Seth Garber:
So what’s going on, everybody? So, listen, we decided to do something a little fun today, and I was fortunate enough to have Nick Bartolo here from California. Sorry, just kidding. I love California.
Nick Bartolo:
I don’t disagree.
Seth Garber:
So those guys who don’t know Nick. Nick’s in wealth management, really at a high level. So Nick, why don’t you tell us what you do just at a high level, just so everyone who’s paying attention can [inaudible 00:00:41] this.
Nick Bartolo:
At a high level, I manage money and try to mitigate taxes for pest control owners, and typically those owners who have accumulated a substantial amount of wealth, either by cash flow in their business or selling their pest control business.
Seth Garber:
All right guys, so that was really formal. So Nick, summarize this really quick for us. In 10 seconds, tell us what you do, but make it fun. What do you do?
Nick Bartolo:
I make people money and have them avoid the IRS.
Seth Garber:
Dude. Now that’s exactly what we actually wanted to hear. So we will listen.
Nick Bartolo:
Within the code.
Seth Garber:
A hundred percent. So listen, the business you’re in is an incredibly regimented business and you’ve got to do things right and everyone gets it. So it’s fun to have a little bit of fun talking about it, but at the end of the day, I sit there and think about all these hundreds of owners that our companies engage with on a regular basis, and it’s actually a very stressful thing. It’s really, really stressful.
You’ve heard us talk about this before in different episodes of the Buzz, whatever we’re talking about, but it’s really complicated for a business owner who’s really good at something like pest control to open up their bank account and look at it and go, okay, I have $20,000 or $50,000 or $100,000, whatever it may be, and be super nervous about taking any money out because they don’t actually know the impact that might have on their taxes. It’s super stressful. So if you’re in the seat of a pest control owner, how do you think about that? Take off your financial hat and put on your, I’m a pest control guy hat, how would you think about that?
Nick Bartolo:
I think that inertia is a very powerful force. So your money’s sitting in your bank account, you don’t have a plan. You don’t know what necessarily to invest in that you consider safe and it’s going to actually earn some money, so you do nothing. So it feels very comfortable to have that money in the bank account. So why not? And you don’t want to do anything foolish with it. But again, it’s not necessarily optimizing or even being reasonable about how you’re actually investing it.
Seth Garber:
I think that’s very hard for people to understand. You and I have already talked about it. It was hard for me to understand. I had a finance background, not like your background, but I had a finance background and I still never really understood that the money that I had was actually a tool to build, really my future life. So I looked at it as having a bank account with cash in it, it was like safety and security, but it actually wasn’t. It was actually the opposite. So maybe talk a little bit about that, because that’s something that’s very interesting.
Nick Bartolo:
It makes me think of one aspect of pest control. I am not one of those wealth advisors that say, “Oh, Seth, you have a really successful pest control company. It’s throwing off all this money. Why don’t you give that money to me and I can invest it and I can make money off of you.” Uh-huh, I realize that you as a pest control owner, reinvesting as much as you can back into that business, as long as you’re generating a good incremental return, it’s leading to growth, it’s leading to higher retention. You can open a new branch. So doing these things that are ultimately going to increase the size of your business, which increases the multiple that someone’s willing to pay for it. So I fully encourage that.
Seth Garber:
Do you know what’s interesting? It’s interesting to hear that perspective because we’ve never talked about that before. And obviously for our companies, we’re building these companies on our consulting practice and obviously with fraction, we look at their numbers in a variety of things, but I always talk to these guys that we work with, about how much cash they should have, what they should be doing it with. But the interesting part is that people choose their strategy. So sometimes people say, “Hey, I use my pest control company to make cash. I use that cash to invest in other things.” Other people though take the money and they reinvest it. I would tell you that it’s interesting to hear that because obviously in your world, the more money people invest, the better it’s for your company. But the reality is that you just described a strategy that I actually have never heard from a wealth manager ever.
Nick Bartolo:
The way wealth managers get paid sometimes can create perverse incentives. And that’s an example. Another example would be if I was managing money for someone and they came to me and said, “Hey, I want to buy real estate for my pest control operation.” And I was like, “Whoa, whoa, whoa, whoa. That’s going to take fees away from me. Maybe you should lease that building.” That’s absolutely the wrong approach and not what we do. We’ll do the opposite, which is help them analyze that purchase and talk to them about, “Okay, do you want to own that inside your pest control business? Actually, we would recommend owning it in a separate LLC that you own, do a cost segregation study to get some bonus depreciation and be as tax efficient, which ultimately increases your cash flow.”
Seth Garber:
It’s like, you think about the value of what you just said. You just think about the value of that. It’s super impactful. And I think what we see too often in this industry is that too many of the people that we see are influenced by the local guy who has a store in a shopping center that’s his storefront.
Nick Bartolo:
Sure.
Seth Garber:
And you come in and there’s a person sitting there and there’s a guy behind the desk who is the wealth guy.
Nick Bartolo:
Yeah.
Seth Garber:
And you know I had spoken about this before, and honestly, I think a lot of these guys take advantage of the people, but I don’t think they take advantage intentionally. I think they take advantage because it’s beneficial to their company and they don’t put the customer first. And so they’re taking their fees. One of the things that I learned growing up, and I didn’t know, obviously now I know, but I didn’t understand how a mutual fund worked. So we would put our money into a mutual fund thinking we’re making a good strategic investment. And what we didn’t know is the guy who’s pushing us to do it is getting a freaking kickback on the backside.
Nick Bartolo:
5 percent.
Seth Garber:
Is it 5 percent?
Nick Bartolo:
Historically, that’s what it’s been. And then they’re getting paid every year 0.25 percent after they put you in there.
Seth Garber:
That’s insane.
Nick Bartolo:
It’s insane.
Seth Garber:
I didn’t know it was that much.
Nick Bartolo:
And then if it goes up, the client can’t sell it because if they do, they’ll take a big tax hit. So then it’s just embedded right into their investments.
Seth Garber:
So this happened to me, exactly what you’re describing. And so what happened to me years and years ago, and I forget, it was right when I started my company, is, I had gotten approached by, I think it was, I don’t even know if they’re still around anymore. It was a company called Ameriprise.
Nick Bartolo:
Yeah.
Seth Garber:
I don’t know if they’re around. I have no idea. But I got approached by this company, I was at a networking event, and you put your business card in a bowl and they chose my name and I got a free evaluation.
Nick Bartolo:
Okay.
Seth Garber:
So good sales strategy. Young entrepreneur, don’t really understand my money. So I get a phone call from this guy and I have a little bit of money at the time. I think I had, I want to say it was like $10,000, I don’t remember exactly. And this was back in 2008 or 2009.
So I meet this guy. He is like, “Hey, you should take this money, invest into this thing.” So I bought, I don’t want to call it the thing, but I bought a REIT. I didn’t understand how it actually worked. And so I buy this REIT, I put my money in it, and about a couple of months later, I needed the money out. I wasn’t really good. I needed some cash, I couldn’t get the money out. Well, I’ll tell you this, let’s fast-forward till today. I still own this product that I actually can’t even get my money out. It’s from 2008 till now, or 2009 till now. I’ve made $175 on that investment.
Nick Bartolo:
Oh my gosh.
Seth Garber:
But this happens all the time, right?
Nick Bartolo:
Oh, sadly. That’s very common. New clients that I’ve brought on over the past year have had that exact instinct, except it might be $200,000 that just locked up. They can’t sell it. It’s a real estate investment trust and they can’t get their money out and they’re not receiving any dividends. But I will tell you what typically has happened in those situations is the financial advisor collected a big commission on the front end.
Seth Garber:
It’s very interesting. And again, I’m not here to beat up companies not to do business. It’s probably a good model, but I think that going through that experience is something, that my takeaway was, is that there’s different levels of people in every industry, just like the pest industry. So there’s certain pest control companies, who they’re really good at sales and they can grow really, really fast, but they’re really bad at operations. There’s other companies that are exceptionally, exceptionally good at operations, but they’re really bad at sales and they don’t really grow that fast. But the level of service is incredible. And then there’s every variation in between.
And I think that in wealth management, what I’ve learned over the years is, there really is a difference. There really is a difference. And so you’ve got people who want to grow really, really fast and they put everyone into the same product, and you’ve got other people who have a customized approach based on whether it’s your income level, whatever it may be. And so maybe, talk a little bit about your knowledge in that space, because I think that’s something that people don’t really understand.
Nick Bartolo:
That’s a good question. So at Essential Partners, we’re very much a boutique that really provides custom services to each of our client partners. And we call them client partners for a reason, because we’re very intentional about ensuring that we have that long-term relationship. Because without that relationship and that trust, you’re not going to have a successful partnership, even if the investment results are doing fabulously, without that real joint partnership. And so what we do at Essential Partners is, we have that custom approach, but also a unique way of investing our client partners’ money. And the goal of that is to really generate good returns, but increase peace of mind by lowering the volatility, given how emotional money can be with our client partners. So that’s one aspect of it.
Seth Garber:
So it’s really interesting. So would you take [inaudible 00:10:32] now, and this isn’t a loaded question, I’m just curious. So if you thought about a scale of one to 10 being the best of the best, the most high touch, best returns, would you put Essential Partners at a 10? Or would you say that someone else is better? Sorry, I had to ask you. I had to do that to you.
Nick Bartolo:
I’m a perfectionist, so I’ll never say that we’re a 10. And I’m always trying to improve it. Just having that growth mindset. Anyone who sits here and says they’re a 10 or any financial advisor or wealth advisors that says they’re going to have the best returns, is frankly full of it. And so, I’ve often had clients, one recently, one client partner that I brought on recently said, “Man, we almost didn’t hire you because you weren’t really telling us that much about how great your returns were going to be.” And I was like, “Well, I’ll never sell that, right? I would never do that because that’s just just not being authentic.”
Seth Garber:
So what would you rank yourself?
Nick Bartolo:
Seven.
Seth Garber:
That’s a tough question-
Nick Bartolo:
On my scale.
Seth Garber:
Tough question, right?
Nick Bartolo:
It is a tough question.
Seth Garber:
I find it really interesting, and I find it really-
Nick Bartolo:
Actually, we should ask my client partners.
Seth Garber:
That’s probably a better response though, honestly. It’s funny. So one thing that I think you and I share is that commitment to ongoing improvement. Ongoing improvement. And in your industry it’s very tough because you’ve got all the regulatory and legal and cost understanding, and-
Nick Bartolo:
People that lack humility in the investment business fail fast. So I operate with the underlying premise that the future is uncertain, and that creates this constant quest and thirst to continue to evolve and expand your knowledge in order to perform on behalf of my client partners.
Seth Garber:
It’s really interesting. I think the other night we had dinner, one thing that really stood out was the commitment to knowing the most sophisticated new things that are out there and understanding it clearly. I was blown away when you got into some of the discussion around quants. I started laughing. I remember years ago trying to study them and trying to study how it worked, and I could not for the life of me put it together. And you made it so simple and eloquent to me, and I was like, “Man.” I went home and told my wife about it. I was like, “Hey, so there’s this tax strategy, isn’t quants.” My wife looked at me, she literally looked at me and she goes, “I don’t care. Literally I don’t care.”
Nick Bartolo:
Sounds like my wife.
Seth Garber:
It was hilarious, man.
Nick Bartolo:
But I do think it’s important to push yourself to be on the cutting edge of new strategies and actually working with a designated group of people like pest control owners, it really allows you to cater and tailor those new strategies to those owners.
Seth Garber:
A hundred percent.
Nick Bartolo:
And that was the genesis of what we were talking about. If I wasn’t thinking about business sales, pest control business sales, I probably may have bypassed that strategy.
Seth Garber:
It’s super, super interesting to me. All right, man. So are you ready for your questions?
Nick Bartolo:
No, I’m not. I don’t want them.
Seth Garber:
No, we got to give them to you. All right, so because people are learning, they’re getting to know you, obviously you’re good friends with a bunch of us in the industry already. I’m going to give you some questions so people get to know Nick, is that good enough?
Nick Bartolo:
Okay, let’s try.
Seth Garber:
All right, so for the record, for those of you guys who are watching this, Nick has no idea what’s about to happen to him. Okay? No idea. Are you guys ready for this? All right, what’s your favorite color?
Nick Bartolo:
Black.
Seth Garber:
But that’s gray.
Nick Bartolo:
This is blackish gray, I would say. Faded black.
Seth Garber:
Faded black. All right.
Nick Bartolo:
Maybe we share that style component. You’re famous for your black tees.
Seth Garber:
I know. It was pretty funny the other day when we showed up in the exact same outfit. It was pretty funny. All right, so black. We’ll go with black.
Nick Bartolo:
I’ll go, the second would be red, I would say.
Seth Garber:
Favorite food?
Nick Bartolo:
The last name is Bartolo, so I’m going to go Italian. Chicken parm.
Seth Garber:
That’s right.
Nick Bartolo:
And it has to be an old school Italian restaurant though.
Seth Garber:
That’s right.
Nick Bartolo:
We’re not doing the fancy white tablecloth. Maybe like a red check tablecloth.
Seth Garber:
Oh, man. A red check tablecloth. Dude, I want to find a red check tablecloth place in here. So for those of you guys who are watching, Nick had a chance to go to my favorite restaurant in Tampa, Donatello’s last night. So when you guys come and visit us in Tampa, we’ll go to Donatello’s. As I’m talking to you, I’m watching Kelly in production, who many of you guys know, shaking his head, rubbing his stomach, thinking about how great Donatello’s actually is. And our team member, Amanda’s here, and she only eats pasta. So when you guys see Amanda out there, buy her pasta. All right.
Nick Bartolo:
I grew up in Vegas and the last name is Bartolo, so I like those old school kind of places. Absolutely.
Seth Garber:
Dude, it’s so good. So these questions are easy, aren’t they?
Nick Bartolo:
No, but that’s probably because you’re giving me the softballs first and then you’re going to start throwing me the zingers.
Seth Garber:
Okay, so you’re ready for it?
Nick Bartolo:
No.
Seth Garber:
Not yet? How about now?
Nick Bartolo:
Let’s do it.
Seth Garber:
All right.
Nick Bartolo:
How about, let’s just rip the bandaid off and get it over with.
Seth Garber:
All right. These are going to get tough.
Nick Bartolo:
Okay.
Seth Garber:
If you had to perform pest control as a financial advisor on your house, what would you do?
Nick Bartolo:
So funny story-
Seth Garber:
You started sweating by the way.
Nick Bartolo:
Funny story, but the other day I started to critique my wife, which is, that’s always a bad start to a story, but because I hear these things from you guys and Patrick and Paul or whatever, and I hear things at the conference like, “Oh, they make fun of the floorboard. Spray the floorboard.” That was happening in our house the other day. And so I then inquired to my wife, “Are you sure that’s what we’re supposed to be doing?” Because I, all of a sudden, because I work with you guys, thought I knew something about pest control. So she’s like, “Don’t talk to me about that.”
Seth Garber:
That’s hilarious. That is absolutely hilarious. So when I was learning the business, I thought you’re supposed to spray the baseboards, and so-
Nick Bartolo:
We’re still doing it.
Seth Garber:
Look, there’s always been this concept in the industry is, more equals better. The fact is these products today are so good that less actually equals better in a lot of cases. And there’s probably people listening, they’re like, “We totally disagree with you.” That’s okay, it’s just the truth and it’s pretty funny. All right, you ready for this?
Nick Bartolo:
But I’ll tell you, the wildlife and the rats and the raccoons and everything like that, I would fail miserably.
Seth Garber:
Miserably, miserably?
Nick Bartolo:
Yeah. Yeah.
Seth Garber:
All right, so let’s continue with the question then.
Nick Bartolo:
I guess I’m soft like that.
Seth Garber:
Here we go. So you climb up into your attic, so you’re climbing up into your attic and you get stuck in the corner. Would you rather get stuck in the corner with rats or with a rabid raccoon?
Nick Bartolo:
Rats.
Seth Garber:
For sure? Why?
Nick Bartolo:
Because raccoons have those claws. They could actually do damage to me whereas rats, they’re just pesky.
Seth Garber:
I always sit there and think about it in the wildlife world is, you really understand the gumption of a wildlife guy. You really understand if you want to be in the wildlife world, when you get stuck in an attic and all of a sudden you get the raccoon, you put your flashlight up and the raccoon stands up like this. You determine how much you really want to be in the business. Really, really quickly. Really, really quickly. All right. So we’ve made it through the easy questions.
Nick Bartolo:
Oh gosh, those were the easy ones. All right.
Seth Garber:
Are you ready?
Nick Bartolo:
Of course.
Seth Garber:
All right, so let’s give you some stuff that’s up your alley. Let’s do some stuff up your alley. All right, so question number one. I have a company and all of a sudden my company’s been successful and I’m sitting here right now and I’ve got a million dollars in cash. I only need about $70,000 a month to operate my business. What should I do with my million bucks?
Nick Bartolo:
It depends on the structure. Let’s say it’s a corporation and you don’t want to extract that money from the corporation and pay a dividend tax on that. I would recommend, and we actually do this for client partners, keep the cash in the business and we can actually invest it just within the corporate structure. So open up an account at our partner, that Charles Schwab that handles the brokerage accounts, and then just invest it consistent with what the objectives would be for that money. But really also talk through that situation with the pest control business owner to really understand, “Okay, how much of this is actually working capital? What are your liquidity needs on this? Are you going to call me six months from now and say you want to buy a building with this money?” That way we can understand the parameters in order to invest that most effectively.
Seth Garber:
That was the best wealth manager answer ever. It was like skirt around it and just come up with a story. That was good. That was a hard one to answer. All right, ready? Here’s the more difficult question.
Nick Bartolo:
Where was the story?
Seth Garber:
Yeah, what is the story? Seth just throws this random question at us. All right, here’s the tough one.
I’m broke, right? So I’m broke. My company does a couple of million bucks a year, but I got no money because I’m a wealth manager that’s not good at it. I just spend all my money, which is fine.
Nick Bartolo:
So you’re not a pest owner?
Seth Garber:
No, I’m a pest owner.
Nick Bartolo:
Oh, you’re a pest owner.
Seth Garber:
But I think I know what I’m doing.
Nick Bartolo:
Okay. So you’re managing it. All right.
Seth Garber:
So my management strategy of my own money is buy stuff. So I come to you and I say, “Listen man, I run a successful company, but I spend all my money.” What discussion do you have with that person? Hard question.
Nick Bartolo:
It is a hard one. So the pest control business, I assume, is highly profitable.
Seth Garber:
Sure.
Nick Bartolo:
So I think the conversation first becomes personally, right? I often joke, it’s like, okay, a lot of things in the wealth management industry I disagree with. But one thing I actually really agree with is understanding that person’s unique attributes that are very specific to them. So like, “Hey, sit down. Let’s talk about this. So what are you spending money on? What are your goals with money? What are you trying to accomplish? Are you fine just spending all your money knowing that you are investing some back into your pest control business? And that’s ultimately going to be your wealth creation vehicle that you’re going to sell someday and retire on? If you’re fine with that, knock yourself out. Keep spending the money.” There’s not a lot that I can do for them at that point. And guess what? That’s okay. No judgment here. If you want to spend your money, then go for it.
Seth Garber:
You know what’s interesting? So you said something in that statement that is unbelievably powerful. So we’ve met with lots of wealth managers over the years, lots of people over the years. And one of the things they always start with, which is very interesting is, they look at you and go, “So what are your goals?” They always ask that question. And I feel like that’s the easy question. I feel like the hard question is understanding the attributes about that person. And so they go, “What are your goals? How much money do you want to spend for travel? How much money do you want to do for this?” I think that’s stupid, and I’ll explain why. So the attributes of a person is a much smarter question. So the attributes of someone like me, and I’ll just use myself as an example, is that my goal is not going to go, “Oh, how much money do I have in my bank account that’s going to last me forever?” That’s not my goal.
My attributes though are I’m going to do stuff that might be considered reckless by some people. I’m going to go out to fancy dinners all the time. I’m going to go buy stupid things. I’m going to do those things. And the person who understands that about me understands that my goal is going to be completely different. And so when we start to talk about wealth management, and I’m being authentic as can be, is, it doesn’t matter how much money I have there and what my returns look like, what matters is am I going to be able to support the lifestyle that I’m having forever? That I want?
Nick Bartolo:
Yeah, absolutely.
Seth Garber:
And that’s why I think attributes is an incredibly powerful word here that I’ve actually never heard someone say before, which is really interesting.
Nick Bartolo:
The thing that bugs me though, on the reverse is, is risk. When wealth advisors say like, “Seth, sit down, please. What is your risk tolerance?” And what it is really, I look at it as a CYA, and that they want to say, “Oh, you have a high risk tolerance. Let me go put you in X, Y, Z investment.” Maybe that real estate investment that you still can’t get out of and say, “Well, we lost all your money. You can’t get that money out, but you told us you had a high risk tolerance, so it’s fine.” And so I just think it’s something that a lot of wealth advisors hide behind.
Seth Garber:
And I can tell you this, so just because we’re talking about pain points right now and my questions, we’re way off track on my questions, but-
Nick Bartolo:
Thank God.
Seth Garber:
Oh no, we’ll get back to them. We’ve got a couple more. Maybe not, but that’s okay. One of the other things that I’ve always struggled with is with wealth managers specifically, is, they’re asking me to be the expert. So they’re always asking me to be the expert. They’re always coming to me, I am using my own personal story-
Nick Bartolo:
Yeah, tell me about that. I don’t know where you’re going with this.
Seth Garber:
So let me explain it to you. So they come to me, they ask questions about, to your point, “What are your goals? Hey, what is your risk tolerance? Hey, all these different things.” Or they give my wife a survey, whatever it might be, and that’s okay. Surveys are cool. I get it. It makes sense, helps people get to know each other, but they’re asking me things that I don’t understand. And so I don’t want somebody to ask me what my risk tolerance is. What I want them to do is I want them to look at my portfolio and tell me exactly what I need to do and exactly how I need to make decisions so I can get, or what we need to do so I can get it off my plate so I can go back and be an expert at what I’m at versus trying to be an expert at what they’re good at. Does that make sense?
Nick Bartolo:
Absolutely. Alleviating that time pain point for someone like you who’s very busy or pest control business owners, you’re tied up with family, you’re tied up with your business. That’s enough on anyone’s plate to keep them well up past the midnight hours in some cases. And so being able to actually offload that responsibility to someone that has possibly more of a sophisticated point of view and can make those decisions independently after understanding your attributes, I think, is incredibly valuable.
Seth Garber:
And it’s like, if I tied it back to the pest industry, when we go through and train people in the pest industry, specifically, call it residential, commercial salespeople, to keep it really simple, is that one of the things that we really focus on is the difference between telling somebody something and asking them for something. And I think in the wealth management industry, we’re very good at asking for things and asking what people’s thoughts are versus telling them what they should do. And I think someone like you, especially after a discussion the other night, when you’re walking me through some of these tax things, you’re essentially telling me what needs to happen. You weren’t going, “Hey, what do you think about quants related to taxes?” You’re like, “Dude, this is actually what you should do.” That’s a really powerful thing, man. I think it’s a huge competitive advantage for people to think that way.
Nick Bartolo:
No, cool. That’s great. Hopefully it can be impactful to people’s lives.
Seth Garber:
So, all right, one more hard question?
Nick Bartolo:
Yeah, let’s do it.
Seth Garber:
I’m not going to do it to you, man. So I just want to tell you, man, I think this is super cool. I think our couple of minute discussion here hopefully provides a lot of value to the people that are watching us today.
Nick Bartolo:
Hopefully.
Seth Garber:
And I’m really happy to have you come in over and being a contributor to PestDaily, I think to our entire community, it’s going to provide a ton of value for years and years and years to come. And I think that some of the generational, these key people that are having kids and taking over, the decisions that they’re going to make with your firm is going to help them forever.
Nick Bartolo:
No, I appreciate the opportunity, and I also hope it’s going to add value and really demystify some of the intentional, confusing aspects of financial advisory, wealth management to really distill it down so people can make more effective decisions.
Seth Garber:
I would agree a hundred percent. So one last question. Why do we have a white tree here?
Nick Bartolo:
That’s the best question of all, actually.
Seth Garber:
I have no idea. Do you?
Nick Bartolo:
No, I think it may be some sort of a Christmas pine tree here situation. I don’t know.
Seth Garber:
I don’t know, man. I guess we can’t solve all the world’s problems today.
Nick Bartolo:
Why didn’t we think of that at the beginning?
Seth Garber:
That’s what we should have started with. Well man, we appreciate it, man. So thanks a lot for joining. Thanks for hanging out with me. See you.