The IC-DISC Show

Ep049: Demystifying Virtual Family Offices with Mark Wade

November 15th, 2023

In today's episode of the IC-DISC show, I chat with Mark Wade, founder and president of Echelon Virtual Family Office. Mark shares insights into virtual family office services, tailored for those with substantial wealth not needing a standalone family office. We also discuss premium-financed life insurance structures and how they serve individuals with several million dollars in assets.

Mark outlines the origins of virtual family offices, tracing back to the Rockefellers. We learn they now cater to those with $10 million or more in assets. Additionally, Mark describes optimizing value when selling a business through pre-sale coordination, marketing strategy, and deploying post-liquidity event assets.

We conclude by examining indexed universal life insurance advantages and investing in index funds, real estate, and small businesses. Overall, this informative episode underscores wealth management options and leveraging life insurance through Mark's insights



  • In this episode I chat with Mark Wade, the founder and president of Echelon Virtual Family Office, How He provides services to wealthy individuals who need family office services but do not justify having a standalone family office.
  • Mark elaborates on the concept of a virtual family office, highlighting that it originated with the Rockefellers. He explains that these services are typically available to those with a net worth of $10 million or more.
  • We discuss the process of leveraging life insurance through premium financing, with Mark emphasizing that the coordination of various financial professionals and providers is key to unlocking a business's value.
  • Mark and I delve into the process of pre-sale value creation, marketing to potential buyers, and the deployment of assets after a liquidity event.
  • We explore the struggle of successful business owners in transitioning from their roles after a liquidity event, and the satisfaction derived from making a difference in people's lives.
  • We discuss the concept of premium financed life insurance and how Etch-A-Lan uses it strategically.
  • Mark describes the process of bank financing with collateral and contribution, explaining how clients can sign a personal loan and provide collateral.
  • We discuss how despite a higher interest rate environment, the strategy of bank financing remains potent due to policy flexibility.
  • Mark and I examine the benefits of indexed universal life insurance and the advantages of investing in index funds, rental real estate, and small business ownership.
  • Finally, we celebrate the power of self-confidence and the wisdom gleaned from financial experiences.


Show Notes

Be a Guest

About IC-DISC Alliance

About Echelon Wealth Strategies


Mark Wade


(AI transcript provided as supporting material and may contain errors)

David: Hi, this is David Spray, and welcome to another episode of the ICDisc Show. My guest today is Mark Wade, the president and founder of Etch-A-Lan Virtual Family Office. They work with families who have a need for family office services but whose net worth does not justify having a standalone family office, so they serve these families and add a lot of value. We had a great interview talking about some of the things they do to add value, and then we also talked about an interesting structure that they are familiar with around leveraging life insurance through premium financing in what he describes as a quote modern structure. I have some familiarity with premium finance life insurance but Mark's approach is really interesting. We also talked about things he wish he had known when he was younger and advice he would have given himself. So this is a great episode for really anybody who has accumulated several million dollars of wealth or more who's interested in learning more about the options available to them to manage their wealth. I hope you enjoy this episode as much as I did.

Good morning, mark. Welcome to the podcast. Good morning. How are you today? I am great. So where are you calling in from today? What part of the world are you in?

Mark: Today we're calling in from sunny Venice, florida, on the Gulf Coast.

David: Venice. Okay, what's the nearest large city that Venice is near or larger?

Mark:20 miles south of Sarasota Okay.

David: Excellent. I love that. That's the largest city. I love that part of Florida. So I'm kind of a sequential learner. I like to kind of start in the beginning. Are you a native Floridian or are you from somewhere else?

Mark: I was born and raised in Newark, new Jersey, and lived my childhood in New Jersey and, as I, when I graduated college. Since then I've been all over the country, coast to coast. I've spent part of my corporate career, my earlier corporate career, west of the Mississippi, headquartered out of Florida where, I'm sorry, out of California, where I ran west of Mississippi for one of the major brokerage firms, and then, when I went independent in 1999, relocated back to the East Coast again. So I'm currently a Florida resident.

David: Awesome. Yeah, so I'm a Texan and it's like Texas and Florida seem to be like kindred spirits. You know the similar philosophies on a lot of things, and with a fair amount of Gulf Coast Beach front. That's right. So talk to me about echelon virtual family office. What's the history? What made you start it? Who are you set up to serve? Tell me the story.

Mark: Yeah, great. So echelon virtual family office really started in 19 as a state and succession planning firm. Okay, business owners have been our focus for many years, though we do serve some at this point quite a few C level corporate executives, upper level corporate executives and retirees from both the business world and the corporate world. So echelon virtual family office is an evolution of that original practice. And you know, as a virtual family office, most people have heard of the Rockefellers and they've heard of the Vanderbilt's and you know the Rockefellers got it right and unfortunately, the Vanderbilt's didn't, and they meaning the Rockefellers really came up with the concept of a virtual family office. You want me to just give a brief run down to what a family office does. Yeah, please do that for those that might not have heard of it or not that familiar with it.

So the Rockefellers figured out years ago that instead of sourcing a variety of outside professionals, instead of going to outside attorneys and accountants and real estate people and mortgage people and bankers and so on and so forth, you know, john Rockefeller figured out that he could just go ahead and hire all those people inside, because he created enough wealth in order to do that. Nowadays, by the way to create your own family office. It makes sense when you have about 250 million dollars of net worth, okay, so below that, a family might employ the services of a multi-family office, which is where a variety of people, a multitude of people, who typically have about 50 million and larger, would use the same services of a family office. That is a for-profit family office. So some of the people from the private family office one day said, well, we could do this and earn a living at it as a standalone company. So they created a multi-family office and for the last 10 years, myself and a mastermind group that I belong to there's about 220 of us now we started working on this concept of bringing family office services. So it's really all of those core services that everybody knows accounting, legal real estate, banking, mortgage, investment, so on and so forth. Everyone's familiar with those. But some of the more esoteric ones are some of the more more specialized ones, like personal security, trademark law, international banking.

So some of the more sophisticated family services not end to include some of the tax driven ones, but you know specific types of tax strategy.

You know we are able now to source those on behalf of our clients and provide a network of national experts that are part of our virtual family office and bring those down to clients. We say typically a business owner or or a retired executive or an existing corporate. We are able to bring that down to where it really starts to make sense for individuals at about the $10 million level. Okay, we figure at about a $10 million level we can really start driving some what we call true and meaningful value to the bottom line. We can start making a huge difference for those families in a variety of different ways and to provide some economies of scale to it, because you know when they're, when these specialists are part of our virtual family office, they're used to deal flow from us and so they give our clients some consideration. So that's the idea from 250 million to 50. Okay, pretty much the same types of services that were offered to the people that 250.

David: Okay, no, thank you for that. That makes sense, and so it sounds like you just identified a need in the market in that 10 to $50 million network range where the this virtual family office made more sense for people there who was more attractive than a multifamily office structure. Is that about right?

Mark: Yeah, clearly, once, once you. So I should tell you we have clients today that are 5 million because they have specific needs that we can address expeditiously and cost effectively. So we have clients that are smaller than 10 million. Typically your clients are 10 million net worth and larger and we have them all the way up to 165 million. So but you kind of write the way you described it we're able to bring under a family or an individual with with less than 50 million. We're able to bring them those family office services that only you know the private family offices used to be able to source in the past.

David: Okay, so I love stories, so could you give us, like, think of the and obviously you don't need to share the name of a client, but, you know, think of a client where your service really a difference. Can you just one come to mind? You can kind of give a little bit of the background, what their pain point was, how you were able to make a substantial improvement in their situation.

Mark: Yeah, so you know, but you know so it's relevant to a wider swath of people, instead of talking about the exceptional ones I won't do that I'm going to talk about. I'm going to talk about what we commonly see. Okay, that sounds good Because it may be more relevant to, like I said, to water swath of people, and so I cannot remember the last time we had somebody show up if they have ever shown up and they have had all their financial work done, all their legal work done, coordinate and I'm talking about their personal and have coordinated that successfully with their business or corporate world, because it's the marriage of the personal and business, financial and legal affairs. That's where the real, that's where the real magic happens, right, okay? And when you think about it, when was the last time, dave, when was the last time somebody sat down and said to you, dave, I just exited a meeting with my accountant and my attorney and my banker and my pension plan manager and our insurance specialist and we just sat down and talk for hours about me. It just doesn't happen.

And so it's the coordination and the direction of all that effort from those various providers that's what drives, I like we say, the true and meaningful value for our clients. So I'm going to you know, I'm going to say that in the areas of wanting to unlock the value, I'm going to say that for a, if they're a business owner wanting to unlock the value, the equity they've created in their firm, whether it's for further investment, for personal investment or because they're looking to succeed, they're looking to transfer the ownership, they're looking to take a strategic sale to an outside buyer, whether it's a internal sale to employees or a succession to family members.

You know there's a tremendous amount of value that's derived from that process. Okay, so I'm going to say that in the pre sale, value creation and unlocking that value, and then to the in the process, marketing of an entity to the alright. So now I've collected this. Let's just put a number on a 1020 million dollars or whatever the number is. I've gotten my liquidity event. Now what do I do? And it's not just, it's not just the deployment of the assets, it's really now, what do I do? I mean, I can't play golf every day. I can't go around the world vacation all year long every year. What do I do? It's the next step is what's their next, what's the next project for them, because oftentimes that's what it is. Successful business owners find it extremely difficult to just turn off the computer and walk away.

David: Sure sure, of course, of course. Okay, well, thank you. Well, that is helpful. What? What do you find the most satisfying about you all with the company?

Mark: That's a great question, Wow. Well, you know, Dave, this is the only thing I've done for 44 years. Over 44 years. I've only ever done what I do today.

Okay, and as a lot of your associates probably are able to say, we don't do this anymore because we have to do it for the money. We do it for a lot of other reasons too, and part of which is it's kind of in our being and who we are and it's how we self fulfill, right, and a lot of the drive behind doing what I do today is making a difference. That sounds kind of corny, but it really does. After 44 years of doing tax strategy and financial advising and business exit strategy and retirement planning and all the different planning subspecialties that fall into that. We don't do it just for the money, Don't get me wrong. It's nice to be paid well, but it's the impact that we have and the lives that we affect, oftentimes for people we will never meet, because they're people in the future. They're the heirs of people that we'll never meet and lots of times it's the heirs of the clients. They'll never meet them either. So knowing that we have had that kind of impact that's, an intergenerational impact is 100%. What does it for me nowadays?

And it's solving oftentimes these complex and comprehensive problems that you really have to have a lot of time in the barrel and a lot of experience and a really deep bench of people to rely on. Those complex and uncomplicated problems oftentimes are the ones that make or break a family's future. So helping to walk clients through that process it's painting a renaissance picture from the standpoint of you have an idea what it's going to end like. You have an idea of where you're going. But the interrelational family dynamics take you left and right and sometimes it backs you up and sometimes it moves you forward. But going through that process it's so rewarding to see the impact you've had on a family.

And oftentimes it's problems that some families don't deal with and oftentimes it's issues that a lot of families deal with. Sometimes it's we have to deal with substance abuse issues and helping our clients get the right help there. I mean we've had opportunities where well, just recently this Afghan war, the withdrawal out of Afghanistan we had a corporate client where we shipped a couple million dollars overseas and a couple of talented and rough guys parachuted into Afghanistan to pick up this guy's daughter who was doing a medical mission for the local population somewhere in the hills and this whole thing kind of exploded quicker than they can expect and a couple of guys wanting to rescue this woman from Afghanistan. Right down to helping our clients prepare their children to accept this kind of responsibility themselves in the future.

Wealth comes with its own issues. Many of our clients are self-made people. Many of our clients created their wealth or increased family wealth, and so now how do you prepare your children and grandchildren to carry that on? So there's just a variety of things that we get involved with by introducing our clients to the appropriate specialists in those areas. Like I said, we have over 60 in our network now.

David: Okay, well, thank you for that color. I'd like to drill down into a subject that I know a little bit about, but your firm seems to have a little different approach to that. I would just like to talk about that's premium financed life insurance. So can you start by, for listeners that aren't familiar with it, what it is and kind of what the purpose of it is, and then kind of get into the strategy that you all take. That's maybe a little different than some others.

Mark: Yeah. So you know, people think about life insurance and they say, oh, I don't like life insurance or I don't believe in life insurance. And we get it because, let's face it, the only people that really want to want life insurance are oftentimes the ones who can't have it. Right. Right, they find themselves in a position and they say, oh man, I really should have life insurance because this is a problem. Now, for whatever their reason health or otherwise they don't qualify for it anymore. But in all other cases that I can think of, you know, life insurance is just a tool. Right, it's just another tool. Keeps on mark what's the good life insurance versus the bad life insurance? And we say, well, oftentimes it's not a matter of what's good life insurance or bad life insurance, it's policy. Design is oftentimes a critical factor, but more often than not, if we just say life insurance is a tool, you know it comes down to the mechanic Okay, Okay, do you use the life insurance in the proper way or what it was intended, and do you design the policy correctly, meaning the agent and the tax specialist. Do you design the policy correctly? Do you own it correctly? Do you fund it correctly? And then, later on, do you access the money correctly. So let's go back to that third one, the funding element.

If I know that it's a tool and life insurance does many things, it's kind of like a Swiss army knife. What do we need for it to do today? Well, today we need a death benefit or, you know, maybe we're going to need it for a. You know? You know, some of the largest owners of life insurance are their Fortune 500 companies and banking institutions. You know banking institutions and Fortune 500 companies. They own this stuff because it's part of what they call their tier one capital. And in the banking world, the bank's tier one capital is that money that has to be the safest and the most protected. And so what do banks use for that? Oftentimes they use life insurance. They use, boldly, bank owned life insurance. Okay, in the corporate world, they use Koli corporate owned life insurance.

So if we know that it's just a tool and we know that how you pay for it is very important and it circles back to your premium financing, you know what are the ways you can do it? You can pay for your life insurance out of assets, you can pay for your life insurance through a corporation and those where that's applicable and that becomes less and less effective nowadays, but nevertheless, there were still great opportunities to do that, or you can have somebody else make the premium payments for you, and that's where premium finance, life insurance, comes in, and oftentimes it involves it involves having arrangement with a banking institution, and the banks love this because, from their perspective, financing your life insurance policy is a guaranteed investment. Yeah, and it's where the obvious reason why none of us is leaving here without passing away Right, you know, at some point we're all going to pass away, so it's a guaranteed investment for them. So banks are typically very interested in financing these life insurance policies. Banks have gotten significantly intelligent. They look for certain types of policies that do certain things with the right provisions and the right protections for them and own the proper way. So premium finance there's a lot of different types of premium finance out there and there have been different scenarios for years. They come and go as the markets shift and the wind shift, along with interest rates and so forth.

But one of these purposes that we see life insurance our clients really warming up to the concept of premium finance nowadays is in the wealth creation process. So we know life insurance provides a death benefit, and oftentimes you can get the bank to provide financing so you can buy more death benefit than you might be able to or might want to pay for, or on your own. Sure, but another more popular way nowadays well, maybe equally popular, but certainly has risen in popularity is in the wealth creation process, whereby you can have a bank, add additional premium dollars to your premium dollars and those monies accumulate inside that policy for you on a tax deferred basis. Right, because insurance companies they get treated especially from all other corporations in the world, so that money multiplies inside the policy for the benefit of the owner and eventually the beneficiaries at some day. But as those policy values grow and grow, because part of it's your money and a much larger part is the bank's money in there, you get to earn money on the bank's money and it's really an arbitrage between interest rates, right, it's how much is the bank charging me to borrow the money versus how much can I earn on that money. And so we've been, you know we've been really fortunate. You know, over the last two decades I have tremendous positive arbitrage on the on those premium dollars and our clients have enjoyed tremendous policy cash value increase, which then they have been able to borrow on the back end, which is one of the preferred ways to do it to borrow your own money out and pay yourself back, right, right so. So the various flavors of being able to borrow that money.

Some financing scenarios where you sign a personal loan at the bank and you provide collateral and the bank can call you at any time and say, hey, you need to increase that collateral because markets have moved against you and we need more money to shore up our policy, cash value. And then there are those type of policies out there Now the newer designs. The financing scenario says hey, for the first five years you put up half and we'll put up half, so let's use a $50,000 premium. So for the first five years, david, you put up $25,000 a year and we, the bank, will put up $25,000 a year and at the end of five years your commitment is done. You don't have to put any more money into this policy. But for the next five years so from years six to 10, we'll put in the $50,000 on your behalf. We'll add that additional premium dollars on your behalf.

So it works out typically between where the bank puts in about just approximate numbers. It depends on age and health. Well, the bank might put in 70% of the premium dollars, you might put in 30. And then at the end of 15 years, so a five year period, a five year. So the first five year period you share in depositing premiums. The second five years the bank puts in the premium dollars, and then the third five years that money just sits there and marinate and percolates and hopefully continues to grow like it has over the last couple of decades. And then at the end of 15 years the bank will say, okay, we're going to take our premium dollars back now with the interest that has accrued. You get everything else left in the policy.

So that is an extremely popular scenario that has worked incredibly well for our clients and it's amazing the wealth that can be accumulated inside these policies to access later on, either through withdrawal while the client's alive or typically what's more effective is a policy loan while the client's alive, a loan that the client presumably will never pay back, and when the client passes away it just comes out of the death benefit. So here's the beauty. The beauty is these more, these newer, more effective designs. The client signs no loan for the bank's premium contribution. The client puts up no collateral for the bank's premium contribution. The policy itself is all the bank needs, and the way of collateral Got you. The bank has what's called a collateral assignment against it. Well, it's all sees, all yours.

David: Yep, and then so would this be like a 10 pay policy, like there's contractually 10 years of payments. Is that typically what it is, or is that payment duration dependent on market forces? What's?

Mark:the tip that 10 year structure is the typical structure. The only reason why it would be different is if the client wanted it to be different. Really couldn't be shorter.

David: Because of the modified endowment contract.

Mark: Yeah, well said, you can only get so much cash into those things in a short period of time. So that's the whole. Yes, to front load the deposits as quickly as you can. Well, not violating any tax code. Tamar defer, so yeah, so that's exactly right. So it must be 10 years. You could fund it in five years, but then you wouldn't get the other five years of the bank's contribution Exactly Right and you'd likely hit the Mech parameters if you just funded it for five years, right?

It's possible. Yeah, it depends on depending on health and age. Yeah, and because these policies are flexible, you can always adjust the death benefit to make it work. Yeah, but the real magic there is in the bank's share of contribution to that policy. Yeah, five years you share. You put money in. The bank puts money in the second five years only. The bank puts money in the third five years. It just continues to grow and at the end of 15 years the bank takes their money out and it's all yours. There's sums that have been accumulated in these policies has been astronomical, really. It's a very effective way to do it without having to commit you know collateral or sign a bank loan. Yeah, the bank uses the policy as the entire collateral required.

David: Yeah, no, it's really an interesting approach. You'd mentioned how effective that had been the last 20 years because of that positive arbitrage between interest rates and earnings. So what are the thinking? How's that?

Mark: going to change.

David: Now that we're in a higher interest rate environment and, at least for the time being, a lower earnings environment, it seems like that arbitrage has flipped the other way. How does that still work then, in that scenario?

Mark: Well, here's what we know. We know that some of the smartest people out there in the finance world work for insurance companies and banks. Right, these people? They don't lose money. Insurance companies don't lose money typically, at least not in the life insurance business and to my knowledge, no banks have ever lost money financing any of these policies. So really, that just leaves the policy, the holder, right, the person who's going to benefit from the actual policy itself and their heirs. And I can tell you this the insurance companies they don't underwrite things that are not going to work and the banks will not invest their capital in things that are not going to work.

Yes, interest rates have risen precipitously and nobody knows in the near term what will happen, because it's everything's a speculation. Today, you know, the expectation is maybe they're going to bump rates up one or two more times before they start reversing course and hopefully by the end of 2024, they see rates coming down. But it's all speculation, it's all just what we hear from the experts. But long term, I can tell you, over rolling 10 year periods still, what's one of the safest, what's one of the most consistent places that you can have capital. You know great dividend paying stocks. You know the wonderful corporations of America. You're the small business owner who is competent, effective and willing to assume some risk of owning his own business has always been a tremendous way to do it.

Rental, real estate, you know, other than those three things, what do you really have? So you have to deploy capital somewhere and, that being the case, having and, by the way, the type of policies that have proven to be most effective or effective today in this area. You know these indexed universal life policies. The underlying investments are tied to an investment index. Most typical ones are the S&P 500 and NASDAQ. You know, even in times of tremendous pressure on these markets, every academic will tell you and everybody who's in the securities business will say, it's just hard to beat the long term returns on America's best companies. They continue to grow for a reason.

David: Yeah, well, that's why I think it was Warren Buffett that advised his heirs to just put all the money in index funds, because when you look at the cost and performance, and yeah I mean, it turns out that it's really hard to beat the market over a long period of time.

Mark: We did have that thing called the lost decade. You know, just look at where we are today from then. Yeah, look at where the market sits today from where it was in 2008 and 2009. It's just staggering, right.

So these type of policies, it's like it's a great marriage because you can participate in the upward climb of the underlying markets, of the S&P 500 or NASDAQ or whatever next, or in these particular policies. You can participate in that, but you don't participate in the loss, and by that I mean the effect of the market can only be positive on your policy. These policies are protected against a loss due to a market value adjustment, due to a down market. Your policy, your policies, are going to earn zero or some positive return and you're not going to lose money because the market went down. Right, hold out a negative market value adjustment, a downward market, a guarantee against a negative market value adjustment and B just to re-go, there's our video back and B. They know you're going to pass away at some point and the worst case scenario is they're going to collect when you pass away.

Yeah, if you die in less than 15 years, they'll collect. That's correct. That's correct. So it's a win for the banks and, of course, the insurance companies always make money, sure. So the downside when we look at this is what else would we do with our money? The opportunity costs, yeah. What else would we do with our money if we didn't have it invested into America's greatest companies, if we didn't invest in our own business and our own abilities, or an investment in real estate? And if you remember, in 2008 and 2009, the stock market and real estate plummeted at the same time. Right, it was the first time what we call the uncoupling of those assets. Typically, real estate goes up and the market goes down. Market goes up, real estate Typically, there's some, there's their link in some way shape. Well, this time they were linked. All right, they both went down dramatically.

David: Yeah, okay. So I can't believe how the time has flown by. I've got just a couple more questions before we wrap up. What do you wish you knew when you were 25? Wow, I wish. Or if you could go back and here's the way I meant to phrase it If you could go back in time and give advice to your 25 year old self, knowing what you know now what advice? And that you give yourself Confidence.

Mark: Okay, what do you mean? Knowledge? Well, have confidence in yourself. Okay, have confidence. Have confidence in your ability to learn. Always learn, continue to learn and expand your mind. Don't draw yourself into this cone of specificity. This world has changed so many times. Have the confidence to be flexible. Have the confidence to step out and do different things. Expand your knowledge. And then the other thing is you oftentimes don't know what you don't know right, and sometimes it only comes with experience and the wisdom comes from the experience that you've been. You know those experiences that you've endured along the way. Don't let that deter you.

Dick Vitale has a great new book out called Never Give Up. Yeah, it's kind of. It's kind of his story about persevering. I'm fortunate enough to be in that book. Oh, you are. I have one of the chapters in that book. I co-authored one of the chapters along with Dick Vitale, so it's it's. It's a little bit about my story of never giving up. So have the confidence. I didn't know that I'd be able to do all the things I can do today when I was 20 or 25 years old. Okay.

David: Just don't know. Sure, no, that's great. I love it. Well, as we wrap up, is there anything that I didn't ask you, that you wish I had asked you?

Mark: Well, I think we covered a couple of extremely important topics. You know, we do have three other entities in addition to Echelon Virtual Family Office, echelon Asset Protection, echelon Resource Teams. So there are a couple other companies that we could talk about at another time, if your audience is interested.

David: Okay, well, that sounds great. Well, mark, I really appreciate you taking time out this morning to talk to me. I really love your story. I love the advice you give to yourself. I really enjoyed learning more about this more modern structure of premium finance, where there's maybe not quite as much leverage upside, but there's a lot less downside for the participant in terms of no personal guarantee and no collateral posting required. So thank you for that insight and just for your time and your enthusiasm for what you do. So thank you.

Mark: David, thanks so much. It's been a pleasure being your guest today and I wish you well in your podcast, continued success. Thanks, mark.