way to get rich. like just honoring the fact that these families have got a really hard thing that they're trying to do and helping them make the best decisions possible. And really just keep it between the, you the K-rail, right? Like they get to choose whether they're going 80 miles an hour or going 60 miles an hour. We're helping them to set the direction of traffic and make really good decisions along the way. And that ends up being a really successful formula.

Mason Brady (31:05)
I really love that

quote that yeah, diversification keeps you rich. Concentration taking the big risk is what makes you rich. That I just think that that speaks to the audience that's listening here that, mean, you're talking about people that have pulled themselves up by the bootstraps and, know, figured things out and, know, whether highly educated or not, it's just a matter of like, go get it done. There's an opportunity, go seize the opportunity and go all in on it and become an absolute expert in it. And I, what's interesting is several of the pieces of advice are.

piece of advice that a lot of people understand is what makes a business really successful. But then it's like, we'll just apply it to everything personally, right? That apply it to your personal life. Like I've, I've done that so many times where, ⁓ you know, I'm part of a executive round table group, a Christian executive round table group. And sometimes I talk with the other peer members and, know, they say, well, Mason, like you, do this really well in your business, but why don't you talk, you know, the same things, you know, with your wife or kind of the same format. I'm like,

never thought I would do that, right? Like there's supposed to be separation of church and state, right? But everything you said, everything that makes a business great is also what makes personal planning really great too.

Brandon Henry (32:04)
you

Yeah, you know, most of these businesses would not be successful if they didn't go through some budgeting process and they weren't doing business planning and they weren't trying to understand sources and uses of capital, what the risk vector was. Most businesses, even unsophisticated ones, have at least in their head in the shower done a SWOT analysis on what the future looks like. And they don't take that to their personal planning. And the reality is that being a good shareholder requires effort and work and long-term planning and communication. And so I think you're spot on.

They need the CFO and the COO of their personal life in the same way that they depend on people in their business to help them make the best and most informed decisions. And it's funny, huge cohort of the families that we work with, not only first generation founders, but these are blue collar businesses. are oftentimes drive-by companies. You would never expect for them to have grown the success they had. They didn't expect to grow to be as successful as they did. And these people would rather show up in coveralls because they're doing the work than they would in a three-piece suit. High finance.

scares the hell out of them. think it's all voodoo and their job is to continue growing a business. And when they lift their head up, it terrifies them, right? That this is a completely different world. These are immigrants to the land of wealth and success. And while on paper, they're uber successful, often they have very little, if any, liquidity and they don't have the trappings of, maybe they have a nice home and a nice car, they the trappings of wealth. They're not jet setting around the world. And even if they have the money, they don't have the time because they're in their business.

Mason Brady (33:43)
Yep. Yep. Very much so. So I'm interested, Brandon, that, you know, we talked a bit about it, about different tax strategies. You know, what's a negative advice because we've talked about, you know, kind of this comprehensive overall planning for businesses and that's what makes it successful is, you know, really creating a plan for the total activity of all the assets and investments that not just the business has, but the family has overall and getting the families talking together and, you know, quarterbacking all that. But

Brandon Henry (33:43)
working.

Mason Brady (34:12)
You know, it's kind of a quick one for our audience that what would you say is some tax advice that you could give them that, you know, what are some of the biggest opportunities that they should be looking into, ⁓ try to grow their net wealth.

Brandon Henry (34:23)
Yeah, so buyer beware not knowing who's listening, but I'll throw a couple out that families can often benefit from, but look into this deeply. The tax election, the tax structure that a business chooses can have a huge impact. And there's often a conflation between the state entity type and the federal tax election. So I'll meet a new family and I'll say, how's your business organized? And they'll say, it's an LLC. And I say, well, how's the tax? And they it's an LLC.

But LLC is a state thing, right? Comma Inc, Comma LLC, Comma LP. It doesn't tell you anything about the federal tax election. That's an S corporation, a C corporation, a partnership or a disregard. And people don't understand that. And so when they're setting new businesses up or they're organizing and operating the businesses, they don't fully appreciate that different tax structures can yield wildly different tax outcomes. One of the most common ones today, and we're in a little bit of an interesting time, I personally believe that we're kind of in a tax golden age.

Since the Trump tax reforms that went into effect in 2018, we've had historically low taxes for both pass-through companies like S-Corps and Partnerships and for C-Corporations. And we've had the highest estate tax exemption we've ever had and it's growing every year. And there's a lot of people that believe, and myself included, that we're likely to get an extension of those rules through probably the next eight to nine years. And so when we look at today, one of the biggest components of closely held businesses is pass-through structures.

And one of the biggest tax benefits is something called QBI, qualified business income. It effectively takes the top tax bracket from 37 % to 29.6%. It's monumental. A lot of families are not optimizing for that. They, don't even know it exists. And B, if they do know it exists, they're not optimizing for it. And so different entity types will allow you to manage and manipulate your tax payments in such a way that you might be able to qualify for it. And so that you could save completely legally with no risk up to 20 % of your total tax bill.

by understanding and managing QBI. The other kind of cousin to that would be C-Corporation. So if you're building a business with the intent to sell the business, and that is the objective, and you're planning to reinvest back into the company while you're working to build the business and sell it, there's another tax code section called 1202, sometimes referred to as QSPS, or Qualified Small Business Stock. I am surprised by how many very successful entrepreneurs don't know about this and never talked about it, but the broad brushstrokes are, and there's lots of pitfalls, so.

you know, work with a qualified tax professional. But if you create the C corporation and it was always a C corporation and you grow this thing and you sell it, and when you started the company, it was worth less than $50 million, which is likely the case for most people, you might be able to sell it with little to no capital gains tax at all. And along the way, you're compounding at a 21 % tax rate instead of a 29.6 or a 37 % tax rate. And so for families who think there's an exit in the future, it might be worth

doing some planning. Now you have to hold on to the company for five years and so it does require some foresight. But what a wonderful outcome to take your hard work, compound it at a lower tax rate and then exit if that's the case without any tax consequences. Got to sell the equity lots of potential places where this doesn't go right. But what an amazing tax outcome. And then lastly, when it comes to investing for families that have been deploying capital, the incredibly low hanging fruit is tax loss harvesting.

Mason Brady (37:37)
No, absolutely.

Brandon Henry (37:46)
This has been democratized. There's a lot of folks that say I tax lost harvest out of a portfolio, but I only do it in November or December. That makes no sense to me whatsoever. Tax losses are an asset you should be harvesting throughout the year. Now you don't want the tax tail wag the dogs. Don't make bad investment decisions, but there are ways to streamline and automate this that are effectively no or low cost. And so families can be building up these tax assets. Cause if you pass away with a big loss, those get wiped out. And so.

As a consequence, let's pay attention to that throughout the year. And then I'll close with one estate tax concept. The estate tax exemption day is like 28 million bucks and it's gonna go up by a couple hundred thousand dollars a year likely for the next several years. That means most families don't have to worry about the estate tax. But there is a concept called the adjustment of fair market value, section 1014. Basically says if I own an asset at my passing and I give it to somebody else, I give it to them at the value of my passing, if they sell it the very next day,

no tax. So the scenario would be I own a shares of Coca-Cola. Today if I sell them, I pay tax on the difference of my basis and the current value. If I do that the day before I pass away, I owe tax. If I give it to my family and they sell it the day after I pass away, I no tax. And so there's a lot of folks that have done estate planning back in the times when the state tax exemption was much, much lower. And today they'd actually be better off owning those assets personally.

getting the step up to fair market value because their business has grown or their real estate assets have grown and having their family sell it after they pass with zero tax versus have it owned by a trust. And there's trade-offs around control and asset protection, so it's not a slam dunk, but it's one of those areas where there's a lot of tax savings to be had, especially in that lower middle market, that people were just dogmatically focusing on the estate tax when we were actually trying to solve or could better benefit from an income tax strategy.

Mason Brady (39:33)
Got it.

Makes sense. So, you know, as we're kind of rounding out the episode here, we like to ask Brandon some fun questions. I mean, this could still be a serious question, but yeah, we like to kind of round out and have a little fun with our guest. And for you, what's the worst? Actually, sorry, Brandon, just really quick. I just heard the doorbell. Cindy, cut this, but let me go check on this real quick. I'll be right back.

Brandon Henry (40:00)
Yeah.

Mason Brady (40:16)
you

Sorry about that. I knew my wife was having to head to a field trip with the girls and so I didn't know if she was still here or not. Okay, so Cindy cut all that. So let me kind of re-ask this question, Brandon, just to kind lead off well. So yeah, Brandon, you've given us some really amazing advice here, very tactical advice, serious advice, but we like to make sure that for our audience, and this could still be very much so a serious question by all means, but.

Brandon Henry (40:23)
No problem.

Yep.

Mason Brady (40:48)
We definitely like to have a little fun with our guests too and make sure that our audience is able to walk with them, know, fun takeaways as well. What's the worst piece of financial advice you've ever heard and why is it so terrible?

Brandon Henry (41:00)
Yeah, well, let me give you the best piece of advice and then I'll answer the worst. One of my good friends who's a CPA here in town, I would call him on a regular basis and ask him about tax strategy. And he got really frustrated after years and years of me doing this. And he said, Brandon, if it makes you smile, it's income. the counter to that is the proliferation of TikTok and LinkedIn posts and magazine articles and YouTube videos has reached a fever pitch. I routinely get articles sent by

clients about this amazing tax strategy to deduct all of their income and never pay taxes again. almost without fail, these have no merit. And so the asset test for me is if it sounds too good to be true, it almost exclusively is. And we've had families who have executed this advice without being really thoughtful and it's cost them millions. Quick example, we had a client who converted their business from an S corporation to C corporation.

the day after Trump passed tax reform in 2017. The rules didn't even go into effect until 2018 and he did it before Christmas of 2017. And the CPA gave him a thumbs up emoji, no problem, you're going to lock in a 21 % tax rate. Well, because he was an S-Corp for years and years years and years, he'd been retaining capital in the business he'd already paid taxes on, sometimes referred to as AAA. The CPA never snapped to the fact that this client didn't know that he only had a year to take the money out of the company tax free.

or it would effectively become property of the C corporation with a tax bill if you took it out. And so as a consequence, we got to meet the family about 13 months after they made that decision. And the first question we asked is, hey, did you zero out your AAA? He said, what are you talking about? And long story short, he ended up trapping about $20 million of assets that he'd already paid taxes on in the company, which would cost him something like $5 million if he wanted to take it out. And the CPA is no longer a CPA.

It ended up being a big fight with his auditors to try and change some of the rules. But it was one of these kind of, you know, not comprehensive, not well thought out and too quick responses to this headline answer or this headline result that ended up having this perversely negative tax consequence. That's an example of the type of stuff we see all the time. There's a newsreel, people try to react and they don't realize the implications of those decisions.

Mason Brady (43:21)
Yeah,

100%. ⁓ and realizing that, again, like I, we tell business owners this all the time that, know, your CPA and I'm not saying, you know, there's several great CPAs out there, but, ⁓ generally, you know, you want them to make sure that you pay as little taxable income as possible. or I should, should say pay as little tax as possible and therefore try to reduce your taxable income as possible, as much as possible, but that has offset effects, right? That, ⁓

know, as you're going to into a business transition, if you're not showing income, if you're going to a bank and you're not really showing much income, they're all going to ask where in the world is it? Because, you know, if you're saying your business makes great money, well, taxes say otherwise. And it's just all this like it, it needs a comprehensive view of everything, right? That, you know, let's let's think holistically, then, hey, we're just going to get something done for, you know, 17 real quick, and then 18 shows up and oh crap, you know, and so it makes complete sense.

Final question here, Brandon. I do see you're music fan back there, but instead, if you could describe your job as instead a movie title, what would it be and why?

Brandon Henry (44:29)
Yeah, that's a great question. I really want to be able to answer with some like deeply thought out noir that really like talks to the types of advice we provide. But the real answer is probably something like Groundhog Day. We're dealing with people that are motivated and inspired by the same things. They tend to make the same types of mistakes. They tend to communicate with their advisors in the exact same way. And so it almost doesn't matter the wealth of the family or the type of business that they're in.

Mason Brady (44:42)
You

Brandon Henry (44:57)
we find the exact same issues and opportunities for improvement with every family. And so I could, if you tell me two or three facts, I bet you I could identify the five most common things with that subset of situations. And so it's surprising to me that the Advice ecosystem hasn't found a way to do a better job because there is so much commonality.

Mason Brady (45:20)
Absolutely. So, well, Brandon, this was great that, ⁓ I think, you know, for our audience to walk away, ⁓ you know, you provided some very, you know, niche tax advice, for our audience, but you've also given a clear picture that, know, for our audience, that if they're making good money in their business and they have a plan to grow their business and they want a strategy of, you know, preserving that for their family and building a family legacy, ⁓ involving your family in the discussions and

creating a comprehensive plan around it, not just talking to your CPA, not just talking to one party and thinking that that's the holistic strategy, but making a comprehensive plan involving your family in the discussions, making sure that it's what they want, and getting outside parties to speak into incentive-based advisors too, and making sure that everything is really clear. Also taking a bit of time too, right? Asking all the right questions. Don't run into something. Don't rush into something just because you're trying to save taxes in one year.

Is all really important is is there anything else that you want our audience to walk away with today that you've shared some wonderful nuggets But anything else you'd say that hey, I really want everybody to walk away with this

Brandon Henry (46:29)
Yeah, well, so first as a disclaimer, nothing that I've talked about today is reserved only for the ultra affluent. Everything I've talked about, I think, has utility up and down the wealth spectrum. So if you're a successful entrepreneur and success can be defined as somebody making a couple hundred thousand dollars a year and being independent, pursuing what they enjoy, to people with many, many commas in their revenue and income, these things are universal.

So we didn't get into some of the more sophisticated estate tax planning strategies that are really reserved for the ultra-affluent. So hopefully all of this at least has some resonance with the audience. The through line here is that these problems and these opportunities are universal. None of this was meant to disparage the professional advisory ecosystem. There's a lot of really competent people who want to do a good job. I would take inventory of how I communicate with my professional advisors.

If I'm so afraid of spending an extra $300 an hour that I refuse to send an email to them until the very last second, shame on you. If I don't share information when they start trying to gather data from me in January and February and I send it to them in March or April and then I get frustrated I've got a late last minute tax payment, shame on you. So there's personal accountability here that goes not just beyond the professional advisors but to the entrepreneurs itself.

But if you're doing a good job and you're being communicative and you are sharing and we're not being penny wise and pound foolish, then you should ask for more. Hold your professionals accountable. These folks generally want to do a good job. And if you give them the space, they will be able to provide. Now you're probably gonna have to stitch some of this stuff together, but it is completely accomplishable if you're focused on it. So your business, we take that really seriously. We do business planning, do personal life planning, take that inventory. And I think you end up having a better outcome as a consequence.

Mason Brady (48:11)
Awesome, great advice. Tell our audience where they can find out more about you, Brandon, and Mosaic Advisors.

Brandon Henry (48:16)
Yeah, so mosaicadvisors.com. I'm not a social media guy necessarily. I don't have a big presence on any of the platforms. But if you're interested, I'm happy to be a resource. We've got a big Rolodex. Shoot me a note. I'm happy to provide some context about how I would approach a problem or who I would talk to at least. So hopefully this was useful.

Mason Brady (48:34)
Awesome.

Great. Well, yeah. Thank you. Thank you so much, Brandon, for being here that, distilling this advice. Like you said, that it's not just advice for really high net worth, but you know, lot of our audiences, lower middle market business owners that this is their first, you know, rodeo of building a business and they're getting to that point where they could be high net worth. And, ⁓ you've just provided and distilled a lot of practical advice for people. So this was wonderful. Thank you so much for joining us today.

Brandon Henry (48:59)
Well, thank you. Look, this is my tribe. I'm a little lower middle market business owner myself. So if I can be useful to the ecosystem, I'm happy to help. So thanks for having me, Mason. All right. Take care.

Mason Brady (49:06)
Absolutely. Awesome.

Thanks. So that's it there. Yeah. From here, Brandon, that I'll do an intro, but yeah, that was great that, you know, I'll do an intro from here. Cindy. So we do a release of these that sometimes I batch record these like today. I happen to have like three episodes I'm batching. It might be a couple months until it's released. Cindy will communicate, you know, generally the timeline of its release and

Brandon Henry (49:15)
Awesome

Mason Brady (49:32)
She'll share some shorts and some social media links that your team can share ahead of time and start helping to promote it when it comes out and when it's launched. But yeah, that's it. Cindy will be in touch and she'll show contact. But nonetheless, I'd actually love to, this month is a little bit busy, but I really would love to actually go get a good bite to eat and just get to know you better and to build a relationship. that's good idea. So yeah, sounds good, No, absolutely it was. So really appreciate you. Thank you.

Brandon Henry (49:39)
cut.

Let's do it. Yeah, absolutely. Thanks, Happy. I hope this was useful.

Okay,

take care, man. Bye.

Mason Brady (50:02)
Yep, see ya.

Bye.

All right, so I'm gonna do the intro now, Cindy. So, hi everyone. Welcome back to another episode of Brewing Business with Brady. Today's guest is Brandon Henry of Mosaic Advisors. And you know, for our audience, actually, sorry, Cindy, I messed that one up.

Okay. Hi everyone. Welcome back to another episode of Brewing Business with Brady. Let me ask you, do you struggle with trying to put together pieces of advice from different advisors as a business owner that, you know, you have your CPA, you might have your personal financial advisor, you have your attorneys, and it is so difficult because you're playing a quarterback role and you're trying to figure out what to do. ⁓ you know, and really

As a business owner, you're wondering that I'm building this business. I'm building some wealth, but you know, this is the first time that this has ever happened that, you know, I've been able to build this amount of wealth, but you know, I want to carry on a family legacy and I want to be able to do that appropriately and to be able to pass on this business or this wealth onto my family successfully. ⁓ you know, without creating issues and creating in family fighting and what, you know, if these are the questions you're asking today's guests.

Brandon Henry of Mosaic Advisors, that he is going to give some real honest, raw advice that Mosaic Advisors, what they do is that they play a role of quarterback. I love this, that he gave the example of practically like a general contractor that works with all types of specialty advisors, whether it be, you know, personal financial advisor, whether it be a state planning attorney, whether it be business attorneys, whether it be CPAs, you know, focused on tax, CPAs focused on audits.

They pulled together all these resources on your behalf and they quarterback it and make sure that everything is rowing in motion together so that you're not having to put together all these different complicated pieces and make sure that all the parties are working together, that Brandon's team instead, this is what they do on your behalf. ⁓ but Brandon also provides some really practical advice to making sure that, you know, for first time business owners that have built a lot of wealth that are building a successful business, that how do you pass that on to the next generation?

And so really love having Brandon on the show today that actually it's great because Brandon, you know, is a Californian, just like myself that moved to Texas. And so we have some relatability there, but you know, what's surprising is you hear some twang and you know, Brandon's, Brandon's speech. And so you would never assume that he's from anywhere but Texas, but yeah, really excited that to talk with him today. And I think that, you know, for business owners thinking about the long-term as to where do I go with this and make sure that.

you know, outside of the day to day of what my business needs, that I'm building something that can last for my family for a long time to come and that it's protected and that I have the right strategies in place. Brand is going to provide a lot of practical advice to that. So really excited for you all. Let's dive in.