Transcription
We wanted to build a business to take care of wealthy American families across the country, not just the Rockefellers. It's a distinctly, uh, uh, American notion that philanthropy should be part of wealth creation. I tell people today, younger bankers, you want to really get a long term client. Make sure you tell them when they shouldn't do the deal.
The Rockefeller name has been synonymous with wealth for more than a century. Rockefeller Capital Management traces its roots to a family office established by John D Rockefeller in 1882. It became a multi-family office in the 70s. And in 2018, we bought it from the Rockefellers. And Jacob Rothschild owned a piece at that time, and we created something called Rockefeller Capital Management.
Its president and CEO, Greg Fleming, saw an opportunity to turn a storied family office into a modern wealth management firm serving rich families across America. We bought it with 18 billion in client assets, and our client assets today are over 200 billion. So we've grown the value of the company quite significantly today. Rockefeller Capital Management provides clients with investment management, estate and tax planning, and family office services.
Fleming took an unconventional path to Wall Street, raising a family of educators. Fleming headed to Yale Law School after graduating from Colgate. But during his final year at Yale, he discovered management consulting and took an unexpected turn in the business.
I said, "I really want this job," and he said, "Well, you came in late. We filled the class with business school students. We don't typically hire from law schools, but we'll keep you in mind." And he came back two minutes later and he said, "You're in." And it changed my life.
Before building Rockefeller Capital, Fleming also spent more than two decades at Merrill Lynch, eventually becoming president of the firm. His tenure coincided with the 2008 financial crisis, and he helped negotiate Merrill's sale to Bank of America.
"You know, I regret having to sell Merrill Lynch. It was a great firm. And I do sometimes think back to, could I have done things differently? I wasn't yet president when that position was put on because it was a 94-year-old company when when I sold it. And, uh, that was a hard thing to do."
Today, Fleming is focused on helping clients navigate a rapidly changing world shaped by artificial intelligence and economic uncertainty. He says wealth management is about more than markets and technology.
"We're counselors in that. And that's a that's a real privilege to do that, because this is really the most important part of their lives."
So why do families need specialized advice? If they made a lot of money, presumably they know how to make money. So why do they need you to help them make even more money?
Well, you know, families and, you know, the estate of, uh, if they've built the wealth for building a business and something else. And our families have, uh, businesses that they've built in so many different industries across the United States. It's really a remarkable country, an economy with pockets of wealth in so many different places. The expertise was was in the business that they built. Uh, they're not as affluent most of the time on the, but what they do with the wealth and how they preserve the wealth and how they plan for the wealth and how they invest the wealth. That's what we're therefore. We really are there to take care of all of the needs. And it can be quite complex. You know, our families are multi-generational. Um, and maybe the business is still ongoing, or maybe they've sold the business and they're just trying to figure out how to have the wealth stretch for generations. And that's not where their expertise is. That's where our expertise is.
How do you find that? Families that are wealthy, they spend a lot of time planning to give away the money upon the death of the founder or the co-founders, or they actually give it away before the co-founder or founders die. I think it's more of the latter, that families give a lot of money away along the way. Before the founder or co-founder, uh, dies. You know, I think it's the most philanthropic country in the world. We work with somebody recently who won a lottery. One of the first things they were focused on wasn't just how to spend the money, but how to give some of it back. It's a distinctly, uh, uh, American notion that philanthropy should be part of wealth creation. We help many families set up a foundation, you know, to make sure that it gets done in the way that the family wants, with the, you know, the causes they care most about. So it's a huge part of almost every single family we work with.
Now, the Rockefeller and Co, which you bought, and what year did you buy it? 2018. We closed on March 1st, 2018. At that time, um, uh, the family decided to sell. Why did they sell Rockefeller and Co, or what part of it? They sold part of it. Remember, they stayed in, and that was something that we were very focused on. We wanted to build it with the family, and they're quite pleased with what we've done with it. You know, they have an incredible name. And, you know, we've really been, uh, privileged to build this company in their name, but they wanted to modernize it, expand it, you know, build world-class technology. You know, create something that could endure going forward. And that's why they sold a significant part of it.
You know, when you bought a significant part, you were backed by Viking. Is that correct? Yes. Viking Global Investors. The founder, Andreas Halvorsen, is still in charge and still runs, uh, Viking. And, uh, Brian Kaplan runs the private investment side. They've been a terrific partner of ours. And I really picked Viking because I was quite pleased with the way they thought about building a business the right way over the long term.
So after you bought it at a certain price, um, you, you and Viking controlled the company. The Rockefellers were still in. And then a number of years later, a number of other investors came in. Did you ever publicly say what you paid for the company when you bought it? We didn't publicly say what the price was when we bought it, but we bought it with 18 billion in client assets. And our client assets today are over 200 billion. So we've grown the value of the company, uh, quite significantly.
So the inevitable question is, are you going to take the company public? You know, in the final analysis, I'm a fiduciary, as always, to the shareholders. Building this company is one of the great things in my career that I'm proud of. But we don't need the capital that would come with an IPO, which is, you know, a lot of the reason why people do IPOs. We just finished the recapitalization in December. We have a very happy set of shareholders, old and new. Uh, they invested knowing that the best way to continue to build this business is for the long run. Uh, and I think they're comfortable with the company being private in the long run.
That's the preferred route for most of your clients in America. Is that what you focus on? American overwhelming percentage. Yes. Okay. And have you thought about moving to Asia or Europe? We've had many, you know, many conversations, people coming to us, opportunities. The name carries well. The Rockefeller's, uh, the footprint is not just in this country. It's in Europe. The wealth creation in this country, David, continues to be, you know, frankly, staggering. And the number of, uh, families that we can serve in this country and the number of places, you know, there are these growth cities in this country where there's a tremendous amount of wealth being created. And we like to be on the ground in these cities with our private advisor teams, close to the families, close to the clients. So there, there's been such a significant opportunity here. We've stayed focused on the US.
I suppose. I say I watch this show and I've heard about your firm, um, but I don't know if I'm wealthy enough to be eligible. How much net worth does somebody need to qualify to be, um, uh, have their money managed by you? We don't dictate to the private advisor teams a minimum. You know, the sweet spot is probably 20 to 25 on up to 250, 500 million. And we take care of many families that have more than $1 billion.
Let's suppose I say I've got $50 million. I inherited $50 million. I don't know anything about money, or I'm something in the non-financial world, but I want to not lose my $50 million. If I give it to you and you manage it, what kind of rate of return can somebody realistically expect from a money manager like Rockefeller?
Well, you know, remember, we're a family on the wealth management side. So it's open architecture. We're providing the advice on which investments to go into. Most of our clients we help put into third-party, uh, firms that that are on our investment platform, and we do a lot of diligence on making sure that we bring in the best outside firms for every single micro strategy you can think about. We're trying to put them in the best possible position. So if it's 50 million and it's preservation of wealth, you know, the private advisor team will be working with them on a on a portfolio that might be more skewed on the fixed income side versus, uh, equities and alternatives. But we, we work backwards from the needs of the client, uh, and the family. And, uh, we emphasize open architecture and, um, independent advice here.
Let's talk for a moment about the United States economy today, which obviously is important if you're in the money management world. Are you worried about, uh, the rate of inflation in this country? I'm most focused on the fiscal situation in this country. I think that, uh, you know, we're we're still at relatively full employment. We have been in a good time. We run these five, six, 7% of GDP deficits annually. And there seems to be no impetus to change that. You know, it's approaching 40 trillion in debt. You know, you're very familiar with all the different benchmarks. We spend more in interest than we do in defense. Um, and I, you know, that obviously could have implications over time. It's a it's, you know, a fantastic amount of money to have borrowed, even for an economy this robust and this big. That does worry me. And it could feed into the inflation side.
The specific inflation question, David, uh, there's a couple of things that make it a very complicated picture for Kevin Warsh as he steps into it at the Fed. You know, the first is AI, which is, um, uh, you know, being implemented everywhere. I mean, every private and public company is trying to figure out how to use the tools for greater productivity. And these large language model companies like Anthropic are working with a lot of these companies. And it's moving faster than even I thought. That could have a depressing effect on prices. You know, you could have a productivity pop coming out of that and it could, you know, make things cheaper as the agents are start to be embedded in more companies, so he's got to look at that. Then he's now got an energy shock. So it's a pretty, he's got an ongoing, you know, significant fiscal deficit which, you know, clearly could put pressure on rates, particularly on the long end. So I'm, I think it's a complicated picture. It remains to be seen exactly how he starts to play this.
How do you think money management, or particularly your type of money management, will be affected by? I think that the front end of our business, the client interface, because the, uh, the work we do with families, there's a lot of complexity. You're dealing with the human beings. The front end will continue to be our private advisors and their teams. I think we can make them more efficient. And I have said, uh, before that if we have a private advisor today that has 20 clients with $100 million, 20 families he or she is taking care of and five people on his team or her team, they could have 40 clients with $100 million, $4 billion of client assets and five people on the team in three or five years. So I do think it's going to make, uh, our advisor teams more efficient. Our whole team, our whole firm more efficient. The great thing about being in a growth firm is that means that we can, you know, hire fewer people. But, you know, we don't have to, uh, rationalize the way a lot of these big firms will have to do it.
So if you look at in the future, what is your biggest worry about for the U.S. economy? My worry is the fact that we've got the most transformational technology that we've ever seen, you and I or anybody in in the form of AI. And it's going to affect every aspect of our lives and every single business, private or public. You know, and my colleague Richard Sherman reminds me that there's never been a breakthrough technology in history where more jobs were, uh, more created rather than the ones that were lost. So net positive on jobs. Uh, and I think that ultimately that could be the case here. But, you know, we may have a transition where agents are able to do things before we have new jobs created. So I think the transition coming from artificial intelligence is likely more comprehensive and impactful than the country is yet ready for.
We have these incredible American families that are coming with incredible success and maybe building a business and creating the wealth. And we're counselors in that. And that's a that's a real privilege to do that. What is it about money management that appeals to you? What is it you like about managing other people's money? What I like the most is the counseling aspect of it. And I do refer to our private advisors as counselors. When I worked in investment banking, I like to think that I was providing great advice to my clients. And I tell people today, younger bankers, you want to really get a long-term client. Make sure you tell them when they shouldn't do the deal, even though you might get a lower bonus a year later because there's no fee. So we're counselors here. We have these incredible American families that come in with incredible success and maybe building a business and and creating the wealth, but they're looking for help. And how do they preserve that over generations? How do they talk to children about it so that the ambition is still there? And the second and third generation, that's a, you know, we're counselors in that. And that's a that's a real privilege to do that because this is really the most important part of their lives.
Let's talk about how somebody like you got into this business. So where were you born? I was born in Massachusetts, a little town called Fitchburg, which I think is in the western part of the state. My father was a teacher. We had a couple of moves, but I ended up from grade school on in a town called Hopewell Junction, New York, in Dutchess County. Uh, and my mother eventually went back to college and became a teacher. Uh, she'll watch this show. And I'm proud of the fact that she went back to college after my youngest brother. I went into the first grade, got her degree, and then she taught for 25 years as a special education teacher.
How many siblings do you have? Three brothers. And are they all in the financial money management world? No. One of my brothers is a teacher. There's a lot of teaching in my family. My my great uncle was also the black sheep of the family. Because you're not in teaching. Uh, well, actually, we can get to that. But I do teach on a part-time basis at Yale Law School, which I enjoy immensely. And I'm proud of. Uh, my other two brothers were more in the business. Um, one was in the insurance industry. Uh, but, you know, we grew up in, uh, in Hopewell Junction, New York. I went to John Jay Senior High School. I know you wanted to ask me that. Uh, it was kind of a, uh, you know, a classic middle-class existence with a focus on, um, a lot of sports. I did well enough to go to Colgate.
And Colgate. And you graduated summa cum laude. I did, and I also met my wife there. Uh, as we were both freshmen, I met her, uh, you know, freshman year. You're married now? For how many years? 36 years. Okay, so you met as freshmen and you got married eventually. And when you graduated, you went to Yale Law School. Is that right? I did, I went directly to Yale Law School.
All right. You got into Yale Law School. You graduated. Most people who go to Yale Law School, they don't be a Supreme Court clerk, they're going to a big, high-powered Wall Street firm. But you didn't do that, did you? I did. I've always argued it's such a great law school and there's such a, um, a breadth of students there that really when you come out of there, you, you're capable of doing, you know, a lot of different things. It was a little less traditional when I did it because I graduated in 1988. Um, and I wanted to I found out about management consulting in my third year of law school. Um, and I know you made a journey like this too in your career, because I know you're a lawyer. Um, and I got interviews at a couple of the firms. Uh, and I had a hard time getting the interviews, and I had a hard time getting the jobs, because at that time, they were, you know, they would say you went to law school. Why do you want to work as a management consultant? But I got a break at Booz Allen, uh, Booz Allen Hamilton at the time, and it's actually a great story. I was on the phone with the hiring partner, and you and I have both. We've all had these moments in your in our careers where you could go left or right. And, um, I said, "I really want this job," and he said, "Well, you came in late. We filled the class with business school students. We don't typically hire from law schools." Um, but we'll keep you in mind. Uh, and I said, "All right, well, I really would like to come here. I'm going to go take this job at a law firm. Please let me know if it opens up." And he says, "Are you telling me you'll take the job? If I offer it to you right now?" I said, "Absolutely." He said, "Hold on." And he came back two minutes later and he said, "You're in." And it changed my life. And I went to Booz Allen Hamilton.
So you go there and for there for how many years? About five years. And then what did you do? I went to Merrill Lynch. So you started Merrill Lynch. And what was your job at Merrill Lynch? I was the chief operating officer in Municipal Securities. I was hired by a guy who wanted to make that business run more efficiently. So it was a good transition, and it leveraged some of the skills I had developed at Booz Allen. I did that with him for a couple of years, and then I went into investment banking, and it was a bit more of a, uh, an easier transition from inside the firm to go into investment banking. And he rose up to be the number two person in all of Merrill Lynch.
How many years? What did I take? I joined in, uh, in 1993, and I was the president in 2007. Okay, that's pretty good, except the financial crisis came along. What happened to Merrill Lynch that required you to effectively sell the company? You know, uh, it was a great firm, and we we had a great set of businesses at the time. Uh, and I think it would have been an incredible deal for Bank America. We owned half of BlackRock, which people forget, which was a deal that I put together in 2006 with Larry Fink. Um, 49% of BlackRock, I said on their board. We had a great wealth management business, a good investment bank. Uh, the reason I had to be sold was really a small part of the firm. Uh, within the fixed income trading area, they had built up a portfolio of, um, CDOs backed by late-stage subprime real estate collateral. And that portfolio, I think, roughly, was $70 billion when we went into the crisis. And I think we wrote off $55 billion against that one portfolio. So you sell Merrill Lynch to Bank of America, uh, for the purchase price was $50 billion and $29 a share. David, I'll never forget this. It was the most stressful stretch of my life. So.
So after you sell, do you say, okay, I'm out of here, I'm going to go do something else and take life a little bit easier? What did you do? I went back to my 20-year-old Yale Law School reunion because it was 2008, and the dean at the time was somebody named Harold Koh, uh, who was, uh, uh, Hillary Clinton when she was secretary of state. I think he was her chief legal counsel. He's a wonderful man. He said to me, "You look terrible. If you decide to take a break, come up here, titrate, uh, you know, do whatever you want. It's a disappointment. Um, I'm happy to have you around here. Be good for the students." And I said to him at the time, I just engineered the sale. I did the negotiation. I feel like I need to stay. And two months later, I just realized it wasn't going to be a long-term career for me there anymore. And I called him up. And in early January '09, I went up to law school.
And how long did you teach there? Nine months. Nine months. And then you joined Morgan Stanley? Yes, I did that for about four or five years. Six years? Six years. Okay. Then you left and you said, I want to be more of my own boss and really build something myself. 100%. I wanted to try to build something, and I really did believe there was this niche in the marketplace that I describe for comprehensive advice to high net worth. And I'll try. Net worth families.
So did you come up with the idea of buying Rockefeller and Co, or did somebody come to you with it, or how did it work? Ironically, the investment banker who was representing Rock and Co was somebody I had competed with at Goldman for years who had become a good friend of mine. And Don, uh, when I found out that it might be for sale and that he was the banker, I called and I said I'd be interested in this. And I've got, you know, an equity partner that's with me. And, uh, you know, the rest is history. We stepped in and we bought it.
How do you spend your day? Do you have are you traveling to meet clients or prospective clients? Your employees are making speeches. Uh, a lot of my week is around leadership, uh, internally with my team, making sure that we're doing the right things across the organization. I spend a tremendous amount of time with clients because we don't. I remind people all the time, there is no business without the clients. Uh, I am the CEO, and a lot of them want to see me. One of the nice things about this firm is our clients number in the thousands, not the millions. So I spend a lot of time with clients. I spend a lot of time with our private advisors on the things that are, uh, you know, affecting their ability to serve the clients. We have a great culture. Perfection is not attainable. But if we chase it, we might just catch excellence.
So let's suppose somebody is at Colgate now, a young professional man or woman and a young student, I should say. And once they get into the financial service world, why would they want to come into this business? And what are the skill sets that you look for when you're hiring young people? I think it's a great business for a young person to get into, because I think the client interface is fascinating. It's obviously about helping them and, uh, take care of their wealth. And there's an analytical side to that, but there's the human side to helping take care of a family. And you get to, in our firm, you get to work with these wonderful families that are really some of the most successful American families. You get to know the story. You're helping them through something they're less familiar with, what to do with the wealth. The skill sets. I always look for, David. I want the people who have the passion to go for excellence. But I also want to find the people that want to do that in a way where they work well with others.
I suppose somebody comes along, they're very smart and they're a history major, or they're an English literature major. Do you just don't hire them, or do you take a look at them? I always love liberal arts. I did, uh, major in economics, but I was at Colgate and I studied a lot of things. And I actually had an anthropology professor at Colgate who I am still in touch with to this day. He just recently retired, had a big impact on me, and opened my mind in so many different kinds of ways. I think liberal arts training is going to be more valuable in the world that we're moving into, because I think the AI tools and agents are going to do a lot of the specific things that you could teach in a more technical manner to human beings, whereas the liberal arts skills, which are a lot about, you know, the the ability to deal with different things, different people, those are going to be business are going to be premium on those.
So let's suppose, um, I say to you, um, you've had an incredible career, but you must have made some mistakes somewhere. What's your regret? Do you have any regret about anything you've did on your career? You know, I regret having to sell Merrill Lynch. It was a great firm. The mix of businesses should have enabled it to survive that credit crisis. Because the kind of exposure that we had on the fixed income side of that balance sheet wasn't core to what Merrill Lynch was. So, you know, I regret that we got to that point. And I do sometimes think back to, could I have done things differently? I wasn't yet president when that position was put on. It didn't report to me. But could I have done more, uh, to try to have that company, uh, still be around today because it was a 94-year-old company when when I sold it.
What are you most proud of having achieved in your career so far? This firm, Rockefeller Capital Management, because we started with not a lot. We had 182 people. You know, it was a very different firm. So many of those people are not here. We have some great people that were here in the beginning. Employees. You have now close to 1700. Uh, we have a great culture. We talk about excellence in everything here, and we. And as a high bar. People reach for excellence. And one of my favorite quotations is Lombardi, who, you'll remember, said in the 1960s when he was paraphrasing Aristotle. Perfection is not attainable, but if we chase it, we might just catch excellence. We're trying to catch excellence here, but we focus on collaborative, collegial culture. We want it to be a place where people love to work with others.
Any regrets about not practicing law and doing something really important for society, like being a corporate lawyer? Um, uh, I really, you know, when I look back at my career and this is probably true, even for somebody as successful as you, there might be some bricks you want to pull out of the house and, you know, this brick or that brick. But I really do believe that by the time you get to where I am, I'm 38 years in and I'm 63 years old. If I start pulling bricks out, the whole thing will come down and it's a different, you know, it's a whole different path. So I don't have any regrets on that.