Insight & Outlook Special Edition

Welcome

Billy Dietze: Hello! And welcome to Insight & Outlook: Special Edition, Fidelity’s audio magazine for financial advisors. My name is Billy Dietze, and I have the pleasure of bringing you a curated selection of market insights and practice management content, all in a quick and convenient audio format. Pick and choose the audio articles that interest you the most or sit back and listen to each article in order – the choice is yours! In this issue of Special Edition, we’ve prepared a conversation with a portfolio manager focusing on small cap stocks, as well as a discussion on the potential opportunity in core and private real estate. I also sit down with a Fidelity business consultant to chat through strategies that advisors might use to attract and retain ultra-high net worth clients. But first, I’m pleased to welcome Brad Pineault, Vice President and Head of Capital Market Strategists to discuss Fidelity’s Market Signals, a new initiative he’s leading aimed at providing financial advisors with timely, best-in-class commentary. Brad, welcome to the show

Brad Pineault: Thank you for having me, Billy! I’m excited to feature on Special Edition and to spread the word about Market Signals.

Billy Dietze: So, Brad, before we dive into Market Signals, could you just tell the audience a bit about yourself and your career, as well as the team that you lead.

Brad Pineault: By all means, thanks so much for asking. So I officially began my career here at Fidelity in August of 1998, after a brief internship in the summer of 1997. My very first role was sitting in a cubicle wearing a headset and enrolling 401k plan participants into their respective 401k plans. And just to show you how long I've been here, Billy, my day-to-day job was trying to get these folks to enroll on, the new thing called the internet. Yeah, you'd be amazed how many people were hesitant to do just that. From there, I had various roles in customer service and then in sales, and then for about eight years, really from about 2006 to 2013, I carried the bag, as they say. I was a wholesaler, working with financial advisors in our bank trust department up and down the East Coast. And then in 2014, I got my CFA charter, and I had the opportunity to migrate from sales into strategy work, where I worked a bit deeper with financial advisors to help them build better asset allocation models. And I'm happy to say that that all culminated into the Head of Capital Market Strategy just last October.

Billy Dietze: Well, congratulations on that. I mean, that's quite a career! And, you know, I think it is impressive to hear how you and a lot of associates at Fidelity kind of started on a phone roll and worked your way up. I like how Fidelity keeps their talent internal, and having a client facing background such as yourself is really helpful for our audience. Can you share a bit more about the team?

Brad Pineault: You bet. So now I lead the Capital Market Strategy Group, otherwise known as the CMSG team, with In Fidelity's institutional business. We're a team of 5 across the country, whose work is really centered around formulating investment themes and strategies across equity and fixed income. We work across the organization with various analysts, our portfolio managers, and other market strategists, as well as conduct external research. We then publish our findings or perspectives, including Market Signals for use by internal business partners and external clients.

Billy Dietze: And I think that last comment you made is what’s most relevant for our discussion here today. So, in your opinion, what sets Market Signals apart from other commentary that either Fidelity produces, or really our industry peers, for that matter?

Brad Pineault: Sure, so our goal, or our purpose, for creating market signals was threefold. First, we felt that there was a lack of market commentary specifically for financial advisors. Sure, there are countless shows, podcasts, and newsletters, et cetera. that cater towards the sophisticated investor/quasi-advisor model, which I get. Generally, our competitors want to cast as wide as a net as possible to obtain as many views as they can. But Billy, we wanted to take a different approach. We wanted to create something that could cut through a lot of the noise that you get from other stock market publications.

Billy Dietze: Yeah, that makes sense. I kind of know what you’re describing there.

Brad Pineault: And we wanted to start sharing those insights externally. As the first half of 2026 demonstrated, that was probably a wise move.

Billy Dietze: I'd agree with that

Brad Pineault: Understatement of the session. Generally, Fidelity tries to help investors focus on the importance of long-term thinking. We tend to shy away from predicting short-term moves and prefer to focus on longer-term trends and fundamentals. However, that doesn't mean that your end clients don't tend to get emotional during times of market stress. It's only human nature, after all, as they say. So, sometimes being able to connect those short-term emotions with a longer-term analysis can be really helpful. As we like to say, it's not what you know, right, that can help out, it's what you can convey that really moves the needle. Now, I'm not going to pretend that we have all the answers, we certainly don't. But during periods of market volatility, think the recent conflict in Iran, we wanted to give advisors our perspective so that they might have some talking points when assuaging their clients' concerns.

Billy Dietze: I hear that. I guess in some ways, you know, managing the money is simpler than talking your clients off the edge, and that’s where the advisor really earns their keep.

Brad Pineault: Exactly. The last point I’ll make on this is, and maybe this is the most important, is that we didn’t launch Market Signals in a vacuum. Our weekly market commentary is just one component of a refreshed program for advisors that we’ve titled “Insight & Outlook.” So, under this I&O umbrella is my team’s weekly Market Signals, as well as a bi-weekly webinar series –

Billy Dietze: As well as this quarterly Special Edition!

Brad Pineault: That’s exactly right. There are, and I should say, there may be some new I&O components coming in the future. Anyway, the I&O program and Market Signals in particular tries to give advisors timely, easy to digest thoughts on the market that they can actually use during client conversations, and to hopefully better manage their client assets.

Billy Dietze: All right, so, let’s see these insights in action! Are there any recent commentary that your team published that you're especially proud of or think was a unique insight?

Brad Pineault: There sure is, Billy. So, we published some commentary back in late March 2026 that laid out three potential market scenarios for the rest of this year, broken down into bullet points that were almost designed for advisors to be able to relate to their clients. And may I say that was certainly done on purpose. If you remember, March was not a great month for stocks. The conflict with Iran was heating up. There was a lot of uncertainty as to whether the conflict would escalate and what was going to happen to the global energy supply, for example, especially for smaller developing markets. My team laid out 3 transparent potential scenarios that we thought were most likely to manifest from most optimistic to pessimistic. We outlined why each outcome might happen, what those potential factors could be, and what the investor implication for each scenario could look like. Now, the goal was not just to give advisors a glimpse into how we were thinking, but also to arm them with talking points that they could use with their clients. Now, the good news for me, I have to say this with a smile on my face, is that the scenario my team rated as most likely is the one that is currently playing out. Though there's still a lot of 2026 left, I can't pat myself on the back just yet.

Billy Dietze: No, no, of course not. To your point, narratives can shift really quickly. But that is the beauty of your weekly market commentary, that your team can always pivot. And It kind of is enlightening to see how your team's thoughts evolve week over week since you do keep all your weekly commentary published on i.fidelity.com in chronological order.

Brad Pineault: By all means, and we do that on purpose to make it easy for advisors to access, right, if they'd like to. You likely saw the commentary, or hopefully you did, just posted a few weeks later, where we essentially proposed that as long as Q1 earnings were strong, markets would look past the conflict in Iran, at least temporarily. One aspect that we think has contributed to the resiliency in the market is that companies have been dealing with supply chain disruptions for the better part of a decade now. You don't know where the next disruption might come from. Remaining nimble and diversified is something that many firms prioritize now more than they might have before COVID. And if I just reflect back on that period, supply chains were so significantly impaired that companies seem to have almost a dress rehearsal to address what's happening today. As it turns out, April was one of the strongest months for the market in some time. Being able to communicate these nuances is important to us, and I believe helps set us apart, what we're doing with market signals compared to other commentary that advisors can find on the internet.

Billy Dietze: I can't believe it's been over 6 years since COVID started, but I agree with you. I think that context is important. Like, it's not just enough to jot down your thoughts, you need to write them in a way that's easy for your readers, advisors, to distill those insights to their end clients. Now, yeah, that is a fun nut to crack, isn't it?

Brad Pineault: To me, that's the special sauce here, the secret ingredient, so we certainly believe it is, yes.

Billy Dietze: Anything else you’d like advisors to take away from this conversation?

Brad Pineault: Absolutely, Billy. In today's environment, market headlines can be overwhelming and distracting, as we've talked about. Our weekly market signals newsletter is designed to help advisors and their clients cut through the noise, providing clear insights and guidance to support. Staying focused on long-term investment goals. Fidelity remains optimistic about the path forward, and we believe that consistent, timely information can give advisors and their investors the confidence to navigate uncertainty and stay the course.

Billy Dietze: Appreciate your comments, Brad!

Brad Pineault: I appreciate you having me, Billy. It's been a true pleasure being with you.

Billy Dietze: Thank you. The link to read our latest market signals is below this video. Brad's team publishes new market commentary every Monday. There's also a link to attend that Insight & Outlook webinar series that Brad mentioned earlier. We record just about every webinar we host, and we publish them to the video library on i.fidelity.com, and the Fidelity Institutional YouTube channel.

Billy Dietze: For our next article, I’m joined by portfolio manager Forrest St. Clair who co‑authored a recent research paper titled “The Case for Owning Small Cap Stocks.” Forrest, great to have you with us.

Forrest St. Clair: Thanks for having me. Glad to be here.

Billy Dietze: And before we begin, could you just say a few words about yourself and your career?

Forrest St. Clair: Sure! I joined Fidelity out of college, 28 years ago, in mid-199. As an Equity Research Associate, I spent my time covering industrials, packaging companies and restaurants. I performed well, was promoted to Analyst and joined our nascent Small Cap Equity Research Team, focusing on healthcare stocks. Over the next several years I had the opportunity to cover all of the market sectors. I gravitated to our Small Cap Team because of how dynamic this market segment is. We also had some world class portfolio managers whose investment styles made sense to me. In 2004, I was promoted to portfolio manager and have been managing money ever since. I am very proud of the Team we have at Fidelity. We are not perfect but over time we have consistently delivered strong returns. I am confident we have the right investment process and resources to generate alpha for clients.

Billy Dietze: Awesome, thank you for that background. Your breadth of experience across equity sectors is pretty impressive. So, let's start with where a lot of investors' minds probably go first when it comes to small cap stocks, valuations. And I want to stress here that in your paper, you're, you're specifically referring to the valuations of profitable small caps.

Forrest St. Clair: Correct, good catch! I’ll touch on that later in our conversation.

Billy Dietze: Great. So, you made a point that US small cap stocks are at their cheapest quintile, relative to large caps, going back to 1990. I mean, that's over 35 years. Now, that really stood out to me. And how do you feel investors should think about this valuation discrepancy today?

Forrest St. Clair: There's no question that the valuations of profitable small caps are compelling. Small caps are historically inexpensive, relative to large caps, and from a long-term perspective, that's a pretty solid starting point. But it's important to keep in mind that valuation alone doesn't necessarily correlate to short-term performance. Just because something is cheap, doesn't mean it's going to work right away. I think intuitively investors know this, but after a long stretch of underperformance, it's worth emphasizing that valuation by itself isn't a timing signal.

Billy Dietze: Agreed. I mean, you just don't know what's going to happen next quarter, I mean, let alone next year. But, low starting valuations are generally correlated to enhanced long-term performance, right?

Forrest St. Clair: Historically, relative valuation hasn’t been a great predictor over shorter horizons, like three years or less. Where it becomes more meaningful is over those longer periods, think five to ten years. When starting from levels like we see today, the odds of small cap outperformance over those longer time frames does increase.

Billy Dietze: And I think that brings us to the other side of the equation, fundamentals. So, in your paper, you're pretty clear that this is where things have begun to change, at least more recently. What's improving beneath the surface?

Forrest St. Clair: Yes, that’s the key point. Sure, valuations have been attractive for some time, but what’s started to shift is the outlook for earnings and sales growth. We’re seeing expectations for the fastest small cap earnings growth in about four years.

Billy Dietze: That’s pretty good. What do you think is driving that improvement?

Forrest St. Clair: A few things are coming together. First, the US economy continues to look more mid-cycle than late cycle based on broad leading indicators monitored by Fidelity's asset allocation research team. That environment has historically been supportive of smaller, more domestically oriented companies. Second, a Federal Reserve rate cutting cycle, if it continues, can disproportionately benefit small caps, particularly given their higher exposure to floating rate debt. And third, recent corporate tax changes have improved cash flows for many small cap firms, allowing them to reinvest in operations, infrastructure, and technology.

Billy Dietze: So, if we zoom out a bit, would it be fair to say that valuations helped open the door, but fundamentals are what could allow small caps walk through it?

Forrest St. Clair: That’s a good way to frame it. Valuations create the opportunity set. Fundamentals determine whether that opportunity can actually compound over time. When both are moving in a more favorable direction, small caps have historically become more interesting from a risk‑reward perspective.

Billy Dietze: Now, we should point out that small caps aren’t a single, homogenous group. You devote a section of the paper to that idea that, “not all small caps are the same.” Why is that distinction especially important right now?

Forrest St. Clair: So, roughly 40% of the Russell 2000 isn’t generating earnings currently, which reflects the presence of earlier‑stage and more speculative companies in the index. The opportunity set is broad, but the quality dispersion is quite wide. That dispersion creates risk, but it also creates opportunity. Historically, the top‑performing small cap stocks have actually outperformed the top‑performing large cap stocks over long periods. The challenge, and opportunity for active managers like myself, is identifying which companies have durable earnings power versus those without a clear path to profitability.

Billy Dietze: That selective mindset also ties into another theme you explore, market structure and concentration. So right now, according to your paper, small caps make up only about 4% of the total US market capitalization, compared with the longer-term average, closer to 9%. So how should investors interpret this in your opinion?

Forrest St. Clair: We've seen an unusually concentrated market over the last several years, driven by a relatively small group of very large companies. If the environment shifts, whether due to inflation dynamics, monetary policy, or geopolitics, we could see a broader range of winners and losers. From a portfolio construction standpoint, small caps can help diversify sources of return and potentially reduce reliance on a narrow leadership cohort.

Billy Dietze: This naturally leads to the role of active management. Why do small caps tend to be an area where active strategies can matter more?

Forrest St. Clair: Small cap markets tend to be less efficient. Many companies have limited or no sell side coverage, and earnings estimates can be volatile. That creates room for differentiated fundamental research to add value. In my role, we're able to leverage broad analyst coverage, sector expertise, and long-term earnings frameworks to help distinguish short-term noise from long-term fundamentals. That depth of research is particularly important in a universe as diverse as small caps.

Billy Dietze: As we wrap up, what’s the main takeaway you’d want investors to leave with after reading your paper or listening to our conversation?

Forrest St. Clair: I’d say this: we don’t know exactly when small caps will lead again. But starting conditions matter. Today, valuations are historically attractive, and fundamentals, particularly earnings and sales growth, are improving. For long-term investors, selectively revisiting small caps, especially through research‑driven active approaches, may help position portfolios for the next phase of the market cycle.

Billy Dietze: Forrest, thanks for walking us through the research and adding the kind of nuance our audience really appreciates.

Forrest St. Clair: Thanks for the opportunity, Billy! I’ve enjoyed this conversation.Billy Dietze: And thank you for listening. For more insights grounded in Fidelity’s research, be sure to explore our latest perspectives. The links to Forrest’s recent paper, as well as complimentary readings, are near the bottom of our web page.

Billy Dietze: In this next article, we're going to try to do something a little ambitious in a short amount of time. Connect the big picture case for private core real estate with a very practical question of where and how you actually deploy capital.

So, to do that, I'm joined by two gentlemen who've recently published. Papers looking at this asset class from complementary angles. Adam Ruggiero, Senior Vice President, Alternatives, and an Institutional Portfolio Manager for direct real estate, who recently authored a paper on the importance of market selection and real estate portfolios. As well as James Ocasio, Vice President, Head of Alternative Strategists, whose paper discussed why investors might want to give real estate a closer look. Gentlemen, thanks for being here.

Adam Ruggiero: Thanks, Billy

James Ocasio: Great to be here!

Billy Dietze: James, let me start with you. I think investors hear a lot of mixed headlines on real estate, you know, rates up, values down, there are office challenges, but when you step back, why does private core real estate still matter in portfolios right now?

James Ocasio: Yeah, look, I agree. There have been a lot of mixed headlines on real estate recently, but that said, What asset class hasn't had headlines in the past decade, right? Or, this decade, I should say, right? We kicked off the decade with COVID, had a couple of drawdowns since, or more than a couple, since then. But to answer your question directly, at its core, an investment in real estate is first and foremost to me a diversification story when included in that traditional asset portfolio, which I'll define as a 60/40 portfolio for simplistic terms; 60 equities, 40% fixed income. Now the next comment probably is, why is that, James, right? And over the past 20 years, core private real estate has shown to have a low to even negative correlation versus investment grade bonds and only modest correlation relative to public equities. There are not many asset classes honestly that provide that level of correlation benefits and in my opinion is easily understandable by the common investor due to its what I'll call “tangibility factor.” Right now we're sitting. In an office building, that's pretty tangible to me. I have a desk in front of me, that's tangible to me as well. So, a lot of investors understand that right off the bat.

Billy Dietze: Definitely, that makes sense to me. Can you tell me more though about these like lower correlation returns you're talking about?

James Ocasio: Sure, so lower correlation returns or at times I call them differentiated return streams, are anchored in contractual lease income. And local supply and demand dynamics, not daily market sentiment or daily market volatility. For example, a multi-family apartment with annual leases. I live in one. I have a lease. It comes due every year, or even a grocery in an anchored retail center on a multi-year lease with embedded rent escalations are both prime examples of real estate investments. These are both examples though of that contractual lease income that help keep correlations moderate to low during different market environments.

Billy Dietze: So, let me just summarize real quick, why it matters in your opinion, right? Contractual income plus potential appreciation should give investors, you know, two potential ways to win. Additionally, real estate's low to moderate correlation to traditional portfolios makes it a potential diversifier. That all checks out to me. But could you just expand a little bit more on the improving fundamentals?

James Ocasio: Sure. So the recent data I looked at, which I thought was quite fascinating, is that transaction activity has accelerated through late 24, 2024 I should say, and into 2025 with both property counts and dollar volumes rising in tandem, which is an indication that pricing clarity is improving and investors are re-engaging the asset class after a period of hesitation, I would say. And, historically this kind of recovery in transaction volume may be a leading indicator of market stabilization and renewed confidence, signaling that the valuation reset is largely behind us and hopefully. An early cycle opportunity may be emerging. And on top of that, maybe some icing on the cake, cap rates have generally increased from bottoms.

Billy Dietze: Makes sense to me, thanks for that context, James. So let me turn to you, Adam. You know, once an investor buys into the case for real estate more broadly, the next question becomes, where? And, and your work really challenged the idea that all markets are created equal. Can you expand on that?

Adam Ruggiero: Yeah, that's right. I mean, I think when most people think about real estate, they think about one phrase first, which is location, location, location. We all know that one, but what people typically miss is that when we say that, we aren't just talking about what block an asset is on, we're talking about which neighborhood and in which market as well. That last element, which market, basically the metropolitan area an asset is located in, tends to be overlooked, and that's a problem. Especially for large, diversified portfolios, market selection can be a huge driver of relative performance. So, to look at that, we studied 37 years of performance data across apartments, office, industrial, and retail. And what we found was that over 5-year periods, markets in the top quintile, that's the top 20%, outperformed the markets in the third quintile, the middle 20%, by nearly 400 basis points annually. And to be clear, I don't mean 400 basis points cumulatively over the five-year period. I mean an average of 400 basis points per year.

Billy Dietze: That's notable to me, yeah. Especially cause a lot of investor energy, you know, still goes towards individual buildings or micro locations, right?

Adam Ruggiero: Yeah, and, and the thing is it should. Asset selection is extremely important, but market selection should guide where those asset selection efforts are focused. It's about identifying where economic growth, tenant demand, and capital formation are aligning before you ever try to find the strongest individual asset.

Billy Dietze: So, let's bring this into today's market. James had talked about contractual income and potential appreciation as well as revived fundamentals. From your market selection lens, what about those aspects matter most right now?

Adam Ruggiero: Well, the, the thing is that what we look for is actually pretty consistent, uh, and those things span multiple economic cycles. We're looking for markets with durable, diverse drivers of demand, significant supply constraints, and attractive pricing. And that last element is really important. The capital markets have a huge role to play. So, we not only project net operating income growth, we also look at what other investors are projecting. So, if we sense that other investors are getting too aggressive and pricing assets in a market too richly, we're likely to reduce our focus in that market.

James Ocasio: Now that's a fantastic point, Adam. That's where active management plays an important role. Sometimes investors are not defined by what they buy. But a lot of times by what they avoid, right? And the last element projecting income growth and watching on aggressive pricing is one reason why private real estate investing is better served as that active strategy, not passive, and thus manager selection is critical to success. We believe one can generate alpha versus the NCREIF index when partnering with the right active manager that number one, puts market selection at first. Two, understands property types via supply demand imbalances correctly. And three, has the discipline to say no when that price isn't right.

Adam Ruggiero: Yeah, that's right. You know, our goal is to overweight the top 20% of markets, but even if we succeed in only overweighting the top 40%, that can still lead to material outperformance over time.

Billy Dietze: Yeah, that manager selection piece is starting to make the picture a bit more. Clear here. Can you actually expand on that though, James?

James Ocasio: Sure, yeah, it's not easy picking managers, right, and doing all that due diligence and private real estate outcomes vary enormously on a manager versus manager basis. Recent data shows that over 5-year periods, top quartile managers outperform bottom quartile peers by several 100 basis points annually. And in a stressed market, let's say, that gap can widen significantly. The best managers tend to combine that rigorous underwriting with deep local market knowledge, which is exactly where Adam's market selection work feeds into outcomes.

Billy Dietze: So just to reiterate quickly, it's not about owning just any building, it's the right markets, right metro area, the right properties with the right investment team.

Adam Ruggiero: That’s exactly right.

Billy Dietze: Let me try to tie this together. Private core real estate still earns its place in portfolios because of diversification, income, and a low correlated return to many asset classes. What's different today is the setup. Fundamentals are seeing a revival. Market selection helps determine where those opportunities exist, while manager selection determines whether investors actually capture them. Adam, James, thank you for helping us connect the dots here.

Adam Ruggiero: Thanks for having us, Billy!

James Ocasio: Yeah, I appreciate you having us.

Billy Dietze: And thank you for listening. We've linked both Adam and James's papers below, so you can read their full thoughts on private core real estate and market selection within the sector.

Billy Dietze: For our next article, we're digging into a topic that a lot of advisors are thinking about right now: how to actually reach, retain and service ultra high net worth clients. So, we're talking about folks with tens of millions in investable assets, not necessarily a huge group, but an incredibly important one when it comes to where wealth is concentrated today.

To help us unpack this, I'm joined by Gwendaline Mazzara, Vice President Senior Business consultant, who has deep expertise in this space. Gwendaline, great to have you.

Gwendaline Mazzara: It's nice to be here, Billy. Thank you.

Billy Dietze: So, let's start with an anchoring point. Can you just help us define what an ultra high net worth client is? How much money are we talking about here?  

Gwendaline Mazzara: Sure. So, the ultra high net worth designation is really used for the wealthiest individuals and families. But there's some nuance in terms of what point one becomes wealthiest. So most often we see this threshold defined at $30M in investable assets. For example, Cirulli often cites that number in their reports, but there's no real broad consensus. So, it's a bit nuanced. And we'll have to think through what the ultra high net worth individual is really about. Right. And we'll talk about some of the personas later on.  

Billy Dietze: Why are we hearing so much about ultra high net worth clients right now? What might be driving that focus?  

Gwendaline Mazzara: Yeah. So, there's really a confluence of factors. The first is that this cohort continues to accumulate assets. So again, according to Cirulli, the assets held by this group grew 173% from 2019 to 2023.

Billy Dietze: Wow!  

Gwendaline Mazzara: So, yeah, they represent only 0.2% of U.S. households, but are 19% of overall share of assets, so rather concentrated. The other factor is that wealthy families have been branching out of the traditional private bank and trust company service model into the RIA channel. And this is supported by the success of what we call multi-family offices. And then I would say last but not least, is something that I think is top of mind for all of your listeners, is this impending $124T generational wealth transfer that's happening over the next 20-ish years. But I highlight here that this is only part of the story, as it doesn't guarantee that every individual getting that transfer is going to have a large windfall.  

Billy Dietze: One thing I want to circle back to is how you said that being defined as ultra high net worth isn't necessarily a number. There might be more to it than that. And I think what you're sort of getting at is there are different ways that people become wealthy, and that can kind of set them into that next tier of ultra high net worth. Can you expand on the source of wealth and how that might affect how people feel about their money and what they might expect from an advisor?  

Gwendaline Mazzara: Yeah, sure. And so really, when we think about our clients or end investors, they're not monolithic, right? Whether they have a few hundred thousand dollars or again in this ultra high net worth cohort, we have to think about them beyond their investable assets. And that goes into the psychographic, right? So how do they think about money? How do they spend money, etc. So back to the wealth origin story. There's a variety of different ways that wealth can originate. Uh, first is from entrepreneurship, right? Um, you started a company and you built a business and, uh, now it's been quite successful. The other way is perhaps, uh, you are inheriting that wealth based on somebody's, uh, previous wealth before you. And, uh, so you are an inheritor. And then again, third and last but not least is very successful executives, right? Long time employees who have accumulated wealth through equity compensation, retirement, saving a whole host of, of ways. But those are some examples.  

Billy Dietze: Totally. And I can kind of see, yeah, how the source of your wealth would dictate the expectations that you put on your investment advisor. For example, if you're the first person in your family to come into a large amount of money versus, like, the fifth-generation inheritor, you probably think about your wealth very differently. Would you say that’s correct?  

Gwendaline Mazzara: Yeah, absolutely. Right. In certain cases, for entrepreneurs, right, no one else in their family was an entrepreneur. Or again, they didn't come from wealth themselves, and all of a sudden, they have a lot of people calling on them. They have accumulated this large sum of cash and they need to put it to work. They also don't necessarily have a network, right? They don't know about estate planning. They don't have a lawyer, perhaps, that can help them, again, think about their personal wealth. They might not have an advisor, right, to help guide them, on not only just their financial plan, but their wealth plan going forward. So, that is a different set of needs perhaps, than an inheritor who over time there has been a family wealth advisor, right? So, perhaps the inheritor is G4, they know the family's advisors. They also know the family's lawyer, right? They know the family's foundation, the board of directors, right. They have, also friends - they have a cohort of their friends that are in the same investible asset class as they are. So, there's a bunch of variables that we need to think through.  

Billy Dietze: I think that makes it a little tricky. Like, as an advisor, if you have a host of clients who got wealthy from different ways, who have different expectations and needs for their wealth, that almost feels a little overwhelming. Do you think maybe another strategy could be finding a lane and sticking to it versus trying to be everything to everybody?  

Gwendaline Mazzara: Sure. We see that actually with multifamily offices, right? They really do, uh, double down on a niche offering first, right? Of course, you can always expand over time. And for those who are also working with business owners probably have witnessed that as well, right? The business owner has a particular area of expertise, product expertise, and then perhaps over time introduces other products. So, I think what's really important is for, again, for your listeners to think about what do we do exceptionally well today for our existing client base? And what are some of the capabilities that we have that actually may be something that the ultra high net worth cohort can benefit from already? For example, let's just say you are working with business owners and you've noticed that you're really, really good at servicing, um, a certain type of business owner. They have a business that's, I don't know, maybe thirty to fifty million dollars in top line revenue. You know, it's a professional services business and, um, you really have got to learn about their industry over time. And so that's maybe someplace you want to start. Same thing with tech entrepreneurs. You've been working with them for quite some time, maybe continue to do that as you expand and think about expanding your business.  

Billy Dietze: No, that that makes a lot of sense. I could imagine how an advisor in the Bay area has a different set of clients than maybe an advisor in South Florida. So, let's shift and move over to pricing because I know that is another hot button, you know, topic when it comes to servicing extremely wealthy individuals. Can you still get away charging, say one hundred basis points?  

Gwendaline Mazzara: So pricing, pricing, discipline and analysis is, is very important to, uh, all of the practices that are looking to build their business again, whether it be for ultra high net worth or mass market now on the ultra high net worth because of the investable assets. Sure. We, we start to see a difference in in pricing tiers. So for example, clients that are in the one to three million dollar range, perhaps we're seeing things around 80-100 Bips, etc.. And then when you get to clients over that $50M investable asset threshold, sure. It tends to be closer to, again, that 45-50 Bips. Now, the takeaway here though, isn't the exact numbers, right? Because ultimately the practices, the businesses, the advisory practices are going to define that themselves, right? Based on their business needs and, um, revenue targets. It's really around what does the pricing represent for the service we're offering to this end client. Right. So ,with the ultra high net worth, it's broader than just investments. There's a lot of planning estate coordination. Again, family governance is very important at that level. And it almost becomes more consulting, right. And so how do we make sure as a business, we are getting compensated for the time that we're spending with our families, our ultra high net worth families and the real intellectual capital we're, we're bringing to this conversation and helping them think through a decision matrix for their generation and generation four, five, six, and beyond. So what we often see in these asset thresholds is a variety of pricing structure, right? So, sure, we'll still be doing assets under management, right? We'll think about capturing that pricing, but we'll also introduce things like retainers, right? For ongoing planning or project based fees, right? For specific events that are happening in, in the ultra high net worth life. Again, it's, it's a way to Separate fees for those non-investment services like also bill pay is in this category, right? Tax prep. And, uh, philanthropic administration, the point that there's some real flexibility here in how you price.  

Billy Dietze: I appreciate that. Yeah, that that's some interesting ways of thinking about, you know, how to still maintain the profitability of your own business while you help these families with, with their own complex lives. As we wrap up here, Gwen, I want to make sure that we leave the advisors listening to this conversation with some practical advice. And I want to circle back to something you mentioned a few moments ago about auditing your own capabilities first. Can you expand on that and leave our audience with some practical things to take away?

Gwendaline Mazzara: Sure. So first, it's always important to just really understand the business itself and the competitive landscape, right? So, what's going on in this cohort and how has the service offering evolved? Then I would really take a look at your own business. And as I mentioned before, do you have clients that are maybe on the cusp of this threshold? Right. So, what are some capabilities that that have been mentioned today that maybe you can expand upon because you actually already have a pretty good understanding of some of these areas? And then also think about, perhaps, relationships or partnerships within your own ecosystem that you can lean on to outsource, right? Instead of going all in. Uh, perhaps you just want to again, test the waters. And that's, and that's common, right? To see, maybe we're just going to service one or two families and we're going to think about outsourcing. And then you can evolve it over time. And we've actually developed a framework around this at Fidelity, right? It's called the Ultra High Net Worth Framework to really start thinking about when it comes to planning, for example, right? What is the scope of offering you have around wealth, growth and protection? What do you offer there, right? Capital preservation, complex cash management, uh, as it relates to holistic family support. How are you helping families think through family cohesion, right? Or personal security. And last but not least is getting around the client experience. Is it a white glove client experience? Do you have an integrated team supporting these families? Just some examples there.  

Billy Dietze: No, that's all great advice. Thank you. And I think that's a great place for us to wrap. Gwendaline, I really appreciate you joining us today.  

Gwendaline Mazzara: Thank you for having me.  

Billy Dietze: If you'd like to learn more about servicing the ultra high net worth segment, we've provided additional resources and readings at the bottom of this page. Thanks for listening.