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Today’s episode features an impressive guest, Tom Bratkovich,
Managing Director at DCA Family Office. With a unique background as an aerospace engineer turned venture capitalist, Tom has spent decades at the intersection of private markets, institutional investing, and family office wealth management. His extensive track record includes building a venture platform inside a multibillion-dollar family office, advising large pension plans and sovereign wealth funds, and now guiding ultra-wealthy families to engineer tax-advantaged investment strategies.
Hosted by Dave Wolcott, this episode is a masterclass in how sophisticated capital is being deployed in 2026 and beyond. Tom pulls back the curtain on the practical frameworks family offices use to navigate the volatile macro environment, explaining how real assets, alternative yield structures, and tax incentives can work together for long-term wealth generation. He also shares insights on deal flow, due diligence, and the vital importance of integrating investment, tax, and estate planning rather than operating in silos.
Listeners will gain a clear understanding of the advantages of private market investing, especially when it comes to maximizing after-tax returns. Tom explains why diversification is key, how to evaluate sponsors, and the role human relationships and networks play in successful investing—an essential perspective for anyone seeking to accelerate their wealth trajectory.
In This Episode
- Tom’s journey from engineering and entrepreneurship to family office investing
- Asset classes family offices focus on, and how tax incentives drive investment selection
- Approaches to deal flow and rigorous due diligence
- The importance of integrating investment, tax, and estate strategies for compounding wealth
The more that we from the investment side and the trust and estate folks and the tax CPAs can actually get together and work together not only on developing a plan but then executing on that, I think it’s going to really change things and help in long-term wealth generation quite a bit.
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy podcast, where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and want to learn about hidden strategies for making your money work for you? And now your host, Dave Wolcott, serial entrepreneur and author of the bestselling book The Holistic Wealth Strategy.
Welcome back to Wealth Strategy Secrets of the Ultra Wealthy. Today’s conversation is a masterclass in how sophisticated capital is being deployed in 2026 and beyond through the lens of someone who’s lived on the inside of family offices, institutions, and private markets for decades. My guest is Tom Bratkovich of DCA Family Office. Tom brings a rare blend of experience. He started as an aerospace engineer and entrepreneur, moved into venture capital, built a venture platform inside a multibillion-dollar family office, advised major pension plans and sovereign wealth funds, and now helps ultra-high-net-worth families structure tax-advantaged private market investing.
In this episode, we get very practical about how family offices are thinking about portfolio construction in a volatile macro environment, where private markets are still creating true alpha, and where they can quietly create tax drag. The difference between private credit and what Tom calls alternative yield, what a real diligence funnel looks like when you’re reviewing over 1,000 deals a year, and why the best investors are willing to walk away. And lastly, one of the most important insights of all: most wealthy families have world-class advisors, but those advisors often operate in silos. Tom explains why integrating investments and tax and trust and estate is where the real compounding advantage happens.
If you’ve ever wondered how family offices actually filter deals, evaluate sponsors, and engineer after-tax outcomes, not just headline returns, you’re going to get a lot out of this one. Tom, welcome to the show.
Dave, thanks for having me. Really appreciate it.
Yeah, great to see you again, Tom, and really looking forward to our discussion today, which I think is going to be quite illuminating for many in the audience in terms of how family offices are really seeing the world in 2026 and beyond. What asset classes are you allocating to? How are you structuring due diligence and looking at sponsors these days? There’s just so much volatility, uncertainty out there, right? And so I think it’ll be helpful to understand the lens that you’re looking at investing from and placing precious capital, how you’re stewarding that for your family and the families that you serve. But before we start that, tell us a bit about how you actually got into the family office space and investing.
Sure. And thanks for having me, and thanks to your team too for helping pull this together. I was an aerospace engineer first part of my life, so a little bit of a different origin story perhaps than others. Back in the ’90s, I built an aerospace startup with some other fellows up in Seattle. It was not a huge success, but it was one of those crazy entrepreneurial rides, which I know a lot of your audience have gone through similar kinds of things. In the end, we sold it to a very large aerospace company that everybody knows.
I had the bug at that point. I knew that I wanted to always be working with small companies at the cusp of innovation, trying to do new things. I went back to business school and came out as a venture capitalist out here on the West Coast. It was a learning period for me for sure. This was back in 2001, and anyone who got into venture at that time certainly went through some scars. But those things make you stronger. I was with a top 10 Silicon Valley firm, and then my first family office experience was building a venture platform for a large $4 billion AUM entrepreneur.
He was just starting his family office, and I built out a venture platform there and then helped him build out the rest of the family office. Eventually we had about 60 people. That was the first time I learned what the internal guts of a family office look like and how you do investments around that. I then got into the institutional side of the business and spent a fair chunk of my career doing that—very formative years. I worked for very large pension plans and sovereign wealth funds around the world. My clients were people like CalPERS, CalSTRS, New York Common Retirement Plan, some of the Canadian pension plans, and the Mideast sovereign wealth funds.
Our team was small, about 35 people, but we did everything soup to nuts for them around private equity, real estate, infrastructure, and private credit—helping them source, screen, diligence deals, find great GP sponsors to work with, and build their platforms. After that, I spent about six years helping mostly mid-market and lower mid-market private equity firms build their businesses. So a lot of new fund formation, work on launching new funds, portfolio restructuring deals, seed deals, stake deals—also a very fascinating part of the private markets industry. I was with a large financial services firm down in Los Angeles for a couple of years. They had a 30–40 person private markets team, and we were putting out about $2 billion a year in private equity, real estate, infrastructure, and private credit. Then I joined the DCA team here about four years ago. Maybe I can tell you a little bit about the origin story, and that will connect the dots in terms of what we focus on here.
And then we can start more of that conversation. Would that be appropriate?
That’s perfect.
All right, great, Dave. So DCA has been around the Central Valley region of California and Reno for many years, 20–25 years. The firm historically has operated as a merchant bank, and most people know what that model is if they’ve been around. Essentially, it pairs up for families and family business owners an M&A arm that does buy-and-sell transactions and helps them find capital or get exits out of their business with an investment team. The investment team mainly focused on private equity, writing $5–10 million growth and buyout checks for family-owned businesses.
They were working with a client, a large family here, helping them build that client’s business through tuck-in acquisitions. Eventually that family’s business got fairly large, and they then asked the DCA team to sell it. Back in 2021, that was successful.
That family then asked us to build them an investment team to help invest the proceeds. That’s when I came on board. This was about four years ago, and it was a fairly large transaction. The family wanted to invest in things they could actually be a part of helping to grow and develop—see it, touch it, kick it, feel it, understand it. Not just get a quarterly report, but be very involved in the development of the investments and the actual value creation around them. That was one of the things we had to figure out.
They wanted to do private markets, which was good because that’s the structure and background of myself and most of the team here. But they were staring down the barrel of a massive tax bill from selling this decades-old company. We had to figure out how to do private markets investments in a way that could alleviate that tax burden to the degree possible—either defer taxes or outright knock out taxes. So we came up with a program focused on tax-advantaged private markets investments, and that has now become our calling card. Along the way, we’ve done tens of investments for them and put quite a bit of their wealth to work doing co-investment deals and direct deals in private equity, real estate, infrastructure, and certain categories of what we call alternative yield, doing that in a tax-efficient manner. And happy to tell you about what we’ve done on some of those fronts and how we think about it and how that kind of structure and application could apply to some of your listeners here.
Yeah, appreciate that framework, Tom. Before we jump into some of the details, can you talk to us a bit about the asset classes you focus on in real assets and why?
Yeah, absolutely. In private markets, there are really four big categories, maybe five, and then lots of subcategories. Most people know what private equity is, with subcategories like buyouts, venture, secondaries, distressed. Then there’s private credit. A lot of people know what direct lending is—lending dollars to private companies. There are various subsleeves of that. And then there’s a whole category we call alternative yield, which has credit-like aspects but isn’t necessarily about lending to a company.
We spend a lot of time in alternative yield, which I’ll go through in a second. Then real estate—there are all kinds of different real estate out there. I think everybody knows what they are. You look out your window, you’re going to see real estate. The building you’re sitting in is real estate, obviously. We spend a lot of time in those sleeves, which I’ll go through too.
Then there are things classified as other real assets, low-correlated things like infrastructure, agriculture, timber, and other kinds of assets that are a little off the beaten path and have lower correlations. We spend time in all those categories, but since our focus is tax-efficient investments for tax-sensitive clients, we’ve had to narrow down the scope compared to what an institutional investor might do. For example, CalPERS or CalSTRS are going to have some of everything I just mentioned, and not just some—probably a lot, given their scale. But for tax-sensitive clients, once you consider the tax efficiency, good or bad, around a given investment, it focuses you on narrower categories.
So, in real estate, for example, we do a lot in hotels, multifamily apartment complexes, mobile home parks, something we call corner retail—car washes, drugstore plots, sale-leaseback around corner plots. We do a lot in cold storage and some things in data centers.
These all have something in common versus other kinds of real estate like single-family homes, large office towers, or industrial warehouses. What they have in common is tax-advantaged programs. If you do the investment correctly and the client or family has structured themselves from a tax positioning standpoint correctly, you can use federal incentive programs and drive a lot of tax alpha out of these deals—saving taxes while simultaneously investing in new assets. That’s an example on the real estate side.
Agriculture is another example. We do a lot in permanent crops—orchards, vineyards, stone fruits, blueberry bushes, hops. Anything that’s a permanent crop has tax incentives associated with it. Other crops like row crops—corn, soybeans—are not as tax efficient and don’t have as many incentives. So again, we focus on the more incentivized programs where we can drive tax alpha more significantly.
Back to private credit. Most people in the ultra-high-net-worth world know, or should know, that straight direct lending—standard private credit—is terribly tax inefficient. As soon as you sign up for one of those deals, you’re signing up for a lot of ordinary income and interest income taxed at the highest rate. There aren’t really tax incentive programs to offset that. But in alternative yield, for example, equipment leasing and financing, we spend a lot of time. Think buying and holding leased aircraft, commercial airliners, barges, rail cars, construction equipment. These are highly tax-efficient.
These leases can be long-term, backed by corporate entities you can underwrite as credit. They produce stable cash flows, so they look a lot like bonds or direct lending. But they generate federal tax incentive programs you can use. Therefore, there’s a lot of tax alpha around them, and they’re a much better play for a taxable client than straight direct lending. These are just a few examples. I could go on, Dave, but that’s how we pick and choose our spots—making sure that when we work with a client or ultra-high-net-worth family, we’re really considering their tax situation in addition to finding great investments for their portfolio.
Yeah. No, I think that really makes sense. A lot of listeners are thinking about portfolio construction—where do I allocate, especially given the times? Obviously, there’s a lot that’s bespoke to that, whether taxes, a big capital gains event, or something else happening. But do you have any guidelines or parameters you could share with the audience in terms of how to think about a typical allocation structure? Maybe something like Tiger 21 or the Yale Endowment Fund as an example?
Family offices don’t chase deals, they engineer outcomes.
Any perspective on that? Yeah. I guess the first thing I’d say is the standard thing anyone who’s been investing a long time would say: diversification is key. A lot of families have made their money and done very well doing one thing, or maybe two things. Once they stop operating their business—maybe they sell it or invest some of the ongoing income or proceeds—they have a choice. They could keep doing the areas they know well. For example, a tech entrepreneur who made money in cybersecurity might say, “I know all the cybersecurity people, I know what’s good, I know what’s coming out, I want to stay in that community and provide value.” So they keep investing in that narrow sector.
The other choice would be: I’ve done really well in cybersecurity, but there are a lot of other investments out there. Finding things with low correlation to my family’s majority holdings would be smart. As one of my business school professors used to say, there’s no free lunch in investing, but diversification is about as close as you can get. It’s about building an efficient portfolio where not everything zigs and zags at the same time. You want things that, when one isn’t doing well, another is. That’s about finding low-correlation assets. So we tend to recommend more diversified portfolios instead of sticking to just one or two things. That’s a generalized statement. Now, back to your question on parameters—the Yale model is interesting.
Many decades ago, I met David Swensen. I know a lot of people have met him, and he’s a phenomenal investor. The Yale model has always been highly focused on alts, but also highly focused on venture capital within alts. When you start to think about a diversified portfolio—we call it the pie chart—where are you allocated and what percent of your dollars go to each thing? You’re probably going to have some in public stocks, some in public fixed income, and some in alts.
The question we deal with a lot for clients is: within alts, what do you want that pie chart to look like for the spread of different things? Not all things are created equal. We have a really interesting chart we use—it goes through each private market sub-asset class, many of which I described earlier. What is the baseline return profile you should expect from deals like this if you’re investing at the median, second quartile, or first quartile? What does the return profile look like?
What’s the risk around those things? Because they all have different risk profiles. How do they correlate with each other and/or with public markets, which is really important? And then finally, the third dimension: tax profile. How tax efficient are these things? Are they good or bad from that perspective? Once you have a sense of that for the different asset classes or sub-asset classes, you start to get a sense of what good portfolio construction might look like.
Honestly, it’s different for each client. There’s no one-size-fits-all, especially in alts. Clients have different views, affinities, tax situations, risk appetites, and return concepts. So we find it’s not a one-size-fits-all thing.
You see more of that one-size-fits-all mindset in larger institutions, maybe Yale being an outlier because it clearly has a different asset allocation look than many big institutions. But most institutions generally run off the same playbook, a pretty standard template. Family offices, however, are more customized, more unique to individual situations. They also tend to be more interested in alts than institutions are. Looking at their pie charts, many family offices today are more invested in alts than large institutions.
Yeah. Let’s unpack that a little bit, Tom. A lot of our listeners might be newer to investing in private markets, or maybe some have just done a couple of investments here or there. But as you said, a predominant amount of families are investing in real assets on the private side. Can you talk a little about your philosophy in terms of private investing versus exposure to public markets?
Yeah. At a high level, philosophically, private markets have generally outperformed their sister or cousin investments in public markets over the last three decades. That data is in now. Obviously, we’re going through this tremendous public markets bull market right now, and everybody sees that and says, wow. But over time, slow, steady, methodical investing, private markets have outperformed.
Twenty-five years ago, we didn’t have that data. We didn’t know. Anecdotally, everyone thought private markets were doing pretty well relative to publics, but it took decades for data providers to build indices and benchmarks for private markets.
You can start at the big private markets level, then drill down to private equity. Show me how buyouts have done. Show me how buyouts have done in North America. Show me how buyouts have done below a certain enterprise value size. There are data resources now, and you can see how private markets investments in aggregate have performed versus public markets. We’ve mapped those out—lines of return over time, risk, volatility. Others have too.
Essentially, the data is in: private markets have outperformed. Philosophically, we are strong believers in private markets. Otherwise, we wouldn’t have put our careers into this. Part of it is the better return profile. In certain cases, not all, the risks are different, but now you can measure and quantify risk relative to publics. Some asset classes have entirely different risk profiles—sometimes less volatility, more steady depending on what you’re buying.
So philosophically, we’re believers. But the answer is not “just go put 100% of your portfolio in private markets.” There’s always a place for publics, always a need for liquidity. Same with fixed income. All these things have a role in a portfolio. Our philosophy is private markets should play a fairly significant role.
I saw UBS data about a year ago. They polled family offices worldwide. The US numbers showed private markets allocations for families are, if not at 50%, pretty close to 50% these days.
So we believe in a philosophical pie chart that looks something like that. If you’re trying to drive alpha, especially if you can do it in a tax-advantaged manner and put tax alpha on top, that’s a compelling way to build long-term wealth.
Yeah. I was just going to ask about tax, because that’s where you get the best advantages—investing directly in privates versus publics?
Yeah. I’ve been speaking with and getting to know our public equity counterparts—the people who do tax loss harvesting on the public side. This is a big thing. For ultra-high-net-worths, most folks have some of this operating around their public markets portfolio. There are big players in the space. I won’t name names, but most people know them. There are probably 20, and every six months somebody launches a new product.
It’s interesting talking to them. There’s a set of well-defined tools for tax mitigation around public markets portfolios, mostly equities. On the private side, not so much. It’s newer, frontier-ish. These tax incentive programs have existed for years, if not decades—they’re federally legislated—but they change with each administration. Somebody tweaks them with a new tax bill. Everyone’s individual tax situation, especially in private markets, is different.
So it’s complicated. We’re interested in educating the industry on how you can do things similar to tax loss harvesting in publics, but apply them to private portfolios. Use private investments that might have different utility within someone’s tax regime. We spend a lot of time doing that, talking to tax loss harvesters, bouncing ideas, asking: you can do this on a 1040, but what if you had this extra tool? We’re spending time educating the broader community, demonstrating things we’ve done. It’s a building trend. Still early. A lot of the ultra-high-net-worth community is still learning how to get the right allocation and access to private markets.
But quickly on its heels is the next question: how do I do this in a way that saves or mitigates my taxes as much as possible, so I can keep my money and build AUM faster? That essentially is tax alpha.
We spend a lot of time around that. Yeah, it’s interesting, right? The private markets and tax here, it’s very opaque, right? And to your point, there’s just been much less data, right, over time to be able to kind of look at those different types of things. But I’m sure that’s changing rapidly as we speak with AI and lots of different tools and analytics that’ll come out to be able to do that. We’ve certainly found great opportunities with tax yield on the private side. And of course, now it’s really one of the best ways to, as you say, increase AUM or your net worth, right? Taxes in the strategy. So, talk to us a bit about diligence. I know you have quite a bit of deal flow that you go through and everything, but help families understand a little bit about, number one, your filter criteria. You have so much deal flow really coming through, so how do you—and you only have so much time—how do you really sort through that? And then at the next level, if you were to take that second look and start the process?
You know, what does that really look like? Yeah, so, it’s a good question. And this is part of just being a good sound investor. Yeah, you want to—as one of my friends used to say all the time—you want to see as much as you can. You want to see everything out there, but you want to invest in almost none of it, right? You want to invest in only the best of the best. We call it funneling it down, right? Top of the funnel, very large, very wide, see lots of deals, helps you build market expertise, helps you build information. But as you start doing work on things or picking things up, you’re constantly declining things nonstop until the best of the best survive. It’s survival of the fittest in some sense on prosecuting deals.
But to get to your question more specifically, different folks see different numbers of deals. There’s no dearth of deals. There’s no shortage of access points these days. That used to be hard, but it’s not anymore. I think everybody you talk to has got access to a bunch of private markets deals of various types and shapes. We see about 1,500 a year, give or take. Most of our deals and what tends to pique our interest is, we have partnerships we’ve developed with GP sponsors who are well-heeled in a sector focus, for example, or they’ve been doing the same thing for 20 years. They’ve raised multiple funds, they’ve been successful, and we do a lot of sourcing of our deals from them.
If they know who you are and you know who they are, they’re willing to share access to those deals. You have to be knowledgeable about how to approach them and how to structure those deals with them. So finding deals from the experts is really point number one, which is all of us like to think that we’re experts in things, but really the people who’ve been doing something for 20 years in their career, they’re probably a lot better at doing X than you are. And recognizing who you are and who you aren’t from an investor perspective and your knowledge base is one of the biggest lessons I think is really important for everybody out there in the investment community, the advising community for ultra-high-net-worths, is go find the best of the best and get them to basically be helping you along the way. That’s one of the major points here, right? So we see a lot. If they come from people that we’ve worked with in the past and that we know very well, we’re probably going to look at that deal. Will we spend oodles of time on it? It depends. If it’s a good deal, bad deal, fits what we’re looking for, back to that pie chart construction, our client’s tax situation in any given year, kinds of things they’re interested in, what they want to be involved in, and what we find interesting and intriguing as perhaps being less correlated with the norm, not having a lot of competition.
The real compounding advantage happens when investments, tax strategy, and trust and estate planning work together.
It’s all the things you look for when you’re looking at an investment and trying to figure out whether it might be investable. But my first point is that the people are really important, notwithstanding AI and everything else. The humans around these deals—it is still very much a human-oriented business. It will be, I don’t know, forever, but it will be for a long, long time, because humans have an amazing set of experiences, networks. And it still is a people business. So anyways, if you’d like to hear more about how we do that, we’re taking a look at all these things at the top of the funnel, we’re screening them, tossing a bunch out. Then we get to the ones that we pick up and say, that’s interesting, I might want to do some preliminary diligence on that. And we’ll start doing preliminary diligence on those.
For us personally, we might pick up 6, 8, 10 deals a quarter to kind of get to that phase. And we’ll start spending time on them. So we’ll organize deal teams from our staff and get them allocated. They’ll start doing work. Those teams need to come with some preliminary assessment to our investment committee, full written reports around what they’re finding, risks, possibilities, all the different factors you would consider. And then we’re chunking it down from there. We’re saying, okay, great. You guys did like this deal.
You didn’t like this deal. We’re just hacking a bunch more out. And then the ones that make it to the cream of the crop, we’re like, “Okay, we’re really going to go after this deal and we’re going to go do full diligence on it. Might take us X weeks or months to do diligence on things, but we’re going to really lean in and we’re going to do a whole pile of work and we’re going to diligence these things.” And then you say, “Okay,” get to your investment committee and say, do we cross all the i’s, do we dot all the t’s? Is this something we’re going to commit to? And if so, then it gets into legal and closing. And by the way, deals fall out in legal and closing all the time. Even then at the bottom of the funnel, things are still getting kicked out for various reasons. You find out that you thought you had a term negotiated with someone on a counterparty as a seller or whatever, you’re trying to buy something and nope, that seller actually didn’t remember you talking about that term or whatever. And it’s a critical term.
And okay, being willing to walk away from these things is really, really important. And it’s hard, right, as you go through and you spend a lot of time and energy on them. And we talk as a team about this all the time: don’t ever become so enamored with your own deal that you’re not willing to walk away even at the last minute when you’re doing the wire. It’s a very difficult thing once you get involved and you spend a lot of your time, and it could be career time—6 months, a year, whatever you’re doing on a deal. But you always have to be willing to walk away and always know that there’ll be something else you can go work on and another interesting deal that’s right behind it. And that can be very difficult as you go. So anyways, Dave, ask you another question. I know I spent a lot of time on that.
So that’s super helpful, Tom. Really appreciate that. If you’re looking at sponsors—let’s say you’re looking at a self-storage opportunity or something—you’ve got sponsors that are from very early stages, maybe less than $100 million in AUM, all the way up to your institutional providers. How do you really rack and stack sponsors?
Yeah. Perspective. So there’s a lot of different factors. Track record is obviously one. Everyone will tell you about that. The people are important—I mentioned that before—and understanding the dynamic of the people within the business. If you go do a deal with a GP sponsor, for example, you might be in that deal with them for 4, 5, 10, 15 years, whatever it might be in private markets.
So you better really know how those people think philosophically and what their alignment is and what their incentives are, right? The people who are actually doing the deal, not the mothership they work for, but just those people. And that’s a really important consideration we spend a lot of time on when we’re thinking about GP sponsors. There’s also how they think about what they’re doing in their own firm life cycle. Some groups are headed to the moon, raising a pile of massive fund capital from institutions, and that’s their objective. It’s almost like an AUM gathering play, and they’re not really overly concerned about whoever they do deals with along the way because their business is heading in a different direction. It’s important to understand that and where they’re going. You’re looking for the Goldilocks zone—not too hot, not too cold, just right—for the kind of relationship we want with the right kind of people willing to stick it out with good alignments for a long time period. Another thing we like to look at is the network of relationships these people have.
We spend a fair amount of time on that. Obviously everyone does reference calls, but really trying to understand what they know about the particular thing they’re trying to invest in. There’s academic knowledge, but there’s also human relationships and knowledge. Who do I know in this sector? Let’s say it’s a healthcare deal, or let’s say it’s a self-storage deal. There are a lot of things that can go right in any given deal, and a lot of things that can go wrong. When things aren’t going well, what you want to know before you get into a deal with someone is: A, are they going to work their butts off to make it better? Of course. But B, who do they have available around them from their own personal networks that can help solve these problems?
In self-storage, for example, sometimes really understanding and knowing the local market, the submarket of that specific facility if it’s just one you’re buying—how immersed are they in the community there? How well do they know the permitting people? The city people? The access point people serving them and getting them clients? How well are they immersed in the self-storage community? Are they known? If I call up five other self-storage GPs, are they going to know who these guys are? They talk, they help each other even though they’re semi-competitive. Just being able to understand what that market is doing through human touch is really important to us, and we spend a lot of time trying to figure out what those networks are.
Tom, how are you using AI in the business to accelerate results?
Yeah, so this is obviously new, coming, already here depending on who you talk to. We haven’t used it that much other than, I would say at this point, background market research and very rapidly coming up to speed on something we might find interesting to support preliminary discussions on market and submarket. What everyone’s trying to get to—and I think every six months I see another solution for this—is one of the holy grails: “Hey, I want to have most of my diligence being done by my AI.” I could just pile in a PPM or an OA or whatever, all the documents for a deal, pile it into the AI, and I’ve given it my investment memo, and the thing basically cranks away for a couple weeks with some modifications and it turns out an investment memo. I’m ready to go.
Now, I know every investor will say, “I would never do that, I still need humans involved.” But I am seeing solutions trying to get to that. We have not used anything like that at this point. And I’ve found that the people offering such solutions now—the key question to work through with them is: how did they train this thing? Because you want to know. It could pop out a couple of good ideas, and I should go flag those ideas and hunt them down. But whatever they’re training it on is really important.
Certain large private equity firms have thousands of due diligence memos they can feed into their walled garden AI and come up with “how does the firm think about deals” and have this super brain that knows how they think about deals. But most smaller firms can’t afford to do that. And most providers I’ve seen offering AI solutions around that—their training database of deals, documents, diligence memos, thinking—is scant. They haven’t had enough access to the broader world to train those AIs to do more than just help on the fringes of research as directed. But I think time will tell. Progress will be made. Over time, they’ll get better. Again, I don’t think it’s ever going to replace the human touch. I think it’s different in public markets versus private markets.
You know, data can be opaque in the private markets. And humans are still going to be around these deals for a long time. So we’re watching, I guess—and you’ll probably get this answer from many people, so I’m not saying anything most of the listeners don’t know—we’re watching, we’re testing here and there, we’re dipping our toe in the water. But we also know what we’ve done in the past and how it works. And we’ll keep doing that until such time as there’s some other way to do business. But right now, in the private markets, I don’t see much of that changing in the near term.
How about from a macro perspective? You’ve got certain folks like Peter Schiff always talking about the end of the world coming and it’s going to be a really tough year. You’ve got this debasement trade going on, people feeling like we’re at the tipping point in terms of where we are with the debt. Any things like that or any areas that investors should really be concerned about, areas to really pay attention to?
Yeah, it’s an interesting question. I think there’s a predilection within the investment community for everybody to opine or form an opinion on macro as if they are an economist, a trained economist. I am not a trained economist. So again, recognizing what you know and what you don’t know. Now, it’s nice to follow what’s happening out there, but for every prediction I’ve probably made—hey, is the stock market going up or is it going down—how often have I been right? I don’t know. And we’ve all gone through this kind of discussion in our lives. I think where macro really becomes more important for us is around the individual deals we’re doing and the impact of some of those macro trends around those deals. But they tend to be a little bit finer point.
So, I’ll give you an example. We’ve done a pile of nut farm deals out where we are in the Central Valley—walnuts, pistachios, almonds, what have you. Macro is important in ag, but we spend time focused on the specifics around things happening from a fiscal policy or monetary policy perspective that could affect those investments. Specifically, those nut farms we have—things like what might affect pricing and supply-demand considerations around almonds, what are the international trends.
So, to finish the example, we spent time trying to understand tariff policy. Is that something everybody likes to do? No, it’s difficult, especially with how things have been moving with this administration, whether you like it or not.
I think we’d all agree it’s kind of whipsawing—every month or three months there’s some new announcement. Roughly 80% of California’s almond crop is sold overseas, so tariffs are a big deal in terms of affecting pricing and supply-demand. On the other side, you’ve got fiscal policy and other things weakening the dollar relative to international markets. Again, if 80% of the product in California is sold internationally and our dollar is weak, what does that mean around pricing and dynamics?
Farmers have to think about things like game theory—who is planting, how much is going to get planted, should I plant that extra 100 acres or not, should I leave it fallow this year. We spend time at that level, which is different than just “macro, where’s the market going.” It’s more specifically focused on things that might affect an investment we’re going to do, thinking about doing, or one we’ve already done.
Yeah, now, that’s really great from an insight perspective. If you could give just one piece of advice to the audience about how they could accelerate their own wealth trajectory, what would it be?
Okay. I’m not a tax advisor, so I’ll make that caveat before I say this. But I think focusing on after-tax return profiles and really understanding the integration of what they’re investing in versus what it will produce from a taxable income perspective and/or what kinds of credits, incentives, deferrals they can find out there—I think that’s the biggest thing they could do. Obviously, diversification, we already talked about that. But once you’re past the two dimensions of risk and return we all grew up as investors thinking through, that third dimension of taxes is really important.
A lot of our models show that if you can keep those dollars in your portfolio longer, not ship them off to the US government, it’s wildly effective in generating long-term wealth. We think that’s really important. That’s the one thing I’d mention and advocate people focus on more.
And if their advisors aren’t focused on it, then ask them. Pound them on the head a little bit. I find this a lot in taxable ultra-high-net-worth world where you’ve got a set of advisors advising you as a family. One set is probably your trust and estate attorneys. They’re very good at understanding generational tax issues, structuring estate and different kinds of trusts to minimize tax. Then you’ve got your CPA team—your accounting or tax team. It might be Big Four, it might be a small tax accountant, it might be internal folks preparing your tax returns and financial statements. And then you have your investment team and advisors.
One of the things that has intrigued me—or dismayed me, I’m not sure which—is those groups don’t spend a lot of time talking to each other.
To each other.
Yeah. Right? They spend a lot of time doing expert work in their sleeve, in their silo, but there’s no working group amongst them to say, “Hey investment guys, we’re the trust and estate guys. We have this long-term plan. What are you doing specifically in whatever you’re buying from an investment perspective to help this long-term plan?” They’re not talking to each other about that.
I see this a lot too. The investment guys are just like, “Hey, I’m going to do a bunch of great investments for my family or client.” And they go off and do that. Then at the end of every year, a bunch of K-1s are generated.
And those K-1s have a whole pile of stuff coming up to the CPA tax folks. And those CPA tax folks just take all those K-1s and say, “Okay.” They plug it into their software: “Now I got all these K-1s, I got to pay all these taxes, it’s all going through Schedule E or D.” And they just pay those taxes. They don’t ever feed back to the investment guys and say, “Maybe you shouldn’t be investing in that kind of thing because that’s really bad from a tax perspective. We didn’t want to pay all those taxes, or we never thought about this incentive or trying to cross-knock these things out.”
So another point is the more that we from the investment side and the trust and estate folks and the tax CPAs can actually get together and work not only on developing a plan but then executing on it, I think it’s going to really change things and help in long-term wealth generation quite a bit. Yeah, 100%.
We see the same thing. And if you can have someone in the middle really quarterbacking this between all the different areas—because it might be the greatest investment, but like you said, now all of a sudden it’s very tax inefficient. Or maybe it’s tax efficient, it’s a great investment, but you’ve added unnecessary risk that doesn’t comply with your risk management plan. So really looking at it three-dimensionally and holistically is the best way to do it.
So Tom, I can’t thank you enough for all your insights and wisdom today. So much information to unpack. I know I’m going to go back and listen to this again. We’re all trying to become better investors, better stewards of capital, place capital efficiently. And it’s also about relationships.
As you said, how can we keep building better relationships, also building our intellectual capital, improving our financial IQ so we can make the best decisions for our families? So if anyone would like to connect with you or reach out, is there a good place?
Absolutely. So you can track down our website at DCAfamilyoffice.com. My email address, just so people know, it’s just T. Bratkovich. I think you can see my name there on the screen, so you’ll be able to spell it. But T. Bratkovich at DCAfamilyoffice.com is the best way to get a hold of me. Certainly, they can reach out to you too, Dave, and you’ll connect them with me if they’d like to speak more.
But I want to thank you too for pulling this together. And the work that you do also, Dave, is really important just for folks to hear what’s practically happening on the ground and what different people are offering as solutions and getting the word out. And so it’s really important—this podcast and the work you’re doing on that. And if we could be helpful to you along the way with more or different types of discussion, just let us know.
Thanks, Tom. Really grateful for your time.
Appreciate that. All right, Dave.
Thanks. Thanks for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com. That’s holisticwealthstrategy.com. If you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com. That’s pantheoninvest.com.