AI, Big Data and the Upcoming WealthTech Revolution | Doug Fritz & Michael Perez, F2 Strategy

Mark Wickersham (00:54):

All right guys. Welcome to the Wealth WealthTech podcast. I'm happy to have you on. I've been wanting to have this conversation for a little while now. Michael and Doug, if you guys could just do me a favor and you could give yourself a brief introduction.

Doug Fritz (01:08):

Yeah, I'll go first. Thanks for having us, mark. I'm Doug Fritz. I'm the co-founder of F two Strategy, 27 years in the industry, former wealth management CTO, and just stoked to be here.

Michael Perez (01:22):

And I am Michael Perez. I'm one of the managing directors at F two. I really kind of oversee our family office practice and I work with a lot of our fiduciary clients, meaning law and trust companies, and been in the industry for about 30 years now. Started off as a developer and still enjoying it and still loving to bring solutions to clients.

Mark Wickersham (01:43):

Awesome. Doug, would you mind kind of giving a brief overview of F two?

Doug Fritz (01:47):

Yeah, you bet. So the F two strategy, it's been around almost exactly nine years now. As surprising as that is, mark, you've been part of that journey since from some of the very, very early, early days. And it actually was really started as really as a response to the firms that I'd worked with before. The wealth management firms, the consultants that would serve those firms had the art of consulting down. They were phenomenal consultants, but what they had in consulting prowess, they sort of lacked in deep industry experience having been there, done that and seen those projects through and lived with some of the pros and cons of good and bad decisions and just sort of change. And so I felt there was a room in the industry for really a proper management consulting strategy, consulting business full of people who had the scars and the stripes on their sleeve of having been through technology transformation.

(02:53):

And that was the origin story of F two. I'm as surprised as anyone about how closely the current F two, despite its tremendous size and equity backing, still holds true to that. And I think just that sort of conglomeration of other like-minded individuals behind that mission, it's now its own mission. We, Liz and I, were co-founders, but this thing has gone on to its own mission and it continues to grow. I think that's it. So today F two is sort of that same thing. We work in all wealth management, pure wealth management. We're the largest pure play wealth tech consulting firm in the industry. We are, as Michael mentioned, we're focused on the fiduciary fee-based side. About half our businesses are in RIAs for hybrid broker deal RAs. The other half are in the p and i trust accounting, regional bank based wealth management firms, which would include also family offices, law firms, and the like.

(03:53):

We've been acquired by a private equity firm, majority stake by a firm called Renos. And that journey for us is now about bringing in talent and bringing in smaller consultancies into F two to really create sort of an amazon.com of talent. And we've acquired a staff augmentation business that Mike came through with, which was deep strategy and execution excellence in the wealth managed technology space. And then we acquired a marketing agency, an advisor marketing business last year that helps our clients to grow organically, not just have the technology to support their inorganic growth, but also help them grow organically. And we're acquiring other businesses this year as well. So a lot more on the horizon for F two as we continue to grow.

Mark Wickersham (04:42):

Well congratulations on the acquisition. I mean I think your timing was great. Obviously the talent that you have has been fantastic and it just kind of shows you the power of focus as well. So congrats. So the other half of F two is your wife Doug, and both of you guys were presenting future proof. How was that experience? How was future proof in general and how was it doing a joint presentation?

Doug Fritz (05:10):

Yeah, so doing it jointly was fascinating. I think it was the first time we were asked to present a bit of the story and the journey from we started the company. We literally sold our house. We had a one and a 3-year-old. We sold our house to bootstrap this crazy consultancy idea and nine years ago, almost exactly nine years ago and just sort of the experience of going through private equity and then m and a, I think our clients are going through it and it's really interesting for us as a consulting firm to be living through that as well. So just being up on stage with Liz and talking about those things. And then also just the brand, a lot about F two especially for us industry is to create a brand that people can identify with. They know what they're going to get when they get in the front door.

Doug Fritz (05:59):

It's a lot of work going on with that. I think Futureproof as a conference, it breaks a lot of molds and sort of conceptually this sort of concept of a wealth tech festival. It's outdoors, it's very different. I mean it's very, very different from any other conference that I've ever been to. We participated with Matt and his conferences in southern California since the inception. What stood out, I think for me at future-Proof this year citywide, which is the Miami version, Huntington Beach version still on for this fall is how the lines between business markets, growth, wealth management, client experience and technology are gone. There's no more line at all, and I think even nine years ago when we started F two, it still took a little bit of effort to get yourself into the conversation with CEOs and presidents and CEOs of wealth management firms to talk about their technology, to add that to the list of things they needed to be paying attention to and to have a strategy and get right.

Doug Fritz (06:59):

But in 2025, there is no line anymore between those things and every speaker from chief economists to brand ambassadors to CEOs of wealth management firms, every conversation was about technology strategy and its implications to their business. And I think you pointed out good time to start a consulting firm in wealth management. Yes, clearly that was timing was 99% of it, but it's amazing how much the technology innovation theme is at the top of every conversation right now. I think that bodes well for us as a business, but it bodes well for the industry. We're taking it seriously. These are businesses that are going to scale. It's a very, very bullish on the wealth management industry in general because of this seriousness to scale in the future.

Mark Wickersham (07:50):

I mean you look at that conference, it shows you how dynamic the industry is, the maturity of the industry. I don't think that that type of conference at that type of scale could have been possible five years ago, six years ago, and you just see the amount of energy that's in the industry. It's really an exciting time. Michael, looking back on it, obviously your industry veteran had spent a fair amount of time in the family office space. Tell me about what you've seen over your 30 years in terms of the evolution of the family office. What was it like back in the early days and how would you compare that to where the market is today?

Michael Perez (08:33):

Sure, great question mark. When I started I guess the family office space, it's really involved when I began, I think most family offices were really focused around investment management and that was it. It was kind of that really single thought on top of mind. But over time I've definitely seen a broader recognition for more of this holistic wealth management that Doug just touched on. Succession planning, philanthropy, governance, and also too, what I've really seen pretty big is really this massive shift away from paper-based and Microsoft Excel heavy environments to more sophisticated digital infrastructure. Sometimes slow, sometimes quickly. And I think really what I'm seeing there, the expectations really kind of the next generation of those families are driving much of this change. So they're demanding transparency, they want real time access to data and then they want that better digital experience, quite frankly, that user experience.

Mark Wickersham (09:39):

Yeah, I think that's a good point. The next gen is driving a lot of change. It's no longer to have quarterly reporting. That's 90 days after the quarter that comes out and it's kind of thick. A paper booklet that was some massive Excel spreadsheet that's been worked on for years. The family offices have really tried to, you're starting to see finally a modernization of family offices. I think AI is one of those things that's going to drive modernization, at least those holdouts, the family offices are looking at that and saying, well, there is really a significant difference between what I'm doing manually or paper-based or Excel based versus the capabilities today. Let's talk about ai, the hype and reality. Certainly city proof that had, I think it was like 30 sessions that were on AI or almost every session was on ai. Where do we stand on ai? What's the impact going to be and where are we in the journey of AI adoption?

Doug Fritz (10:39):

Adoption first off is surprisingly high. I think at F two. I think just the nature of who we are, we come from the industry and so we've seen these cycles of hype over promise money, tons of venture capital flows into these ideas and companies that we look at we're like there's no fricking way any of our clients are when we were making the tech decisions that we would never use these tools, they're not built to be sustainable, they're not built to be built to kind of garner capital and to get startup funding and then they all die. AI is, I would say in 27 years of being an industry as close to a norm breaker here as I've seen, I think that part of the reason why we're seeing higher levels of adoption than we had planned on or we'd expected is because the evidence of its benefit and its value versus the cost is so extreme and there are pockets of ai.

Doug Fritz (11:39):

And to back up a little bit, one of the things that F two does, and I didn't mention this before, but we run the largest cohort of national wealth management, CTOs and COOs in the country, about 200 of the top decision makers in technology. We're on our seventh year, and so we do five research projects a year closed within the audience itself, and it's really just for the benefit of the CTOs and CEOs in the industry. But we've done two studies on trends in AI now going back almost three years and what we saw just closed our most recent survey is the penetration of specifically of note taking ai conversational tracking is vastly, it's no longer in the nacent try it phase. It's in the, oh my god, if you're not using this, you are seriously behind. It's akin to an additional administrative assistant literally sitting on every single phone call taking all the notes and then getting that into the CRM and then getting all that information back to you when you have the next conversation with your client and the time payback for a producing advisor or anybody working with clients or within the wealth management organization is measured in hours per week, four up to four hours per week of time save by not having to do some of the sort of operational tasks around client experience, task initiation, et cetera, which is exceptional.

Doug Fritz (13:04):

The other ones are utilization of AI to create context for messaging. You always have to review it. I think we're still at a regulatory era where we're not going to see that automatically send AI generated wording and context to investors, but it can prompt, Hey, tell me the story about performance of this portfolio before I sit down with my client. Boom, right? Oh, that just saved me 45 minutes of reading through stuff, but it's actually going to pick up some trends that I missed. I still have to deliver the message. And so that's what we're seeing a tremendous amount of adoption. It's going to lead to better and more frequent and more high quality client interactions. I think that's fantastic for us as an industry. It bolsters the trust of advisors with clients and it also starts to address some of the aging advisor issues where we've got advisors that are getting older and older. We know we don't have a crop of new ones coming into the industry. We had had in previous years, AI enable advisors to continue to deliver high level of service but also manage more clients at the same time. I think it's kind of like its timing is perfect and so that was one of the big things we're seeing that within our clients as well. And I think I project that by the end of the year, half of the advisory businesses in this country will have some form of AI note-taking, plugin CRM type of technology.

Mark Wickersham (14:28):

I mean they're so good and they're so relatively affordable and they really do a great job of picking it up and they seem to get better all the time. I mean it seems like we're measuring progress not in terms of years but quarters or even months in terms of how this technology's getting better all the time. Where are you seeing the adoption curve, Michael?

Michael Perez (14:49):

What Doug said really resonated with me for the most part. I agree, but I think the family office and the trust technology space is kind of behind the curve. It's not as dynamic or innovative. So I tell my family office clients really actively explore it, but do it with a healthy degree of skepticism. And I say that because the key I think is to understand their use cases and what's the real value. So it's a no-brainer, right? There's intelligent document processing, predictive analytics, data aggregation are big kind of in the family office space, but a lot of what I'm seeing too is just marketing is kind of like noise and rebranding automation that was already there. So I emphasize education. I think that's critical to my clients invest the time in learning how these technologies actually work and where they can drive return on investment. So definitely see it. If you don't have it in your shop at some point it's going to bite you, but I think you need to be kind of smart about it as well. Right.

Mark Wickersham (15:52):

Yeah, I think that's a good point. I think family offices, it should have some sort of AI policy. They need to think about their data and the sensitivity of their data versus just without a policy then employees are going to do whatever they need to do and check things out. And I think certainly one of the biggest areas around alternative investment data management, that seems like in the past, pre AI OCR didn't really work. You had so much information's unstructured, tied up in documents, locked into A PDF and now it seems like AI and you have specific providers on that front that are doing that arch canoe deploying technology on that front to be able to unlock that. I think you use family offices sit on a ton of technology or I should say data and don't necessarily have the means to be able to harness that technology in an efficient way to create that data moat and be able to create, like you said, Doug, to create a narrative on what happened with my investment portfolio over the past month or the past quarter that could take an hour or two hours. AI can quickly do that, create a draft that then needs to be reviewed and edited and put into correct context and tone, but you're certainly seeing the ability to kind of crunch a lot of information really easily. What's next on the AI curve? We could certainly, generative AI is out there, AI agents. Where do we see the next wave of adoption coming with ai?

Doug Fritz (17:25):

Yeah, I think the agentic stuff is the next logical conclusion. We're already listening, we're taking notes, we're picking up on tasks. It is a fairly simple and already a fairly well-worn path through robotic process automation and some of the other task management tools that have been around for 20 years is to start to put some of those tasks and actions into play and AgTech is just sort of it's, it's able to hear you say, Hey, we've got a new payee we need to start establishing. We need to set up that payee in our accounting system. It knows what information to go get. It checks whether or not that payee has already been set up on a different client, so we already have some of the payment information. It initiates a task for an operations person to ensure that the calendar for payments get set up correctly.

Doug Fritz (18:19):

It sort of manages that all the way through to completion. All you had to really do is just in a client conversation, start to talk about adding a payee for a family office and that saves a ton of time and it also, there's parts of human operations and human client and wealth management that are fantastic. You've got the brains, you've got thinking about things, but we also are inundated with new information. We're inundated with new tasks. Our lives have gotten more complex even with more technology. So tech is like, it's relentless, right? It's going to make sure that damn thing gets done no matter what and it's going to always remain open until you get it completed. It's not going to forget that that task was out there and that saves not only a lot of time, it keeps us out a lot of compliance problems as well. There's no more sort of sloppy, I thought you had it. I had it fell through the cracks. This stuff gets done.

Mark Wickersham (19:11):

Every client's co consistent done the same way, right?

Doug Fritz (19:14):

Exactly right. And the data, if done correctly, there's always a quality factor of how it's implemented, but if done correctly, it's also checking for data quality. It's prompting when it looks like some of the information gathered or entered is incorrect and it can save a lot of headaches down the road and a lot of money down the road by being done correctly.

Mark Wickersham (19:33):

Whatcha seeing Michael?

Michael Perez (19:34):

Yeah, I think Doug hit it right on the head, right? Moving away from these basic AI systems like rule-based chatbots that have preset questions and this kind of limits family office AI assistance could be managing entire workflows now like compliance checks to investment analysis. I think there's a lot that can be done there at that next level. Again though, I think we got to be smart about it too. With this powerful tool comes some responsibility. So we still need human oversight, ethics and data governance. So I think we're all kind of learning together, but it's really an exciting time right now for sure.

Mark Wickersham (20:15):

It certainly doesn't remove the decision-making. That's still a need for a human in the loop on many of these things, but for some of these repetitive tasks, it can go off and execute it on a semi-autonomous basis. It's like you can see where the efficiency is going to come from. Obviously AI is the dominant headline, but there's been a lot of other tech trends out there. What are some of the other wealth tech trends that you guys are seeing that are either impacting the space now or soon to be impacting family offices?

Doug Fritz (20:45):

The availability of illiquid securities is predominant. I think there's always been a family office angle to deploy capital in areas that are because of your size and your ability to invest outside of the markets, it's sort of always been there. I think that those doors open up even wider. I think one of the things that I would expect to see just from an economic standpoint, we're already starting to see some indicators of global markets being more outperforming or being projected to be outperforming the US markets, but we've been what, 20 years now where the US market is generally outperform global markets and some of the rails that global, especially global direct investment need to be deployed is something that I would expect to see more and more news about that this year. Do I have multicurrency reporting? Do I have a custodian that can actually deploy capital globally?

Doug Fritz (21:42):

Do I have a mechanism to actually check on foreign currency reserves and my foreign exchange required to execute internationally? I think that's pretty natural, especially if we're seeing a prolonged or multi-year interaction or recession in the United States, especially with global markets. Maybe I would say catching up with the US as the US sort of survived covid better than most. I think we're going to start seeing more of that reporting workflow, custodial direct investment, foreign exchange being critical, things that aren't being talked about yet but are going to be required. Everything else is really operations, automation, scalability, how do I spend less money to get the same amount of stuff done in that AI conversation? CRM workflow automation, that's a ton of our work. So I'd say that too as a barometer, people are looking to invest to save money and invest. They don't have to keep hiring really expensive humans in their operations.

Michael Perez (22:40):

Yeah, Doug touched on a lot of great points there. If I get a little more granular and I dig into som, I think what I'm seeing is definitely a push towards better data interoperability and then better integrated client experiences. So I see that a lot. Cybersecurity was another big focus certainly in the last for me, I noticed last eight to 12 months with high net worth families really being prime target. So a lot of interest in that. How do we get assessments? What type of software do we need? That type of thing. So that was been really big. Doug touched on alternative investment administration. That's huge. Other areas that blood lot focus, digital onboarding, making that whole experience more streamlined, more scalable and I would think another one that I've seen too, I'll call it portfolio visualization and or entity or family tree visual tools, a lot of that and that's all driven by transparency and personalization. How do we dig in here and really take a look at ourselves? So that's what I'm seeing kind of in the family office space.

Doug Fritz (23:50):

There's one more Michael made me just remember was we had seen none of this until 12 months ago and now we've seen three examples of it happening in 12 months, which is almost a trend, but because of the nature of this podcast, we'll call it out as a trend to watch our single family offices looking at the valuations of RIAs outside of themselves and saying, wait a second, we can do this for just ourselves and we're just basically giant expense bucket. We're going to put money into this and we're going to try to run it on a shoestring budget or we can combine one or two or three family offices as the kernel for an ultra high net worth multifamily office entity that then has a massive valuation to the business. We're going to do almost the exact same thing, but we're going to combine family offices. Then all of a sudden something that was generally an expense category is now a value creator for the families involved and I think never saw it until 12 months ago, seen three of 'em in the last 12 months if that continues. I think that's some trend to watch too is single family offices turning into multifamily offices and looking for that to create value.

Mark Wickersham (24:59):

Let's talk about best of breed and comprehensive. I've often said there's no one right answer for every single family office that it really depends on the operational needs of the family office and a lot of what we would say is their technology personality that would kind of drive that decision. But how should family officers be thinking about that decision? When should they be thinking about that decision and just describe to me some of the pros and cons of each approach.

Michael Perez (25:28):

Well Mark, you helped me out a lot there. You answered quite a bit of it, right? Really there is no one size fits all answer. Best of breed can give you some depth, but I think, and you had mentioned it, but integration becomes a real challenge. How do we do this? Is it flat askey file? Is it API? How does all that work? That can be a burdensome area. Comprehensive platforms, they can offer convenience, but I think they lack depth in certain areas for sure. I think what we try to encourage our clients is to evaluate this based on their internal capacity, what strategic objectives they may have. And that can be a wide range of things that they look into, grow organically, buy books of business, are they looking to set a de Novo trust company? There's lots of different things that come into play there and then kind of the user needs. And then my advice always to them is, well, your tech stack should really mirror the complexity of the family and your governance structure, right?

Mark Wickersham (26:32):

Yeah, I think that's the right answer. It depends, right, because there is no one right answer on this. I think some of it too, it depends on not only the operational requirements of the family office, but also like I said, this tech personality, like

(26:46):

The comprehensive system provides one vendor to manage In some cases that's about the extent that a family office wants to deal with. In other cases, some people or maybe early adopters want to be able to have different systems that are the best for each particular category, especially larger family offices. What the investment department wants versus the finance department would've different needs. I think no matter which approach, I think it's important, especially for the comprehensive systems to have some sort of level of interoperability to be somewhat open. You can't just provide it all. You have to be able to hook into a family office's existing tech stack at certain points.

Michael Perez (27:29):

And I think most of my clients too, if there is a preferred choice or what I would call guiding principles, I kind of coined it one throat to choke. They like that. And that sometimes can override maybe some better functionality or some more effort on their part to make things work more seamlessly.

Doug Fritz (27:54):

Yeah, I think for what it's worth, I think that I try to simplify everything down as like a president or a CEO would understand it and all in one versus best in breed comes down to do you want to bet on a vendor being great and being continuing to invest in their platform, continuing to improve and to use the money you're spending on that platform. You're betting on that firm being great and continuing to be able to support you into the future. The track record of some of those vendors longstanding, there are some that have been around, have been servicing clients well and improving for over 40 years and there are some that wither out, don't get funding and they die in two or three. So the bets on vendors are difficult, but you're betting on someone else being successful when you go best in breed, typically, whether you know it or not, you're betting on yourself.

(28:48):

And so that's betting that you as a business are going to be able to keep up with integrations. You're going to be able to pick the right little modules and then piece that together into a workflow and an experience that's going to be able to support you and your clients. But you're betting on yourself. And I think by and large, I think this is a very cultural kind of a US thing. We see a lot of firms betting on themselves because they can control it. That's not always a great bet. They don't typically invest or don't know that they have to invest copious amounts of human capital and technology integration expense into making it great and then the continuing care and feeding that they're going to have to provide. We see a lot of best in breed clients just rumble that don't invest well. Those that invest well and bet on themselves and really put the right amount of money and they pick the right vendors hugely successful and they get the best of a lot. That's where I think if you're going to bet on yourself, make sure you're funding it, you're going to bet on someone else. Make sure you take a good horse.

Mark Wickersham (29:44):

Yeah, I think it's a good point, Doug. I think there is a risk management component to it that you can lower your key vendor risk because you have multiple vendors and you can swap out those components a little bit more easily. And to your other point there too, I do think there is a cost premium that they need to take a look at that it's not just the cost of two vendors, that there's an additional delta there. I don't know what that number is, 20, 25% that you need to invest at least initially, get those workflows and those integrations up to speed and as tight as possible. Let's talk about where tech can go wrong. Where do we see family office decision making? How do they avoid failures and what are some of the kind of common mistakes that get made?

Michael Perez (30:32):

I think they have to hire really good consulting firm to help them out. There you go. I always stress over and over again with my clients requirements, requirements, requirements. So before we go out on a collaborative joint engagement together looking to better technology or improve compliance or operational efficiencies, I really kind of get them to understand the use cases, the value they're trying to address with a technology solution. So it's really about that really kind of understanding it and doing that upfront work I think is very important in the process. And then leveraging our expertise and experience and best practices we've seen in over many years to help narrow down the list for them and get them in a good place to make good decisions. So I know that sounded a little self-serving, but I worked in industry and I sat on the other side of the desk and once I was able to embrace that help, it really made a big difference.

Mark Wickersham (31:35):

It's important to have it a front loaded process that before you start getting a lot of vendors involved and start seeing the next shiny object or the next slick demo that you understand what problem you're trying to solve and what it requirements to solve. Yeah,

Doug Fritz (31:51):

I think that the true single family office, what we're generally seeing is that as technology is just an expense category, it's an expense to be reduced. And I think that's hit very traditional, very plastic. We see it all the time. But what the single family office leadership I think fails to fully interpret is that the lack of spending, the lack of infrastructure doesn't actually make that go away at some point that will catch up to them. So lack of managing data, information security, workflow automation, sort of better reporting as the next generation comes to that money and the multifamily offices down the street have all this great technology, a great experience, the costs are fairly minimal. The family office effectively is going to struggle to continue to maintain itself unless it has a major investment period. And so constant maintenance, constant investing and feeding and keeping up with the times is definitely the right way.

(32:51):

We don't see a lot of folks do it for the multifamily offices out there. The nature of that business is so complex and operationally intensive, technology generally is going to be adopted better because it's going to be proven to save money. And then we like to throw the benchmarks. We have seven years of track record of managing and monitoring the top CTOs and cos in wealth management. What we're seeing is an increase from the amount of revenue spent on technology just as a ratio went from 90 years ago it was like four or 5%, we're seeing seven to 10% of revenue spent on technology. Now with the faster growing, more scalable, more valuable, ultimately firms being closer to 10% of revenue spent on technology. So hopefully that for folks listening, that's a good benchmark to find out where do you sit in that that structure

Mark Wickersham (33:42):

Post selection process firm has picked a particular piece of technology. How can they increase the odds of success? I think sometimes you've seen family offices, I'm sure RAs as well, they pick a vendor, the vendors, it could be the right choice, but still the implementation fails. What are some ways in which firms can increase the odds of success?

Michael Perez (34:07):

It's a great question. We see a lot of opportunities there and I think it's probably adoption and championing that and kind of that communication internally on change management is lacking and perhaps the organization is not embraced it. So I think kind of doubling down on the implementation process I think is really valuable and ensures success. Again, I'm going to sound a little self-serving too, but a lot of times outside help can really help you kind of bridge that to get you to day one and live on whatever implementation you have. So I think it's really spending additional time and energy and efforts in the implementation process and adopting. And I see that as places of fail where that's not happening. A lot of times the implementation may not be deemed as successful and there's not really getting the use that it should be. I won't name a vendor, but I had one in New York, went through the exercise with us, implemented a really good investment reporting tool, really didn't put the effort and energy into the implementation to do it. Sat there for about three years and they were paying for this and really hadn't used it, right? And that's an extreme case, but that was directly related to hands off on the implementation. So there's some areas that I see there that can be improved or focused on.

Mark Wickersham (35:41):

What you see too is that when you bring in that outside help, the implementations are tough, right? There's very few implementation. People are like, oh, that was a fantastic experience. They're tough experiences, even good ones. And I think what an outside consultant can do is help manage the two parties and play that Switzerland that actually you end up with a better vendor relationship post-implementation because some of those humps or some of those hurdles that you had during the adoption process can be smoothed over because you have this third party that's involved. So I think that's kind of an underrated area where a consultant can really help out a lot because you want to have a good,

Doug Fritz (36:25):

And when technology changes in an organization, usually one or two people in the organization make the decision to go change with almost always limited visibility into how that change is going to impact the rest of the organization on a daily basis. And I would say that the other two things I'd add to what Mike said was there's this old adage, everyone hates change. Especially in our industry, people hate change. I actually found that to be incorrect. It's that people, they fear coercion not change. And so in a lot of cases, if it's not communicated that the new technologies here to facilitate a better experience or to facilitate added value or better value for the clients, for the family, for investors it's like change for change's sake. And as an operations person, you're making this change and you're actually reducing my ability to be valuable by making this change.

(37:22):

I no longer can track that spreadsheet and make sure I'm finding the errors, you're telling me the system's going to do it. My value coming into the office is to provide that level of oversight and risk management. You're now limiting my ability to add value. I will naturally as a human reject that change. I'll find every reason to avoid it because you're taking the value away. And so we introduce technology to clients, especially after this key decisions or maybe we're often brought in when things go awry is just try to talk to the people in the organization about how the new technology, the new process is actually going to help them be a better version of themselves and add more value, not reduce their value. And you'd be surprised at how much just sort of the frustration goes away when that really happens. It can be very, very helpful.

(38:08):

And I think to the point on working with vendors to implement vendors, salespeople, they come in, they sell the software, they sell what it can do, and then the implementation team comes in and asks the questions, what do you want the tool to do? And if they're asking, they typically don't ask the management team that made the decision. They asked the operations team, the people I just mentioned before that check the spreadsheets. Not surprisingly, a lot of the configurations we see when we weren't brought in initially we were brought in after the fact are a replication, a previous tools capabilities with new technology. So it's like I love riding a bicycle, thank you for the car where I see pedal, but how do I pedal the car? No, you just put the foot on the accelerator. That's not going to work for me. I got to be able to have pedals in a brake in my car and you'd be surprised how many great tools magically have pedals and hand brakes on the car when they, because no one's spent time with the team to actually say, let's actually design a better process. Let's find a better way to do this. Not just replicate

Mark Wickersham (39:04):

Remapped their old processes on the new system. And

Doug Fritz (39:08):

It happens all the time.

Mark Wickersham (39:10):

You've implemented, you've been onboarding. What should family offices be doing with their vendors to stay up to date, make sure they're fully optimized on the latest capabilities? What are some best practices in that area in terms of vendor management that's close implementation?

Doug Fritz (39:30):

Ideally, this, what I'm getting ready to say starts during contract phase, but if it doesn't, it's still something to stay on top of. But when we take our clients through the contract negotiation process, we really always try to get a couple of key things in for that year. 1, 2, 3, after the implementation is holding your vendor to the KPIs you've established and helping really, really good initial KPIs can be very helpful to both just maintain relationship, maintain the quality of the servicing, and also give you optionality if there is some either new liquidity event they get bought by another firm or a lack of liquidity, their PE or their venture sponsors dried up and suddenly they're going to have to curtail the roadmap that they sold you on. And so that constant holding your vendors to where they're going, making sure that if you're not getting great service from a daily configuration or service manager, you're raising those things up.

(40:32):

You need to be a squeaky wheel as often as possible. If you're not squeaky, you don't get the good service people issues and errors can make you really frustrated and the leadership, that vendor doesn't know anything about it. And so just maintaining that level of pace, just also tracking on the financials, most of these firms are going to be venture backed or backed and not going to publish audited financials to any of their clients. It's probably not in your contract. It could be you could ask for audited financials, annual audited financials from your vendors to make sure you're tracking their help. But when you start seeing a vendor not pick up in the industry and not grow and growing for your vendors, growing is a sign that you've made a good choice, but it's also a sign they're going to have to hire new people.

(41:15):

The people that they're going to hire, you may get a new person and it's you're no longer their top client in the bottom half of their client size. You're not getting as much service, but making sure that you're tracking on their financials and they're healthy, they're not healthy, they're just not growing, they're not healthy or they're growing too fast and it's starting to cause problems. It is time to start thinking about a lifeboat. If I had to leave, how would I leave? What could I trigger? Do I have evidence that there was under performance or lack of delivery? Go back to the contract to make sure you're checking that you've got an email saved that indicated like, hey, this is not breach, but it's getting close to breach the contract. Making sure you stay on top of it is pretty critical.

Mark Wickersham (41:59):

I think those are all good points. I think having regular QPR QBR is being able to manage the KPIs, having those KPIs defined in advance. If you can't measure it, you can't manage it type of situation. That should be having regular conversations with your vendor. Ideally you're treating that vendor as a partner and being able to help them understand what's new with your business as well as understanding what's new with 'em. And then to be able to understand that the baseline performance is key. So I think those are all good points. Let's take a look at into the future. Obviously it's a very dynamic market, things have changed a lot, but where do we see the future of wealth management? Where do we see two, three, even five years out? What does the industry look like?

Doug Fritz (42:48):

I'll go first this so Mike, but I want to hear your perspective too. And so I think that the real two to five years out is going to be folks are going to continue to realize the value of scalability. They're taking their businesses very seriously, operating them and managing professional businesses. Not like a couple of people that got together 25 years ago and are just managing things on spreadsheets. But the nature of advice, humans working with humans, I don't really see that changing at all. I think we've been scared as an industry several times during the robo-advisor phase and also sudden the AI phase that we get these reporters saying the role of the advisor is dead. The role of humans helping in wealth management is dead, right? If you're thinking about being an advisor and you're in college, forget about it. Just go be an AI coder or a prompt engineer and that's your job. I really don't see that happening at all, not just from a regulatory standpoint, but just humans dealing with difficult situations want to work with humans. And so I think that less will change than you would expect in five years other than just more maturity.

Michael Perez (43:53):

Doug really hit the points. I guess if I'm looking two to five years, I would say there's probably more adoption of AI as AI advances. So there's more opportunities there for education and implementation. And then Doug hit it big and I've just seen this increase dramatically over the past three to five years is the alternative asset administration, that whole piece. I don't see that slowing down. That touches a lot of other things like direct indexing. So there's a lot of opportunity around this new thinking or quite frankly just new ways of doing business that I think translate into technology opportunities.

Mark Wickersham (44:37):

I think that makes sense. I think you're going to see AI really force the modernization of family offices that we've been talking about for a long time. I think Covid put a good dent in it making sure these family offices get into the cloud at least, but now you're going to really see 'em modernize. I think alternative investments, family offices have a high exposure to it, but I think that there is some feeling out there that even could be low that they could be under allocated by up to 20%. And with all these technology options are coming available around alt data management, that these family offices are going to be able to, without significantly increasing the headcount, be able to take on a higher degree of exposure. All right guys, I like to wrap things up on a personal note at the end of the podcast here. Just three questions that had nothing to do with WealthTech. Let's start with the first one. What is that a hobby or scale that people might not know that you have or that you do? Mike, yours has got

Michael Perez (45:37):

To be more fun than mine. I got this one. I dunno how exciting mine is. I've been really passionate about fishing for many years and for me, I guess it's something deeply grounding about being out there early in the morning on the water at sunrise, right? Waiting patiently, right? Fully immersed in nature, I think is really awesome. It's one of the few activities that lets me really disconnect, reset and focus, right? And I think over time it's become more than a hobby. It's kind of a way that I recharge and stay balanced for the demands of my professional life here. So I would say freshwater fishing for May is probably it. Nice.

Doug Fritz (46:18):

Yeah. We moved from California a year and a half ago where we lived two blocks from the Pacific Ocean in a great surf spot. So in moving from the coast to what we call the central coast of the Lake Michigan

Mark Wickersham (46:34):

Waves are a little different,

Doug Fritz (46:35):

Not even at all. So we just started, I started Sailable racing and it was very classic. People that know me really well, of course you would learn to sail and then race. That's how you're going to learn to sail is by sailboat racing. So I picked up racing J 70, which is a four person sailboat. They have races all over the country, including here in the Midwest. And so we've been along my second year of building a racing team, basically of a smallish sailboat. That's my current passion.

Mark Wickersham (47:05):

Doug, correct me if I'm wrong, but you had a chance to live in Moscow in the early nineties. What was that experience like?

Doug Fritz (47:12):

I absolutely did. So people, especially now, you can't look back 30 years in the past and be like, why did you make that decision? Especially for younger people. But if you get out of high school in 1992, it's a forgivable mistake maybe to say, I'm going to go to Russia as a conservative capitalist ideology purveyor, and I'm going to learn Russian. I'm going to learn international business. I'm going to have two degrees. I'm going to go work in Moscow. But that's what I did. I went to college, got a double major in international business in Russian, ended up spending about one semester in 1995 in the hinterlands of Russia, and then ended up back in 97 working right out of college at Credit Suisse, doing Russian equities for Credit Suisse on market. And that was my first job out of college, was working in Moscow, speaking Russian, doing Russian equity settlement, which is a whole separate podcast to talk about Russian equity settlement in the nineties. Suffice to say, when you talk about security registration, it's because there was a registrar person in a book in a lot of these companies. After it was privatized, they had to actually hand write in who owned which share. And my job was to go send people to the different companies to get shares registered for major US and international clients. That was a fun time to be 23 years old, getting paid in dollars and living in Russia.

Mark Wickersham (48:39):

Michael, you're from the New York area, obviously New York City is one of the great cities on the planet. What do you love about New York City? What's your favorite spot in the city?

Michael Perez (48:50):

I've worked there for many years, Rockefeller Center for years, and then I also worked downtown in the World Trade Center in the South Tower for over a decade, probably downtown is my favorite place in New York. I, it's just dynamic. I mean, it's kind of where the whole world, everything collides. It's a global city in every sense. Now that said, I have a lot of Boston clients too, and I love Boston, right? It's charm, it's history and everything else too. So got to be fair here to both of my Boston and my New York clients. But New York is awesome. Just love it. Can't say enough.

Mark Wickersham (49:28):

Yeah, I mean, Boston's a great city. I was going to try to get you to compare and contrast the two, but

Michael Perez (49:32):

Well, ' Donuts at least, or are you a'

Mark Wickersham (49:34):

Dunking Donuts at least, or are you Starbucks guy?

Michael Perez (49:37):

Well, it'd have to be Starbucks over Dunking Donuts.

Mark Wickersham (49:40):

All right, guys, well this is a great podcast. I really appreciate the insights on this and bringing the truth bombs. It's been a fascinating conversation. I know people are going to get a lot out of it.

Doug Fritz (49:52):

Thanks, mark. M

Mark Wickersham (49:53):

Great. Thanks for having us. Mark. The Wealth Tech podcast is brought to you by the generous support of risk clarity. Risk. Clarity fills in the technology gaps family wealth firms face when serving the complex needs of ultra high net worth families. They enable firms to simplify complexity so they can scale efficiently and securely. To learn more, see Risk clarity.com.