Chapter 1

1. The Early Years

Back in the eighties, I was the Alex P. Keaton of the day (if you ever watched the popular TV show Family Ties). I devoured books on Wall Street and investing and dreamed of one day working on Wall Street. Posters of the New York Stock Exchange and tall skyscrapers lined my childhood bedroom walls, while my peers had Baywatch models and famous athletic heroes. You could find me at the local library checking out everything in the business section; I often wondered why anyone would read fictional stories! How was that going to help me achieve my goals and make me rich?

I jumped into competitive mock stock trading contests and started many entrepreneurial ventures to raise money to invest in stocks. It was the roaring eighties, and Wall Street was the place to be. But I’ll never forget the day I came across a new book called The Art of the Deal, written by a guy named Donald J. Trump. Wow, I thought, this commercial real estate thing sounds pretty exciting! Those 384 pages of gilded gold became my go-to bible of a sort. What if I could be a Wall Street guy and also invest in commercial real estate? Who knew that one day this dream would become a reality.

My first big break came when a family friend introduced me to a commercial real estate developer and investor. He offered me an apprenticeship, and I jumped at the chance. I learned how to evaluate complex investment deals, construction management, structuring development opportunities, and learned how millionaire business people thought much differently than most of my friends.

Wall Street would have to wait. I was going all in on commercial real estate.

I’ll never forget my first deal. I drove into a dusty industrial area hidden behind the airport and found a treasure. This was the ugliest piece of real estate you’ve ever seen. It was 4.3 acres of flat dirt located in a heavy industrial-zoned area that was the home to an aging crane construction company. To the untrained eye, it was a junkyard. But I’d been learning about zoning classifications and how it impacts real estate valuations. This was going to be great.

After meeting with the property owners, I quickly assembled a group of investors to buy the property. We did it, and we eventually sold the investment a year later for more than a 300 percent return. Walking out of that real estate closing one week before Christmas with a six-figure check was exhilarating. My Wall Street dreams took me to Main Street, and real estate was now my game.

I continued to invest alongside my clients and recruited other investors in a diverse collection of commercial real estate assets. We invested in office buildings, industrial and retail deals, along with acquiring land to position for new development. Over the years, I participated in more than $1 billion in transactions and learned from the best in the industry.

The next logical step in my commercial real estate career was to create an investment fund to pool investors and acquire properties to create long-term wealth. This gave us the opportunity to have the necessary funds to take advantage of deals immediately without having to raise capital once a deal was identified. It was interesting to begin hearing feedback from investors about real estate and the stock market. This is when it became apparent that wealthy investors preferred real assets and often only used Wall Street for small portions of their overall investment portfolio. Our investment funds not only provided steady income through dividends to our investors, but had huge upside with property appreciation. An investor friend described it like a CD bank coupon with a lottery ticket at the end.

Living in a high-growth market near Washington, DC, we found the deals were plentiful and we needed more investors to take advantage of the opportunity. To maintain the growth of our investment funds, it was necessary to reach out to financial advisors, independent wealth managers, and other traditional Wall Street players to see if their clients would like to invest in our real estate funds. This was a natural fit: financial advisors have clients who need to diversify and allocate real assets into their portfolios. It became apparent these guys had a different agenda: sell Wall Street products that fit nicely into their firm’s platforms and collect fees no matter what happened to their clients’ financial lives. These advisors agreed that we were offering excellent investment opportunities, but they were never willing to invest their clients’ money. It’s simple to see the conflict of interest. Fees and commissions are only paid on sanctioned firm investments. The advisors were never going to tell their clients about commercial real estate. This made me mad as hell. How could these guys, who are responsible for the well-being of their clients’ wealth, be so blinded and irresponsible? Could I convince them to reconsider and put their clients’ wealth ahead of their own personal agenda? It became an obsession to educate and convince the financial advisor community to rethink what they’ve been taught for years by Wall Street banks.

I spent countless months educating investment professionals with seminars, meetings, and proposals, only to fall on deaf ears. How could they not understand the power of true asset allocation that undoubtedly increased their clients’ returns while protecting their exposure to volatile markets? The hard facts proved my point. But self-interest prevailed; the advisors had no interest in asset allocation for their clients and continued to do business as usual.

Have I stumbled upon an opportunity? If the status-quo financial advisors wouldn’t entertain innovative investment allocation to help their clients, maybe I should dig deeper. I really needed to understand the mindset of the financial advisor and wealth management business to gain perspective on how these firms constructed investment portfolios and why they recommended specific investment choices to their clients.

What would any logical person do in such a situation? I took a leave of absence from my real estate business and joined the Merrill Lynch financial advisor trainee program. This may sound extreme, but I always wanted to work on Wall Street! You’re probably thinking that I’m a bit crazy at this point, but if my passion was truly to build investment portfolios to beat Wall Street, it was only logical to learn from the inside why financial advisors do what they do. At the time, my commercial real estate partner was generous and continued to manage our business while I took a leave of absence to study and learn the wealth management business from the Wall Street perspective. It was important enough to take the time and learn valuable insights so I could give the highest level of advice to my investors.

I finally arrived on Wall Street.

It took four months of taking aptitude exams and having lengthy interview discussions on why an investment bank should hire a guy like me. But I finally prevailed and was hired into the Merrill Lynch program. It was exciting to join the “Rolling Herd,” the nickname on Wall Street for Merrill advisors, and get this rare glimpse into what goes on in the inside. I was going to learn to be a classic stockbroker from the best in the business.

My first day, I walked into the fancy office building adorned with bull statues and marble. The fun ended there, when my new manager dropped the huge textbooks for my Series 7 exam on the desk and said, “Start studying.” I had six months to study for and pass the infamous Series 7 and 66 security exams, or I would be fired on the spot. Studying gave me an excellent education on Wall Street products such as mutual funds, option trading, stock picks, and financial planning. It was interesting not finding much on real estate investing in these huge books. It became apparent that it wasn’t the fault of the financial advisor regarding their lack of knowledge of real estate investments; Wall Street firms simply didn’t provide access to the products, so they had no interest in telling these young advisors about the subject. My Wall Street education was focused on sales and how to convince trusting investors on why they should purchase these investment products, as opposed to how to build a solid investment strategy for clients.

Fast-forward. I passed the exams and became an official licensed Merrill Lynch financial advisor. This was going to be great! Maybe it was my calling to build a wealth management practice that incorporated private commercial real estate and prove my investment philosophy to all the naysayers. Well, that dream didn’t last long. My time at Merrill Lynch was sitting in a bullpen making four hundred cold calls a day. Our management didn’t care one bit about the client; it was nothing but a quota shop and who could bring in the most money to the firm. There was no doubt: this was a sales job, and no one cared about the well-being of our clients’ investments.

I was also quickly introduced to the term “selling away.” “Selling away” meant that no financial advisor could introduce a client to an investment product outside of...