What the 1 Percent Really Do With Their Money with Tad Fallows - EP31

In this episode, I sit down with Tad Fallows, CEO and co founder of Long Angle, a private peer community built for first generation wealth creators.

Tad works with entrepreneurs, executives, and families navigating the real challenges that come with significant wealth. Not the flashy stuff, but the complexity most people never see.

We talk about what actually changes once someone reaches $5 million, $10 million, or even $50 million in net worth. How wealthy people really invest. Why many high net worth individuals avoid leverage. How private markets fit into their portfolios. And why wealth often creates more questions, not fewer.

This conversation goes deep into topics most podcasts avoid, including parenting with wealth, overcomplicating investments, private equity and private credit, tax efficiency, insurance myths, and the emotional side of money.

If you have ever wondered how the 1 percent actually think about money, this episode pulls the curtain back.

Topics we cover include
 • How the wealthy really allocate their portfolios
 • Why many high net worth investors avoid leverage
 • Public markets vs private markets
 • Why complexity increases as wealth grows
 • Parenting and raising grounded kids with money
 • Life insurance myths and what actually makes sense
 • What people misunderstand about rich investors
 • How first generation wealth creators think differently

About Tad Fallows
 Tad Fallows is the CEO of Long Angle, a free peer community for first generation wealth creators with complex financial lives. Long Angle connects thousands of members across the world to share unbiased advice around investing, taxes, estate planning, lifestyle decisions, and more. Tad is also a former tech entrepreneur who bootstrapped and sold a software company and now focuses on helping others navigate wealth intelligently.

Connect with Tad Fallows
 Long Angle website
 https://www.longangle.com

Navigating Wealth Podcast
 Search “Navigating Wealth” on your favorite podcast platform

LinkedIn
 Search Tad Fallows on LinkedIn

If you enjoyed this conversation, make sure to like, subscribe, and share it with someone who would appreciate a real conversation about wealth. And if you know someone who would be a great guest for the show, reach out.

🎙 About Steven Weinstock
Steven Weinstock is a real estate investor and founder of WeCapital and the Goethals Capital Fund. Since 2001, he has built a diverse portfolio of residential and multifamily assets while helping investors access passive income through strategic real estate opportunities. On this podcast, he shares real-world insights on investing, capital raising, and what it really takes to build and scale in today’s market.

📩 Want to invest or get in touch?
Visit: www.WeCapitalX.com

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LinkedIn: www.linkedin.com/in/stevenweinstock1

Instagram: https://www.instagram.com/wecapitalx/
YouTube: https://www.youtube.com/@TheWealthClockPodcast

Transcript

Steven Weinstock (00:00)
Hi everyone and welcome back to another episode of the wealth clock with Steven Weinstock. I am Steven Weinstock, your host. I've been investing in real estate for close to 25 years. I started in a single family, graduated to multifamily and recently I've been investing in private credit, firstly in positions. I love to speak to operators, business people, entrepreneurs, and anybody who could add value to my audience.

This episode is sponsored by Cable NOI. NOI stands for Net Operating Income. This company helps multifamily owners earn revenue from cable companies such as Spectrum, AT &T, Verizon does not cost a penny to the owners and they will pay you a commission, a per door fee upfront. It's really a no brainer. I've used it on my properties that I've owned.

and it's the easiest NOI enhancement I've come across. So they are now a sponsor. It's free, doesn't cost anything. All you need is your address and 20 units plus in the building, and they can decide and figure out how much you can earn. Today we have a guest. His name is Ted Fallows. He is the CEO of Long Angle. Ted works with experienced entrepreneurs, executives,

families navigating complex wealth issues across all different life stages from growth, liquidity, and to their legacy. Ted, welcome to the show. Thank you.

Tad Fallows (01:28)
Thank you so much for having me here, Steven. Really excited for the conversation.

Steven Weinstock (01:31)
Okay, let's jump into it. First, what's your background? Where are from? What was your first job? And what did it teach you about money?

Tad Fallows (01:40)
All right. Got a lot of questions there. So, um, from, uh, the Washington DC area, but I have not lived there since high school. And for those not viewing this, you know, I'm in my mid forties. So it's been a little while. Uh, my first job out of college was actually as a math teacher in Southern Louisiana, uh, right on the Mississippi border. I did teach for America out of college. Um, I made it one semester and then I determined this was a value destroying move. You know, I was miserable. My kids, kids had a terrible teacher.

I don't think I was actually even a statistically significant outlier on the age versus my students. ⁓ so that was not a win. And I decide, know what, if I want to get back to society, I'm probably going to be more successful getting a normal job, making money and donating money rather than being a, you know, low quality underpaid teacher. So I have a ton of respect for those who do it, but I, I quickly pivoted toward the business world. I then after a brief stop, stop in China, which

corresponding with SARS, I went into McKinsey, I did consulting for a few years, and then my main professional from sort of my mid-20s onward has been as an entrepreneur, largely tech-focused entrepreneur. So I bootstrapped a software company from about 25 to 35, it 10 years to the day from when we started it to when we sold it to a strategic acquirer.

I grew it to about a hundred employees before we sold it. And that was fantastic learning experience. Cause you know, you go from, okay, there's three of us. We are literally doing everything. Yeah. I'm the sales. was kind of the suit and my two partners were the more technology guys. And so we'll go from being all the sales and legal and finance yourself to hiring out a sales team, a marketing team, a finance team, et cetera. So that was a great experience. And then that meant my mid thirties, I kind of went, since we'd bootstrapped it.

basically paid ourselves almost nothing for 10 years. And then on one day got the deferred liquidity for the last 10 years of effort. And so had a whole bunch of new high net worth questions, whether that was around taxes, estate planning, raising kids with wealth, umbrella insurance, kind of you name it. the biggest challenge I had at that point was I felt like all the advice from those questions was coming from Goldman Sachs.

And I wanted to get advice from people who are in the same situation, who are not trying to sell me anything, which is what actually led me to start long angle, which is really, it's a community of first generation wealth creators. So mostly people in their thirties, forties, fifties with call it, you know, five to a couple hundred million of net worth. so enough money to have a lot of this complexity, not so much money that I'm a billionaire with a family office and Ryan, the PJ around, but still sort of having to do this, this stuff yourself.

⁓ and so yeah, that that's kind of my background. and then from an investing side, I've gotten into a bit of real estate investing myself. ⁓ largely, would say unintentional where I've had a series of bought a single family house, bought a house that we really liked, you know, got a low rate mortgage. And then when we move said, Hey, this really makes more sense to turn into a rental property rather than, just selling it. So my portfolio is much more heavily skewed toward.

you know, class a luxury single family real estate than anyone would intentionally put together, but it's actually ended up being a pretty good portfolio from investment point of view, you know, accidentally.

Steven Weinstock (04:42)
Yeah, you have a lot of real estate investors that got into this as accidental landlords. Exactly what you said. They have a house, great rate, or, you know, they have a job that's moving and either they can't sell it, they don't want to sell it. They inherit a house and they become landlords and the numbers start clicking and they really love owning a piece of real estate. Typically, it comes with hopefully some easy property management that allows them to.

move further and continue loving it. First property I ever bought was 2001. I was a young kid and I purchased a single family home. My goal was to buy just one and keep it for 30 years, pay off the loan. And when it's time to retire, it's like an added 401k bonus, so to speak. But after about two or three months, the numbers really started clicking. You know, it's one thing when you just think about it in theory.

another when you actually own it and you're in the thick of it and you see the payoff schedule every month in the statement. And I said to myself, why just one? Why not two? Three, why not five? And, you know, it's close to 25 years later and I'm still in the game.

Tad Fallows (05:43)
Yeah.

I mean,

yeah, I'll tell you one that, you know, my journey sounds similar to yours. ⁓ I haven't bought stuff in explicitly to be rentals. It's all been, either intended to live there or did live there myself, but the one that's probably the furthest to field from that, but, you know, and of one data point for your audience is when my wife and I were looking at it, said, Hey, we would really love to have a vacation house in Santa Barbara. You know, my brother lives there. It's a beautiful place. It's close to her mom, all that sort of stuff. But.

The math on that, even if you have significant assets saying, okay, I want to spend, you know, high seven figures for a vacation house, just very hard to make that math work. But actually it's worked really well as, we can use this as our vacation house. And then we also get the income from it. And the way we looked at buying upfront was, Hey, can we use the income to offset a lot of the costs? So it becomes a manageable prices of vacation property as it turned out.

you know, actually cash flows like a, you know, class C kind of thing. But then you also get your vacation house in Santa Barbara. So that, that is probably the one that most over-delivered in expectations. And, you know, even more than just sort of buying a primary residence.

Steven Weinstock (06:54)
Yeah, mean, the appreciation on some of these assets are phenomenal. And if you don't necessarily need the cash flow, buying some of these properties is a great investment. I I live here in New York, New York City, and you have people buying properties in New York, buildings in Manhattan, where it doesn't cash flow at all. In fact, they might be underwater. They could buy a $10 million building, be underwater 25 grand a month. But six years later, sell it for $16 million.

Tad Fallows (07:18)
Yeah.

Yeah.

Steven Weinstock (07:19)
And

⁓ it's a big boy game, especially in these Class A areas. Tell me about Long Angle. When you started Long Angle, where were you holding in terms of, I guess, your life, lifestyle? I guess you had some money. You had gotten advice on what to do with it. What made you start this business and helping out others?

Tad Fallows (07:38)
Yeah. So it was really, I know everybody says this, but really true is out of this personal need where my co-founder from the software company and I, we said, Hey, we, again, we want to get this advice where we have these questions that are not super well addressed on kind of mass market, ⁓ you know, financial literacy kind of areas. So I think a classic one is a state taxes. The standard advice is look for a couple, there's a $30 million exemption. Nobody ever hits it. Don't even worry about it. And you say, okay, well that, that is accurate.

But that is not helpful if you're in position where you, you know, either today or, know, if you're 40 and you have a little bit below 30 million, there's very good chance you're going to hit that, that 30 million by the time you pass away. say, okay, I actually want something that will go into some of these more niche year, uh, kind of questions. But again, I want to be unbiased advice. I don't want to hear, you know, what the life insurance salesman has to say about whole life insurance. I want to actually talk with other people, first person in the same situation and say, Hey, did you buy whole life? I'm getting pitched this.

did you actually buy or do you run the math and does it not work out? And the same thing around, hey, how do I talk with my kids about wealth or what's the best trip to take to Tokyo or do I need private equity in my portfolio? Any these sorts of questions where they're a little bit niche-ier toward a higher net worth demographic but looking for that unbiased advice. So we just started this community. said, hey, we know 10 other. And I think one of the challenges is a lot of people in this situation.

They know a couple other people in the situation. So for me, it was maybe my co-founder and my brother, but I didn't have a full sounding board the way if I have a question about setting up a 529 or maxing out my 401k, I can ask the dad next to me at the soccer game. I'm going to get a good answer. But if it starts to become this question of, maybe in your example, I've got a $16 million office building. Should I 1031 it into self storage or should I sell and pay the taxes? That kind of question, you're going to look like a jerk and you're not going to get useful information. And so we said, OK.

Each of us knows a few people in the situation. Can we put together a community where the, you know, we're not gonna charge anybody, it's just sort of a free peer community and where the guiding principle is just non-solicitation. So you're just here to give advice and get advice, but nobody can get a client, nobody can get investor, it's just sort of peer-to-peer advice. So that was the reason that we started it. And then over the past five years since we started, it's grown a lot more than we expected. So we started with a few dozen members.

⁓ They ended up just sort of a constant set of, ⁓ you know, this guy from my board of directors would make a great member or my college roommate would make a great member. And so we've ended up with about 7,000 members now, mostly in the US, although across about 50 countries worldwide. And still keeping that same principle, we don't charge for membership, we interview every potential member. Now it's not just.

me and Suryam and Matt personally, we have a few dozen of our members act as volunteer ambassadors, kind of do these interviews. So we still interview them and vet the community and moderate it. And then there's a few things that as we've gotten bigger, we've said, hey, there's certain ways we can take advantage of this scale to collectively drive value.

One of those, some of those we just do a lot of events. So we'll do like an annual retreat kind of thing where you rent out a nice hotel. did Sonoma last year. We're doing Austin next year and have a nice weekend. We've got interesting speakers and a lot of kind of networking there, again, with the sort of no solicitation guiding principle. We do peer advisory. You might call it like a mastermind kind of thing, but it's not like a real estate mastermind. It's more, hey, let's talk about both business and personal and that sort of thing and just a sort of confidential board of directors. But maybe the biggest.

thing that might be interesting to your audience is we also determined, hey, there's a set of, it's very easy to invest your own stocks, invest your own bonds, even your own real estate is relatively straightforward. But, and I'd say most of our members don't work with a RAA or other financial advisors. They are just managing their own portfolios. Say I can pay five basis points and buy an S &P fund. I don't need to pay somebody 1%. But if you're looking at people say, hey, maybe I want 10 or 20 % of my portfolio in private equity, in private credit.

venture capital, oil and gas, litigation finance, music royalties, these things that are both more esoteric and also tend to have very high minimums. You're not gonna get into a good private equity fund even with a million dollar check. If you want to get a good one, you're looking at five or a $10 million check and the same in kind of all of these. And then also you have to, they're much harder to underwrite and to evaluate. If you go with a bad, you could pick a random stock and you're gonna get a random return.

If you pick a random venture capital firm, you're going to get a terrible return and you have to sort of be able to figure out which ones are good and then get them to be willing to talk with you. And so we said, Hey, this is something we can do at scale. If we bring the 7,000 people, the collective hundred billion of assets and the collective expertise where we have at least a handful of people who work in every given industry and really can help us identify who is the best upstream oil and gas operator, who is the best litigation finance operator. And we basically do syndicate investments there where a couple of times a month we'll say, okay,

here's this private equity fund, here's this private credit fund, that's not any obligation to invest, that's just hey, this is something that, and we typically will get maybe a 10 or 20 million dollars per fund, so it's enough that we can then hit high minimums or negotiate discounted terms and that sort of thing.

Steven Weinstock (12:36)
So let me ask you a blunt question. How rich does somebody have to be to join a long angle?

Tad Fallows (12:41)
Yeah, I'll answer that three ways. One is the average net worth is going to be low eight figures. I would say the people who tend to find it most valuable, it is somewhere between five million on the bottom end and call it 200 million on the top end. And I know that sounds like a really broad range, but what we have found is that the person with eight million and the person with 28 million,

it's really not that different of a situation. You have enough money that you have lot of these complexities and you have to think about these things like, okay, if I can save half a percent of my portfolio management fees, it's a lot of money. Or, you know, I can realistically think about a second house, I'm thinking about estate taxes, et cetera. But again, you don't have so much money that you truly set the infrastructure of a single family office, you're not a billionaire. So it's pretty broad spectrum there. In terms of the minimum.

We have a hard minimum, which is the qualified client threshold, 2.2 million of assets outside your primary residence. And so that's binary welcome with the interview anybody above that. But I do think it tends to become most valuable over about 5 million.

Steven Weinstock (13:39)
What about liquidity? mean, I'm in real estate. I meet people all day that are worth 20, 30, 50 million, but everything is in, you they're...

Tad Fallows (13:48)
yeah. Yeah. Many of us

are cash poor. I mean, you know, or myself, at least speaking for myself. Yeah, I have a lot of that real estate there. But no, it's purely anything outside your primary residence. Because again, our point is we're not trying to be your RIA. It's just if if you've got, as you said, 30 million of real estate, you probably have similar questions and similar goals and similar problems as somebody who has 30 million in tech stock or 30 million in crypto or 30 million and what have you.

Steven Weinstock (14:14)
So most of these high net worth individuals, they're not necessarily struggling with opportunity. I guess they're struggling with complexity. Is that how you're defining it? Am I getting that correct?

Tad Fallows (14:25)
⁓

Yeah, I would say there's a question of, it's a few things. One is, know, the unknown unknowns or am I doing this right? Like you still have somebody who, well, there's a lot of things you should do yourself. Like if you enjoy doing your own yard work, it's great to do your own yard work, but people are kind of saying, hey, what should I think about outsourcing if I now have the resource to outsource stuff?

What is the right use of time to focus on? Like, I'm not going to necessarily hire somebody to drive my kids around, because maybe that's a really high value parenting thing for me to do, drive them around. So I don't want to hire a driver. But maybe I hate cooking. How do I find a good chef to come prepare meals for my house, or questions like that? So think some of these people, they tend to be first generation wealth creators. So they don't.

you know, trying to get advice on, what should I be thinking about, whether that is tactical investing kind of things, whether that's responsible, okay, I should get better insurance, I should get better tax protections, I should get better, you know, what have you. But, you know, if I answer a different way, I'd say, hey, what are the two or three biggest questions that people struggle with? And I would say it's not surprisingly, it's no different than people who have less money. The number one thing is how do I raise my kids well? Most of our members still have kids, you know, in the house.

And it's not some sudden unlock of you have $20 million and suddenly you become a great parents and your kids don't have problems. In some ways you create this higher, it's whatever it was before but on steroids. So if you're worried about your kids misbehaving or being spoiled, now you have a much bigger problem because it's easy to throw money at the problem and avoid the hard parenting. So the number one question is probably this thing of how should I do parenting well? And then there's stuff that comes up a lot of,

I've never traveled before or not extensively. should, you know, what cities should I look at? And then also some stuff around taxes where I'd say most people feel like, hey, I'm the one idiot who's actually paying my taxes. And, you know, I'm sure there's all these other guys out there, you know, finding better strategies. You know, if it gives people comfort, I would say most people feel that way. And most people are not paying these, you know, 0 % tax rates through dubious conservation easements. Most people just kind of take their lumps and pay their fair share. And I think if you're

Already into real estate, you've probably found most of the good, you know, ethical tax dodges that are out there.

Steven Weinstock (16:28)
Yeah, they're called loopholes, although loopholes have a negative connotation. But yes, real estate has tremendous tax loopholes, which is great. It reminds me of that story because you mentioned raising kids, you're worth tons of money. How do you do it? How do you do it correctly? There was a story, believe it's with Trump, President Trump. When he was a kid, his father...

Tad Fallows (16:34)
Yeah, yeah.

Steven Weinstock (16:53)
His father was a wealthy man and he still made his son work a paper route. ⁓ However, his father would have his, I guess, personal chauffeur drive Donald around to deliver the papers. Now, obviously, you're spending more money on the chauffeur of the car and all that, but obviously it teaches the kids tremendous value and responsibility and work.

Tad Fallows (16:58)
Mm-hmm.

Steven Weinstock (17:16)
like him or hate him. He is a successful person and working at a young age is definitely very beneficial. It's not about how much money you're making as a kid, but it's teaching you responsibility. One of the first jobs I had was working in a grocery store when I was in eighth grade. We had a Passover break, a Passover vacation. And what I learned from that job was it's something I never want to do.

And I did it, I was a kid, I was schlepping boxes from the basement to the upstairs. And I was a kid, so I was fine. And I got $100 at the end of the week after working God knows how many hours. But it taught me that this is not something I want to do because I have to. It's fun to do because I'm a kid. But it taught me what I want to do, what I don't want to do. And I had some other jobs growing up. And most of them, it taught me.

what I don't want to do. So that was definitely very beneficial. ⁓

Tad Fallows (18:13)
You know,

there's a really interesting book I read by a woman named Covey Edwards Pitt. I believe it's called Raised Healthy Wealthy and Wise. And she works for one these big multifamily offices. And what she did is she did a lot of research on saying, and that tends to be kids at a very high level of wealth. So not necessarily a family with five million, but let's say a family with 50 million, enough that that kid could realistically never work in their life and materially they would be fine.

And she did research saying, people in that situation, let me look at across a sample of several hundred, the ones who are successful. And let's say successful, not in they made the most money, but the kind of things that you would want for your kid, okay. Your kid is in a healthy, loving marriage and they have children of their own, they give back to society through work, they kind of live the sort of life you'd like your kid to live. And she said, okay, what are the commonalities that we see there? And one of the big things was that at some point in their life, they lived entirely

by their own means. So even again, let's say it's Ivanka Trump and she never actually has to work, she'd still be fine. There's at least a couple of years there where they are paying their own bills. And apparently one of the big things that gives on top of the appreciation, et cetera, is it gives people a lot of self-confidence where there can be this sort of terror of, my family has $100 million and it's a fine piece of the identity. And what if that goes away? In some ways, the more money you have, the more you worry about money. Because you say, this disappears, I don't literally know if I could survive. Like, how would I do these things?

And so that fact of somebody saying, I really don't want to lose this money, but I would be OK. I could handle it if I lost it. Because I think for a lot of us who are sort of first generation wealth creators, that's built in. You say, OK, I know what it takes to make this money. And sure, I don't want to lose it because I worked very hard. But if something really bad happened, I could recreate this. And so it kind of gives a bit of that gift to your kids where they know, OK, if something really bad happens, that's not the end of my world. I have the ability to survive without it.

Steven Weinstock (20:01)
So you're dealing with, I guess, the 1 % on a regular basis. Tell us or tell the audience, what do people, I guess, misunderstand about how the ultra wealthy actually invest?

Tad Fallows (20:13)
I would say the biggest, I don't know if it's a misunderstanding or not, but what I can tell you is we do a lot of survey benchmarks of our members. So we're saying, okay, across the people in this circumstance, let's say most of them are in the eight figures of net worth, what does your actual portfolio allocation look like? And it's pretty interesting. And then you also see some skews within there. What does it look like for the person with 10 million versus 100? How are those different? Maybe the...

The biggest surprise is these people don't tend to overspend on yachts and Rolexes and Bentley's and that sort of thing the way you might expect. The average savings rate is actually about 50 % among this cohort. So sure, they're enjoying themselves, but they're making a million dollars a year. They're saying, I could live on half a million. And it's talking post-tax here. So they save about half their post-tax money. They're not spending on, and I'd say particularly not heavy toward the

Demonstrative flaunting at luxury goods, you know, they'll spend a lot on say travel is the number one category of hey I value going trips with my family but on things like cars watches really not nearly as much spending as you'd think by you know, mass culture and then from a portfolio allocation Maybe the most surprising thing is actually a very low level of leverage for those of us who are more in real estate Probably shocked by it that our typical member has only about 10 % of their net worth and leverage

So to put that another way, if somebody has 10 million net worth, they have about 11 million of assets and 1 million of debt. And that's including mortgages. I half of people don't carry a mortgage. You could say, hey, that's inefficient. I should max out my leverage because I can borrow at 4 % and invest at 8%. I'm going to be better off overall. But people tend to say, I don't want to do that. I've got 10 or 20 million. I don't need to take on the added risk of this leverage.

Now the flip side is the money they do invest, they tend not to put it into low return assets like bonds. They put it much more into either public equities or private assets that perform at equity like rates. talking high single or low double digit expected returns. And that's probably the biggest difference from lower net worth investors is let's say that somebody might have 80 % of their money in stocks if they're younger and more aggressive.

If you look at the higher net worth categories, they might have 50 % in public stocks, but then 30 % in private equities. And I'm including both traditional private equity as well as venture capital, other small companies, oil and gas private equity, all the kinds of private assets. As you get more money, people do tend to skew more toward private markets.

Steven Weinstock (22:38)
Now is that balance because of the opportunity? Meaning a guy who's making 250 grand a year, can't, all he can do is really just buy stocks with his Fidelity account. But if he's sitting on 10 million, all of a sudden opportunities open where, like you said, there's a minimum check size of a million or so. And therefore, his portfolio is able to be

I guess more diverse. Is that the reason? Because of the minimum check sizes? Or is it just that they think differently?

Tad Fallows (23:11)
I think that's a significant part of the reason. I'd say somebody with a million dollars, yeah, it doesn't really make that much sense. ⁓ There's the minimum check sizes. There's the complexity. I won't lie. Your tax return gets really long. get all these, I mean, you know this from real estate. If you're some real estate fund, you might be filing in Missouri and paying them $12 of taxes. And so if you're talking about, well, I'm investing a lot of money, that extra tax overhead and complexity overhead's worth it. If you're not investing that much money,

it's not really worth the complexity. think some of it's that. Some of it is just the access of, aside from minimum check sizes, really being able to identify and get access to the top quality funds. And then one other thing is most of these private markets are less liquid. Of course, you have exceptions to everything, but on average, your stocks, I can go right now into Fidelity and I can liquidate a million dollars of Apple stock and I'm not going to move the price by a penny. But if I have this private equity,

Best case, we're talking about a quarterly redemption window. I send it in, I get it back, there's a lot of back and forth. If it's a venture capital fund, I put a million bucks in, I'm locked up for five or 10 years there. And so part of it is if you have more money, now the good news is you tend to, on average, at least in theory, but also in practice, get paid that illiquidity premium, but you need to be able to absorb that illiquidity. So if you have significantly more assets than you need to spend them near term,

then you can't afford to have them tied up. think the same reason endowments tend to have highly illiquid assets is they can afford it, whereas somebody who only has 100 grand of buffer, it's not gonna be responsible to tie that up for a long time horizon.

Steven Weinstock (24:42)
Investors over complicate certain portfolios as they grow wealthier. Do you see that in your business and the people you're speaking to? Do you see that with yourself or is it getting easier?

Tad Fallows (24:53)
We see the whole gamut, you know, you have some people the so-called Bogle heads who say the only thing I'm ever gonna do is buy the three three three funds, know, just or maybe all do is buy the S &P 500 never touch it and and I actually would say there there's nothing I've become much more, you know tolerant of different views on these things over time. I think if that lets you sleep Well, there's a lot to be said to it stocks perform great. They're completely liquid It's always mark to market very low fees. There is nothing wrong with that and there's a lot of people in that camp

I think there are probably a lot of people who, the kind of people who tend to make a lot of money relatively early in life, they also, many of them find money interesting, know, sort of intellectually interesting and they say, okay, well, maybe they're engineers and the way you get a good job at Nvidia and get a ton of stock there or open AI is you're really good at math and you're really good at thinking about optimizing. And as these numbers get bigger, it's hard to say, there's $10 million sitting there. If I play around with a little bit, I could squeeze out another half a percent return.

Well, that's actually real money here. Or maybe I can squeeze an extra 2 % return. That's real money. And again, if it becomes $50 million, another percent on that becomes even more money. And so I think some of it is just the kind of people who find money interesting. And either you worked at a hedge fund, you get stocks, you start your own company. By definition, you had to learn about how business works. You work in real estate. You're forced to learn it. You're good at math. You're good at optimizing. So a lot of people will get into it that way.

And then it's kind of hard to unwind. say, okay, maybe I feel obnoxious trying to get the extra percentage point, but I'm not going to be so lazy as to give up 1 % a year just for some nebulous simplicity. So I think you kind of get all over the place. If I'm looking at personally, I'm honestly not as, as I said, my top-down portfolio, you would never say, Hey, you should put this much money into luxury, single-family rental real estate. Like that's just not rational, but that's kind of the portfolio I'm at. And you know, there's such high switching costs to change from there. So.

I wouldn't, some people are very disciplined. They start their top down and I want exactly 7 % in this category and 14 % in emerging markets and just rebalance constantly. I bet a lot of people are much more bottoms up of, I found this cool opportunity. My college roommate is starting this biotech and so I put 100 grand into it. I got a 10X, now I have a million dollars of private biotech. Not really like a rational allocation, but again, that money's there. So you have the whole spectrum.

Steven Weinstock (27:06)
Just to go back to what you said before, how certain high net worth individuals have low leverage. It reminded me of a conversation I was having with my business partner when Jeff Bezos was buying property, I guess, when he got divorced or whatever it was. And he, I don't know, was in the papers. He was buying houses in Florida and duplexes in Manhattan. And I must have spent three, $400 million or whatever it was.

Tad Fallows (27:21)
Yeah.

Steven Weinstock (27:33)
And me and my partner were discussing on whether he gets leverage on that. And I was saying, no, he's just paying cash for it because he has the cash. is not a business. He's not thinking about this in terms of business. This is more of just a personal toy for him. And my partner was saying, no, it doesn't matter. He's got business advisors. He's somehow leveraging it. Maybe he's getting a

Maybe it's not 80 % loan to value, but there's some sort of leverage. Maybe it's leveraging against the stock. What's your opinion on that? out of curiosity, guy like these really high net worth guys, when they're buying three, $400 million of property, are they leveraging that or are they just paying it out?

Tad Fallows (28:14)
think a lot of them are leveraging it because of the tax reasons where you say, if you're Jeff Bezos, you've got 100 billion of Amazon stock, but your cost basis on that is 10 cents. And so if I want to buy a $300 million house, I have to sell 500 million of stock. I'm paying half of it in taxes, and then I can buy my house. Whereas the famous buy, borrow, die model, you say, OK, I can just borrow 300 million, and I'll spend that in the house. The bank's fine lending it to me because they know I'm good for it.

And then when I pass away, I guess step up in basis and so my kids never pay tax on it. I think they're now that is probably more of a billionaire issue. That is less common at the 10 millionaire. But what I will say is common is that situation of the 10 millionaire says, OK, maybe I was in video. Maybe I started something and now I'm super concentrated or I just made a good bet on Tesla a while back. So I'm super concentrated. Half my portfolio is in this one stock. I'm very uncomfortable there, but I don't want to pay a quarter of my net worth to the government just to

Deconcentrate here since there is no version of a 1031 for stocks. I can't just trade some of my Apple stock for Microsoft stock that I won't get away with that. There are actually a couple of interesting things that people in that situation do. One is called, know, there's if you're philanthropically oriented and I've been doing more of this lately, you can just donate the highly appreciated stock. That's a great way to go and donor advised funds are a good way that you can make the donation today. You don't need to know the recipient today. So I always advise people to take a look at that.

You can also do what's called an exchange fund. I'm not sure if you're familiar with that. But basically, I put in a million of Bank of America stock. You put in a million of Exxon stock. And somebody else puts in a million of Microsoft. We create this pooled vehicle. We're all now riding along with it. And if it's properly pooled, it mirrors the S &P. And so I get market returns. But I have never crystallized my gain because I made an in-kind contribution. And so that's an interesting one. Comes some downside. You have a seven-year lockup and things like that. But it's interesting.

Or there's also something called direct indexing, which is a way to kind of manufacture a lot of losses. This was pioneered by some places like AQR, where if I put a million dollars into stocks, rather than buying one Vanguard fund, they're actually buying 500 little pieces of the S &P 500. And as those individual companies move around, they trade out of the losers so that they're manufacturing losses along the way. So if oil stocks go down, they'll maybe sell some Exxon and buy some Chevron. I haven't changed my oil exposure.

but I've locked in my loss on the Exxon stock, it might not sound like much, but actually, especially if you take a long short, you kind of do a 200, 100, let's say, where you buy two million of stock and you sell short one million of it, you can manufacture losses that are well in excess of the million dollars you put in, which is a little, you we don't have time to kind of explain the full mechanics here, but it actually works mathematically and it's very kosher with the tax code.

And so that there's some interesting options for those hyperconstrait positions and that's kind of stuff that people, know, anybody's listening that think sound interesting. That's kind of discussions we have in the community.

Steven Weinstock (31:05)
I know we were talking offline about this and I know your opinion on this, but let me frame it this way. You have a 35 year old who's worth $20 million and he's got kids at home. Should he have life insurance? If so, what type?

Tad Fallows (31:20)
If his kids will be fine, if he passes away on that $20 million, he does not need life insurance. If they need another $5 million to pay off the mortgage or something like that, he can buy term almost for free. And so if it's like, hey, I'm sort of on the fence about whether my wife would be comfortable, spend $1,000 a month or $1,000 a year and just buy the term insurance and you're fine there. I would say whole life insurance, in my opinion, makes sense for absolutely zero people.

It ends up being a high fee, low return vehicle that is good for the salesman and not good for a buyer at any income bracket. What I will say, and we are chatting about offline, is the one version of quote permanent life insurance that I've gone very deep on this because life insurance people are so, the salespeople, they're so persuasive that you keep thinking you're missing something, right? You're like, this guy showed me all his illustrations. There must be something to it. Every time I dig down to it, the one exception that is interesting is private placement life insurance.

And I will say, I don't sell private placement life insurance. I don't have a policy to offer. So this is, you know, I think is unbiased as you can get. I think it's very interesting. And what that is, is it is a life insurance policy, like a term, you know, so okay, I have whatever $10 million payout or $5 million payout, but it is combined, you put in a specific set of investments that are tax inefficient. So you say, okay, this one's just gonna focus, let's say on private credit.

Because as you know, doing this private credit, maybe you get a 9 or 10 % headline rate, but that's all ordinary income. So after tax, you're only making 5 or 6 % in New York. Say, well, that's not that compelling. If you put that private credit or those hedge funds in there, then they are totally shielded from taxes, not just in the growth, but you can actually withdraw the principal. you're 10 % the private credit you're putting into private placement life insurance. Let's say there's a 1 % tax or fee burden. You're getting a 9 % after tax effective return.

rather than the five or six percent you get in taxable portfolio. So I would say it's the one exception. There's a bunch of kind of challenges with this in the sense that they tend to have very high minimums and that we're actually trying to explore internally. Can we do some sort of pool thing to bring down some of those minimums? Because you can't, we're talking typically minimum premiums like a million dollars a year. So extremely high, you have to be really committed to this. We're trying to explore if we can bring that down to, know, a hundred grand a year or something to make it much more approachable. But I do think that private credit,

Private placement in particular is interesting because you really can get the tax advantages outweighing the fees the way that you cannot in whole life or cannot in VUL or IUL and that sort of thing.

Steven Weinstock (33:42)
Got it. You know, obviously you're hobnobbing with the 1 % on a regular basis. What do do for fun outside of work?

Tad Fallows (33:50)
Um, I mean, I'm passionate about being a dad. That is my number one thing. So, um, you know, doing boy scouts with my son, take my daughter dance classes, working on math projects with them. So me personally being a dad and then secondarily, I'd say, uh, exercise. And that's been a cool thing is my kids had gotten older and, my son's gaining it across country. So now my parenting can be, I'm going to go for a run with my son and train for a half marathon with him, as opposed to, you know, I loved watching him at the three year old soccer games, but I think I even more.

Enjoy the ones where it's more of a pure activity.

Steven Weinstock (34:20)
When you're sitting on the couch and you're watching TV and you're binge watching Netflix, what kind of shows are you watching? Anything good?

Tad Fallows (34:27)
Yeah.

you know, I don't watch TV. ⁓ so when I, my exception is on an airplane, that's one place I'll watch it. So I watched land man recently and, ⁓ really enjoyed land man. and, and, know, I'm, I'm, live here in Dallas, so I'm not personally an oil and gas guy, but I know a lot of oil and gas people actually did a very good job with their, their treatment of it. You know, of course it's dramatized and you're not having, people are not dealing with cartels on a day to day basis.

Steven Weinstock (34:32)
Au revoir.

Tad Fallows (34:55)
But when they talk about the geology and also just sort of the risk appetite these people have, it's to go on a bit of a tangent here, it's funny where I've invested in a few oil and gas funds and they tend to have mind blowing ROEs on drilling. Talk about like 70 % IRR or 70 % ROE on that active drilling there. And if you do it properly, you can actually hedge out your price risk. I'm drilling today, I'm fracking, so I know I'm gonna get and it's all gonna come within the next few years. So I hedge out the price.

Very few operators do that. say, well, I'm not going to accept that 70 % ROE. I think prices are going up, so I'm going to let it ride and not hedge it. And when oil goes back to 100, I'm going to get even more upside. But of course, when oil goes down to 20, then you're wiped out. that sort of everyone's a bull mindset in the oil industry, I think, is pretty accurately represented in Landman.

Steven Weinstock (35:42)
Just to go back, my thoughts on insurance are term life, meaning rent the policy, invest the rest, and I would say get a 20-year policy, and after 10 years, get another 20-year policy. And if you want to get rid of the first one, get rid of the first one. It's cheaper than getting just a 30-year upfront. you know, invest the rest, get some assets. So when the kids are out of the house,

They don't need to borrow money to bury it. So that's my opinion on life insurance. Ted, it was great to have you here. I appreciate you coming on. You said you're based in Dallas. Where are from originally? You said Louisiana?

Tad Fallows (36:19)
No, I'm from Washington, DC originally.

Steven Weinstock (36:22)
wow, okay. Very

nice. Wow. Is that where you went to school and all that?

Tad Fallows (36:26)
⁓ no we actually moved here for my wife's job and i love it you know it fortuitously moved here about a year before i sold my company been living in california before it was not for the tax treatment but it ended up working out well but but i i love texas is a place to live ⁓ you know friendly happy ⁓ nothing but good things to about dallas

Steven Weinstock (36:44)
Yeah, Texas seems to be all the rage. Ted, it was a great conversation for everyone listening. How could they reach you? Email, phone number, social security, bank account, whatever you want to share. I'll put it in the show notes, but go ahead.

Tad Fallows (36:56)
Yeah,

yeah, I'd say if anybody's interested in joining long angles, I mentioned no membership fees, be happy to talk with you just go to long angle.com and learn more about there. I do I host a podcast of my own called navigating wealth. So if you want to and that's we tend to interview a lot of members, people interesting personal stories, whether that is professional athletes, cybersecurity entrepreneurs, biotech entrepreneurs, etc. So navigating wealth, if they want to check it out, or I'm on LinkedIn.

Steven Weinstock (37:20)
without dropping any names, any famous people in your group that the average person might have heard of.

Tad Fallows (37:25)
Yeah, there are some people, whether that is on the entrepreneurship side, a few pro athletes that, you know, if you follow the sport, you would know. But I would say 95 % of the people you would not have heard of, just by the nature of things.

Steven Weinstock (37:40)
Got any names you could mention or let's just no.

Tad Fallows (37:43)
I don't think so.

Steven Weinstock (37:44)
I mean if I go to your website I'm not gonna see a picture of like Michael Jordan that says come click here

Tad Fallows (37:47)
Well, yeah.

You'll see some members there who are happy to give testimonials, but now I'm not going to out anybody as being a member. But I do think Jordan would qualify. So if he's listening, we'd love to have you.

Steven Weinstock (37:58)
Yes. Anyways, Ted, it was great having you here. Thank you for tuning in to the wealth clock with Steven Weinstag. Like, subscribe, reach out if you know anyone who should be a guest. Ted, thank you so much.

Tad Fallows (38:10)
Awesome to speak with you.