Mike Germain: Sudden Wealth Management, Risk, & Kizomba

Mike Germain is the CFO of True Capital Management, an innovative wealth management firm and leading advisor for ‘sudden wealth’ clients, like athletes, entertainers, entrepreneurs, lottery winners and inheritors. Mike also holds an MBA, and CFA, CPA, MAcc certifications. We met with him to discuss his perspectives on risk-taking, crisis management, developing strong & nimble finance teams, and — the surprising hobby he’d focus on full-time, if he weren’t working in finance (bet you won’t guess this one!)

Check out our conversation for some fascinating finance insights & leadership lessons from Mike…

Let’s start with a little about you...

I was born in a small town called Petit-Goave, Haiti, but grew up partially in Paterson, NJ and Orlando, Florida. After college and getting my MBA from FSU, I got my first finance job as a commercial banker from SunTrust where I spent about a year, and then went back to school for a second Masters in Accounting in order to get enough credit hours to sit for the CPA exam.

I passed the CPA exam in grad school, and then went to work for EY in Atlanta to meet the required work experience to be licensed, but I ended up staying about 6 years. I left EY for a VP Finance & Chief Accounting Officer position at Canyon Bridge, then moved on to my current CFO role at True Capital.

Can you tell us more about True Capital?

True Capital is a fast growing mid-size asset management firm with $1.2B in Asset Under Management (AUM), and about 40 employees. The business has multiple service lines, including a traditional wealth management and concierge (family office) services. In addition, the firm offers an alternative investment management platform.

The focus of the firm is to serve clients that find themselves suddenly wealthy. True has mastered the area of ‘sudden wealth management’ which is different from traditional wealth management services, as sudden wealth clients usually have very little time to create their wealth, but need to stretch it over a long period of time (e.g., the rest of their lives). The emphasis is strongly placed on wealth preservation, and money management. In addition to investment management, the firm spends a lot of time coaching clients on budgeting and overall financial management.

That’s a fascinating niche: sudden wealth management. What are the most challenging & rewarding aspects of your CFO role at True Capital?

The most challenging aspect is risk management. This is a growth-oriented firm where we strive to be optimistic and forward thinking while at the same time ensure that we manage short term risks. Businesses can fail for two reasons:

1. It is a bad business model, bad product or bad idea; or

2. It’s a great idea that’s poorly financed.

Poorly financed can mean lack of financial resources or bad financial management - where the timing of cash inflows and outflows aren’t properly matched and handled. It might also mean bad planning and budgeting practices, or where the firm doesn’t properly pace itself and isn’t strategic with its financial decisions.

Typically, in a firm, the CEO will lay out the vision of where he or she would like to take the firm. My role as CFO is to map out the financial strategy to attain that vision. I get such a surge in dopamine and serotonin when I lay out a plan that I feel confident about and see it come to fruition.

It seems like risk management has been a theme throughout your career. Did that prepare you at all for the crisis that we're going through right now?

Having some kind of a risk management mindset certainly helps you to manage in a crisis. But in general, while I think this crisis is a challenge, it does provide some opportunities. It’s a challenge in terms of the level of uncertainty and as to any lasting impact that this could have once a cure is found. And then it's also a challenge when it comes to thinking about the psychological impact on people that we work with, having to work in the same place with minimal changes in scenery. Or in terms of places they can go after work. Obviously we have uncertainties in the business environment as far as it's unfavorable for businesses, and we don't really know when a cure's going to be found anyway.

But on the other hand, there’s the advent of new technologies like Zoom. We're all asking how much we really need the office for certain types of jobs.

If you're a commercial real estate company, this could be a bit challenging for you in the short run in terms of having all these excess spaces. But it does provide some opportunities for businesses to assess how much efficiency that could be gained with regard to office spaces, whether we could rent less space and have people working remotely. And a lot of people seem to be happier working remote.

We're seeing that already; a lot of companies are letting their employees stay remote, renegotiating their leases to have less office space or no office space. From a finance perspective, that must seem like a great solution to free up more capital to do other more impactful things, right?

Yes, I would say that. Normally labor cost is the most expensive line item. But rent is also significant. And then there's utilities for the people working there. So by having a smaller office space you cut down on a lot of those costs.

Maybe we can go to a world where people are going into an office two or three days a week. We’ve seen that people have adjusted — maybe they’ve got a new desk and created a home office. So it's just going to give people more options in the future. And senior executives are getting more comfortable with things getting done when people are working remotely. So I think we can't forget that. We're not just going to go back overnight.

Is there anything that has fundamentally changed in your view of finance or your view of the world from this crisis experience?

From a finance point of view, obviously we were blindsided by this. That's why I’m always thinking about risk management. You always have to hedge your risk, and you always have to think about the outside risk. Because things happen in life. I'm an optimistic person, but a calculated risk-taker. I don't mind taking risks, if it makes sense, but with a good hedge behind it.

So when crises like this happen, I'm not completely caught flat footed, because I'm a hedger. But in terms of my view of the world, in a global sense, when people think about security of the world, we used to think how it was all about the military, how strong our military is. And now, you have to think that the strength of our healthcare is as important as the strength of our military in terms of protecting the people.

We lost 2,800 people in 9/11. About 2,500 Americans died in Pearl Harbor. And you think about Vietnam, that was 58,000. And here with coronavirus, we've lost - at the last count I saw - 94,000 people, and still counting.

I guess people didn't think of a pandemic as something that is important to be ready for, from a national security standpoint. But it's had, so far, one of the biggest impacts in terms of lives. That’s kind of shaped my thinking in terms of what is ‘safe’.

Let’s talk about the “modern” CFO — how do you think the role is evolving?

Traditionally, CFOs had a role as steward of company assets and financial risk management, which is still crucial and serves as the base of what they do. But firms are continually relying on them to keep up with the latest technology, hire the best talent and have access to information to provide guidance on how to achieve efficiency and make the best decision on what services to outsource or keep in house.

In my industry, CFOs are involved in structuring deals, working with tax accountants and attorneys on the best structures for investments and investment vehicles, especially for overseas investments. Should a fund be domesticated in Cayman or somewhere else, for example? It is also good to be aware of different tax regimes in different countries and cash repatriation issues. Some countries have limitations and restrictions on getting money out.

And what are the biggest trends shaping the future of finance, in your opinion?

FinTech. We are in an era where the world is trying to figure out the best way to combine finance and technology for best results. There are talks about using blockchain technology to streamline certain financial practices, like eliminating copious paperwork in lending and borrowing. There is a lot of research on the best way to use artificial intelligence to make and optimize certain financial decisions.

What are your favorite finance tools?

Addepar is a great data accumulation and analysis tool that’s used quite efficiently and effectively in our space. It connects with other software, external vendors or systems to extract data to produce comprehensive reports. We use it for various analytical reports to better observe informational trends and support optimal decision making in our business.

I think all finance teams should have great systems in place to quickly and efficiently turn data into information that can be used for decision making. Systems need to be talking together, and firms should have proper controls in place to identify and rectify deficiencies. Information needs to be timely, reliable and complete.

Is there ever a ‘right time’ for a company to hire a CFO?

I don’t think so. CEOs or entrepreneurs are usually people with dreams and visions who tend to be very passionate about their ideas. I think it’s good to have someone in the room who thinks from a calculated risk point of view. I think it’s a good balance. If a firm can’t afford a CFO at the very early stage, it’s not a bad idea to partner with someone who thinks that way.

What’s the most important lesson you’ve learned as a CFO?

You’re as strong as your team. You must focus on developing your team, share as much information as possible to help them do the best job. If your team struggles, you’ll have to spend a lot of time fixing their work, which will rob you of the time you need to ensure the firm has the best strategic guidance. The chain is as strong as its weakest link.

What’s the best advice you’ve gotten in your career?

Never be afraid to fail. At the very least, you will learn something. You tend to learn the most when you fail.

Do you have a favorite book or resources you recommend finance leaders check out?

This is an old one, but it is still one of my favorite books: 7 Habits of Highly Effective People.

Ok, now for a fun question: what do you do in your free time, or what would you be doing if you didn’t work in finance?

I like to be very active, which includes practicing karate, running and recently playing soccer (which I used to do as a kid). I also play tennis, basketball, and love to swim. In addition, I have a bit of an artistic side, which includes playing the piano and ballroom dancing. If I wasn’t working as a CFO, I’d be a full-time ballroom dancer.

I also love this dance called kizomba. Not Zumba. Zumba's a workout. Kizomba is very different. It is a partner dance that came from Angola, Africa. It's a lot of fun. I can dance for hours, sometimes four or five hours…

Wow, so if you have a huge windfall of ‘sudden wealth’ — you're going to retire and just go dance around the world?

Yeah! It's so much fun. And you also get some exercise out of it.

Thanks so much for taking the time to share your story & perspective with us, Mike. It’s great to have you in the CFO Connect community.

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