Transcript

Jack: Welcome back everyone to The OZExpo Podcast. I am your host, Jack Heald inside this very echoey conference room here at the Mandalay Bay hotel. Joining me is Susan P. Rounds, who's the director of wealth planning at Deutsche Bank. Welcome to The OZExpo Podcast, Susan.

Susan: Thank you, Jack. I'm delighted to be here. This is the second expo that I've attended and they're tremendous events.

Jack: Did you go to the one L.A. Back in January? Very good. Well, we always start by finding out about who it is we're talking to. So, tell us a little bit about yourself. Who are you, where'd you come from? How'd you get here?

Susan: Great question. Sometimes hard to remember the path to getting here, but I currently work with Deutsche Bank and I work with clients on tax trust and estate planning and also other matters, charitable planning, things like that. And so to get to this point, there's been some history. For example, I'm a CPA. That's how I started. Then I missed my law license and what that could add. So, I went into private law practice, so I was doing both, financial type work, but also litigation. And all of those things. I was in the process of combining those skills and then I also got an LLM in taxation. So I think it was the combination of those things that actually led me here.

Jack: So, let's back up a little farther. We want to get into the personal as well as the professional. What were you doing? Where were you living? What school did you go to? I want to know you a little bit about you and, and already at the fact that you have not one, but two law degrees paints a picture for me.

Susan: No social skills. How about that?

Jack: Clearly not true.

Susan: I am a military brat, so that will start the conversation of where I started. I was born in Bermuda. My Dad's name was Jack and my mom's name is Diane and I was born in Bermuda and John Mellencamp wrote the song about them. He certainly did.

Jack: No, probably not.

Susan: My mom wouldn't have liked it, but anyway, so lived in Bermuda. Then we moved from there, lived in a few states for a very short period of time. Moved to Hawaii, lived there for 10 years. Then my dad retired from the military and wanted to go to law school. They didn't have a law school in Hawaii yet. So we moved to Athens, Georgia, so we could all be Bulldogs, go dogs.

Jack: Ok.

Susan: So that's that. It's interesting because in Georgia, the Atlanta/Athens area has kind of been home base now for a long time. Although I leave and come back, other family members leave and come back. Right now I'm in Santa Monica, work in Century City. So I'm on the left part of the equation. But you know, I'll, I'll go back,

Jack: There will be a go back at some point.

Susan: Yes.

Jack: And where did you take your law degrees?

Susan: I got my JD From the University of Georgia law school.

Jack: Okay.

Susan: And then I got my LLM from Emory.

Jack: Emory's also in Georgia, right?

Susan: It is.

Jack: Okay.

Susan: Yes.

Jack: Alright. So, we'll leap forward a few years and here you are now at Deutsche Bank as the director of wealth planning. We’re here to really talk about the Opportunity Zone. You intimated that your interaction with Opportunity Zone customers might be a little different than most of my guests might be. So, let's talk first of all about how you interact with customers and then we'll drill down into the Opportunity Zone stuff after that.

Susan: Absolutely. So working for Deutsche Bank in this role, I work with clients of the bank on the tax, trust and estate planning and income tax planning. Well that's tax. I've worked on those issues, but the way clients come to me is actually through the bankers. The client belongs to the banker.

The banker will either ask me to come along for an exploratory meeting and we'll discover what needs to be addressed. Or maybe there is a prospect meeting and they'll ask me to come along to help with the conversation. Or very often a banker will see a transaction coming through or something has changed for this client and they'll come and they'll ask me about it. And that's how I've realized we need to address this trust change or this income tax opportunity, something like that.

Jack: So what's the typical relationship, and I realize we're very early in the process here, -- we're less than 18 months into the Opportunity Zone program -- but what kinds of relationships are you getting your clients into? I'm assuming Deutsche Bank has Opportunity Zone programs. Is that correct?

Susan: That is a great question, Jack. Actually, we are developing three proprietary funds, but they are in the works and that that's really not something that we're talking to clients about.

Jack: Not there yet?

Susan: Right.

Jack: Okay. So, what brings you to the Opportunity Zone expo today? I know you were on a panel earlier, so tell us about that. Am I right about that? 

Susan: You're right. I was also on the panel in L.A., I'm trying to remember how I got on the panel in L.A. Good, great. I'm glad you asked that. Now I remember. So, one of the bankers in the L.A. office knew it might be Leo or it might be Nam or who's the CEO?

Jack: Ollie.

Susan: Ollie, maybe Ali. He knows Ali and said she would be a good speaker.

Jack: Gotcha.

Susan: That's how I got involved.

Jack: Okay. 

Susan: So, I was on the L.A panel.

Jack: Right.

Susan: Fantastic event. Really, when I attend a lot of events...

Jack: Do you?

Susan: I speak at a lot of different places on different topics. But this event has so much energy.

Jack: It does.

Susan: And everybody is spending all their time figuring out how to make this work.

Jack: Yeah.

Susan: And as soon as one hole gets filled, they're digging five others. And I mean that in a good way.

Jack: A positive way.

Susan: Do you know they're trying to turn over every rock? Maybe that's what I should say. I just love this group of people. They're very different.

Jack: In what way?

Susan: Well, there is so much passion around this.

Jack: I have definitely observed that. I occasionally have a guest who gets really wound up and then we'll apologize. Oh, I'm sorry. I'm so passionate about, no, absolutely not. That kind of stuff is magnetic. It's absolutely, it's fabulous to have that kind of emotion involved in these kinds of projects. So, what are your clients asking you and what are you telling them when it comes to the Opportunity Zone program?

Susan: Sure. Well, some clients just want to know what this is. “I see all these advertisements, I'm getting all these brochures from funds. What is this and how can I be part of it?” So from their perspective, they're an individual investor and they need to understand the tax saving implications but also the risk factors and also the differences between the different funds. Because they're not trying to set up their own really.

Jack: Right. 

Susan: So that's one type of client. Another type of client would be a single-family office that is very interested in beginning their own program and they would be a fund. They're going to self-certify as their own fund. And so the conversations with them are going to get much more technical because they have to be able to navigate the regulations. Thankfully we now have a lot more certainty than we did prior to this second set being released in April.
Jack: Yeah.

Susan: So I would work with usually the family office personnel to talk about regulations and what they mean, because you can even see when you l watch the panelists discuss, nobody is certain about everything. There’s so much, “Does this mean this or did this mean that?”

Jack: We know that you've got 180 days from the time you take a capital gain. However, that's measured, we know that there's a December 31, 2019 deadline and we know there's a December 31, 2020 deadline. And I think we know there's a December 31st, 2026

Susan: 26, yeah.

Jack: That's four things that we’re relatively sure about. Beyond that, it's kind of just variables isn't it?

Susan: It kind of is. The benefit of talking to somebody who is in the tax world is that they can draw on experience with other tax codes, other tax regulations, I should say.

Jack: Yeah.

Susan: Others tax statutes and regulations that have kind of grown up themselves. And you can kind of look and say things like, okay, well what would be safe as far as deploying capital.

Jack: Right.

Susan: If you've got too much working capital and then you can refer back to, well, they have that role when you talk about excess accumulated earnings. So there's so many things that you can relate to if you've got some history or some knowledge in other areas that will clarify the questions.

Jack: It sounds like you're operating primarily in a consultative role.

Susan: That's correct.

Jack: Is the bulk of your consultation more on the tax side or more on the investment side or  you sound like you might be a true generalist?

Susan: Well, I do try to be a generalist. I do want to say I hold some licenses, some financial, I can't even think what they're called, FINRA, FINRA licenses, but I don't actually advise clients on that you should invest in this or you should invest in that.

Jack: Right.

Susan: However, because I do have an understanding of the different types of investments when I do the overall estate planning, I can see where some things will align with the ultimate goals and objectives of my client and the client's family and often the client’s business, whereas other things might not.

Jack: Sure.

Susan: So, it's helpful but I don't directly advise.

Jack: Okay.

Susan: But you kind of opened a door because talking about everything I do, there is the tax side of it. But also we were talking about liking people and all of that. There's the fun side of it and that's where you get into.

Jack: Are you implying the tech side is not fun? Is that what you're trying to tell me?

Susan: Let me say this. It's a tortured kind of fun. There is some satisfaction, but anyway.

Jack: It feels so good, once it quits hurting. I understand.

Susan: Yes. When you're up at 2 a.m. thinking, do I understand this regulation? Can I talk about this tomorrow? Probably not. So anyway.

Jack: That's the bad news. But the good news is nobody will know that you don't know because nobody else understands it either. So…

Susan: I love that. So the other part of my work involves working on family dynamics, inter-generational wealth transfer, family legacy, all of that really cool stuff.

Jack: Now I'm really interested.

Susan: So that's part of an estate plan because you just don't walk in and say, Hey, I want to save taxes on my estate plan. You want to give it to somebody; you want your assets to be used for the highest and best purpose that you envisioned. You personally. And that may be your kids, that may be the community, it may be a charity. You may have a business that you want it to get more of your hard earned dollars. Every single estate plan is individual.

Jack: There's a very personal, interpersonal element here to what you're doing, isn't there?

Susan: Absolutely.

Jack: I'm guessing every single client is a completely different experience.

Susan: Absolutely.

Jack: This is why I love these kinds of conversations. What interpersonal strengths do you bring to this work that you do, that make you particularly good at it? And I may be asking you to brag a little bit, but I don't think you'll take it that way. You've obviously got some innate or developed abilities that allow you to excel. What are those?

Susan: Well, honestly I'd say the number one thing is the same thing you said when we were first talking: listening. I really attribute listening to the time when I was a litigator because if you are asking someone questions on the witness stand and you're looking down to see what the next question is, you are going to miss so much. And I have won cases based on catching one thing that a person says and just drilling in and all of a sudden the whole thing blows up.

Jack: Because you were able to listen.

Susan: Yes. And so I've learned to do that.

Jack: How did you learn to do that? How did you learn to listen? What drove that?

Susan: Well, I think really it was watching other people who were working with a client or on a situation and seeing what they were missing because they're focused on something else. Like their next question. But that's true all the time in conversation.

Jack: I was going to say that's just so common. So, I guess I'm going to go back now because it fits. Let's talk about some of the objections that you hear when you bring up Opportunity Zone investing.

Susan: Okay. So, when the topic was first being discussed, one of the objections was why would I put my capital somewhere where I have to wait 10 years?

Jack: I'll bet.

Susan: Yeah, that was a big one. Because when you're working, particularly with real estate developers, they kind of think of themselves as movers and shakers and they really are.

Jack: Right.

Susan: They're creating the communities we live in every day. So they have an impact on all of us. And because they're able to look at the landscape of opportunity and figure out where they are, they're used to constantly scanning. And if they put all their capital in one place, they're going to feel like they can't move somewhere else. When they're doing their scan.

Jack: Of course.

Susan: You know, they're trapped. So that was a big one. Another big one was just about the logistics of it and not being able to easily understand the program as a whole or the benefit as a whole.

Even down to the very first benefit, which is the deferral of tax on an original sale. So you've got one asset that you sell for a capital gain. You invested in a Qualified Opportunity Fund after five years. When you make that investment of the gain from the first sale into the fund, you have a zero basis after five years, if you do it timely, you’ve got to do with the 180 days.

Jack: If you do it in time, right.

Susan: After five years you get the little bump up to fifth, 10%

Jack: 10%.

Susan: And after seven you get the bump up to another five. So you're at 15 so you've got that piece of it. Then you've got the whole 10-year permanent exclusion part. But it's very hard for someone to immediately understand there is a distinction between the two gains. So it was just so confusing. And I think at first that people were just throwing up their hands. “What are you talking about? I thought you're saying I'm going to get a 15% break, but they're saying I'm going to get a complete exclusion. You're wrong.” So it just because there's some complications in there that are not immediately obvious and just kind of muddy up the plan someone might want to proceed with.

Jack: So, let's talk about tying up your capital gains for 10 years. What kinds of solutions are making sense to people?

Susan: As far as tying up the capital?

Jack: Yea, somebody who's got the objection of, “Hey yeah, I, can't stick this in a fund for 10 years.” So, what kind of solutions are coming? 

Susan: Well, I mean, one thing, just looking at it very simply, the question would be, you can't stick this in a fund for 10 years. Why? What's better? What's the opportunity cost? What are you looking at? And then you can just do a dollar-for-dollar comparison and say, “Okay, you pay the tax, you go over here. You have more profit potential.”

Jack: I want, I want to stop you right here. This is probably the 45th interview I've done in the last 45 days. You are literally the first person who has said opportunity cost, which, it just strikes me as kind of odd that with all these people, you're the first one to bring up the opportunity cost of not doing it.

Susan: Well, opportunity cost and Opportunity Zone, you know, I just kind trips off your tongue. That's one. And then the other is really, instead of investing in a single-asset fund where you've got one asset that is in one place, invest in it in a multi-asset fund that's going to have on different properties and then it will roll up into a holding entity.

Jack: And that's where the multistrada multilayered structures come into play.

Susan: Correct.

Jack: Okay. Very good. Alright, so you intimated at before I started recording here that in Susan P. Rounds is, that the P is important and I'm a huge believer that names are very important. So, when you, when you made that comment, I made a note that I'm going to ask you that question. Tell me about the P. in Susan P. Rounds.

Susan: Okay. So, I was named Susan Patricia obviously never liked the name Patricia. I didn't understand why that was my name. It made no sense to me. I didn't feel like a Patricia. Then I found out my father Jack, his confirmation name was Patrick. That's how I got Patricia. And then when my first daughter was born, I gave her that middle name. So now we have a Shannon Patricia, and Shannon had the first boy in the family in two generations and she named her son Patrick.

Jack: By the way, I wanted to ask you, UHNW stands for?

Susan: Ultra High Net Worth.

Jack: I assumed as much. Alright. So, when you're not being a mom or grandma and advising clients, then maybe there's no time for anything else. But what do you like to do for relaxation? How do you unwind?

Susan: Well, before I talk about that, I do need to talk about another professional endeavor that I have that's near and dear to my heart. I'm on the board for the National Association of Estate Planners and Councils.

Jack: Okay.

Susan: It's a nationwide wide organization. We have, attorneys, CPAs, financial advisors, insurance consultants, trust officers. Also CFAs as members all across the nation. There's local estate planning councils. They, if they want, they can join the national. And that's when I'm part of, so I spend a lot of my time working with NAEPC on different things. That's what the acronym is. I know it doesn't quite…

Jack: National Association of Professional Estate…

Susan: National Association of Estate Planners.

Jack: Planners.

Susan: And councils.

Jack: Councils.

Susan: Because we're talking about the councils. Part of what would I do is I edit a journal for NAEPC. So, I put a lot of professional reading materials. That takes a lot of my time as well. I also do a lot of speaking at local estate planning councils, so I did want to get that in there that I spend a lot of time on that.

Jack: Okay. Time for my favorite question. You get to be queen of the world for the day. But it's only one day and your powers are devoted to solving one problem, one problem and one problem only. What's that problem that you are going to focus your supreme power on for that one day?

Susan: Wow. Well I would like every single person to realize the power they have within themselves.

Jack: Okay. That begs for a follow-up question and that almost probably begs for a follow-up interview. Expand on that answer please.

Susan: Well, there's this saying.

Jack: There's a story behind that answer I know there is.

Susan: Well and then there's the saying or quote, I can't remember who said it, but it’s circumstances don't create the man, they reveal him. And I think that's absolutely true in that I don't think people realize that they are actually actively creating their own lives every single day and they have complete power over that creation.

Jack: Yeah, there's a whole lot more to that. I know there is, we're running out of time.

Susan: Yeah.

Jack: I may have to figure out another way to have that conversation. Well, Susan, it has been really tasty but not satisfying because I want it to go on longer. We're going to have to end it because I've got another interview starting here in just a few minutes, but it's been a pleasure to meet you. A pleasure to get to know you a little bit. Do you have any last words for us before we sign off?

Susan: I just want to say thank you to this organization for being on the leading edge and having these events where people can toss around ideas, figure out where the holes are and I'm sure a lot of what happens here is what ends up in the commentary that goes to the IRS when they're asking for guidance on how we're going to create this platform.

Jack: Yeah.

Susan: So, it's thanks to this organization because you're different than any other one I've worked with.

Jack: Well thank you. On behalf of all of us, thank you for that. So, if folks want to or need to get a hold of you, what's the best way to do that?

Susan: Email is susan.rounds@db.com and the easiest number to reach me at is (310) 788-6152

Jack: Very good. And for our listeners, that information will also be available in printed form on our podcast website. Well Susan, I thank you for being with us. On behalf of Susan Rounds, I am Jack Heald for The OZExpo Podcast. Thanks for joining us. Thanks for listening. Be sure to subscribe and we will talk to you next time.

Announcer: This podcast is for informational purposes only and does not constitute legal tax or investment advice. For specific recommendations, please consult with your financial, legal, or tax professional.

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