Russ: Hi I’m Russ Capper and this is BusinessMakers USA brought to you by Insperity, inspiring business performance. Coming to you today from Seattle, Washington and I’m very pleased to have as my guest Randy Gantenbein, Co-founder of Tapestry. Randy, welcome to the show.
Randy: Thank you, it’s nice to be here.
Russ: You bet, tell us about Tapestry.
Randy: So Tapestry is a firm, we just celebrated our 7 year anniversary so we started 7 years ago.
Randy: Thank you. The easiest way to describe what we do is that we manage non-financial assets for ultra-high net worth families which means that for families of significant wealth or evolving wealth they accumulate large portfolios of non-financial assets; primarily real estate such as private estates or maybe yachts or planes or art collections. And our business is involved in helping the family on a very comprehensive level with everything in that part of their life; basically everything except their financial investments.
Russ: Okay, that’s interesting. So are there companies that manage financial assets that also try to get into non-financial assets?
Randy: There is a history of that. So what we learned – what we suspected before we started the business and what we’ve learned now and really believe to be true is that wealthy families are surrounded by what we refer to as a circle of trusted advisors and if you were to put those people all at a table – we always call it the circle of trusted advisors – you can predict with a high degree of certainty who’s going to be at that table. It’s going to be somebody who represents their financial assets, either a private bank or investment firm that’s helping them advise on their money. Also you’ll have a tax advisor, a trusted estate attorney, a philanthropy advisor. All of those people fundamentally are talking about helping provide a very high level of advice to a family on those aspects but we always say there’s been a missing seat at that table for somebody that provides that same level of professional advice for their non-financial asset holdings.
Russ: Okay, real interesting. So ultra wealthy people these days, there’s sort of a lot going on, there’s probably more ultra wealthy people today than there ever have been on Earth.
Russ: And in the United States.
Russ: So you mentioned real estate, there’s other things I guess in common, maybe airplanes?
Randy: Airplanes – you know float and fly – could be planes, could be yachts. There’s also collections that can have extraordinary wealth or value such as art. And the art market has been sort of astonishingly over heated for a period of time right now so we have – I can think of numerous examples where we have a client who has a very large, very high value private estate and there will be one piece of art hanging in that house that’s worth twice as much as the entire estate because of the nature of the market right now. So art is a significant factor and it needs to be managed.
Russ: So how do you mange that, a real very high worth art collection? In that specific example do you start telling them hey, maybe you want to move it into a safe place?
Randy: Well there are a whole roster of factors pertaining to art. One is acquisition; so buying the right thing to begin with. There is transportation which can be very tricky, there is insurance. Back to purchasing there can be financing and you have financial institutions that are very eager to finance it right now because of the value. There’s the space in which the art lives, so you have to be concerned about temperature and light and humidity and the conditions that it lives in and securing it, and then security in general. And then also documenting the assets; if you have an extremely large collection of art you need to understand what you own for insurance reasons. You have to know where it is and you have to track when and how and where it’s moved.
Russ: Wow. So that right there kind of demonstrates the value that you bring to the table. So I guess there are sort several big categories of nonfinancial assets that you have expertise in, would that be accurate?
Randy: I think that’s an accurate statement. It’s fair to say that our core strength is in real estate, management of homes and that has to do with from where I came from and where my partners and coworkers came from, they came from the world of managing large, private estates on the owner’s side. So our expertise is really in that area but in that capacity we were involved in virtually everything, whether it’s planes or cars or art for example, and there are very specialized advisors and consultants in all those areas. And a lot of what we do is make sure that the family is connected to the right advisor for what the situation is. There’s no one size fits all, if it comes to an art advisor because it depends on what you’re working with and what your needs are. So if we don’t have the expertise ourselves in house we know how to get the right person there.
Russ: That’s interesting. So even airplanes, some of the airplanes they buy are I don’t know, I guess families can buy things that are the size of big jetliners these days?
Randy: Yes, and do.
Russ: And do, okay.
Randy: So the issue that we’re most often confronted with is families trying to decide okay, I have one or more planes or private jets or helicopters so all of a sudden I have an aviation department, do I manage that all myself or do I outsource the management of that? And there’s a whole range of issues that drive that; what makes the most sense for a family? And so again we advise on that and we also have a roster of aviation management companies that we work with and they come in all shapes and sizes too. And it goes back to the same thing as art, our job is to make sure that if a family needs aviation management advice our job is to help them get the right person there or the right entity there to help them.
Russ: So you must have these specialty companies that manage different kinds and levels of aviation ownership calling on you to try to get on your list and earn your respect for recommending them.
Randy: Well I think that’s a fair statement. In the grand scheme of things you could say that we’re still a relatively new company and much to my surprise I’m told virtually every day that we don’t have a competitor, so when we started the company we sort of – we didn’t change a paradigm, we invented a paradigm or created one. And so as time goes by more and more specialized entities are finding out about us. Now one of our values as a firm is that from our previous work we’ve done – working for significant families we’re done projects all over the world so we have what we call a global network of vetted resources. So we have worked with very specialized companies and individuals all over the world and that network is really valuable for us right now because – I always call it one degree of separation – it’s how can we get the right advice to the client at the right time. And it’s a very specialized world and lots of issues about security and confidentiality and all of those factors have to be put in to the mix before you take an advisor to a family.
Russ: Oh yeah, I’m sure. So I know you consistently talk about the family so it’s not necessarily – I guess when you get into the ultra wealthy there’s multiple people involved and it usually is from a family, is that right?
Randy: Yeah, and it’s – there’s all this sort of industry lingo that evolves, it’s always called G1, G2 and G3 – so you start understanding which generation you’re working with because the issues of a generation 1 in which the person or the couple that generated the wealth it’s first generation money so there’s issues involved with that and then it starts to become more complex over time. Because instead of dealing with two people, let’s say two people have three children and each of the three children have five children, all of a sudden there’s many, many people to deal with.
Russ: Well I’ve been exposed to some of that in covering some family office events and I remember recently hearing that it’s G3 that often is the one that makes the mistake and loses a lot of the family wealth but it also makes sense that in G3, 4, 5 it starts getting to be a big group of people.
Randy: It does become a big group of people.
Russ: So do you deal sometimes with a group decision I guess on using you.
Russ: Almost always.
Randy: We are initiating a new client relationship right now and our primary client will be the person who is actually the heir apparent and he’s a G3 person. He has three siblings and three cousins so there’s seven people on that line, but he’s the one that’s evolving as the leader and he’s extremely smart and extremely disciplined and determined to do the right thing, so he’s a great client for us.
Russ: Well it sounds just like a fascinating business, I’m sure you must meet some very interesting people but I’m just real curious, what triggered the idea of this area of specialty?
Randy: Myself and my co-founding business partner Anne Lyons worked together many years for a very large family office in Seattle and in that capacity we also, through circumstances, met very talented people from another very large family office in Seattle and we, through the exchange of confidentiality agreements with both families, we were able to start talking to one another because we needed somebody to talk to. And these conversations evolved like okay, we’ve developed these network of resources and people and skills and we’ve done projects all over the world for arguably two of the largest family offices anywhere. And it seemed like there’s an opportunity there to take this to other families that don’t have established or big, built up family office infrastructures. So basically take our skills out into the market which is what we did.
Russ: And I’m sure you had to get the approval of the two families that you met through and worked for too and they thought it was a good business idea?
Randy: Well Anne and I were the first to leave and we founded the company and then over time more people have joined us. We had to obviously separate ourselves from those families, now wonderfully both of those families are now clients of ours.
Russ: Oh wow, really cool.
Randy: Which is a great thing. And so that was the idea and then alluding to what I said earlier, we felt that the real viability of the company was hinged on what I said earlier, there is that missing person or entity at the advisory level. So these people have very high level sophisticated professional advice in all of these areas of their lives like investments and tax and philanthropy and all of these issues but they may have hundreds of millions if not more assets tied up in nonfinancial assets so why would you not want that same level of advice? So we decided that we wanted to put a new chair at that table, sort of push our way in, and then over time earn the right to sit at it.
Russ: So actually when you got together with your co-founder this was a startup business.
Russ: And so we have lots of startup businesses on the show and it’s always interesting because almost all of them we like to say I’m sure it’s been easy the whole way; this model might be. Has it been easy sailing the whole way or have there been any challenges?
Randy: If only I could say that but that would not be true. Probably the first initial challenge is that we are a new concept and a new paradigm so it’s not like we’re going out and competing with somebody, we just found out that there are no competitors so we’re kind of having to create an identity and try to get people to understand what our concept was, which is true. Then if you look at it from a marketing perspective a real challenge is everything that we do hinges on confidentiality. If we ever breach that we would be out of business. And so fundamentally we’re out trying to tell a story without being able to talk about the work that we do, which is very challenging. In other words how do I make you understand what I do if I can’t really tell you what I do.
Russ: Yeah, you probably can’t even use customer references.
Randy: We can’t and we sign a lot of confidentiality agreements to that effect. So I think that that is challenging that that has been a real challenge for us and it continues to be although over time we’ve done a significant amount of work all over the world and we can sort of in a redacted fashion talk about what we do and it establishes – our credibility is established by the work that we’ve done even though we can only kind of talk about it in the abstract.
Russ: Wow, unique challenges but challenges that seem like you’ve certainly made your way through them too.
Randy: Well I think we certainly are. The other challenge that we experience is we’ve been blessed with extremely large projects for families. Projects like develop a new home that takes 3 or 4 years and assemble a large team of people and create the most interesting homes in the world and fascinating places but you go in knowing that the project is going to end. So all of a sudden you have this very big project and all of a sudden it’s ending so it’s like you’re approaching the cliff and you’re going to fall off and you have to kind of scramble around. But that’s true of all the world.
Russ: Yeah, that’s the real world.
Randy: That’s like an architectural firm, you build the greatest building in the world, sooner or later it’s finished.
Russ: Well Randy thank you very much.
Russ: It’s a real interesting business.
Randy: Thank you.
Russ: You bet. And that wraps up my discussion with Randy Gantenbein, Co-founder of Tapestry. And this is BusinessMakers USA.
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