Matthew Oberdorfer | ObFi.com

Josh Hile: Hello all, this is Josh Hile, CEO of Citizen Mint, and this is the Advisor View podcast. Today we’re joined by Matt Oberdorfer. Is that how you pronounce your last name? Actually, sorry.

Matthew Oberdorfer: Yep. Oberdorfer. You got it.

Josh Hile: Okay. And Matt runs a firm called ObFin.com. And maybe, Matt, you can just talk about your background. How you started the firm, kind of, and I think also the interest of your background of being a veteran and kind of all that would be helpful.

Matthew Oberdorfer: Yeah. Okay. So first of all, thanks for having me on and I appreciate it. Excited to talk a little bit here. My background, I’ll do the short version. Okay. Is 24 years in the United States Marine Corps as an aviator. A planner at the operational level, and then at the end, space operations. So it was a really nice combination of kind of motivated, gung-ho type stuff coupled with nerdy analytical stuff. And for me, that was a great fit. So I got to touch like all four corners of the Marine Corps. you know, be all over the globe. I was, uh, active duty, I was enlisted, I was an officer, I was reserves. So I had like a really comprehensive experience. I loved it. Uh, we— I was in the, uh, EA-6B Prowler jet, awesome machine. Um, we would do electronic warfare. So basically our mission was to keep other people, uh, typically Marines, typically US service members, but a lot of times it was, uh, coalition forces to keep them safe. So for me, it was fantastic. Did a little under a decade of that, and then a little over a decade as an operational planner where you’re at the next highest level. Basically, simple version, you are assigning missions to the squadrons, right? So get the missions from higher headquarters, then I was assigning the missions to squadrons, and that requires allocation of resources and a lot of skills that ended up making a difference as a financial planner, a lot of, um, analyzing and mitigating risk. Um, so it was, it was kind of a nice precursor. Um, and then lastly finished off with about 3 years, um, at, uh, US Space Command.

Josh Hile: Okay.

Matthew Oberdorfer: For the Marine Corps. So all the services have, uh, some responsibility there. For the assets that help, uh, around the world. And that was a really nice way to end the career. Kind of got nerdy again, got really high level. It goes beyond the operational level into the strategic level. And long story short, I loved serving others, and I knew that I kind of wanted to get back to it. That’s what gave me, like, my greatest sense of purpose.

Josh Hile: Yeah, yeah, that’s great. And so just because it’s so interesting, so what does Space Command do? What is— what does that actually, like, entail? Like, what are they looking— like, is that like satellite satellites?

Matthew Oberdorfer: Is—

Josh Hile: what is that?

Matthew Oberdorfer: Yeah, so it’s a lot of assets on orbit, but also there’s ground-based assets that help support the whole infrastructure, right? Um, and some of it is as simple as keeping GPS timing proper, because your position is basically a function of accurate timing. And, um, so that’s an oversimplified version, but yeah, mostly assets on orbit. And some of them have exquisite capabilities, as we say. And, uh, and just really trying to keep the country at the forefront of all that’s happening, which, which it is. Yeah. Okay.

Josh Hile: Super interesting. So what, so what kind of clients, um, do you serve? Are you looking to serve right now? Um, and kind of what’s your vision for the firm?

Matthew Oberdorfer: So I knew immediately I wanted to serve a certain type of individual, right? So not necessarily based on age, not necessarily based on net worth, although those are characteristics that a lot of firms use and I understand it. I was more interested in working with a mentality. So the way I say it is we put your money on a mission, right? So people that operate their day, their week on a mission. Oftentimes that is quite literally service members, which makes perfect sense. Business owners, right? This like win the hour, win the week mentality, like really speaks to them. Even if, you know, that term is new, like it makes sense. They’re trying to drive forward, make decisions that are going to generate revenue and control expenses and serve the public. And then professionals is a bit of a broad category, but especially professionals that are actively managing their career. So like their career is their mission, right? And oftentimes that comes with things like equity, right? Some type of ownership. And then it is similar but still different from, you know, a business owner. So that tends to be who we try to serve, that person who’s on a mission.

Josh Hile: Okay.

Matthew Oberdorfer: Yeah, yeah.

Josh Hile: Um, and so maybe you can just talk about like your approach to advice and planning and investing. Um, where, where do you see like— what do you see as your kind of like differentiators within the market?

Matthew Oberdorfer: Yeah, so our approach is a combination of two things, I would say. One is best practices Right. So we try to live at the intersection of best practices and then 21st century mentality or design. And I’ll explain both of those. So best practices, things like people need financial planning, people need investment management, business owners need 401s. So we provide that. And then within each one of those domains, They need quality best practices, right? So we need to manage risk. We need to diversify. We need to understand your objectives overall if we’re going to build you a portfolio. When it comes to financial planning, we need to touch on all the big topics such as cash flow, liquidity. If you’re a business owner, is your business cyclical? Or not. So are you going to have cash flow crunches? And the list is long, right? So insurance, estate planning, right? So all these things fall into best practices. But then the intersection of best practices with a modern 21st century advisory is what I’m calling next-gen advisors. And I’m not the only one sort of in this arena with this mentality. But it’s a— so it’s the way that we charge fees or don’t charge fees. And the way that— the way I say it is it all boils down to how can we align with your mission as highly as possible. So I’ll give you a concrete example here. If you want to be strictly an investment management client with us, that’s perfectly fine. We do that. It’s an AUM fee, and that’s, you know, a best practice, that’s a common practice. But once you are interested in financial planning, we now use a flat fee model. And one of the things that we really love about the flat fee model is we feel like it’s very highly aligned with somebody’s financial goals. And I’ll just give you like some numbers. For instance, say we had an individual who was worth, um, maybe their business was worth $5 million. So they’re doing pretty well, you know, their business is growing. And let’s say that they’ve done a good job, um, growing their net worth in a second place. Let’s say the markets, all right, let’s say they’ve got $5 million of net worth in their business and $5 million of net worth in the markets. So if we are your financial advisor and we’re doing planning for you, we strictly charge a flat fee. And if you come to us and you want to have like a legitimate conversation, right, or you’re trying to make a decision in your personal life or your business life about maybe it’s time that your business buys the building that you typically lease, like you’ve leased since you were, you were a startup. Now you’ve got a lot more cash on hand, a lot more revenue, and maybe owning the building is starting to make sense, right? Now you’re going to diversify, you’re going to have tenants, right? Let’s say there is multiple spaces, you’ll take up 60%, the remaining 40% will be tenants. And, or maybe you want a second home in Florida, things like this, right? Real estate is just a simple example. If I— if our relationship is entirely AUM-based, then, you know, I instantly recognize that it’s going to be $2 or $3 million of exiting the market and purchasing the building, and that’s going to reduce my fees. Now, I don’t like— proactively, uh, work against the AUM model. Again, if you just want to be an investment management client, then we use it, right? But I think once I explain that the flat fee doesn’t really change the equation for us and it’s strictly about giving good quality advice, then clients and prospects, they really are very receptive to it. And So really, that’s the kind of high alignment that we wanted to create when designing our fee structure. Mm-hmm. Got it.

Josh Hile: That’s helpful. And so what do you think most advisors get wrong about working with high net worth clients?

Matthew Oberdorfer: So for high net worth clients, I would say probably two things. One, is so the fees that a high net worth client ends up having to pay start getting quite large. You know, frankly, if you have a— like in the previous example, if there’s $500,000 or if there’s $5 million in assets in the market, we’re looking at $50,000 a year if we’re at 1% AUM now, typically. Right? Um, advisories will start reducing their fees, but you’re still in that $35,000+ a year. Um, and that, that gets, you know, high net worth individuals’ attention. So like with a flat fee model, we tend to cap around $25,000 and that instantly cuts their bill in half. So I think that’s something that speaks, you to high net worth individuals. And a second thing is managing risk. So I think the way risk is managed is oversimplified. And I think there’s more due diligence that ought to be there. Thinking beyond the markets is pretty critical once someone’s net worth starts growing, growing, growing.

Josh Hile: Mm-hmm. And maybe you can talk about that risk and like, what does that look like for you and how do you think about that for your clients? Like, what are you looking at? What like specific metrics or things are you looking at for clients to help them with their risk profile?

Matthew Oberdorfer: Yeah, so overconcentration is pretty much a go-to answer because I think it ought to be, but if you are strictly in the market, And it’s got to be coupled with a few different things too. So what’s your time horizon? This stuff, this matters, right? What are your feelings about risk in the first place? This matters because what’ll end up happening is, um, it begins to feel like a roller coaster ride. So maybe, right, it’s a bumpy road for a month, maybe it’s a bumpy road for a year, Over the course of time, though, the charts start smoothing out. But if you make decisions because you’re overconcentrated and the pain looks or feels very significant at the time, it starts becoming more difficult to help a client through different market cycles. But if they are more diversified, right? So say they have, um, they’re invested in private deals, alts of some sort, right? Whether it’s real estate, private credit, um, and crypto, I know is a buzzword, but, um, there are benefits that are significant to managing risk the second you exit the market with the appropriate amount of money. Or the stock market, let’s say, and starts investing outside that market, it starts increasing your diversification, reducing your concentration. And I think there’s an unfortunate misconception that the second someone hears alts, it inherently feels more risky. And it’s just really not the case. You have to look at each deal or investment closely and decide, right, if it is actually more risky or not. You cannot just label alts risky, uh, broadly. That’s not very professional.

Josh Hile: So anyway, yeah, no, I, I 100% agree. And it’s, it’s funny because I think that is the broad— or people will say that, and then it’s like, well, You can invest in all these like, um, SPACs and that could be incredibly risky. You can invest in a hot tech stock that could be incredibly risky or biotech stock and that could be incredibly risky. And that can be completely different from an alt investment that has a lot of downside protection already embedded into it.

Matthew Oberdorfer: 1000%. Those are classic risky areas and there’s probably the list is really long of areas that are pretty darn solid, right? So yeah, yeah, yeah, the broad label is not good. I’ll also dovetail on that broad label thought, um, and it is an important sort of concept. I think oftentimes this probably happens, um, to all investors, um, regardless of their net worth. I think it’s probably quite common that advisors will give you a questionnaire. It tends to be quite nearly at the beginning of your relationship, you know, and it needs to be for compliance reasons, and then it’s repeated every so often, and it helps the advisor assess your level of tolerance for risk. And there’s a, you know, a handful of criteria that they’re going to ask you about, or the form, the questionnaire will ask you about, and that’s all well and good, that’s important, but what tends to happen is that’s as far as that conversation goes. So a label of cautious is applied to the entire individual or the entire household, and to me that’s not quite enough due diligence, to put it lightly. So I’ll give you an example. And if I were to ask somebody, what is your level of comfort for risk on your 401? And say you’re starting to get older, say you’re 45, so you’re not at retirement, typically speaking. You have significant time on the clock, but you’ve also spent significant time in your profession earning and trying to build a 401 so that you can go retire. Generally, people feel fairly cautious. They feel like they have to stick that one. They feel like they have to do a great job with that. And if that’s their mindset, I would encourage it. You know, that’s a pretty good mindset for most people on a 401. But if I were to say— if I were to continue the conversation and give it a little more due diligence and say, okay, your business is worth $5 million. You’ve got $5 million in investments in the stock market that have been growing. It’s been a great decade to 15 years. Um, what are your feelings about risk if we took $50,000 and created a new portfolio on the side? And you’re on— you could retire now if you wanted to, but you still have 20 years, you know, before you’d like to retire. Well, that $50,000 on the side, their feeling about risk is not going to be the same. They’re not going to express the same concerns, the same goals, the same objectives as they would with that heavy hitter, gotta stick it, gotta land this airplane right on the numbers, right where it counts, 401. There’s— right, so that’s where a level of You know, detail starts to matter, and, and you can get— and this is where alts become a beautiful thing, right? So it’s a fantastic tool, but the conversation needs to be, uh, thorough enough with your advisor that these topics even come up, and you can break out how would you feel about, you know, this amount of money in this asset class.

Josh Hile: No, definitely no. This is— that’s, that’s definitely a huge topic. Um, and you mentioned, um, the type of clients you serve are usually business owners, maybe servicemen or women. And anybody else that you’re serving kind of from a client perspective? And then, uh, how does the client you serve influence how you build the portfolio?

Matthew Oberdorfer: Yeah, so another So when it comes to professionals, that’s really kind of our third category— owners, service members, and professionals. It tends to be— so like we have an executive, a CFO, he’s been a COO at a number of companies. We have airline pilots, right? That’s a whole unique category, quite frankly, because they tend to have good income, but they also tend to have a lot of time. So then they tend—

Josh Hile: in a lot of cases.

Matthew Oberdorfer: Yeah, they can control their schedule and they, they tend to do a good bit of research on investments, but they tend to fixate on one particular thing and fall in love with it. So that, that’s a unique— just, just knowing that, that group of guys and gals, right? So how do you work them off of one idea that they think is going to make or break a portfolio? And those, those are like a couple good examples Um, and then, you know, we, we have, um, two doctors, and they tend to— they’re, they’re incredibly busy, right? So they’re very smart. If they had the time, right, to pour their energy into finances and investments, they would probably do well with it, but they don’t. And they know that their time is best served earning and working. As a surgeon, for instance. So yeah, yeah.

Josh Hile: What about, um, I, I’m not sure if this is like specific, but like, you know, you mentioned about risk and managing concentrated wealth, like whether it’s within like a particular stock or something else that the client’s holding. How do you think about that for the client, and what are ways you mitigate that?

Matthew Oberdorfer: Yeah, so I think the first thing I do is The first thing that comes to mind is I think about taxes and how do we do a good job of diversifying and managing this concentration without getting this client crushed by taxes. So that ends up becoming more complex. It’s very much dependent on what are they currently invested in, where is it invested, right? So a tax-advantaged account versus a taxable brokerage account, the approach is going to be different. Um, and then there’s other details too, right? If it’s equity, um, then there’s vesting schedules. Yeah, you know, they need to be considered. And once they start getting older, then there’s things like, um, you know, RMDs, right? What’s the best time to— do we want to delay the first year of RMDs? Um, I just went through that whole conversation with a client, and we decided that we weren’t gonna delay the first year, and that’s what ended up making sense by the time we ran the numbers. But the overconcentration piece— I come to taxes, that’s my first thought. I’m trying not to get a client hurt by taxes. Um, the overall net is more important, right? So if there is some sort of taxation that’s going to occur, um, but we’re going to be up 15% overall, Right. We’re not— I’m not necessarily inclined to pass on things that grow your net worth strictly, strictly to avoid taxation. Right. If you’re running a business, you’re going to sell a widget and just pay the taxes on it. So similar mindset in that regard. But, but yeah, that’s, that’s kind of the first thing that comes to mind when I have a client that is heavily concentrated is how do we carefully unwind this thoughtfully, um, and with especially being careful about taxation.

Josh Hile: Yeah, yeah. And then, um, just thinking about liquidity and like illiquidity and like what your clients are comfortable with based on their specific situation, is there a percentage that, that usually falls in for your clients specifically of their portfolio, like for private markets? Or alternatives in general?

Matthew Oberdorfer: So it, so it varies. So like, again, business owners, their profile tends to be different than what I see with service members, and that profile tends to be different than the professionals. So some of the service members, their paychecks are healthy. But once you’re a COO or a CFO, it tends to go, you know, 3x. And, and then once you’re a business owner, the sky’s the kind of the limit— is a little bit of an exaggeration, but it is kind of the big idea, uh, in the first place, generally, that, you know, you can make a significant amount of money. So the profiles on liquidity vary greatly across those, um, three different type of individuals. But what I end up seeing, like, is that service members, um, their liquidity tends to be, um, very appropriate for their financial situation, generally speaking. Um, the dollar amounts might be smaller dollar amounts, but based on the volatility of their income, which is not very volatile, right? Next year tends to always be your best— your next best year, right?

Josh Hile: Yeah.

Matthew Oberdorfer: 3% pay raise. So that they tend to be pretty in line with liquidity needs based on their expenses. And but then when you come to business owners, liquidity is much more all over the place. So, uh, that— it tends to be a bigger conversation, a bigger piece of the puzzle. Um, they’re making truthfully moderately difficult decisions about should I— how much should I reinvest in the business, right? So I have growth, I want to keep fueling growth. Um, so they have a bit of a fear oftentimes with not fueling the growth or not reinvesting in the business. And, and, and so their, their liquidity oftentimes it can become a little bit constrained, right? And then they— the problem is you’re going to hit, you’re going to hit bumps along the way, right? Some of these are macroeconomic bumps that are just not up to you. And you want to be in a position where you can weather the storm or even thrive, right, in an economic downturn. ’08, ’09, great financial crisis. COVID more recently. Um, and if you have an appropriate amount of liquidity, then you can make some significant moves during these downturns that enable you to accelerate, right? So maybe it’s buying out another company that is just a great fit for you. Maybe it’s hiring another person because you have an expertise. Like, I was talking with a CPA who has an ex— they had an expertise in PPP, um, because they poured themselves into it during COVID and business was booming. And because they had enough cash on hand, they could hire 2 more people right then and not, not wonder how they’re going to pay for it. And it really fueled growth, and it ended up absolutely defining their business, and it helped people through a very difficult time. And those are extremely loyal clients now. Uh, yeah, so the owner’s tent, their, their liquidity, um, sort of management is much more varied than, say, a service member’s, generally speaking.

Josh Hile: Got it, got it.

Matthew Oberdorfer: Yeah.

Josh Hile: And so, um, I guess just, um, switching topics a little bit, but where are you seeing the most compelling opportunities today, um, from a like alternative standpoint?

Matthew Oberdorfer: Yeah, so I think for as an advisor, what I noticed is I tend to work with people that are younger. So I’m 45. It tends to be people that are in their late 20s, 30s, 40s, and 50s. So it’s not really people that are in their last 5 years or about to retire, although I do have some of that. Um, if you can’t have an intelligent conversation about alts— or let me put it another way, if you can have an intelligent conversation about alts, it brings a lot of peace to the clients. And here’s what I’ve noticed. Is there’s a lot of information out there and people have a lot of access to information. So it tends to be they hear about crypto, they hear about private credit, they hear about data centers and infrastructure, they hear about do we have the energy to actually pull this off. They have— they hear about all these things, but they’re not a professional in that regard. So to not have the conversation about probably 15 hot topics in the world of finance and investing, um, I think it’s like a big white elephant in the room, and you just need to give it its due diligence. And if the answer is okay, this isn’t a good fit for you because you don’t like it or because of your financial, like, profile overall like it just doesn’t make sense for you. But you need to be able to talk to clients about it. Just to be quite frank, if it’s all stocks and bonds and like your big pitch is that you’ve got a high yield savings account, everybody can do that. Everybody can have that conversation. So the differentiator is, I think, or at least what I see, and I can’t speak for everyone, is the ability to talk about alts intelligently and then implement it thoughtfully, right? Suitably, right? To use a legal compliance term here. And I also think the structure of your fees in creating alignment. So I would say alignment and the world of alts, you really, really need to give it a lot of due diligence nowadays.

Josh Hile: Yeah, I know we agree. And we’re seeing that too. We’re talking to a lot of advisors and just their ability to offer something that they can get elsewhere. And, um, you know, it is going to be something that in a world of information they’ll want access to, especially if you’ve seen like the statistics about younger clients. They just don’t believe in the stock market as much as the older client generation has.

Matthew Oberdorfer: Yeah. So yeah, I could— yep, I see the same thing. Yeah.

Josh Hile: Um, so What’s, um, just looking back at our questions, so what, what is one thing that advisors should rethink or one thing they should do when they’re listening to this that think about improving how they, uh, help clients?

Matthew Oberdorfer: I think I’d come back to the way you’re charging clients, right? Like, we, you, we, we make no money on commissions. We have no, we have no hidden fees. Yeah, 1% is 1%. There’s nothing else. I think people appreciate that. Um, like, the fee schedule that you agree to when you onboard with us is the fee schedule you’ll have forever. I think that speaks to people. If we did generate a new fee schedule that applies to new clients, I think people like that. I think they’re tired of finding out later that it wasn’t quite what they thought it was. That’s one thing. And then I would say, again, the ability to add specialty advice or understanding, right? So for us specifically, like in this conversation, alts, I think you need to widen your scope and get educated and have the ability to have broader conversations about what’s out there. Um, again, somewhat tangential with the specialty advice is if you want to be able to speak about insurance, right? So now let’s not even talk alts for a second. If you want to be able to speak about insurance, You can go get an insurance license but not charge or sell the product, right? So this is just how you can add value to the relationship that you have with clients or prospective clients, um, the ability to have, again, educated, thorough, comprehensive conversations. So I, I think the way you charge someone and what you bring to the table. I think those are the two critical areas where, where, uh, the whole profession of advisory, um, can grow. Yeah.

Josh Hile: Okay. And then, um, this— and this kind of goes on a separate topic, but what do you think is the biggest opportunity over the next 3 to 5 years for you, wealth advisors, this space in general?

Matthew Oberdorfer: So for me as an advisor, you’re saying, or for clients?

Josh Hile: For me as an advisor, I think it’s, I think it’s both, kind of talking about the wealth management space in general. And like, what do you think wealth advisors’ biggest, uh, opportunity is over the next 3 to 5 years?

Matthew Oberdorfer: I think it’s the ability— I’ll use an analogy. So when, when MP3s came out, they caught fire. It was a fantastic value add to society, right? You’ve got a lot of music in your pocket. Yeah, right. Um, so we’ve got an app that does that. We’ve got multiple apps that do that. What ended up happening is two things coexisted at the same time. Um, you have that convenience and you have that breadth. That was cool. But there’s a reason why vinyl made a comeback. Vinyl made a comeback because it’s real, because it’s tangible, because there’s a connection there, because there’s like a relationship, right, with vinyl. And you can show someone your collection, um, it kind of demonstrates what you like the most, right? So long story short, there’s a lot of fintech apps out there now that are trying to provide clients or customers with financial solutions. And I respect that. And a lot— some of them do a good job, some of them don’t do a good job. But if you’re able to go fill that space where you’re both modern in the sense that you align with 21st century values and you can provide a relationship and build trust and be high touch, you know, with clients, then that is similar to, um, the sort of appeal, right, that vinyl ended up having. And like, why did it make a comeback? Because, um, because it had a place, right? So I think the advisor that can be both present and important in your life as a client, but also is willing to depart from like the legacy style of advising. And I think that’s really where there’s a tremendous opportunity. And I kind of, I got an expression and, you know, it’s like, I don’t think a lot of the younger clients, let’s say my age and younger, um, you know, I don’t think they need a mahogany office and a lecture. More so, they need wise advice and a coffee, right? Yeah, I would say that’s true of myself. If I was looking for something, I want wise advice and a coffee, right? If I’m gonna go make a decision, whether it’s financial or otherwise. So that’s kind of where I think the opportunity exists, is that filling the space. Um, there is no shortage of tech apps like fintech apps out there, um, and they’re going to keep coming. But if you can like be that human with a relationship, an actual meaningful impact on someone’s life— and we— I like to intercept someone like at a more meaningful part of their life that kind of directs their trajectory more so than, you know, coming in the last year or 5 and landing the airplane into retirement. That’s, that’s where I think the most opportunity is.

Josh Hile: Yeah, definitely. No, that’s super helpful. And so what about— here’s, here’s kind of my last question, a little bit different, but What’s one thing that people don’t know about you?

Matthew Oberdorfer: Hmm, well, I haven’t really thought much about that. I really like the question.

Josh Hile: A hobby that, that you do outside of work that you enjoy?

Matthew Oberdorfer: Oh yeah, I mean, uh, I’m really big on fitness and discipline. Like, discipline is like an overarching category for me, and like so many things fit in there. Um, fitness is, is just one of them. Um, General Mattis, I believe it was, you know, had this comment about fitness. He said, get on with it. Right. So it’s kind of like, the way I see it is, I personally enjoy it. I can’t really get enough of it. But I need to respect my body and do what’s healthy for it.

Josh Hile: Yeah.

Matthew Oberdorfer: But, but yeah, I think, I think, I think I’d probably go with something like, I’m kind of a— I love fitness.