Alan Harter is the founder and CEO of Pactolus, a platform dedicated to knowledge-sharing and bespoke solutions tailored for discerning entrepreneurs and their high-net-worth families. Founded in 2011, Pactolus is dedicated to empowering families to effectively manage their wealth and shape enduring legacies. Alan is committed to philanthropy and supporting causes such as child welfare, education, literacy, job training, food security, and environmental preservation.
Alan sat down with New York business litigation partner Gabe Berg to discuss the unique approach of Pactolus, the evolving trends in the wealth management industry, and the importance of maintaining strong client relationships. Learn more when he joins Robins Kaplan as one of the keynote speakers at our 2024 Annual CLE event, “Roots, Branches, and Wings: Risks and Rewards of Generational Wealth” on November 14.
GB: How would you describe your business to people who are not in the wealth management industry?
AH: Pactolus as a firm is very different than most multifamily offices. Insomuch as the way we originally organized in January 2011—and continue to be organized—is, we are truly a firm built by families for families. What I mean by that specifically, is you have family shareholders in the Pactolus business, side by side with us. We are in virtually every investment together with the families.
The investment sourcing is largely from either direct business industries that we and the families have knowledge of, or relationships in, or with trusted partners. About 97% of every dollar that we’ve invested over the last 13-14 years has come that way, so we rarely raise third-party money. We are unique in that way.
When we started in 2011 there were few, if any, truly collaborative, multifamily office models like this, where the clients had a seat at the table in the business as partners. Our families can decide who joins Pactolus because any referrals or relationships that come into Pactolus go through an advisory committee, including the clients, the family members, and they’re interviewed by these clients to see if they are a good fit. Again, this is the uniqueness of our model.
GB: What is one of your proudest professional moments?
AH: Probably the early days--and then Covid took the momentum out of this. We used to have some amazing gatherings of the family members and the Pactolus team that were typically hosted at a family home. When it first started, the event rotated, beginning locally in 2011 in Leesburg, Virginia, and then expanding to many locations, including Sea Island, London and New York.
Some of the proudest professional moments we’ve had have been around those gatherings. I was very proud of my team and all the work they did to coordinate and, bring it all together including the incredible environment that was created. The energy in the room was electric. In many cases, the family members themselves were the ones identifying the topics and speaking.
It made for a great professional success, and also made me proud of bringing everybody together and the environment it created— independent of the investments.
GB: What is a common misconception about your job or industry?
AH: I think part of the misconceptions that you see from the industry involve the issue of conflict of interest. Is the advisor acting in your best interest? And there's a lot of debate around the fiduciary standard. But really, what is the incentive? How is the investor aligned with the advisor? How is the advisor compensated? Being able to articulate that clearly helps to avoid conflicts of interest. I think what we’ve done is overcompensate for our alignment to avoid conflicts because our economics are so directly tied to our families’ success. I have not really seen it in other advisors to this degree.
GB: What are some emerging trends, including technological ones, in your industry that interest you?
AH: We’ve seen a large-scale movement towards independent advice. While families need the large financial institutions and large banks for their presence and longevity, we also see families migrating to much more boutique settings where the families, especially larger ones, back the boutiques, and the advisors curate their advice to the families.
The larger institutions have investment bankers, trust officers, etcetera, and each tries to bring a cohesive experience together. But oftentimes you have silos in large organizations, and everybody has their own deliverables and metrics. So, it's very different.
We also have seen huge changes in technology. Certainly, the most important thing with technology is efficiency. While it does not drive investment advice, it does make managing capital markets much easier.
We are seeing much more robust required financial reporting. The need for technology to be able to track multiple asset classes in multiple jurisdictions is starting to come about. You have to think about what you are doing to stay two or three steps ahead of the regulatory needs and requirements, and a lot of it’s around disclosure. But that also can hamstring some creativity, as it relates to the type of investments that you're able to bring to the field, or how they’re structured or conflict.
I don’t see AI taking over the management of a family office. It'll supplement and be another resource. The reality is, with most families, you’re not going to replace the value placed on relationships, and you'll never get that from technology. The value of true trusted partners will be the currency that persists.
GB: We have known each other a long time…
AH: Yeah, sorry about that…
GB: [laughs]. We have had many meals together in New York City. What is your favorite NYC restaurant?
AH: The first time we ate at L’Artusi. That was so good.
GB: It was, and so much fun. And boy, did we eat.
AH: Yeah, we ate like it was our last meal.
GB: Well, now we have just given away the secret, L’Artusi in the West Village. So, I hope everyone takes advantage of it. Well, hey, I appreciate all of this. I will see you in Minneapolis on November 14.
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