Rockefeller Capital CEO Greg Fleming on managing new-wealth AI founders and navigating the private market bubble

Speaker 6: He's the Here

Speaker 1: we go. CEO. Greg. What's going on?

Speaker 2: Welcome to the show. How are you doing?

Speaker 9: Well, good to see you, gentlemen.

Speaker 2: Thank you so much for taking the time to come chat with Since this is your first time on the show, I would love to... For you to introduce yourself for the audience and give us a little bit about your background and then your business today.

Speaker 9: Great. I'm the CEO of Rockefeller Capital Management, which we started in 2018.

Speaker 1: Mhmm.

Speaker 9: I spent most of my career in the financial services business. I was a management consultant at a company called Booz Allen and Hamilton in the late eighties, early nineties, which was actually great training for learning about lots of different industries. I went from there to Merrill Lynch, and I was an investment banker mostly in the financial services space. A noteworthy deal that I did, I was the lead banker on the IPO of BlackRock in 1999 at Woah. $14 a share. So it's done quite well since then. And I actually just rejoined the board for the second time last year.

Speaker 2: Congratulations.

Speaker 9: I was the president of Merrill Lynch during the credit crisis, and I negotiated the sale to Bank of America, which was, and I have said this before publicly, the most disappointing moment in my career. Mhmm. I was happy to keep the company out of bankruptcy, but it never should have had to be sold, and having to sell it was very difficult.

Speaker 2: Yeah.

Speaker 9: I then went to Morgan Stanley, I ran wealth and asset management, and I left there in 2016, and I wanted to start something. Mhmm. And I I found out that I could partner with the Rockefeller family by the family office that was started by John D Rockefeller way back in 1882.

Speaker 7: Yeah.

Speaker 9: So the guy who made all the money.

Speaker 1: The guy.

Speaker 9: His wealth, by the way, gentlemen, at one time was 4% of GDP. So maybe he's still the wealthiest guy in history, that family. So we partnered with them. We started a business. I was backed by a... An investor, Viking Global Investors. They've been a great partner. We started on 03/01/2018, and we built a firm that is, I think, among the best serving wealthy American families. We call them high net worth and ultra high net worth, and we provide comprehensive advice to these families.

Speaker 2: Yeah. I have so many questions. Let's start with the process of actually building the firm. Wealth managers have lots of different products, lots of different relationships. How did you think about building out a portfolio of offerings quickly as an upstart firm to actually give a client who's coming along for the ride at the early stages a full service experience? Was this like a hiring spree? Was this partnering with other banks and firms to try and fill gaps? What was the secret to actually delivering a top tier level of service quickly?

Speaker 9: That is a great first question because the reality was we bought Rock and Co, which was originally the the family office. There wasn't that much there. We had to build it.

Speaker 2: Yeah.

Speaker 9: So it, you know, it was the classic j curve in the first couple years. We were investing Mhmm. Because you couldn't really onboard those families that have a complex set of needs. Yeah. And so you had a broader set of capabilities. So the first figure... Few years was a significant investment time for us.

Speaker 2: Yeah.

Speaker 9: We started hiring the private adviser teams to take the lead working with these families in late eighteen, early nineteen, but we started building the capabilities right out of the gate. And it's really taken us... You know, we're... We have our ninth anniversary next March. We've been building, building during this time, and only in the last few years did we have all the capabilities in place so we could provide comprehensive advice, generational tax Yeah. Financial education. If the family owns a business, we give them advice on that. We have a boutique investment bank.

Speaker 2: Sure.

Speaker 9: It was only in the last few years that we really had all those capabilities come together so that we could really start to grow the firm.

Speaker 2: So obviously, the brand is is incredibly storied, but... And and you had, you know, an incredible journey in your career. Obviously tons of connections. But how did you think about the top of funnel? How did you think about onboarding clients? And then once you'd onboarded that initial set of tapping your Rolodex, I imagine, how did you think about growing that client base? What actually works in this particular market? I imagine it's not Super Bowl ads, but what does move the needle in the modern era?

Speaker 9: You know, the thing that we think is the secret sauce is providing advice across the full range of the family's needs. Mhmm. Because wealthy families have a complex set of needs. They're they're trying to plan generational passage of wealth. We do that. We give them a lot of tax advice. We put them in the invest... Investment solutions, and those include the best alternative managers, also direct investments. You know, we put clients in in a lot of the companies that you guys talk about

Speaker 1: Yeah.

Speaker 9: That are earlier on. We provide advice on how to talk to the next generation about money. We have a NextGen advisory council with some of the, you know, prominent wealthy American families represented on that NextGen advisory council. We do philanthropic advisory. We find that most of our families... One of the greatest thing about The United States, in addition to the whole entrepreneurial machine that you guys talk about all the time, is the philanthropy.

Speaker 2: Mhmm.

Speaker 9: $600,000,000,000 given away every year. Almost every single family that we work with wants us to help them put in place a philanthropy plan, including young wealthy people. Wealthy, you know, new, you know, new people making new wealth at some of these AI startup companies. Even if they're on the younger side, young people want comprehensive advice right up front. They wanna obviously, you know, spend some of the money, save some of the money, but they also wanna start giving it away. So we do a lot of... We spend a lot of time on the philanthropy side. That comprehensive advice, nobody really did that in the way that we do it when we built... When we started building our company. That was, you know, what we really set out to do.

Speaker 2: How is the how is the upper echelon of, like, family office and multifamily office business changing what you do? Is that is there just a demand for a wider breadth of services for a longer period of time? Is there something where you need to react to the fact that some ultra high net worth individuals are building whole trading desks and real estate teams and they're doing like such complex management that you still wanna partner with them in some meaningful way or advise them on their journey.

Speaker 9: You know, John, for most of them, until you get to, you know, really significant wealth, you know, north of $10,000,000,000

Speaker 2: Yeah.

Speaker 9: That's enough wealth to really have a a fully staffed family office.

Speaker 2: Yeah.

Speaker 9: But, you know, in the first, certainly hundreds of millions into the early billions, you know, we encourage families to think about using us because we'll do everything that they can build. Sure. We do it for lots of families. Yeah. And it's easier for us to deliver that for them than it is for them to build it and manage it. There are headaches involved in building your own family office. So the the very high end will will, you know, do everything in house. But really, everybody else is a potential client for us, and and and even the very wealthy families will some... Sometimes do some aspects of things for them. Mhmm. They'll have a lot of it internal, but they might be turning to us for advice on different kind of investments.

Speaker 2: Sure.

Speaker 9: Or, you know, for for help on some of the sophisticated tax and and estate planning, they might turn to us for that. But, you know, right up to a couple billion dollars, that's a sweet spot for us.

Speaker 2: Got it.

Speaker 1: How how has your, you know, private market strategy evolved over the last few years? So many of the world's most exciting companies have obviously stayed private for a long time. They're also quite high profile, so I imagine some of that strategy ends up being led by the client base coming to you and and various, you know, people on your team saying, get me into Anderol or get me into x y z, you know, name. And it feels like it's probably coming, you know, the the the the ultimate strategy is being led in some way by by both sides.

Speaker 9: It is, Jordy. And and in fact, you know, Rockefeller Capital Management, we're in over 30 wealth centers over 50 cities across the country, and one of the reasons we do that is we wanna be embedded in local communities with the clients, with the families, because wealth is created in this country. You know, when I was younger, you had a a a certain set of cities, they're still there, New York and Boston and Houston and Dallas. But now you've got Nashville and Charlotte. Obviously, many places in Florida and and and in California, obviously, Silicon Valley. So we're in these communities. So we'll often have people working at, you know, the the the companies that are getting built and built quickly come to our advisers and look for help. So we get a lot of introductions that way because we're embedded in the community. And we do a lot of work with entrepreneurs across all different industries. And and, frankly, they benefit from our advice because they're really spending $24.07 building these companies. And they're not... They don't have the time. They don't really have the training to do the types of things that we do in terms of helping them start to think about, you know, more of a diversified approach to long term investing, philanthropy, things like that. So it's been a great... The, you know, the the the... This whole growth in in entrepreneurs. I mean, I think we have 6,200,000 new companies being created The United States this year, which will be a record. This entrepreneurial surge has been great for us in terms of creating clients all over the country.

Speaker 2: Yeah. Totally. I wanna talk about the research the research function at the firm. I imagine that clients want your house view on interest rates and inflation and whether AI is a bubble or not. How do you think about answering those questions? What team members do you have in place? How do you grapple with, like, the hot questions of the day to keep, a consistent view from a firm, but also tailor the advice to the specific client?

Speaker 9: Yeah. We we have a chief investment officer, Jimmy Chang, who takes the lead on pulling together a firm view. I have another colleague, Roshir Sharma, who writes every other week in the Feet. He's our chairman of international. So we've got some great minds. Yeah. You know, and I I I spend a lot of time on this myself because clients ask me all the time, and I'll give them my my own my own views. I've been pretty clear that this technology is revolutionary. I'm in I'm in my thirty ninth year in in my professional career. I've seen a lot, but there's nothing like this technology in terms of its impact on every part of society. You know, you have the CapEx investment and and all the data centers and everything that's that's happening there, is driving the economy. But then you have the other side of it, is every private and public company in the country trying to figure out what to do with these tools, how to use them, how to drive productivity in your firm, how to enhance the client experience. So, you know, we think this is a revolutionary technology and and is beyond anything that's happened to this point, frankly, in human history.

Speaker 2: At the same time... So I completely agree with you, obviously. But at the same time, there are a number of Cassandra's out there right now, and that is offset by a lot of investors, lot of people in finance who have lived through the great financial crisis or .com or both. And I'm wondering, from your experience, what are the canaries in the coal mine that you do look towards as useful signals for something maybe getting too far? Because even when the technology is real, there's always a risk of overinvesting. Right?

Speaker 9: Yeah. Look. I mean, you know, I... And I I lived through both of those times, .com and the and the financial crisis. Not every dollar is gonna get the return that you're... That it's looking for when you have a time like this with this kind of massive investment. That's clear. The question is, is the overall technology gonna pull the economy and productivity forward in a way where it's going to have the kind of impact that we all hope for? I believe the latter is going to take place. I think that you're already starting to see some signs of productivity and improvement. Now the... You know, you got different people arguing about that, but, you know, output per per hour seems to be going up in some industries without employment going up. So, you know, as long as all of the investment leads to the kind of growth in the economy, the growth in productivity, this obviously what the government's hoping for because, you know, one canary in the coal mine that we could talk about is the fiscal debt situation, which is unique in my history and is a problem and may be driving some of the longer term rates up. Yeah. But from an AI standpoint, if the overall investment that's being made, trillions of dollars, leads to the the effect on the economy and on productivity across thousands of companies and every part of society, then the the the return on the capital will be there. But it'll be differentiated. Not everybody will be a winner. There will be winners and losers.

Speaker 2: Yep.

Speaker 9: And, you know, even though we saw... And I lived through this, the .com explode, you know, in in 2000 and 2001. Obviously, there were tremendous companies that ended up coming out of that. Yeah. And the same thing coming out of the credit crisis. So not everybody's gonna be a winner when you're looking at investments and, you know, and and the capital that's chasing different companies now. Some of them will will justify the the the capital investment, some won't. But from a macro standpoint, I'm optimistic that all of this capital that's behind this whole AI investment will have the impact on the economy, productivity, you know, people's incomes, you know, a lot of the positives that are in the in the dialogue, I I think that that can come to pass.

Speaker 1: Yeah. How how are you processing the obvious bubble in in the early stage technology private markets, you know, where you have a company that goes from, you know, being worth, let's say, $0 to, you know, $2,000,000,000 a couple months later. You're talking

Speaker 2: about like pre revenue?

Speaker 1: Yeah. Yeah. I mean, right now, there's all this NAV appreciation that you're seeing across the, you know, the top early stage funds because there's effectively multiple rounds happening in a very short period of time. There's so much excitement around these companies and these categories and the TAMs feel so big that it's easy to get around to justifying, hey, if we give this company $500,000,000 and they're going after this hard problem and there's meaningful technology change, they're going be able to figure something out. But at the same time, we go through this every week where we'll have multiple times a week, we'll have a company on the show we've never heard of and somehow they they have, you know, $500,000,000 of of fresh capital and, you know, pretty small revenue base at least and a lot of potential, but it's a little bit nerve wracking having, you know, just gone through a similar investment cycle in in 2020 and 2021, although we didn't have this this sort of same technology shift.

Speaker 9: Yeah. We didn't have the underlying technology shift, but, yeah, there there was that cycle. And remember, again, I did live the Internet cycle, and John's saying, while you were, asking the question, Jordy, pre revenue, that was, remember, clicks and different things that were looked at in '98 and '99.

Speaker 1: And now it's just like talent it's talent density. It's like if you get five... And so and and so the investment thesis is just like, hey. These... We got five really smart people here. Time to give them 500,000,000. You know?

Speaker 9: Yeah. Look. I mean, you know, in '99, you get in a taxi, and the taxi driver would ask you for three recommendations on on, you know, stocks he could buy or companies he could invest in. So there's some of that going on now. No question. The way we deal with it... First of we do a lot of diligence on the private investment side as well. Mhmm. We try to only put things in front of our advisers and clients that we think, you know, look like they could pass the test of time here, but that's still a challenge given the number and and quantity that are coming out, Jordy. When you guys are seeing companies that you've never heard of and you live in this ecosystem Sure. We're gonna see companies that we've not heard of as well. Diversification is the way that we do it with our clients. And also, not just diversification within the space, but only a certain amount of the capital goes into this this part of their capital allocation plan. So, you you know, we... We're... We have these families, you know, broadly diversified across alternatives, obviously, some public market exposure on the equity and even on the fixed income side with rates backing up, And then a certain amount of the capital into things that, you know, fit the bill with what you're describing, where, you know, some of them might work and some of them won't work, but, the client is not exposed to more risks than they should be taking given the fact that we're in a we're in a time like that. And we're definitely in a time like that.

Speaker 2: Yeah.

Speaker 9: What's different about this time... And that's always a dangerous phrase, I've been around long enough to know that. But what's different about this time, and John was saying this before, the underlying technology and the underlying, you know, business shift is real.

Speaker 2: Yeah.

Speaker 9: Yeah. But a lot of these companies are not going to get the valuations that they're being awarded now.

Speaker 2: Yeah. One more.

Speaker 1: Yeah. One more. How do you how have you processed how success ends up clouding the judgment of otherwise really smart people?

Speaker 2: That's a good question.

Speaker 1: And and you even talked about a low point in your career with Merrill Lynch which avoided the worst case scenario. Yeah. But when you have absolutely knocked it out of the park for long enough, you start, you know, otherwise smart people start to not even be able to imagine the possibility

Speaker 6: of

Speaker 1: failure, and I'm seeing this, you know, just in the private markets where we're spending most of our time. Some of these managers have put up such unbelievable results for the past few years that that that... And and and at at a certain point, you start feeling like you're you're playing with, like, house money to some degree too, is which is another dynamic. But You know? But having seen a bunch... All sorts of managers across across your career, like, when do when do you feel like... What are the signs that you look for to to think, like, okay. Maybe this person's overplaying their hand.

Speaker 9: Well, you know, part of it is is what you describe as even generational. Have they been through the cycles? Is this the only cycle that they're seeing? Part of it is back to the diversification, you know, I was talking about before.

Speaker 2: Mhmm.

Speaker 9: But, you know, you're... What you're describing is an incredible... Is spot on in terms of what's going on right now. I mean, you know, you have clients that everybody's kind of expecting... You know, anybody who got into SpaceX early, you know, that... That's kind of the vision they have for every private investment. You know? Am I gonna be up thirty, forty, 50 times?

Speaker 2: Yeah.

Speaker 9: It's like, look. This is, you know, not something that is, you know, recurs on a regular basis. You know, I was looking at the scale of companies now. Apple was the first trillion dollar company. I think it was 2018 or 2019. There are now 15 or 16.

Speaker 7: Yeah.

Speaker 9: I mean, it is... There... There's a a momentum here. And, you know, look. This is what what our advisers do. They've been around a long time. They've been working with wealthy families. They say, you know, let's stick with the plan. We can put this much capital and these types of investments. You know, we like these vehicles here for these... For this reason. We think this vehicle might be too speculative. We think these people, they've done well, but they've really only seen one cycle, so we wanna be careful there. Our advisers are providing that kind of advice, and we're constantly reminding, you know, people throughout the firm because I've lived these cycles, and and and this one, you know, is taking on some of those characteristics. Again, having said that, the underlying driver is real Yeah. But there will be winners and losers. We look at diversification. We say to clients, just a portion of the capital, be careful, and let's look for managers that have actually seen something go wrong because things go right and they go wrong.

Speaker 2: Last question for me. How have you grappled with or implemented AI at the firm level? Not as an investment strategy, but just you can imagine, you know, every email getting passed through AI. But wealth management is a luxury product. Some clients might want a handcrafted email even if it's takes a little bit longer. Where have you seen it integrate usefully versus okay. Maybe we're gonna sit that one out.

Speaker 9: Well, you know, one of the great things about our business because the clients... There's so much complexity around taking care of these families. The interface stays human beings. Yeah. So the advisor's gonna stay on front... Out front, and we think that's the case for decades and decades. The family will come in, and they will meet with the advisor and the team. Yeah. We use AI as a growth enabler.

Speaker 2: Mhmm.

Speaker 9: We're... And and, you know, we've got partnerships with some of the top firms. We're building things ourselves. Mhmm. We're trying to make the advisor teams more efficient in dealing with clients. So a lot of things that used to be more manual or semi manual will be done by agents.

Speaker 2: Yeah.

Speaker 9: And we're working on that. So for... I'll give you an example of that. Advisors spend a lot of time getting ready for the meeting with the family. They have the meeting, then they have the follow-up Yep. And, you know, making sure the follow-up occurs and the investments occur. We're trying to automate that meeting prep, you know, and have an agent really help pull that string all the way through.

Speaker 2: Yeah.

Speaker 9: So that's the type of thing that we're we're we're investing in so that the adviser teams become more productive, gives them more time with clients, they can work with more clients, and and and we think the tools will be very efficacious there.

Speaker 2: Yeah. Removing the drudgery from just piecing the other portfolio, understanding what's happening. It makes so much sense. Thank you for coming on the show.

Speaker 1: This was Yeah. Very, very cool. We love you, Greg.

Speaker 3: We can talk

Speaker 2: more soon. Have a great rest of your day.

Speaker 1: Yeah. Let's do it again soon.

Speaker 6: You too.

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