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Need Financial Advice? Nice To Meet You!
David, we\’re going to talk about something we haven\’t talked about yet on the show. The 4% rule is the main subject of conversation, at least for one of our segments. What is it and what do you mean?
It\’s one of those shows that we haven\’t done in the past that I feel compelled to do it. We\’re going to talk a little bit about the 4% rule. We\’re going to talk about Social Security, proper asset allocation, and your retirement savings. We\’re going to talk at it from a perspective of the misinformation that\’s out there. It\’s one of the reasons why we do this show and why we have this practice that we do call Thrive Financial Services. Advocacy, education and really trying to empower the people that we serve to understand how to make an informed decision.
I was a little agitated because I read a bunch of articles that were out and one article tells you this and another article tells you that one on the same topic. I love listening to CNBC or Bloomberg and the weeks preceding the little market correction we had, how wonderful things were, how great things were and how awesome things we\’re going to be. Then as soon as we see a little blip out there, the pundits were trying to change their tune. That\’s aggravating and it confuses the consumer out there to the point that they throw their hands up and go, “What do I do?” I hope that this show will shed some light on all of this.
I remember coming away from our show where we had an extended amount of time to dive down into the nuts and bolts of what a workshop is like and what our audience can expect should they come to one of the complimentary workshops. I remember going away that night with that very thought that you started the show now. There’s so much information and as we consume it and as we absorb it, it\’s very difficult for us to understand what\’s real and what\’s not.
The feedback that we get is that our show isn\’t routine. It\’s not your typical financial advisory show. It\’s not like an infomercial where people are trying to promote. We\’re trying to get a message out there. Whether it ultimately ends up with our firm or not, we want Boomers and retirees, at this stage of their life, to be able to make the decisions related to their future based on all the facts. Not just one side of the story or not just an agenda side of the story but have all the facts. If you\’re not going to seek out the use of a financial advisor who\’s going to implement it or you\’re going to self-manage or you want to get a second opinion on the advisory person that you\’re going to work with, get the whole story, jot down the notes, hit the bullet points and then start a conversation.
Karen, you\’re going to join us and get into Social Security. I\’ll give you the opportunity to at least set the table for our audience so they know what\’s coming from you.
With your comments when you said you were almost overwhelmed to the point of confusion and that sometimes leads people to stick their head in the sand and do nothing. I\’m going to touch a little bit more on Social Security, which we did talk about previously geared more towards the survivor benefit portion of it.
Bret Elam will be along as well and somehow, I imagine that he will at least scratch the surface of taxes. With Bret, it always comes up and this being the real opportune time of the year where those conversations are more than just conversations. What\’s being said there is real because it\’s that time of the year.
We\’re going to focus on some of the misinformation. I think Bret touched a little bit on taxes, but he\’s going to talk about asset allocation and the proper allocation of investments to make sure that we get our money lasting throughout our lifetime. We had a phenomenal response from our previous show. I was excited that we were able to get that extra time and we decided to pull the curtains back on what we do at a workshop. It was the first time that as quickly as it happened, we got requests for Social Security maximization reports.
We offered ten free reports that we typically do for our clients. That\’s fee-based financial planners. Those routines are a couple of hours’ worth of work. Somewhere between $500 and $600 but we gave those away complimentary. We were able to talk to those folks that called in to get that and I thought that was great. We gave some books away and we\’ll plan on doing that again.
A lot of the information between the 4% rule, the Social Security and your asset allocation. We utilize tools internally within our practice that do a phenomenal job digging in and illustrating those different things. On the 4% rule, we used a tool called the MoneyTree Report. It\’s a financial planning software where we can basically find out what the money plan is going to look like and is it going to last? When Bret does his part talking about asset allocation, we use a tool called Riskalyze.
That has become the platinum standard within the industry to do risk analysis. Client\’s risk versus the portfolio\’s risk and see how that marries up. Karen\’s been talking about Social Security and we gave away ten Social Security maximization reports. It\’s great to see what the math is or what\’s the best? Living in a vacuum, how do I get the maximum type of benefit out of Social Security? If I happen to be a widow or a widower, am I entitled to the money that I didn\’t even know about? Those are the things that we\’re going to talk about throughout the show.
It\’s as individual as the individual that you\’re dealing with, based on their circumstances, based on their questions and based on what everything looks like. It forces you or puts you in a position to be able to become the chameleon, to be able to react and to be able to help them based on those circumstances.
That\’s the biggest point of the show, is that whether you read an article, you see something on the internet, or an advisor who has an agenda tells you one thing, you don\’t always get to hear the whole story. A lot of times it\’s biased information and people make generalities and then they don\’t get the facts to make their decision. Every single person has a different situation and those plans and the decisions accordingly have to be customized and tailored to that specific need.
David, do you want to reference or set the table on the 4% rule?
I want to tell you why we’re doing this. Why did we do this show? Why did we build Thrive Financial Services? For me personally, after a 30-year career in this industry, I found that Baby Boomers needed a trusted resource to navigate retirement successfully. As we meet Baby Boomers and pre-retirees and retirees, they have two major overarching questions. One is do I have enough money to retire successfully? That’s the lifestyle that I want. Number two is, will my money last throughout my entire life and if I happen to be married, will it last both of our lives?
These are the two critical questions to answer. What we found the reason people come to us is that traditional financial professionals don\’t have a broad enough understanding of how all the different puzzle pieces of retirement fit together. We decided as a firm that we would know how all the pieces fit together and we became specialists in all of those areas. We\’re not generalists, we’re surgeons. We\’re much focused on helping people navigate that retirement with all of its complexities and all the rules that apply during retirement. We make sure people understand how all that fits together and put a plan in place to have that happen. A lot of the work that we do is complimentary on the front end.
That is well-stated and well-said and that certainly puts a clear description about what Thrive Financial Services advocates for you. Karen, let me come to you at the top of the hour. When we came on, you talked about Social Security, we talked about the topic, referencing that we\’re going to spend some time on it.
David has been doing this for 30 years. I\’ll admit I\’ve been doing it for about 25 years, probably longer. We talked about Social Security in our workshops and we say it\’s one of the best annuities money can buy. It\’s something that you\’ve paid into all of your lifetime and when you come to plan for retirement, it would be a good idea to understand how your Social Security\’s going to work. Not only how your personal social security works, but if you are married and you have a spouse, you should understand all the aspects of it. A big part of that is survivor benefits and even spousal benefits. Recently, there was a study that I read somewhere that Social Security has underpaid 80% of entitled widows and widowers.
[bctt tweet=\”Every successful relationship is about communication.\” username=\”\”]
One of the problems which we also site in our workshops is that if somebody calls the Social Security Administration, they cannot give advice. They have to give you enough information that you can make an informed decision, but they\’re technically not allowed to give you advice because they\’re not financial advisors. They are not registered to The National Social Security Advisors Association. That\’s what we can do for you. Please feel free to give us a call and say, “I would like a Social Security maximization report.” Somebody will contact you and that\’s it. We\’re not going to take any money. We\’re not going to drag you on the phone for hours to get some information and we\’ll get that free report to you.
For the benefit of the audience, Social Security Maximization Report is going to give them a good look. It\’s going to give them a good snapshot of everything.
One of the big things most people should know is if you can delay your retirement, if you are age 66 and two months to your full retirement age, depending on when you were born, the longer you wait, you actually get an 8% increase in your benefit. We\’ve met with people that have come in before they retire. They’re in their 62 and they\’re like, “I\’m retiring. That\’s it. I\’m going to take my benefit early” until we show them the difference between age 62, 66, 67, 68 and it\’s a big difference. We\’re talking thousands and thousands of dollars that you can lose during retirement by taking retirement early or at the wrong time. Another area in which people don\’t know too much about is survivor benefits or planning for the surviving widow or widower.
What Social Security does is they don\’t inform the person fully. Somebody will call and they\’ll say for example, they want to apply for their retirement benefits. It might be a man or a woman nowadays. It could be either/or and they\’re going to start taking Social Security. What they don\’t tell them is that they are eligible to still take a spousal benefit even though the Bipartisan Budget Act of 2015 limited the ability to claim spousal benefits, but it didn\’t have any effect on the survivorship of benefits for Social Security. A widow or a widower can still receive a spousal benefit. They can apply for benefits as early as age 60 when your spouse is deceased, so you can still apply for a benefit.
If you need a little extra money, you can get that benefit and then let your benefit grow until age 70. That can be a difference of thousands of dollars a year when you go to retirement. Another statistic we talked about which is near and dear to my heart is 70% of all elderly persons living below the poverty line are women. This is a big deal for a woman who comes in, maybe she\’s going to collect her spousal benefit at the age, she might need her benefit, or she might need money. She goes into Social Security and she says, “I\’m 62. I need to start collecting Social Security.”
They\’re going to give her reduced full retirement age Social Security benefit. What she could have done is gone and collect her deceased husband’s spousal benefit and then let her benefit grow 8% a year until she\’s age 66, 67 or if she can wait until 70, that\’s great. Another tidbit of information that we have is if you\’re a widow or widower and you remarry after the age of 60, the remarriage will not affect the eligibility of your survivor benefits. Please give us a call. I know it\’s confusing and we can straighten everything out for you.
Those are the Social Security Maximization Reports, as Karen referenced, will help you start to see what the picture should be with the ability to understand what you\’re looking at.
The big thing we see out there is people are out. They’re giving Social Security workshops all the time where they\’re offering these free maximization reports. People didn\’t realize that things changed back at the end of 2015, so these reports are old. A lot of times it\’s that simple ghetto giveaway to get somebody into the office that no one\’s interpreting that report. It\’s great but that report lives in a vacuum. It\’s not taking everything into account, “What\’s my budget? Do I have a pension? What\’s my savings? How much money do I need? What happens when the first one of us passes away?”
What\’s great about when we go through that Social Security Maximization Report is we interpret it. We put it together with all the other puzzle pieces. If you\’re out there and you\’ve gotten a Social Security Report before and you have no idea what it\’s saying and how does it apply to me, we\’re giving away five reports now and in addition to that will interpret it for you. Come into the office. We\’d love to take the time and go through the process of continuing that education, that advocacy.
Bret, you had a great successful workshop.
We have passion. There are so many times we meet people during the workshop. I heard David a little bit talking about some of the dynamics that were in. It gives us that sense of pride each and every time that we wrap up a workshop that somebody is not trying to jam product down someone\’s throat. People are saying, “I didn\’t hear anything about an annuity or a stock or a bond or some other crazy investment that\’s out there.” People are coming in and we\’re fulfilling our obligation which is continuing that theme of education and advocacy.
I want to bring into the conversation the acronyms that I jotted down from the previous show: WM = IC + RP + DS.
When people say, “What do you do? Karen, David, Bret, what do you do for a living?” That\’s where we said, “Take a pen out and write this down.” WM stands for Wealth Management equals IC. IC stands for Investment Consulting and that\’s typically where it stops in our business, at that investment consulting spot. Managing the money, but it needs to fit hand in hand with that RP, which stands for Relationship Partnership. We talked about every successful relationship is all about communication. It\’s not simply the asset allocation of the portfolio. Then DS stands for Deep Support. Encompassing, we\’ve talked about the importance of putting all those puzzle pieces together and being able to help people navigating down the path to retirement.
I’ve got to segue into an article that we read from the CEO of Vanguard. It\’s almost alluding to what I started off there with the whole WM = IC + RP + DS. What he had shared is that we were hearing about some of these Robo-advisors that are out there like we do not need financial advisors anymore because I can just put it in and Robo is going to take care of my asset allocation. I\’m going to read some of what\’s in the article here and I\’m going to talk about it. What Tim Buckley said, the new CEO of Vanguard, was that there is still a future for advisors who embrace the disruption and understand that their value lays not in asset management or allocation plans, but in managing client behavior. Moving them away from commission-based business models and towards fee-based advice.
He went on to talk about over, and David\’s talked about this at our workshops and talked about it here on the radio as well, they are saying that over the next ten years that they feel the typical mix of 60% stocks, 40% bonds will yield somewhere in that 4% to 4.5% range over the last decade. Remember what the market did last year? It’s almost 20%. We\’re talking about 4% to 4.5% over the next decade versus what we\’ve been historically getting here in recent years of 8% plus. It\’s a big pullback, so understand that we\’re going to see some rocky roads that are coming to us down the pike. They also went onto say that Vanguard calculated that advisor\’s performance of three basic taxes, generated significant value for client\’s investment portfolios and those included low-cost portfolio construction.
We\’ve been talking about that overtime and talking about our Riskalyze process in finding low-cost way of putting a plan together. We’re talking about rebalancing, just because it works today doesn\’t mean that\’s how it works tomorrow, so constantly keeping an eye on it. Then tax efficiency, I think we\’ve exhausted that tax efficiency conversation and we\’re going to continue to do that for the months and years to come through our workshops and here on the show. It\’s things that you take pride in. WM is more than just IC, it\’s that relationship partnership. It\’s that deep support and takes it to the next level. In addition to that it says, “How should advisors spend their time?”
The CEO went on to say, “We suggest you spend it on uniquely human task. Behavior coaching is difficult to code when volatility returns to financial markets. Some advisors and customers will panic and others won\’t pay attention to behavioral coaching. That depends on you,” meaning us as the advisor. Where the big deal comes in here is how do your clients want to spend their time in retirement? Most retirees, Vanguard sees underspent in retirement because they are concerned about medical expenses being a burden on their children. Imagine if you can get rid of some of those fears and put all those puzzle pieces together for them to have a little bit more peace of mind through retirement. He goes onto say, “Advisors should learn everything about their clients.” Not just their investments and trying to grow their money but their children, their family, and their passions.
[bctt tweet=\”Continuing our message of education and information is power, and knowledge is power.\” username=\”\”]
If you know these areas, it\’s easier to create a structure for human tasks. These things are tough to measure, but you’ll have value. Your clients want to trust you. They want communication, price, and performance. We\’re not seeing our clients leaving us and going into the Robo-advisor because they see the value in the relationship and sitting down and getting to know somebody and putting all those puzzle pieces together. I can tell you a great story with a client of ours who their son happens to work at the company from the CEO that I spoke about who is a certified financial planner.
He blessed and said, “Mom, you should go to work with those guys over there.” She said, “But you’re working at Vanguard.” He said, “Yes, but you don\’t understand everything that they went through beyond investment construction that we don\’t talk about when we talk about tax efficiencies.” We always stressed we need that five plans, investment management, taxes, income distribution, plan for healthcare and that legacy plan. He said, “We don\’t do that here, mom.”
The fact that Thrive took the time to sit down with you to figure out and customized everything for you, understanding things like the saver\’s credit that we\’ve talked about on the show and during the seminars or workshops that we give, when we talk about being able to pull money out of IRAs and having that come tax-free, when we talk about selling things for long-term capital gains and having those numbers tax-free. The Robo isn\’t giving that guidance and that\’s where that human element comes in. If you are contemplating, “Should I go to work with Robo? Has my advisor given me what I need? What am I getting for that fee that I\’m paying out there?” If you\’re thinking that or you\’re looking for a second opinion on what I\’ve done this far, feel free to call us. That\’s what we have passion in, that education and advocacy.
I sit in this chair on behalf of the audience. I sit here and I consume the information that you so eloquently provide for the audience. I couldn\’t imagine it being any other way than the way you\’re doing it.
People attend our workshops for a reason. They\’re looking for information that they haven\’t gotten and 90% plus of the people who do attend our workshops have current financial advisors. That\’s why we put this company together. We\’ve witnessed it from our chairs and going to conferences and talking to our peers within the industry. When you hear their focus, it\’s linear. If they\’re financial advisors, it\’s investment management. If they\’re insurance agents, how can I sell the most amount of life insurance? How can I sell the most of the amount of long-term care, whatever it may be? It isn\’t looking at the actual overall needs of the client with a caring, empathetic, and trying to act as steward. Trying to act as steward and navigating that course for people to reach retirement the way they want to reach. That\’s what we\’ve dedicated our lives to do and we love it.
I\’ll give you the last word on the segment. I can certainly attest for anybody out there who perhaps thinks that you are a Robo-advisor, you are not.
Whether you\’d like to come in and visit us here at the office or come to one of our workshops or take advantage of one of the Social Security Maximization Reports and actually understand how it applies to you. That\’s what it\’s all about, continuing the education, continuing our message of information is power and knowledge is power. The more informed you are about all the choices that you have available to you, the better decisions you\’re going to make.
David, I want to come to you to start off the final segment as we were chatting and absorbing everything that was said here. It is an amazing thing for me to be able to listen, absorb, learn and feel good about the information that you are providing. That is very powerful stuff.
We appreciate that you\’re the cohost because I think what you said in our earlier segment that you sit in the chair as a consumer and we\’re just talking. We\’re having a conversation and your questions are authentic. Your expression and emotions are authentic and it\’s what we experienced when we sit down with our clients. After doing something for 30 years, you can imagine that it could become old hat. The fact that we feel as a firm that we have such a mission ahead of us to help people make sure that we get those two questions answered, “Do I have enough to have the quality of life that I want in retirement and most importantly will it last my lifetime and not run out before I need it? We’ve got a lot of work ahead of us.
10,000 Baby Boomers every day, turning age 65 for the next fifteen or sixteen years. I’m not sure exactly what the number is anymore. I\’ve been telling people I was in the business for 25 years and then I did the calculation and found out it\’s 30 years. One of the things I\’d like to do is put the clutch in, shift neutral and talk to our audience. I\’m not a scripted individual. I don\’t sit with content. I always try to talk from my heart. Sometimes it\’s good, sometimes it\’s bad. I think so many people out there are nervous, fearful and anxious in talking with financial advisors because their biggest impression is, “They\’re just going to try and sell me something. That\’s how these guys make their living.”
I\’ve always believed if you do good by people, people ultimately will do good by you. We take that risk from a business perspective. That\’s why we go to the marketplace with truly complimentary consultations, second opinions, continuing education, whatever you want to call it. People definitely have their guards up when we first talk about it, but it\’s why we associated with an organization called the Society of Financial Awareness, which is a national 501(c)(3) non-profit. One of the mandates of that is that your seminars or your workshops, your consultations have to be complementary or have to be free. We\’re okay with that. From a business model perspective, we decided to take the risk and put the information out there. If it\’s information that has genuine value for people, they\’ll take you up on it.
[bctt tweet=\”Getting overwhelmed to the point of confusion leaves people to get their head stick in the sand and do nothing.\” username=\”\”]
If they think they can do it themselves, we\’re okay with it. If they think that the financial advisor that they\’re currently working with doesn\’t have a wide enough breadth or scope of understanding all the specifics, we\’re happy to take you on as a client. That\’s the way it is for us. If you\’ve attended our workshop, you came because you had questions or you weren\’t getting the information from whatever source you had. We always ask, did we provide value and we typically have somewhere between 60% and 80% of the people who attend our workshops actually schedule a complementary consultation with us. It does prove the value is there.
With that said, these are the areas that we focus on as a firm. We focus on taxes, both what we call normal taxes and then forward tax planning. Forward tax planning is the new aspect of it where most people don\’t put emphasis. They don\’t have the information but it\’s an opportunity to look into the future and make decisions that are the most tax efficient. That\’s a big area for us. We use a software tool called Tax Clarity. It helps to identify the information, we stress and talk with our clients about it and if it\’s an appropriate thing to do, then we do it. We spend time on Social Security and Medicare.
Our financial advisors went through an accreditation program called the National Social Security Advisors Association. It\’s a curriculum and a certification and it validates our seriousness on making sure we understand every single aspect of Social Security and Medicare. We understand legacy and trust planning. We\’re experts at strategic development of those plans. We know how to do an investment portfolio and our primary focus there is doing it from a risk-based perspective. A lot of folks that we sit down with already have all the money they need, now it\’s just about not losing it.
We talk about producing sufficient income in retirement despite possible disruptors. Those disruptors can be things like stock market downturns which we see every nine or ten years that are significant. If it happens while it\’s in retirement, it makes it much more significant. We talk about medical issues. Crisis-related to long-term care and things that can wipe out a retirement for a couple. The passing of a spouse is a big deal. Emotionally, it\’s the biggest but it also has economic consequences.
Those are the areas that we focus on. For a lot of our conversations, it\’s the first time people are engaging in these types of topics so we know the need is absolutely out there. I encourage anybody in our audience to give us a call. You can talk to my mom. My mom answers the phone and she helps schedule the appointments. Her name\’s Myrna. She\’s 75 going to be 76 years old. She\’ll take your call, she\’ll figure out a time in your schedule, accommodate you, get you in on our calendar and you\’ll sit and you\’ll talk with us.
I will spend an hour complimentary. We\’ll get to know each other. We\’ll find out what your areas of concern are. We can help validate that everything\’s on track. We could validate that you only have minor adjustments. You get one of maybe four different reports that we can do: Social Security, taxation, risk analysis and retirement stress analysis. Those are all the things we do. Just a confirmation that people need help out there in deciphering, I want to show you something. This is a New York Times article from 2013 that said the 4% rule, which is a big rule, a formula that financial advisors used to help people figure out how long the money\’s going to last, it’s saying that it\’s no longer the golden rule. That was back in 2013.
We adjusted back then on our models to make sure people knew that rule didn\’t work, instead of 4% it\’s 2.8 %. Then I was reading from CNNMoney magazine article. It said “Have you heard of the 4% rule? Most Americans have,” basically totally endorsing it and then from the same new source, less than one month later, “Three serious problems with the 4% rule and why it doesn\’t work.” Just as a quick example, there are three different sources basically giving misinformation about something so vital to people\’s retirement. We just want to make sure people have the facts.
You are cordially invited to visit David Bezar, Karen Bezar and Bret Elam from Thrive Financial Services. Well-said by you, David, and a great job by all. We thank you all on behalf of Karen Bezar, David Bezar and Bret Elam, I\’m Joe Krause. See you next time.