Show Notes
Josh Tirado: [
00:00:20] Welcome to making smart decisions podcast. I'm your host, Josh Tirado, and today we are discussing a very fun topic. The topic of what do clients like the most? In a recent survey of my clients, the number one and number two items they liked the most and why one was the educational aspect. Where we take complex things, make them simple, actionable, relatable, and explain how this will benefit them or discuss those two or three options and let them make an educated decision on which route they want to take that they're most comfortable with. So the educational aspect was big.
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00:01:37]The second component was constantly looking for something new to add value, whether it's an investment strategy, whether it's a product that's out there, whether it's a change of philosophy, whatever it is staying current. And I really think that's one of the main advantages of working with an advisor, and I'm biased, but working with a fee-based advisor.
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00:01:54]Who is working off of a plan with you? Not just managing assets because we're having serious discussions. For my average client, three times a year, and we're going over different things. And each year, we try to bring some additional value. I might not have a brand new topic. Every three or four months.
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00:02:07] We might not need one, but we're constantly searching for something. So one finding unique. Things that can add value to the client and then to being able to translate those unique opportunities or products to the client to make an informed decision. And I want to touch on the product side a little bit of it.
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00:02:23]Because again, this comes up time and again, and I make this comment jokingly to many clients, but I often referenced the old golden rule. And I slight twist on it. So I would say, the golden rule. He who has the gold makes the rules. And I know that it's not the true golden rule, but it's very applicable while investing as your money grows.
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00:02:41] And as you put more aside and reach different levels of wealth, more opportunities pop up. I can offer clients who have an account balance of over a hundred thousand dollars that I can't offer to someone with an account balance of 25,000. I can offer things to someone with an account balance over 500, over a million, or at different income levels.
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00:02:58] There are different things out there. And everyone grows and gets access to these things eventually if the money keeps growing. But what I want to say that there are certain things that we can offer to most people, Almost everyone. It depends on your situation, but there's a lot of value out of things.
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00:03:11] And I want to touch on a few of them very quickly. One of them is 401k management. The vast majority of people out there that are still working have a 401k. It doesn't apply to everybody. It's currently about a third of the client, a third of the companies out there offering 401ks, but it's growing dramatically every single month is the ability for the advisor.
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00:03:28]Working with a money management firm to have a contract with the 401k company and your employer to be able to go in there and manage your 401k on your behalf. So if you have a self-directed option inside your 401k, which allows you to create a little brokerage account, that is the window we were allowed to use, and then we have a signed agreement.
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00:03:45]what we do is we go in through that brokerage window. And we're then able to put new investments in your 401k and actively manage those investments. So it used to be that this was all on you. And in a lot of cases, it still is. Like I said, only about a third of the companies out there offer this, but for the ones that do it, it's a tremendous way to have more choice in your 401k and someone watching it for you in real-time.
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00:04:06]for my clients have been using it over the past two years, results have been. Very good across the board. So I'm quite pleased with it, but either you have an advisor helping with the 401k or an advisor helped me with the 401k and can directly access the 401k through a money management firm.
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00:04:21] And help you manage it. Now, when I say directly access it, we're not asking for a username. We're not asking for a password. We're not taking control. We're assigning all the appropriate forms as though you're opening up a brokerage account. That account is within your 401k, and we're using an amen money management company.
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00:04:36]Just like we may be using a third-party money management firm to help manage some of your money outside of your 401k. We're using a similar firm to help manage it within your 401k. That's a great advantage. And another thing is alternative investments. Now you do need to have a minimum net worth and a minimum household income.
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00:04:51]Either both or one of the other has to be even higher, but as long as you have, as long as you reach the minimums, you have access to alternative and investments. Now, so alternate investments are great. Some are not. Some have received a bad rap in recent years. Some have been a real advantage.
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00:05:03]Two people, but they're often in things such as currency, real estate, several oil and gas partnerships. Sometimes I know a lot of those. Were used heavily in the eighties, and I had a lot of trouble. But there are several different things out there. Some of these alternative investments are restrictive because they're privately held. Some are in mutual fund form.
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00:05:20] So they're very illiquid and publicly held. So there are a number, different ways to do it. But what I suggest is it's not the same old as some stocks have some bonds. Even at a more modest level of money invested, you can have access to stocks to bonds. Still, also if you're interested the real estate and some of the other alternative investments. New ones are coming out all the time now. It takes a while for them to get, be regulated, and be approved on different platforms to be sold or used in your portfolio.
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00:05:44]But there's a lot of options out there, and new ones are coming to market all the time. Recent events or the past year with COVID and the economy, different things have really limited some of the alternate investments for folks. And some have just made the very liquid ones available and the illiquid ones not as available now. I don't want to paint anything with too broad of a brush.
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00:06:02]Some of the liquid ones have many advantages and are great, but there's no one size fits all. Each thing is on a case-by-case basis, but the alternatives are great. So far, we've already touched on helping you manage your 401k, some alternative investments that are not as correlated to the rest of the market and get your returns from a different type of asset.
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00:06:17]That's really great. I want to mention some, there are some annuity products out there, and they're becoming so popular. I think they'll eventually end up with their own asset—class their own category. Many people refer to them as buffered products, and essentially you have an annuity where you're still offered upside potential where you're tracking an index for the market.
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00:06:33]But if the market goes down, the insurance company issuing the annuity has a clause in there where they will absorb the first certain percentage of loss. So if your account, a lot of them that I've used are, is 10%. So if the account goes down 10%, they absorbed the first 10% of loss over the first year.
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00:06:49] there's a trade-off there. You're also not receiving a hundred percent of the index. So you're tracking the SME 500, and you're probably walking away with something close to 90%. If it goes positive, 90% of the positive return, but that's an exchange for them being willing to absorb 10% of the loss. Now.
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00:07:03]If this sounds familiar to some people, it's because they basically took the best parts of a variable annuity and the best parts of an indexed annuity and smashed them together. So it's not as extreme where it's only investing, or there's a hard floor where you can't lose any money, but your returns are limited.
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00:07:18]And they went into the middle where they're providing some safety net with generally higher returns, higher participation, in the indices. So you have the chance of a higher rate of return. There are some other nuances to it involving the lack of fees and smaller things. But they're becoming very popular.
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00:07:32]I've used them successfully in my practice for the past. Going on eight years, and a lot of advisors are starting to offer them. It is not a one-size-fits-all. Again, that product has to be the right fit for you and match your goals and objectives, but it's neat. An option that didn't use to exist.
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00:07:44]I just haven't used it for seven or eight years. Maybe they ran a little bit before then, but they're really coming into their own now. And it's another great option. So now we're looking at 401k things. We're looking at alternative investments. We're looking at being able to add a layer of safety and protection through this buffered style.
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00:07:59]An annuity product even a touch on insurance, it used to be that you had life insurance or long-term care. And now you have combinations where they're called hybrid policies, where it's long-term care on top of a life insurance chassis, for lack of a better term. And you're able to get the benefits of both insurances rolled up into one product.
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00:08:16] You're spending one set amount of money to cover both problems. So multiple birds, one stone, and it becomes very efficient from a planning standpoint. There are things out there, and there are things out there that you don't often see when you're just reading some financial articles. Are you using A free calculator? You find online, and forgive me. I don't want to bash all financial calculators. I even have some on my website. But they're a far cry from having an actual collaborative relationship with an advisor and discussions in multiple meetings to put together a plan for you. And then multiple meetings implementing that plan year over year after year.
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00:08:45]We can accomplish a lot more, but using some of these tools works really well and has a lot of value to my clients. I'm going to compare the use of these tools to adding salt. To the soup, a little bit adds many flavors and a lot of value to any recipe. Too much can ruin the whole thing.
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00:08:59]again, it's one of those, I won't say tread carefully, but it's one of the things where, Hey, each thing is not right for everybody, but if it's right for you and your situation, it can add a lot of value, So I just wanted to touch on those things as to what the clients like the most I've heard recently.
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00:09:11] And it's these different types of products.