He Built A $100 Billion Firm To Provide Asset Planning And Other End-To-End Services To Ultra-High-Net-Worth Families

Imagine a startup that doesn’t fit the usual mold—one that manages over $100B in assets with a team of nearly 600 employees. This is the incredible story of Matthew Fleissig and Pathstone, a company that has experienced tremendous growth and continues to innovate in the world of finance.

Join us as we delve into Matthew’s journey, from his North Jersey roots to co-founding a trailblazing financial advisory firm.

Listen to the full podcast episode and review the transcript here.

Early Life: North Jersey Beginnings

Matthew Fleissig’s story begins in North Jersey, a place he fondly remembers. Life was good, filled with tennis and a keen interest in computers.

With a father who was a dedicated real estate lawyer and a mother who worked as an occupational therapist, Matthew grew up with strong role models and a solid work ethic.

“I always aspired to be like my dad,” he recalls. “He genuinely loved the law, and that passion for his work was something I admired and wanted to emulate in my own career.”

Tennis played a significant role in Matthew’s upbringing. Competing at Livingston, a top 20 tennis team in the state, he developed a competitive spirit that would later serve him well professionally.

“Playing tennis, especially in a competitive environment, gave me an edge. It was a fun and integral part of growing up.”

It was the early days of the Internet and eBay, and Matthew enjoyed exploring new and interesting ways to make money.

Finding His Path: From Computers to Finance

While computers fascinated Matthew, the world of finance eventually captivated him, which he chose above other career paths, including law.

During college in the late 90s, he wrote software to auto-confirm IPO trading amidst the IPO boom. This experience, though it impacted his academic performance, provided invaluable lessons.

“My entrance into finance was marked by significant gains and losses in the stock market. I learned crucial lessons about investing and financial management during that time,” as Matthew remembers. He had fun with the money he made but also invested in volatile stocks like Cisco and Lucent.

After college, Matthew faced a crossroads. It was in the early 2000s after the bubble burst, and there weren’t a lot of jobs available. He could pursue a computer science job or take a leap into the unknown with a finance position at Lord Abbott in New York City.

Choosing the latter, Matthew stepped out of his comfort zone and into a rigorous training program that honed his presentation and storytelling skills.

“Calling brokers across the country and getting hung up on repeatedly was a humbling experience. But it built confidence and opened the door to a career in finance,” Matthew reveals.

The Goldman Sachs Experience

A pivotal moment in Matthew’s career came with his tenure at Goldman Sachs, particularly in the AYCO division. He gained exposure to the world of family offices, taxes, accounting, and investments, working with Fortune 500 CEOs and Goldman Sachs partners.

They had the AYCO University, where they would send employees to learn about estate planning. The comprehensive training and holistic business approach from straight investment to the wholesaling and investment side were transformative.

“This experience rounded out my skill set, preparing me for the multifaceted world of financial advisory,” Matthew recalls. In the early 2000s, not many firms offered this full suite of services beyond direct investments.

The culture also had a lasting impression on Matthew. He was impressed by just how much training was done to grow their people in-house and make them smarter and better advisors to be able to work with more and more clients.

The Birth of Pathstone

Matthew’s journey took a significant turn when he met Steve Braverman, a visionary entrepreneur whose family had invented the powder-free latex glove. Their chance meeting at a barbecue at Catskills led to the founding of Pathstone in 2010, following the financial crisis of 2008.

Steve had a vision of investment services for families and was looking for a solution. He had the investments covered, being a financial engineer and running his family’s single-family office for years. Steve’s family had sold their rubber glove business for safe skin to Kimberly Clark in 1998 for $1.4B.

Steve’s idea was to find a firm to provide services like taxes, accounting, bill payments, etc., for ultra-high-net-worth families.

He needed someone with expertise in asset planning, and Matthew also fit the bill because of his software capabilities. Initially, the firm managed assets worth $1.4B for 19 prominent American families.

“We started with seven shareholders and built the business from the ground up. It was an exhilarating time, and we effectively tripled our assets in four years,” says Matthew.

Pathstone’s growth trajectory continued, driven by a unique business model that offered unbundled services and investments. Unlike traditional banks and broker-dealers, Pathstone charged clients separately for the services they consumed, fostering transparency and efficiency.

Matthew remembers writing their own optimizers and rebalancers since there was no technology to handle them. They also designed their own reporting systems. Matthew enjoyed leveraging his computer science and programming skills for estate planning and taxes.

Scaling New Heights

By 2015, Pathstone had grown to $4B in assets with 50 families. Realizing the need for scaling and additional capabilities, Matthew and his team took on outside capital. They acquired their first firm in Boston in 2014 with the assistance of two investment bankers.

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Taking on convertible debt marked the beginning of Pathstone’s journey into mergers and acquisitions (M&A), a strategy that propelled the firm to new heights. After the first Boston firm, Matthew and Steve took on another $4B firm in 2015.

Pathstone scaled quickly to become a $8B firm and opened new offices in Los Angeles and DC. It continued to expand organically from $10B to $16B over the next few years, 2015 to 2019, essentially quadrupling its assets.

Matthew and Steve realized they were no longer a club for a select group of families but a blue ocean opportunity for a completely underserved customer base in the ultra-high-net-worth market.

Pathstone’s innovative approach and commitment to client service set it apart. Unlike the traditional world of banks and broker-dealers, it was a completely unbundled business around services and investments.

The firm never said no to clients’ requests, whether it involved arranging a plane on short notice or conducting mock trials to prepare clients for legal battles.

Steve and Matthew would do anything from the investment side to reporting to the admin. They would buy planes, hire pilots, do background checks on the dog walker, manage payroll for the household staff, and collect mail from five homes.

Pathstone charges separately for the services customers consume instead of charging them a percentage of their assets.

Managing Post-Acquisition Integration Challenges

Considering that 99% of acquisitions fail because of integration challenges, the question arises: How can we acquire service-based businesses where it’s all about people? How does Pathstone make sure that people stay on for the long haul?

As Matthew explains, the big differentiating factor is that they fully integrate. They developed this strategy when they acquired the Boston firm.

Families need people to interact with in a world of chatbots and AI. The firm focuses on providing consultative support and services to clients that serve their needs rather than selling products.

Pathstone has a robust equity program. In the traditional private equity world, people don’t view VCs favorably. Instead, Pathstone tries to equitize the next generations of Pathstone advisors.

Of the nearly 600 people they have working at Pathstone, almost 50% are shareholders. The company has had three rounds of private equity come through, and every four to six years, it will have a transaction. Shareholders have a great incentive to support the growth of the firm.

They also build net worth with a lot of these incentive unit programs that Pathstone creates with the private equity firms as part of the transaction. Every four to six years, folks have mini-transactions that they never would have had if Pathstone had not been an outside provider.

The shareholders know that the company will keep stair-stepping up to larger private equity firms every four to six years in the foreseeable future.

Pathstone’s Objectives Behind M&A Deals

Matthew explains that Pathstone engages in horizontal and vertical deals, and execution is about culture.

They have executed 14 deals in 12 years, and until around two years ago, when they acquired a trust company and a direct indexing firm, Matthew and Steve mainly focused on acquiring other RIAs that fit their culture and people.

They have been engaging in social activities and dinners with potential acquisitions and trusting their guts before finalizing the deals. That’s how they have successfully built a strong team and a large equity base.

Matthew and Steve also realized that Pathstone is a multi-generational firm for multi-generational clients, and they were missing things. Each time they made a referral out to a law firm, accounting firm, aircraft firm, or travel firm, they were effectively taking a risk with their relationships with their clients.

By outsourcing, Pathstone couldn’t control the experience any longer. Thus, its M&As have been more about insourcing. Since it was a multi-generational firm, Matthew and Steve saw that there was a gap in the business.

They also needed tech and automation to manage portfolios on an after-tax basis in an incredibly efficient manner.

With this objective in mind, the duo acquired a trust company and merged with a firm in Walnut Creek. This firm had AI automation portfolio implementation technology that managed portfolios that were compliant with tax laws.

Pathstone also integrates aspects like property management and insurance. Matthew and Steve are looking potentially to acquire a law firm and bring that in-house. That’s how they will perfect the client experience and not take on that risk whenever they use an outside party to provide services.

Matthew explains that when clients call them for issues not involving investment or tax, they know that Pathstone has become a part of their family.

They are available 24/7 and have handled situations like emergency flights arranged within 90 minutes, delivering goats and gold, and purchasing engagement rings.

The Future: A National Brand in the Making

Today, Pathstone is a $100B firm with nearly 600 employees and over 1000 clients, including 700 families, each with an average net worth exceeding $100M.

The firm’s unique structure, including a non-depository trust company and proprietary technology platform called Arrow, positions it for continued growth.

This strategy allows Pathstone to operate with unique flexibility. It can administer and be the trustee and not actually control the assets while providing a broad portfolio of services to client families.

Matthew explains that they have spent almost seven years building ARROW, which has accounting, reporting, rebalancing, optimization, and workflow, leveraging data as the new oil for the system.

They have a centralized data warehouse with a front end on top that connects to investment custodians. ARROW also connects to accounting and all the users work through the platform at Pathstone.

The US has around 230,000 families, but Pathstone still has a low market share. “We see a vast, underserved market for ultra-high-net-worth families. Our goal is to become the national brand in fiduciary services, disrupting the traditional bank and broker-dealer models,” says Matthew.

Having already passed a decade and 100 times bigger than when it started out, Matthew sees the firm managing more than $1T worth of assets, similar to some of the top firms in the country.

Conclusion

Matthew Fleissig’s journey from North Jersey to leading Pathstone is a testament to the power of passion, perseverance, and innovation. As he looks to the future, the possibilities are endless, with Pathstone poised to redefine the landscape of financial advisory services for generations to come.

“I wish we had started Pathstone sooner, but there are no regrets. Building this firm has been the most exciting and fulfilling experience, and we’re just getting started.”

Listen to the full podcast transcript to know more, including:

• Matthew Fleissig’s early passion for computers and entrepreneurial ventures set the foundation for his future success in finance and tech-driven solutions.
• His experience in competitive tennis fostered a resilience and drive that he carried into his professional life, particularly in the challenging finance industry.
• College was a crucial period where Fleissig engaged in IPO trading and software development, sparking his deep interest in finance.
• Fleissig’s journey included diverse financial roles, from wholesaling mutual funds to comprehensive training at Goldman Sachs, which rounded out his expertise.
• Pathstone was born from a vision to provide a full suite of financial services to ultra-high-net-worth families, driven by Fleissig’s diverse skill set and experience.
• The firm’s unique model of offering unbundled, personalized services and solving clients’ diverse needs has been key to its rapid growth.
• With a current $100B in assets under advisement, Pathstone aims to become a national brand, addressing the underserved ultra-high-net-worth market with innovative, technology-driven solutions.

 

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