Hi, everyone. Welcome to What Works. This is a show for consortium advisors that taps into over 1,000 years of experience shared by our consortium advisors.

I’m your host, Don Patrick, and I’m here to guide the conversation with guest advisors and lift the hood on what works for them in business and life. It’s all about learning and growing.

So let’s go.

Don Patrick: Welcome, everybody. This is episode number two. What Works, consortium member insights and stories from the field. Today, Matt Carpinelli is our guest. Pretty cool. Matt’s president, wealth advisor of AFC Wealth, located in Littleton, Colorado. It’s a suburb of Denver out in the foothills, right, Matt?
Matt Carpinelli: Yeah, that’s exactly right. Just about 30 minutes southwest of downtown Denver.

Don Patrick: And it’s beautiful out there. It’s gorgeous. And that’s pretty much where you grew up, right?
Matt Carpinelli: It is. I used to drink beer where I live. Oddly enough, it had a four-wheel drive to it or ride your motorcycle or mountain bike. But, yeah, I didn’t stray very far from the beginning.

Don Patrick: So I didn’t know that. So that’s all the Red Rocks. And so you guys four-wheel it out there, drink beer. And now you have a beautiful home there, right?

Matt Carpinelli: Yeah, exactly. We’d have big campfires and big parties because it was so far out of the way that you weren’t bugging anybody and, the law certainly wasn’t patrolling out here on a regular basis.
Don Patrick: And you’re not that far from the Red Rocks amphitheater, are you?

Matt Carpinelli: No, probably a half hour South of there, but my backyard looks just like that. It’s the same rock formation. It’s called the Fountain Formation, 150 million years old.

It’s a big red sedimentary rock that got pushed up. That was an ancient seabed. So there’s a bunch of fossils and all that kind of stuff. But yeah, my backyard, I’m looking out right now. It looks just like Red Rocks amphitheater without all the concertgoers and everything.

Don Patrick: Sweet. Yeah, that’s beautiful. So tell us a little bit about your family.

Matt Carpinelli: Well, I’ve got a wonderful wife, Jessica. We just celebrated our 22nd anniversary last Friday. We met in college. I was really lucky to meet her. She moved out here from Maryland, to go to the University of Colorado up in Boulder. And I ended up there in a roundabout way.

And it was a learning experience to get there, but it was the best thing that ever happened to me. ‘Cause I met her. We have two just incredible daughters. Juliana’s just turned 20 years old. She’s a sophomore at the University of Colorado and her sister Carmen is 17 and she’s a senior in high school and we’re trying to figure out how we can help her decide on where she’s going to go to school next year. So it’s been an interesting couple of years for us.

Don Patrick: What kind of activities and interest do the two young ladies have?

Matt Carpinelli: We’ve been really lucky. We kind of all like the same stuff: being outside, hiking. But selfishly, I had them started with a golf club when they were a little tiny, just because, that’s where we used to hang out.

I would play golf with my buddies on Wednesdays, the girls would end up at the swimming pool with my buddy’s family. And then after we’d hit some balls, play a few holes, and then all have dinner together. So both of my girls are, amongst a whole bunch of other sports, really taking the golf and my youngest Carmen right now is, state champion last June for the state of Colorado, our team.

Don Patrick: That’s amazing. Oh my gosh.

Matt Carpinelli: Great way to spend four hours together and the older they get, the fewer chances you have for that. And it’s just been a great opportunity to be around one another.

Don Patrick: It doesn’t get any better than that. And Jessica, she was kind of corporate America, and then you had the girls and she left corporate America and became a CrossFitter. And now she’s a yoga instructor or something, right?

Matt Carpinelli: Yeah. She’s an interesting character. It’s like we’re like the mismatch of all mismatches. She was worked at IBM. She interned there for two years in college, and then they gave her a wonderful job when she graduated. And she was the highest paid senior graduate of the University of Colorado Business School up until that time.

That was 1999. So she had an amazing job, a great career for IBM and, then she decided to be a mom after we had Juliana, our first one. And the crazy thing about it, I always tell people how amazing IBM was to her and to us, because they kept us on the health insurance plan for 10 years, hoping she would come back to work.

Don Patrick: That’s amazing.

Matt Carpinelli: So it was fantastic and a huge help for us because, as you know, self-employed health insurance, not cheap. But she’s big into health and fitness and was a jiujitsu practitioner for a lot of years and had fights which had me minding my tongue because she could twist me up like a pretzel
Don Patrick: Yes, you gotta behave yourself.

Matt Carpinelli: I do and I know when I’ve pushed it too far. She’s got a look; I can tell an arm bars right around the corner. But now she’s, yeah, she’s had five or six years where she was a daily CrossFitter. Now, she’s eased back on that a couple times a week and she’s just became a certified yoga instructor two weeks ago. So she’s really digging that kind of second chapter for her.

Don Patrick: That’s great. I love it. Anything else you want to say about the fam? So I know the girls are super smart. They always have a smile. I mean, they both have incredible personalities. And, just always happy, it seems like. And they work hard too. They’re very focused, but they have fun.

Matt Carpinelli: Yeah. they’re just the exact opposite of me when it comes to that, they really take after their mom. I mean, they’re both great students and take it serious. They study, they do their homework. They’ve both been straight-A students forever. I think I graduated high school with a 2.5 or something. So luckily they take after mom and that’s the best thing about it is: they’re always happy and I’ve been so lucky in my life as a father and a husband that we have spent so much time together that, Jessica and I were thinking the other day and 22 years after we had kids. And so in 20 years, I think her and I have only been away from the girls like 10 nights or something.

And it’s just how it worked out. We never really, we wanted our alone time and we had dates nights and things, but we went somewhere, we took everybody and I wouldn’t trade that for anything.

Don Patrick: That’s fantastic. That’s wonderful. That is great. Well, let’s talk a little bit about business because it’s, so you got a 2.5 in high school. I didn’t know that. But, you’re getting straight A’s in the world of financial planning and running a business. I can tell you that because I know what you’ve been doing all these years and you’re constantly getting better coaches and it’s just amazing. So I guess, first question is, how long have you been in the profession?

Matt Carpinelli: So basically since 1998, so I guess that’s about 24 years now.

Don Patrick: So you are seasoned.

Matt Carpinelli: I am seasoned. I feel like I’ve seen a lot of things and I kind of started it right in the tech boom bubble and then it was three years of misery. And, so now when we’re going through the stuff we’re going through, I mean, it still hurts. But when you look back like, well, you’ve seen this before. It’s just a different, different story.

Don Patrick: Yeah, exactly. And what we’re going through right now is nothing like 2008, which was the worst a hundred years in. The 2000 tech crash was incredible. So far it’s not like that. We’ll see. We don’t know. This also will lead into the two main topics today that we’re going to get to about how you got started in the profession. And this has an impact on what we call gen one and gen two, and how you go about that. And then secondly, advisors are always kind of wanting to own their own office building for some reasonably good reasons, but we’re going to talk about the pros and cons of owning your own office building versus renting or leasing. So tell us a little bit about your business. It’s pretty interesting. There’s a lot of folks who know you, there’s some folks who don’t. Their whole visual is being bagged chairs and I’ll let you finish the rest.

Matt Carpinelli: Well, I still have the beanbag chairs, but I only bring them out for certain people. I think that as serious as I take the financial part of our business, the thing that I love about it the best is just the conversations that I’m able to have with clients and I try to set up the entire experience that way.
I don’t have a conference table. I don’t have filing cabinets. I mean, I’ve got couches and pillows and sometimes people lay down on them. Especially lately when they’re seeing their statements and I just kind of lucked into that. I mean, I always knew it was my style, but then I just thought, “Hey, I could do whatever I want.” I want to set my office up like a therapist office, just because of the kind of conversations that comfort seems to open up towards. It’s not stuffy, it’s not business. I’ve got people’s favorite music playing when they walk in, not CNBC. I mean, kind of basic stuff, but what I think is pretty cool.

Don Patrick: So yeah, what I’ve found – and I know you have, and most of the financial planners that are true financial planners – it is about people and we end up, I’ve always said that we have more impact on people’s lives than a physician does until they get older.

Everything from preventing divorces and getting kids through school and so on and so forth. But one of the things that’s always amazed me and obviously with you, this is the case, is that they share things with us that their closest friends have no idea.

Matt Carpinelli: It really is the truth. And I can’t tell you how, as my client experience has adapted, especially over the last three or four years, when I moved to the couches and just did a real serious shift and how I work with people, I’ve found that I had to really change how I did meetings starting with the time. I used to be a very process-driven 45 minutes. You’re out the door. We talked about important stuff, but it was tight and then I was on to the next one after making some notes, I deliberately changed that process.
And what’s happened out of that is that we talk business for 10 minutes and then spend an hour and a half talking about family and pets and all the wonderful stuff that really helps us get to the bottom of the real person that we’re helping and really do something transformative instead of goals. We’re talking about dreams and I think those things are very different.

Don Patrick: They are. So, you do quite a few unique things with your clients along those lines. Obviously, you know everything from their pets to their favorite hobbies and so on and so forth. But just kind of walk us through how that works, because I know you do very special things for the clients. It’s incredibly powerful and meaningful.

Matt Carpinelli: Yeah, that’s been fun. And the cool thing about that is that I’m always trying to provide an experience that they can’t get anywhere else. And the way I do that is by really knowing them and, first and foremost, after every meeting, sometimes before, my assistant Sue has a different list of profile questions to go over. And none of them have to do with business and they’re all personal: favorite charity, favorite music, favorite band, simple stuff like anniversaries. But one of the cool things that we’ve done is when a client walks in the door and they love the Rolling Stones, we’ve got the Rolling Stones playing when they walk in and it’s just cool. And half the time they don’t even notice, they think it’s just a coincidence. But the second time they come in and it’s playing, they’re like, “Yeah, wow. You listen.”

Don Patrick: That’s fantastic. And share a couple other things you do have. You’ve shared with me. Well, actually I think in one of our retreats, you shared a lot of this. There’s a lot of things you do to really drill down and get to know your clients besides beanbag chairs and laying on a couch.

Matt Carpinelli: Yeah. So I’ve got a pretty detailed discovery process that I go through that’s adapted from a lot of different coaches that I’ve used over the years. C. G. was the first one. They had this whole client model that’s basically they give you 50 questions to get down to a client’s personality. And I’ve adapted that with some of my own language and some of the Carl Richards stuff. It’s really all about life planning, even though I cringe at that. ‘Cause that reminds me of some weird idea from 20 years ago, but-

Don Patrick: Yeah.

Matt Carpinelli: That’s not what I do, but that’s kind of how I would describe it to an outsider. But, just really asking the right questions and I think it kind of goes back to, I think it was that Bill Bacharach book that values-based selling where, it’s so uncomfortable, like what’s important about money to you.
And then you ask it again and then, but you keep asking it. I kind of do that in a much softer conversational way to really find out what’s making somebody tick. And, once we know that, what’s really important to them, we can really tailor the experience that we provide before the meeting, during the meeting and after the meeting to that client.

So if I’ve got a client coming in that I know loves golf, their favorite golf magazine or something cool that I see at the bookstore is sitting there waiting for them, along with a sleeve of golf balls. If I’ve got a client that loves to cook, I’ll have some really cool but inexpensive cooking item that I pick up from Williams Sonoma or Amazon that I know they’re going to love and probably don’t have, so trying to get something unique every time, it keeps it fresh and it keeps it interesting for me because I’ve got a weird personality. I get bored with stuff. I got to keep it changing.

Don Patrick: But I mean, how powerful is that for your clients? I mean, that is so special. We’re in a world where we read about, well, 1% AUM, da da da, well. It’s the value in which you are providing is so powerful.
It’s amazing. I mean, you talk about separating yourself from the critical competition and I’ve always said, if you’re doing a financial plan, doing things that you’re doing, you really don’t have competition. People aren’t going to pay. So a couple of things: I know you’ve been involved in a number of coaching programs and I’ve seen your business and practice more, if I guess, develop and grow in different ways. It’s been wonderful for you. Do you think it’s something for everybody or not?

Matt Carpinelli: No, I definitely think it’s something for everybody. And I think that the cool thing about like one-on-one coaching is, if you go to a big event like LPL’s Focus, there’s so much information and they’re trying to give it to 5,000 people and find out what’s interesting for all those people. And, I always feel like I’m really lucky if I get one or two nuggets out of it that I can bring back to my business.

My experience, especially as I’ve grown older and more experienced, is that with the right coach, you can focus on one or two of those nuggets that you find together with that coach and drill deep and then get some accountability around it. So for me, my last coach was focused around client experience.

And like, I just locked into that and I’ve just enjoyed it so much that, in two years, I still feel like I’m doing something different every single day to stay on top of that and keep it good and fresh. And I don’t think you can do that without-

Don Patrick: A coach, quite frankly.

Matt Carpinelli: I can’t anyways.

Don Patrick: Well, I’ve watched you, I think the last three or four years, and the amount of work you’ve put into this, it is so incredible, so powerful.

I mean, can you imagine, going to any professional and being treated like that and so deep? And plus, it’s fun for you. I mean, we’re in a people business. We’re here to help people. And, you’ve just taken it to the nth degree. And by the way, you’ve gone from a 2.5 GPA in high school to a 4.0 in your business. It’s amazing what you’ve done. You are a great student of the business and of the profession.

Matt Carpinelli: Well, thanks, Don. And I guess I’m glad that the consortium didn’t ask for my report card. But now it’s just, I think it’s just a function of my personality. Like I want to keep it fresh for me and, in order to do that, you gotta try some different things.

Don Patrick: You get bored and stale, right?
Matt Carpinelli: Yeah. Yeah.

Don Patrick: Yeah. So in terms of financial planning, so when I started, 47 years ago, and most of you have seen one of my original financial plans, it was hand typed and I did all the calculations of the hundred pages and we charged a thousand bucks for it.

And then nobody implemented. Why? I mean, you paid all this money. It’s about, that’s about $33,000 in today’s world. And we quickly went to one-page executive summaries because that’s all people want. And I’ve always said, with the perspective client, I said, when I go to a doctor’s office, first of all, I don’t like medical terminology.

I want them to speak to me in English. If there are choices, I want to know what the choices are and what their recommendation is and why – that’s simple. And our annual progress review meetings, the clients just want to know they’re okay. They’re fine. So you’re a one-page financial plan guy, right?

Matt Carpinelli: I am. I read that Carl Richards book – I don’t know how many years ago now, six or seven, it seems like – and, I was kind of that way before because I like simple stuff and to-do lists, and I like to be able to cross it off the list. It’s like, listen, I want to do this. I want to max my SEP out this year.

And in order to do that, I got to save $5,000 a month. And then once I start saving $5,000 a month, I can cross it off the list. And incredibly enough, I’ve found that my clients for the most part want exactly the same thing. They want one page. They want to know, where am I at? What do I need to do to different to get to where I want to go?

And what do I have to do now to get there? And what do I have to do in a couple of years to get there? And really that’s it. So I use a one-page plan. It is literally one piece of paper that is set up just like a to-do list. And I tell people, I said, put this on your desk, on your fridge, wherever you need to put it in order to get those to do now things done right away.

I want to cross it off. Then I want you to not worry about it for a while. And you can feel a sense of accomplishment. And that tends to really work for my clients. And it creates a wonderful follow-up touch for me to say, Hey, did you max out your 457 plan? Or, have you started looking for financial aid for your kid? Or whatever it is, still, just a great excuse to spend more time with your client.

Don Patrick: So do you do any retirement planning projections behind the scenes to kind of get an idea? Are they on track, not on track and to come up with your one-page plan? How does that work?
Matt Carpinelli: I do. I’m really simplified that into something that for the vast majority of the people that I work with, that’s exactly what they need to know.

They need to know. Here’s what I’m doing today. Is it going to be enough to get me to where I want to go? And I use Riskalyze and their retirement map module for that, super simple. It’s not a detailed financial plan, but the reason I use it is because it’s easy and it’s interactive.

So when people are in the office, we’ll sit down and I’ll print them one copy. That’s like the ideal situation. And then we’ll say, “Hey, what if you retired early? Here’s what it would look like.” And it just makes that conversation of kind of a dry, boring review of numbers more engaging and interesting because they control the variables and can see what it does.

Don Patrick: Yeah, they’re driving. They get to see the impact of different choices, right? Delay retirement, spend a little less, all those kinds of things. And they can also see the impact of different asset allocations, right?

Matt Carpinelli: Yeah, that’s exactly right. I mean, you’re taking not enough risks. We can’t grow enough.
You’re going to have to work seven more years. If we take the appropriate amount of risk, get enough stock in there that you’re still comfortable, but we’re growing, hey – you can retire two years before that. And I think people don’t realize that that’s how that can help them towards their destination.

Many times, especially right now, when it’s scary, my experience has been that people are just worried about, Oh, what are they going to, what are they going to lose? That’s a function of risk. To me, I think, it’s equally impactful to say, “Hey, here’s the real risk. You don’t have enough stock. You ain’t going to be able to retire when you want to.”

Don Patrick: Yeah. And so when I started, literally a hundred-page bound book and here’s your plan, here’s what you’re going to do. And today, because of technology, the clients make all the decisions and they see the impact of the choices. I mean, it’s just amazing what has happened in the last decade with technology and client interactions. They’re making the choices. You’re not telling them what to do, right?

Matt Carpinelli: No. I mean, and that’s the cool part about it is that, they’re doing all the hard work and picking the variables. You’re just helping them understand it. And I mean, that’s what makes it so cool.
Don Patrick: So on, I call them progress review meetings only because some consulting firms said that people don’t like the word review meeting.

So, and it makes sense to me because we are reviewing their progress, correct? So in an annual, I don’t know what you call your meetings, but what percent of the meeting is directed towards the investment portfolios?

Matt Carpinelli: Very little, I’d say, 10% probably. And we’ll take a look at their success meter on Riskalyze, say, “Hey, here’s how much this has impacted this, your ability to retire on time.”

I think they also need to understand that like today you’re looking at it from the middle of the fire. If we looked at it six months ago or nine months ago or a year ago, it’s totally different. It’s fluid. What’s this effect on the long term? And for most people, It’s not very much.

Don Patrick: It isn’t, is it, right?

Matt Carpinelli: As long as they don’t shoot themselves in the foot and do all the wrong things.

Don Patrick: You don’t have a loss unless you sell.

Matt Carpinelli: Exactly.

Don Patrick: Do you do the money manager yourself? Do you outsource it? What’s your philosophy on that?
Matt Carpinelli: So my philosophy is that I don’t have any initials behind my name. I want to spend my time with my clients, so I outsource almost everything. 99% of my investment activity is outsourced, even for myself. I practice what I preach. I basically use two money managers: SEI, cause they offer so many different things on their platform from mutual funds to actively taxed managed, separately managed accounts. And it just works for me.

And I don’t like to make the investment performance the reason for somebody to continue with me as their advisor. I want to be able to fire them for one thing: the money manager. Make changes without having to fire myself. And I don’t feel like I’m qualified to pick funds or stocks. And quite frankly, I’m not very interested in that.

Don Patrick: Yeah, you’re interested in the clients, their lives. So then that kind of leads to my next question. I think you’ve already answered it. What do you like about your profession, I think I know the answer, but…
Matt Carpinelli: Yeah, I mean, it’s kind of all the same. I mean, I love conversations. I love spending time with people.

And, it’s probably cheesy, but I love helping people. Now, I’ll tell you, I mean, I didn’t get in the business to help people. I got in the business to make money and feed my family. And then I figured out that you could do that by helping people. And that’s really what I enjoy about the business. It’s just spending time with people, listening, helping them, making them feel comfortable and calm.

Don Patrick: Fantastic. Yes. This is a incredible profession. You get to do great things with people and helping them, like you said, and make a damn good living. It’s pretty amazing. So you’re a good business guy. I know that. What are some of your biggest challenges running the business?

Matt Carpinelli: I’d say every single one of my challenges with my business is me. That’s my problem, between my ears is an interesting place. And I think that, that’s my number one challenge is: I think when you’re on your own, even if you’re lucky enough to have a group of people like IFG, sometimes you get wrapped up in your own head. And for me, I tend to focus on all the things that can go wrong, especially as I get a little further along in my business. For me, I’ve achieved, I built a decent business and I kind of worry more about how it’s going to explode than how I can continue to be really good.

And that’s my own fault. There’s nothing really driving that other than it’s just in between my ears. And I think for me, the other thing that I’ve struggled with the last five or six years is, just being pretty good at what I do and having a pretty good business. I think some of that hunger is gone.

It’s not, I don’t work harder so I can have a nicer car or any of that. What drove me for the first 15 years of my career doesn’t drive me anymore and I’m fairly comfortable. And I just got an interesting book. It’s called the Comfort Crisis and it talks all about it. And I started reading it and I had to put it down because I’m like, “Oh my God, they’re talking about me.”

Don Patrick: I don’t know that that’s necessarily unusual. I’ve seen so many advisors, watched their careers and there seems to be an apex in the careers. So that’s interesting. So it’s between your ears, that is the challenge in your business.

Matt Carpinelli: I mean, I think that’s the number one of the hundred problems I have, 99 of them are between my ear.

Don Patrick: I guess join the club, right?

Matt Carpinelli: Yeah, exactly. You made me feel a little better that I’m not the only one.

Don Patrick: You’re not, you’re not. So I’m going to ask you to describe your talents and strengths in three words.

Matt Carpinelli: I think my number one strength is I’m empathetic and that’s just something my dad used to tell me. He’s like, the best thing a business person can have that’s going to work with people is empathy and you can’t fake it if you go as deep as I go with people.

Don Patrick: I understand you have several boxes of tissues in your office.

Matt Carpinelli: I do. And every once in a while I’ll need to use one myself. So, that’s definitely my number one strength. I’d say I’m very adaptable. I don’t want to change just to change, but I feel like I’ve had a lot of different kind of events and circumstances come out at me in the last 20 years. And I feel like now that I’m comfortable adapting to different things, I’m not rigid. I’ll try anything. I’ll do anything.

Don Patrick: And I know that up close and personal, I’ve watched you over the years.

Matt Carpinelli: And then it’s weird to kind of describe myself. Like, that’s kind of a tough question for me to answer.

Those two are easy. But I think that, the other word is, I’d say I’m kind of like an iceberg. I mean, I think that what I show on the surface is only about 10 percent of the person I am. And, even though I’m very open and I’ll help people talk to anybody, I think there’s a lot more to me that meets the eye.
And that’s helped me with my business. I like to learn. I like to get involved in stuff that’s totally different than what I think some people might expect.

Don Patrick: That is a fascinating self-observation, an iceberg. I love that. We’re probably all somewhat like that, I suppose. I think so.

Don Patrick: But you, yeah, I’ve watched you through the years. You are a learner. You’re passionate about improving, getting better. Very creative. So, a couple simple questions. When did you join the consortium? What year was that?

Matt Carpinelli: Matt Carpinelli: It was 2011.

Don Patrick: 2011. That’s correct. And why did you join the consortium at the time and what is different about your view of the consortium today, many years later?

Matt Carpinelli: So in 2011, when I joined the group. Really, I did it out of fear. I was scared to death. I was at Securities America. It was the only broker-dealer I’d ever been at and it was going bad. And my perception of it was that my business was going to go really bad if I didn’t get out of there. And I started kind of looking and interviewing broker-dealers.

I got some trips to some places and pretended like I knew what questions to ask, but then I was like, wow, I have no idea what I’m doing. The only thing I know about my broker-dealer is what the payout is. And luckily, I had a friend who I’d met through a consulting program say, “Hey, you should talk to Don Patrick. They’ve got a whole group of people that love the kind of stuff that you’re afraid of and have done all the legwork already. I think they can help you out and kind of went from there.”

Don Patrick: Yep. I remember. And, so, the consortium is the brain trust, it’s the sharing and the caring and you’re great at it. You didn’t see that in the very beginning. I know that it was chaotic then. So as your view of the consortium evolved over these so many years.

Matt Carpinelli: Yeah. And really, it’s changed a lot in the last handful of years, just because I think my involvement has gotten a lot better. Those first few years, I just kind of did it out of fear and kind of latched on, even though I loved everybody I talked to, I’m a thousand miles away from everybody. And didn’t really get the feeling – plus I had some weird things come up where I couldn’t make the retreat. So I didn’t really get to know anybody for a long time.

Don Patrick: Well, yes, you were nicknamed ‘the hologram man’. You almost died twice, I think. And so you missed like three retreats ago, “Matt Carpinelli really exist?”.

Matt Carpinelli: Yeah, exactly. It’s like people would come up and touch me. And I’m like, “What are you doing?” You know? And they’re like, we’re just trying to see if you were real, because I missed a bunch of those first ones. But now, it’s like, as I’ve been lucky enough to talk a little at the retreats and get to know people and share my experience, I think that’s made it just a huge difference for me, like getting to know the group that everybody’s in it for the same reason.

And I feel like I’m out on an island a lot by myself. And now I know that, hey, I could just send a note to Andrews or my mastermind group or you, of course, and they might not have the answers, but I can talk it out. And nine times out of ten, that’s what I need. So I think getting more involved and like being able to kind of teach the things that I’ve learned have made me just a better student and a better member of the group.

Don Patrick: Yeah, so you contributed so much. You are really one of the great thought leaders in the group. So that’s fantastic. It’s one of the hardest things for us is we know you’re on an island and to create that community. And even though you’re a thousand miles away, you’re literally a phone call or a Zoom call away.

Matt Carpinelli: It’s true. And I feel more like that every year that I’m closer than the miles might say.
Don Patrick: Yeah. In today’s world of technology, definitely. So let’s jump into the main topics. This is fabulous learning about you. I know quite a bit, but there’s a lot of folks didn’t know a lot of this. I think there was a lot to take away from it as well for their businesses.

But the first topic, I want to get into, I know how you got started in the business and there’s a lesson here. We have a lot of what we call G1, G2’s going on where, G1, it’s the main advisor, older advisor, whatever, bringing in either younger people or family members. And there’s this notion of, do you bring them right in out of school, or do you have them go out in the real world and see the real world before they’re invited into the business?

So if you want to kind of share with us how you got started and with your dad. How he didn’t let you come in and how that all went down.

Matt Carpinelli: Yeah, man. It’s so funny when I talk about that. It feels like it was a hundred years ago and then it feels like it was yesterday, like the emotion with it.

Because like, I always knew I had an incredible relationship with my dad. I mean, I was like the luckiest kid. It wasn’t always perfect, but like, we really loved each other and we turned out to be, he was my best friend for sure. And, I remember him when I was in second grade, he came in to get a slideshow presentation to my second-grade class, Mrs. DeTola about inflation. And it was this little green monster called inflation. And I don’t know, I get that it’s gotta be like 1982, 1983. But I remembered it and I was like, I want to work with my dad. And my dad was just a great entrepreneur. And really, he was a real estate guy that he sold investment properties and then managed them with a property management company.

And the way that he got his clients was by working with small accounting firms. And he would partner with these guys and say, “Hey, we can write all this depreciation off.” I think it was one year, maybe it was two or three or four, but you could depreciate the property like that. And the accountants loved it because they could give their tax clients a break and real estate was cheap and all these things.

But he got so good at it. What he just started doing was buying the tax business to kind of go along with it and ended up with three or four tax businesses that he had bought, kind of started doing some cross sales with some insurance and some annuities and things. And when I got out of school, I was like, “Man, I want to come to work for you.”

It’ll be awesome. You know? And he’s like, “No, no chance.” He’s like, “I know how to do what I do really well. I don’t have any idea how to train you to do what I do.” Said you got to go figure that out somewhere else. And then five or then years, you come to work with me and then we’ll, we’ll go from there.
So, after begging him and doing the whole deal, I finally went to work for a big life insurance company and sold group 401k and health insurance. And liked it. But really, it was smile and dial and I was in downtown and it was a suit every day. And it was just not what I had always envisioned.

So every time I would see my dad, he wanted to kill me, but I was like, “Hey, man, could I come to work for you?” And, finally, for some reason, he’s like, “All right, you can come to work for me, but, here’s what you’re going to do. You’re going to do tax return. You’re not selling anything to anybody.

You don’t get to talk to clients, you’re not going to be a stockbroker, a real estate salesman, you’re going to do tax returns. And from January to April, I expect you here 12 hours a day. And I’m not going to lunch with you. you’re going to be a tax guy and that’s what you’re going to do and you’re going to figure it out.”
So I was like, okay, I still get to work from my dad and I figured he’d cave a little bit on that. And, well, he didn’t, and it turned out that after doing four or five hundred tax returns, like my second year, I determined that I would never wanted to look at another tax return again. But what I was really good at was not doing taxes, but find an opportunities when I was meeting with those tax people to do their tax return that we could help them in other ways.

IRA contribution, too many dividends or capital gains distribution, didn’t have a rental property. So I’d give them to my dad and it turned out like I was giving him five a day or something. It turned out to be just kind of a monster. And he was like, you gotta stop this or we got to figure it out a different way. Cause he’s like, I can’t, I can’t keep up. And, then in, in the second year, he let me start working on doing IRAs and rollovers and stuff I had my series six. But, at that time we didn’t have any, I mean, I think he had four or five million dollars in annuities and VUL and a handful of fidelity advisor funds.

But then we kind of came up with this brilliant idea after my second tax season to really tackle that and try to turn it into, I guess now what you would call wealth management.

Don Patrick: Fabulous. So he actually, the fact that he recognized he didn’t have the skills to train you was pretty amazing, actually.

So he said, no, you can’t join, go out and make your bones somewhere else and get trained somewhere else. And then we’ll have that conversation. And then he turned you over to the tax guys, right? And then you start converting all these tax clients and the wealth management clients. So I got a question for you: Juliana has an interest in your business, correct?

So if she’s serious and wants to continue to pursue it, what are you going to do? Are you going to let her in the business or are you going to tell her to go make her bones somewhere else?

Matt Carpinelli: I’m going to tell her to go make her bones somewhere else, because I know that’s one of those difficult fatherly decisions that I thought I totally disagreed with at the time.

But, now I look at it and I’m like going through the same thing my dad did because I’m thinking, “ Boy, I don’t want to screw this kid up.” I do things my way. And, some of that’s right, but some of it’s really, really wrong. And I think that the thing that I learned in my training, I had to go to like a month-long training where I stayed at a hotel and all that basic prospecting and sales stuff that we all don’t like to talk about because we’re life planners and wealth managers, but when it comes down to it, I think that’s probably the most important part. It’s the most important part of building your business.

Don Patrick: Of any business.

Matt Carpinelli: Yeah, absolutely.

Don Patrick: You have the best mousetrap in the world, but nobody knows about it.

Matt Carpinelli: Exactly. And, I learned all that stuff away from my dad and then he helped me learn the other stuff for a year or two, which was how to listen, the stuff that’s hard to learn at a big corporate training seminar.

Don Patrick: Yeah. I’m wanting to have this conversation with you, but there’s quite a bit going on right now with gen one, gen two. Training is hard. Most of the gen ones have never trained. They don’t have a training program. It’s a challenge and, there’s more of this coming down the pipe. And so I think really good words of wisdom from somebody who lived through it.

Matt Carpinelli: Well, I tell you, I think that all that experience of how my dad made me handle that helped me a great deal when things got tough in my business and my life, and I didn’t know it was the right stuff at the time. But when I look back now, of course. I mean, it made me the person I am and the father I am too. So, I can’t say it enough.

And my daughter and I, Juliana, we were just having the conversation last week. It was parents weekend up at CU Boulder. And, the amazing time to be a young person in this business is that everybody’s hiring. It’s like every time you open investment news, JP Morgan’s hiring 7,000 people in wealth management, Fidelity’s hiring 10,000 people in wealth management.

I mean, maybe that changes a little if the economy turns down, but that didn’t change demographics. And I think it’s a great time to go to work for those companies. There seems to be a lot of opportunity.
Don Patrick: It is. I would agree. Now on to the second topic, this is always a question mark with financial planners in their business.

And that is: do they own the office space, pay the rent, build up the equity, or do they lease it? And the reason I want to have this conversation with you is, you’re a real estate guy. How many single-family homes did you and your brother manage at one point?

Matt Carpinelli: About 1500.

Don Patrick: So you know a little bit about real estate, don’t you?

Matt Carpinelli: Yeah. Yeah.

Don Patrick: And you owned your own office space for many years, correct?

Matt Carpinelli: Yeah. For about 14, 15 years, something like that.

Don Patrick: And I believe in the past year you sold your office space and now you’re leasing office space.
Matt Carpinelli: I am. I don’t remember what commercial it was. Maybe Alka Seltzer. Oh, what a relief it is.
Don Patrick: So walk us through the pros and cons of both of them.

Matt Carpinelli: Well, I got a big list of cons.

Don Patrick: Well, let’s hear it.

Matt Carpinelli: The pro for me, maybe that’s easier was appreciation. And that’s just dumb luck, and taking some risk and getting a loan. That was the pro for me was the appreciation. Everything else.
I feel like, the benefits that I’ve heard about are. Something you’d learn in college, a theory, but in practice, turns out, weren’t as great as everybody said.

Don Patrick: So one of the benefits that people tend to look at, is that their business is paying rent to this building they own. And it’s paying it down where you’re actually building up equity in another investment and it’s low risk because you’re the tenant. How do you address that?

Matt Carpinelli: Well, I think there’s some truth to that, but again, one of those things that people don’t think about – and I know about Colorado real estate, I don’t know about anywhere else. I don’t know about Georgia or South Carolina or anything, but everything is expensive here and it’s been expensive for a long, long time. Less so when I bought my building, but it was still expensive.

And commercial interest rates, lot higher than personal property than your primary residence. I mean, no comparison with different requirements, different terms that all of those loans are balloon loans. You’re lucky if you get them to ammit for 20 years. So your payment is super, super high and most of its interest. So, the equity, there’s some truth to that.

Your business is paying down, but the rate’s super high. You got to jump through all kinds of hoops and you got to own it for a long time for that equity event, that appreciation event to happen. And you have to sell it. If I didn’t throw a fit last year with my building because of a bunch of bad stuff that happened, I wouldn’t have realized the equity event.

I wouldn’t have realized the appreciation. And all those years, I mean, paying myself rent that turned out to be taxable income, no matter how you do it, you get to shelter it through depreciation and expenses somewhat. Not all of it. It’s also taxable income to you personally. Right? It’s about half of as good as it sounds, I think.

Don Patrick: So what are some of the other cons?

Matt Carpinelli: Well, the worst part about it is headaches. And in my town, in Denver, nobody will take on a single property as a property manager. So I was in that business. I know it. If we had one guy come to us with one unit, we’d be like, “Yeah, maybe we’ll help you, but we’re going to charge you 15% of rent collected every single year.”

And that turns the financials and cashflow upside down on any property. So you either have to own a property management business, which I did for maybe the first 10 years I owned that building. And it wasn’t that it was a much less headache because if a toilet broke or a pipe froze, I’d have my property management get one of our maintenance guys and they’d go and fix it.

But when I sold that business, I had to manage it myself. And literally every single time I would try to go on vacation, a pipe would break, a toilet would overflow. Somebody would have a drug overdose in the backyard. Somebody would crash into it going 80 miles an hour. So it’s a headache. And for me, I think personally, it was a major stressor. But business-wise, it took time away from the stuff that I really enjoyed and was really good at and that provided my living.

Don Patrick: You made some great points. So yes, you’re paying yourself rent. However, it’s taxable income. Yes, there’s a little bit of depreciation and I think it’s a 27 and a half year. I don’t forget what it is.
Matt Carpinelli: Yeah, that’s what it is.

Don Patrick: It’s not a lot. And, then all the typical things of being a landlord, even though it’s yours, you still have to deal with it all.

Matt Carpinelli: That’s exactly right. And, things go wrong in an office that don’t go wrong at your house. And weird things can happen and, there’s a different code and a different way of handling those things as you deal with government entities and things with a commercial property that just make it harder.
For instance, like I had five furnaces and five air conditioning units. One goes out, the one or two you have at your house. Well, I mean, that stinks ten grand. If you got five of them, it’s a hundred grand to fix. And of course, it’s very difficult to match them up.

It’s kind of like tires now on a nice car. You can’t get one, but you got to get four.

Don Patrick: Yeah. so yes, you’re dealing with the different regulatory environment, the local city, county ordinances, licenses, a lot of things like that, that you wouldn’t normally deal with in a residential property, right?

Matt Carpinelli: You have to deal with that. And the absolute worst thing is property tax. So finally, last year, what got me was, my property tax was going up 50 percent a year.

Don Patrick: Oh my gosh.

Matt Carpinelli: And it started off being, for years, it was about $10,000 a year, which, manageable. But by the end of last year, it was $33,000. And the monthly property tax payment, if I were to amortize it out, was more than my mortgage payment on the property.

Don Patrick: That’s insane.

Matt Carpinelli: So, that’s really hard to cash flow against. I’d gotten to the point where, in my business that evolved in such a way where I used to occupy the whole thing, and then for years I occupied two of the three levels, and that worked pretty well.

When I occupied one and had to get a tenant, even though I was getting good rent and getting reimbursed for utilities, the overall cash flow, even with me paying rent to myself, it come out to about $500 a month. And then when property taxes went to, $1,500 or $2,500 a month, that all went out the window and I was, that was leaking.

Don Patrick: Wow. And so now you’re leasing and, if toilet overflows, you just call the landlord, right?

Matt Carpinelli: Best thing that ever happened to me, like the third day I was there, I went to plug something in and the AC plug didn’t work. So I called the guy and said, “Hey, get somebody over here. The power’s not working.”

Don Patrick: So how do your lease payments compare to what your carrying costs were when you owned the building? Is about the same, a little less, a little more?

Matt Carpinelli: So, I have to think about what the net ended up being from, certainly the last few years on the property taxes went up, my net outlay is about the same leasing.

Don Patrick: Without the headache.

Matt Carpinelli: Without the headache. The gross is totally different. I’ve got a.. It’s a great time to lease. So I think my timing was good there. But, I’ve got about 1,800 feet and it’s $18 a foot gross. So that means all the utilities and everything are included in that.

Don Patrick: That’s a great rate. That’s a great rate.

Matt Carpinelli: It’s a great rate. It’s $2,300 a month, roughly something like that. And in my building, utilities were $1,500, mortgage was $1,600, property taxes were $25 plus all the other stuff. The insurance on the property, commercial property is expensive to insure, blah, blah, blah.

You got all these other expenses. I mean, I was spending $60 or $70,000 a year and if I lost my tenant, I would have been losing three or four grand a month.

Don Patrick: Well, that was a great insight into the choice of owning versus renting an office space with somebody who kind of knows real estate and has done it for years.

That was, very helpful. Great insights. I’m going to kind of close this thing out, asking you one last question, and that is: if you could share something about yourself that others might not know besides being an iceberg.

Matt Carpinelli: Yeah. Let’s see, how about this? I hate tuna noodle casserole.

Don Patrick: I’m taking notes.

Matt Carpinelli: Yeah, and the reason I know this is that the one time I ever had it served to me in my entire life was when I met my in-laws for the first time, I will eat anything and anybody that knows me, I mean, I’ll eat it all. I’m not afraid to try anything to eat. Love it all. It’s maybe one of my problems, but my in-laws had me over and they asked my wife or my girlfriend at the time, “What’s Matt like?”

And she’s like, “Oh, he’ll eat anything. He’s a human garbage disposal.” And we get over there and it’s tuna noodle casserole. And I couldn’t eat even a bite of it.

Don Patrick: I’ll tell Ramey to make sure that is not on the meals for the retreat.

Matt Carpinelli: Yeah, please. Please. It’s good to know.

Don Patrick: Well, Matt, this has been fantastic. You’ve been great. Learned so much and you’re so engaging and I want to thank you so much. And, gonna go ahead and sign off now. Wanna thank you all for listening. I think you’re gonna get a lot out of these, and I know you’re gonna get a lot out of this interview with Matt.

Well, that’s it for today’s show. Thanks for listening.

If you’ve got something to share, send an email to dpatrick@thebraintrust.net. We want to know what works.

Until next time. See ya.