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Today, we had the pleasure of hosting Jason Nees, a seasoned financial expert with an impressive background. Jason’s journey began as a financial advisor at renowned investment firms like Morgan Stanley and Merrill Lynch. During his tenure of over a decade, he assisted countless investors in meticulously planning and strategizing their financial futures.
However, Jason’s career took an intriguing turn when he was presented with a unique opportunity. He was recruited to assist in raising capital and lead the business development team for a consumer finance company. Over the course of several years, Jason successfully raised over $300 million in capital, showcasing his exceptional financial acumen and ability to navigate the intricacies of capital markets.
In this captivating episode, Jason Nees sheds light on the benefits of alternative assets and how they can play a pivotal role in wealth-building strategies. We delve into the world of tax-efficient investments, consistent cash flows, and uncover additional upside potential.
With a newfound focus on tax efficiency, consistent cash flows, and potential upside, Jason delved into the world of alternative assets. He became an avid investor in these unconventional asset classes, discovering their potential to accelerate wealth growth while maintaining tax advantages.
If you’re keen on expanding your financial horizons and discovering how to grow your wealth through innovative investment approaches, this episode is a must-listen!
In This Episode
- Jason Nees’ background as a financial advisor at prestigious investment firms like Morgan Stanley and Merrill Lynch.
- The pivotal role of alternative assets in wealth-building strategies.
- His top 3 due diligence points.
- Dealing with windfall profits and navigating significant tax liabilities.
Welcome to another episode of Wealth Strategy Secrets. Today we are joined by the one and only Jason Nees. Jason started his career as a financial advisor working at investment firms including Morgan Stanley and Merrill Lynch for over a decade.
He helped investors plan and invest for their financial future while debating his future in financial services. He was recruited to help raise capital and manage the business development team for Consumer Finance Company.
After several years and raising over 300 million in capital he decided to leave and start his own business. After running that business for five years and selling it, he was left with a windfall but also some large tax liabilities.
From that point forward Jason began investing in and focusing on alternative assets that can grow wealth with tax efficiency, consistent cash flows, and additional upside potential. He joins Pantheon Investments to help investors better understand the benefits of these alternative asset classes. Jason welcome to the show.
Thank you so much I’m happy to be here. That was quite the intro, I appreciate it.
You bet, this is cool that we’re going to allow folks to learn a little bit more about you and the unique perspective that you bring into this world of wealth building and everything, which is you’ve made such a great fit on our team. So, can you unpack as we start this off, why don’t you tell the listeners, who are people who haven’t met you yet, to tell us a little bit more about you, know your story, your background, how it all started for you?
That’s kind of a long journey, It’s going to be an interesting one. I first started my journey in the army, I spent some time in Hawaii for 4 years and the main reason was I wanted someone to help pay for college, I’ve always been interested in finance since I was a younger person. I went to school for finance. I started and interestingly enough my very first position out of college was with an event Investment Bank.
So I was in investment banking for a year in New York City and ended up transitioning to wealth management a quick little tidbit about me I have a son who has autism and the city wasn’t going to be the best environment for him. So transitioned back to the Midwest and transitioned into wealth management.
So I started working as a financial advisor at Merrill Lynch, working with several clients on financial planning, moving them towards their goals whether that be retirement asset management, etc. And did that for about a decade and left very happily the industry. After about 10 years of doing it, he was quite disenfranchised by the industrial complex of that style of investing and was very happy to be recruited away to a consumer finance company which is where I learned quite a lot about investing as well as investing in credit-style vehicles.
I’d say one little bit about the financial services, the reason that I was so happy to leave that environment was seeing a lot of my clients following the traditional asset allocation principles and literally walking through the steps of where we go on this journey and over 10 years you talked about having traditional 7%, 8% returns, I watched stitch in real-time and there weren’t any major blow-ups that weren’t any major explosions.
But in the market the progress these people had continuously fed their accounts to offset and battle the fees and taxes that were generated by turning over portfolios over and over. So, a long way to say that is the crux of what led me to the alternative space and was my personal experience of being disenfranchised with just buying stocks and bonds and turning them over and over.
There was a client of mine who showed me in real estate that he was investing and I wanted to participate in his real estate myself but Merill Lynch being Merill Lynch it wasn’t a deal that was sponsored by them and I couldn’t get compensated for them and the firm subsequently couldn’t get compensated and so it was a hard pass and I had passed on that opportunity. But coming full circle to running a business and selling a business and having a windfall moment was the opportunity for me to go back and seek that, so, you know, kind of reconnected with that former investor and started on the journey of alternative investing.
That’s awesome, it’s such a unique perspective and I know there are some folks out there that have that. They’ve transitioned from that traditional financial planning model into the alternative and real estate side and certainly one of the observations that I had made across my journey as well.
And as we unpack the wealth strategy secrets of the ultra-wealthy, that’s completely one which is making sure that you’re investing across different buckets, as Michael Sonnenfeld was talking about, investing in private equity and alternatives, investing in real estate, having a good cash position and things such as life insurance to be able to have that all-weather portfolio that gets you through different things so you don’t have everything tied up in what I think are traditionally more investment or riskier type investments, stocks bonds, mutual funds and of course loaded with taxes fees and inflation.
But what do you think, given your experience, did you have any aha moments, or in that journey of transitioning, were there particular lessons that you learned?
I would say there were several smaller lessons. I would say being an entrepreneur and selling a business and not adequately planning for the taxes of that was a driver, and when I started to look and say here’s our overall landscape of things that we can choose stocks or bonds or dividends or single-family homes or rentals.
I started with a couple of single-family homes and initially thought I was going to build that out. I learned a hard lesson in that, I didn’t want to do property management and didn’t want to pay 10 percent for a property manager, so I thought next, let’s scale up and so we scaled up to an apartment complex and should have carried over and learned the same lesson that just for me having to be involved with property management that wasn’t freedom of time moment for me and so it ended up kind of liquidating those and started to focus more on how can I participate in another kind of syndications or Investments where there is passive income, there is forced appreciation there are tax benefits of the holy trinity of things that we tend to look for.
And I think food me learning both as a personality fit, but as well as actual expected returns they were just far higher by participating in leveraging others’ expertise rather than relying solely on myself. And I think that was a big lesson learned for me.
Makes sense, So is that created for you a particular investment thesis that you have or your wealth strategy that’s been guiding you?
Yeah, I mean, I rarely ever participate in the stock market, I own a couple of stocks that I’ll probably have for my kids someday but for the most part, I only do private Investments. And when I say private Investments whether that’s private credit commercial real estate industrial warehouse or triple net real estate which I do. And so from that standpoint, it’s about trying to create that wealth kind of flywheel where I can rely on others’ expertise I can put capital to work in opportunities but I’m also trusting partners to help me realize that. So as my thesis essentially I look primarily towards syndications and or commercial real estate individually to grow multiply and build that wealth. But also creates some freedom of time so that’s my investment I’m not beholden to the Investments and I can continuously put capital to work and create that flywheel effect when one rolls off I find another good opportunity to roll into.
Has that created a particular asset allocation model that you’re preferential to?
I would say not necessarily from the standpoint of maintaining diversification but I tend to have a little bit more of an open approach since I have a wide array of knowledge about different financial products. I don’t have a specific model that I try to fit into.
For me it’s about finding an asymmetric risk-return profile and if that means I allocate something to a field that I don’t have as much expertise in and I can leverage somebody else’s expertise, doing so, yes. But for me, it’s more about not allocating more than seven to ten percent of my capital into any specific idea, but I’m willing to go wherever that capital is going to be best treated.
So, why don’t we talk then a little bit you mentioned the credit fund that you had recently come out and you’ve also had some background and exposure in this sector. We’ve now got almost two months of performance with the current fund, and I found it to be such an excellent diversity play in terms of diversifying your portfolio, creating cash flow that everyone is looking for, and then also having the flexibility to have growth or cash flow that I think a lot of people aren’t familiar with the asset class of private credit. So can you unpack that a little bit for us?
Yes, I mean, to that point, I think my first experience with credit was at a subprime consumer company where I worked for many years where I was responsible for bringing in capital and overseeing the delinquencies.
But I got my real first taste of how the underwriting was done and how to manage a collections team and things of that nature. And it’s what drew me to merchant cash advances in business. Merchant cash advances. as an industry that didn’t even exist 20 years ago, but is doing about 20 to $30 billion this year. And there’s a very natural progressive reason for that is that it’s traditionally hard for banks to move quickly or as quickly as a small business needs.
So starting my own business, I experienced this myself. If you think about a business that needs capital in a short period, there are many, many reasons why getting a merchant cash advance while it costs a bit more is a much better decision for the business than it is to wait three or four months to go through underwriting.
And so we participate in merchant cash advances and do so in a very diversified way in that we’re participating on a platform that several other hedge funds or other institutions will participate in our credit funds will traditionally participate in five to 10% of any specific deal to provide that diversification, but also to provide that asymmetric upside where it’s an investment that has a high rate of return but is spread out and diversified across several industries.
No, I think the point that you make right about the industry, I mean, this was a nascent industry, That’s been growing the combined annual growth rate is well over 15%, and continues to accelerate all of the issues with the banking crisis that happened earlier in the year further propel the business case for merchant cash advances.
So we expect as a sector that this is going to continue to develop. And as you rightly pointed out being a business owner, you realize how important capital is, It’s the lifeblood of expanding a business. And, that’s the type of capital that’s being lent, it’s businesses that are growing.
So, they’re doing well, they have a proven model, and they’re looking for additional capital to be able to scale their business. And if you go to a traditional bank, it might take three to six months to get the funding if you can even get the funding. And in the meantime, you turn around, cash advance, they’ve got the capital in a week. They start paying that back to investors pretty quickly.
So I think it’s a nice play for a couple of reasons. One, nice diversification across asset classes, that you’re in something else. And then the risk mitigation in this is interesting as well. So tell us a little bit about the default rate and how that works. What has it historically been and how does that work?
So, historically, if you look over the last five years, the default rate will run anywhere between, five and six percent, sometimes a little cooler, sometimes a little hotter. That’s been the general average.
You have to think about the fact that a business is repaying a loan on a sometimes daily, weekly, or bi-weekly basis. So you have a lot of factors playing in that you can see play out and you can see that if a business hits a road bump or a speed bump or something happens, we can adjust and say, okay, business, you have a week or two to get your affairs if some one-time event happened, and then they get right back on track.
And so to that point, from a delinquency standpoint, as soon as a payment may be having NSF, we have a third-party team that immediately reaches out to the merchant. Tries to identify what the issue is and figure out how to solve it. In some cases, it’s something silly, like they blocked a checking account from a large check coming in or something of that nature that can be easily quickly mitigated and got back on track. We’ve experienced a couple of those.
But it’s the nature of lending is that so there will be delinquencies, they will be cured and things will default, but there is a reason why we’re mitigating risk and spreading that over several merchant cash advances. And we deploy new money on a daily and weekly basis to continuously do that and participate in the asset class.
But risk mitigation is very important to us and providing that and reasonably doing that, making sure that they go through all of our underwriting criteria before we participate. All things are there to protect the portfolio, and the health of the portfolio, as well as protect the returns for our investors.
So that’s a great segue. Why don’t we transition into overall how you’re analyzing investments? How are you mitigating risk? What are the things you’re looking for when you’re trying to identify opportunities?
I will tell you this is one of the most interesting markets that I’ve seen in many years. And I’ve, again, I’ve been watching the market in all facets for many years. And it’s a unique time in investing for us in that we’ve had interest rates rise faster and higher than they ever have before. We’ve gone through a period where 13 years of near-zero interest rates have suddenly been over.
And so, we get many deals that we look at weekly. It is a tough environment in that when I even talk with other allocators, I hear the same phrase over and over again, and I can’t make this pencil.
And so part of that is an amendment in the market, I think, that cap rates will naturally start to go up as we go through this and there will be pockets of stress in the market. But doing that work of due diligence, Pantheon has a 50-point due diligence framework that we go through to analyze these deals and make sure we’re considering all the factors before we put capital to work.
And I will tell you that of the ones that we’ve reviewed, most of them at this specific moment haven’t passed. But I have the fundamental belief that when you find yourself in a market like this if you continue to look for opportunities, there are opportunities out there. We have to keep searching for them and keep doing the work behind them. There are good deals and there are good places to place capital.
Just continue to look for opportunities, there are opportunities out there, we just have to keep searching for them and keep doing the work.
What would you say would be like, say your top three, if it’s a 50-point cycle around due diligence points that you’re looking at, what would you say are some of the top three things that you look at?
So I think it’s always very important, especially if you’re participating with another general partner, who is the actual sponsor and what is their track record? You know, always the big red flag for me. If you’ve only got maybe one full cycle under your belt, you’re probably not going to be where I’m going to be looking to allocate capital. So track record is certainly important, but character is another one.
I mean, if you’re entrusting somebody as an expert. Having reliable references and investors who have successfully invested and participated with them is a big deal. And moving past that would go down to the property as well as the debt structure.
I would say debt structure today is more important than it’s been in the past. Again, with zero rates moving to five, five, and a half, it makes for a different market. And so, trying not to identify properties that aren’t in variable rates. With shorter timeframes, because as we go through this period of the advent of higher rates and cap rates come down and prices come down, it’s a reset of expectations.
And so what we’re looking for is a margin of error for the unknowns that are going to happen in the next three, four, or five years. I would look at it from the standpoint of character analysis and track record, property specific and what’s the business case? Does it align with the real? Realistic expectations and overall debt structure. Does this financially work and make sense?
For sure. And then in terms of other asset classes, do you see any other opportunities, So, given the interest rates, real estate multifamily has been impacted, based upon the interest rates, but any other sectors that, have less exposure to interest rates or that, you’ve been tracking that look to be good asymmetric opportunities.
I still keep an eye out for multifamily because as we progress through this, I expect to see some distressed assets that we may have an opportunity to pick up some bargains. But the same would apply to self-storage.
There’s going to be some, as we look through, moving these interest rates from zero to five. For anybody who structured a deal that was leverage, we may find some diamonds in the rough there. But I do think, self-storage is an asset class, and car washes are a unique opportunity as well. I have many investors who talk about different ATM funds.
So as I start to look through them, some of them have all of the characteristics of the things that we typically look for in that upside value, that passive income, as well as the tax benefits. And so I do see opportunities out there, It comes back to the overall structure and continuing to look at new and different asset classes because real estate is going through a transition, but also because it’s important from a diversification standpoint to help our investors not be too over-leveraged in any second.
What would you say is your current take on the market? There’s been so much going on this year. It’s almost mind-boggling when you think about all of the differences, from geopolitical events that are happening across the world, polarization, and rise in interest rates.
So many different things happening at the same time. How do you make sense of it all? And what would you say is your outlook for the remainder of the year going into 2024?
So when it comes to the stock market, it is one of the most confounding things to me at this specific moment. And, as the year progressed, I mean, if you looked at the start of the year, everybody was universally bearish across the board. And the market, first half up 18%. A lot’s been speculated and talked about on the big eight, the big eight stocks essentially driving the entire market higher. S&P would be flat to down if it weren’t for those eight specific stocks.
It’s been talked about quite a lot. But, one of the things that does confound me is that, theoretically, as Fed rates move up, the risk premium generally for investing goes up. So your risk-free rate, which was zero, is now five and higher.
But investors continue to plow money into the stock markets at very high elevations. You could take Nvidia, for example, at the earnings that you pay for that. It would take 40 years at their current rate to get that money packets. And now again, the expectation is that the E part of that multiple of earnings goes up through AI and demand.
But I see this at a lot of places in the market where the valuations don’t make sense. So, I don’t have a favorable outlook for the latter half of the year. I don’t see the risk-reward there. It seems more risk than potential reward on the upside.
Historically, when we get to the end of a zero market cycle, you’ll get a reversion to the mean. I may be wrong on the timeline, and I may even be wrong on the direction, but that’s my outlook is that I think there are better, more efficient places to place your capital with less risk.
Good, good observations. You know, one of the things Jason, for me along my journey was, you hear some good podcasts or some people talk about things, you get some ideas, you get a little excited to take place in an opportunity or something.
And there comes this point where you have to, you can’t be in this mode of paralysis by analysis, You have to move forward. But one of those things that helped me do that was objectively looking at the numbers.
And trying to break down a particular investment and then compare that versus another investment and then make some assumptions based on your comfort level, based on your risk tolerance, and what you think works for you. And then when you do that, and you can compare apples to apples, for instance, when I exited my 401k, I thought it was interesting to compare that against, if I progressively invested in multifamily assets, for some time, I would reduce my taxes, I would increase my return. And then that return becomes exponential, with a compounding over time.
And I’ve been so excited to bring to investors in our mastermind and virtual family office community, the wealth strategy dashboard, which is essentially a software tool that helps investors make those types of decisions. So for instance if you’re looking to achieve, your income exceeding your expenses and have that financial independence number, let’s say in 10 years Okay, what’s the quickest way to get there? And then if I reallocate my portfolio from say an equities position to moving into maybe a combination of single-family rentals and some syndications, how can I get there quicker? If I can reduce my taxes maybe by 10% by doing something particular, I can get there.
But when you get that objectivity in the software and the calculator, and you can see that, then all of this stuff starts to materialize. So can you share with us, some of your initial thoughts, especially as a prior financial planner and working through something like this to look at not only equities holdings but other asset classes in your portfolio?
Great question. And I think it’s a very, very powerful tool that we created. It’s one of the first times I’ve ever come across a tool that says you can manage a whole number of investments, but put it into a holistic picture get an idea of where you are today, and make a plan for where you want to go. Again, being from the financial advisory side, on that side of the business, you only get one half of the equation, and that’s stocks and bonds and maybe some mutual funds or ETF, and that’s it.
But if you wanted your financial advisor to evaluate your business or your rental properties, they don’t generally, those are line items on a financial plan. And it’s not even considered as far as the value goes up or rents go up. What does your passive income look like? It’s left out of the equation. It’s a frozen asset in time. Where the wealth strategy dashboard provides a lot of value is that we realized that this is the real world where these valuations change. The passive income may increase from one month to the next higher than your projections. Your multiple exits may move higher than what you were anticipating.
So it’s a real-world tool that allows you to see the amendments but apply rational logic to how am I moving from here and how do I get here? If my goal is to 10x my wealth, I need a plan to start moving accordingly, but I need to see where I am in the full picture first. So I think that’s the power of the dashboard. And I think I know that it’s been useful. I’ve used it with a number of our clients already and have already started developing plans to 10x their wealth and move them down that path. But it’s a concrete tool that allows you to visibly see it, but also track the performance as we go through.
And I think so key in that too, is understanding people’s goals, Because you’ve got different goals. Everyone has different goals, But how can you track towards that and make incremental progress? Because if you want to get to some real exponential growth and you have big goals, it’s not going to happen overnight, When we want to put a system in place and have a methodology. To show you’re investing.
And, that’s why the majority of people lose money over time, because of the emotion in it, and they’re changing course, midstream because of something’s happening in the market or their life, versus if you have this strategy that’s outlined for the next 10, 20 years, you keep building on that.
Absolutely. Investing is a lot like a marathon. You don’t run a couple of 10Ks and expect to run a marathon. You’ve got to do that repetition and put in the work. And that wealth strategy dashboard is the one thing that can help keep you disciplined and moving forward, but also celebrating your successes and being able to adapt and ad to the market.
100%. So Jason, from a personal development perspective, what would you say has been the one practice that you’ve done that’s yielded the biggest results for you?
You know, this is probably not a popular answer, but I would say treating due diligence like a religion it’s the one thing that’s helped me to avoid pitfalls for things that I was personally attached to I wanted to make something work and I didn’t do it the times when I’ve done that in my life is usually when I’ve lost the first money. I was emotionally attached to something.
So I would say due diligence is one but also having a fast filter to be able to know that these are my experiences and this is what I do understand, but I can look at something and make a snap judgment and probably have a higher than average probability of being successful. But again, it’s only by doing it over time. So those are probably my two big ones.
Great. And tell us, we have so many parents in the audience. And our children are our pride and joy. And you get out of them what you put into them. And family is everything. And I know I had challenges, having triplets, as everyone knows.
But I mean, tell the audience, that having a child with autism must create some extraordinary challenges for you and your wife and the family and how you guys operate.
So how have you been able to manage through that? Do you have any strategies that you can help other listeners with?
I mean, from a strategy standpoint for any parent with a child with special needs, planning is of utmost importance. There are special rules for social security and how you navigate that for somebody with a disability. In financial planning, everything needs to be in trust. You need a team of special needs advisors to help with that.
And I think I would say that very early on, it was probably something poor that I used to say. But one of the things I used to say to my wife is, some days when it’s tough, I’m thankful that I don’t have a choice in the matter because it forces you to work through it and go through it rather than to maybe run off and hide. But it’s been interesting. I’ve learned far more from him than he’s probably learned from me. Patience, I’ve learned. So a lot of things.
That’s, that’s awesome. Well, kudos to you, man. It takes a courageous person to be able to do that. And your wife must be a saint as well. And keep the family strong. That’s awesome. So, appreciate that. And then I guess, the final question for the audience is, if you could share one piece of light advice, to listeners about how they could accelerate their wealth journeys, what would it be?
Action, take action, move forward every day, and be better than you were the day before.
Awesome. The fourth phase is right in the holistic wealth strategy. Take take massive action, right to get there.
Awesome. Well, Jason, appreciate you coming on the show today and having the opportunity, for listeners to get to know you and everything. And if people, want to inquire more, connect with you, what’s the best place they can reach out to you?
So you can send me an email, go to PanteonInvest.com and you can find me there. You can reach me by email at [email protected]. That would be the easiest way or pick up the phone. My number is 913-961-4361.
Awesome. All right, guys. Thanks again for tuning in today. Appreciate you spending your time with us. Please do us a favor if you’re getting value out of the show. Please go in and give us a rating review. It helps us amp up the level of guests. And we’ve got an awesome lineup for the rest of the year. But we continue to expand on that. So appreciate your support there. And again, we’re always here. If you want to work through some good strategy on your own to take your game to the next level. Until next time, thanks again.