2022 EP0716 | PLANNING MATTERS RADIO | FINANCIAL CONFLICTS

We want you to plan for success. Welcome to Planning Matters Radio. Hello and welcome out to another edition of Planning Matters Radio.

I'll be one of your hosts today, Amber Rashawn, and I'm here with my lovely husband, Peter Rashawn. How are you doing today, Peter? I'm doing well. Good to see you. I mean, good to see you too. Guys, since COVID, Peter and I have done everything together. I guess for the past 20 years, we've pretty much done everything together. Still not tired of him yet, folks. Not yet.

There's still time. All right. So today we're going to be talking about hot financial conflicts, right? People want to know that they can get trusted advice.

They want to know that they can trust their advisor. So what are some hot financial conflict tips we can talk about today, Peter? Well, when I talk about financial conflicts, what I'm really talking about is where we are receiving guidance of what to do with our money. When behind the scenes in the financial industry, exactly the opposite is typically going on or where there may be an inherent conflict in what we are doing or what our expectations with our money are versus what is actually happening behind the scenes. The old man behind the curtain.

So there are a couple that I think are big. The bank mantra of saving your money. And then as opposed to that, what banks actually do when they get your money. The old Wall Street mantra of buy and hold. Is Wall Street our mutual funds?

In fact, following their own advice. And then there's the inherent conflict of interest regarding compensation. I think that professionals providing a service deserve to be compensated. But do you know all of your costs and fees? Are they fair? Are they fully explained?

So you can actually make a judgment on whether or not you're getting what you're paying for. And then there's outright conflict in, unfortunately, fraud and identity theft and things that you just need to be very vigilant and careful about in the financial world. So we're going to be talking about all of those things a little bit today.

Important topics. But if you have any questions or concerns, we are local here in central North Carolina, Fuquay-Varina. We are independent. We are fiduciaries.

That means that we are morally, ethically, legally responsible for looking out for our client's best interest whenever formulating plans and making recommendations. And we do offer a complimentary conversation, initial review, consultation, and we even put together that optimized retirement plan. No cost, no obligation. Just give us a call at 919-300-5886 if you'd like to take advantage. And that's a great way to take a bird's eye look at where your expenses are going to.

We like to think we just put money in the stock market or enter an annuity and it just does what it's supposed to do. But having that report to be able to look at where your fees are going, who you're actually paying, and how much you're losing or gaining on the front side of the backside is very important. And that's what we do here at Rashawn Planning for free. So you want to have that complimentary review with us, pick up the phone, give us a shout. 919-300-5886.

We believe that anyone has the ability and everybody has the right to feel confident about their money and with their money if provided with good and accurate information. And so that's our mission at Rashawn Planning is to provide that information so that you can know more about what's going on with your money and feel confident about it. Again, give us a call.

919-300-5886. You can visit online to do a little bit of background and research, find out a little bit more about us. rashawnplanning.com.

It looks like richonplanning.com is our website directly. But if you just search Rashawn Planning online, you'll find plenty of information about us. You can ask Siri.

Yeah, indeed. Siri and Alexa know where to find the podcast. The Planning Matters Radio, rich on planning podcast.

I'd pull it up, but technology ultimately is only dependable when you're not counting and relying on it. But if you ask Siri or Alexa for the Rashawn Planning podcast, you may already be there. That may be how you found us today. But if not, I like to walk into friend's house and ask Siri and Alexa to go ahead and subscribe to the Rashawn Planning podcast.

That's right. So moving on to news headlines. Do you remember those times where you just depended on the news to tell you what to do and you kind of went from there? Or at least present the information, right? Just the facts, as they used to say on Dragnet. Just the facts, man.

The news headlines used to at least feel like they were presenting just the facts and then allowing you to draw your own conclusion. But today, in the modern world, we've got to do our due diligence. We've got to take everything with a little bit of a grain of salt. Is this actual fact? Is this somehow slanted opinion? And then we've got to do additional research. Are there other opinions out there? Is this the complete story in order to be able to draw conclusions about what's actually going on?

Now, remember, ladies and gentlemen, here's the rub. Here's the inherent conflict is that the news is designed to keep you watching so that they can sell advertisements during the news. Right. I've heard if there is no product being sold, guess what? You are the product. And that's the case with the news.

So or really any television or information or entertainment program is if there is not a product or service being sold, then you are the product or service. So you've got to keep that in mind when sort of doing your screening and choosing to believe or to be skeptical about what you are hearing is that with the news in particular. The headlines are meant to be sensational. They are meant to drive emotion because that's what's going to keep viewers continuing to tune in and view.

If they were plain vanilla, noncontroversial, that just doesn't attract the viewership. And so as you are kind of looking for where can I find a reliable source of financial information, what source can I choose to believe? Just keep in mind that, A, the news is generic in nature. It's never specific or intended as guidance for your individual situation regardless. And then you are there because they are trying to drum up viewership.

They've got to lead with what bleeds is sort of the saying in the news world, because those are the things, those are the stories that are going to captivate and capture and retain attention. So just sort of be wary of that as you are looking for any kind of financial information of what source you are choosing to rely on may or may not be specifically intended nor applicable to your individual situation. And that, by the way, includes this very program in order to get specific guidance for your situation. That's why we offer the ability for those follow up conversations, to ask questions, to sort of get to know one another, and then to put the plan together if needed, warranted and desired. So knowing the past is super important, and a lot of folks say the best way to predict the future is to know the past.

Right. Well, if you don't learn from the past, you're doomed to repeat it, is one saying. But in the financial world, the saying goes something like this. Past performance does not guarantee future results or past performance is no indication of future results.

And yet, so often what I see is that plans that are projecting out or forecasting the future are, in fact, exactly based on that past performance. I say, well, this fund has averaged this over time. Well, this fund has done this over time. That does not mean that that is reliable, that you can depend on that fund or that result to happen again into the future. And that's why that disclaimer language in the financial world is always included and is necessary. But the inherent conflict here as we're talking about financial conflicts on today's program is that it is still, despite those disclaimer words of past performance, no guarantee or not indicative of future results, it is still what is so often used to sort of predict the future and people count and rely on those projections and those assumptions based on past times. But, you know, if we were looking at the past history of a mutual fund and I say, well, this fund has averaged eight percent over time. Right.

And then you count counted and relied on that eight percent to continue to happen in the future. There's no guarantee that does actually have a great story and analogy. Amber, you and I, we're heading out on on a African safari. Right now, I'm your tour guide. Hope we're staying at the Ritz-Carlton, not camping. It's not her style.

She doesn't like bugs. So we head out on an African safari. We've got a river that we've got to cross as part of the safari adventure. We've got a river that we've got to cross.

I tell you, Amber, don't worry. The average depth of this river is only one foot. Now, are you going to feel safe crossing that river knowing that the average depth is only one foot? Or are you going to worry about the deepest part of the river, not the average depth and the hippopotamus? Right. So that's the kind of thing that people are doing with their financial projections, is that they are using that average when the average isn't what matters. It's the deepest part of the river that matters.

That's the dangerous part. And that average, in fact, can be very misleading. It's one of the, I think, biggest fallacies and false advertising that's done in the financial world is advertising past performance of funds. Because if I have a fund, let's say that averages a 10 percent rate of return over a three year period. The first year goes up 60 percent. Second year it falls 50 percent.

Third year it goes up 20 percent. So 60 minus 50 is 10 plus 20 is 30 divided by three is a 10 percent average rate of return. Now, here's what happens with your money. I know numbers are confusing over the radio, folks, but bear with me.

And if you'd like to see an example of this, get in touch and I'll send it to you, show you how this works. But if I have one hundred thousand dollars and get a 60 percent return, now I have one hundred and sixty thousand. And then I lose 50 percent. Now I have eighty thousand. And then I grow 20 percent.

Now I have ninety six thousand dollars. I've got a three year track record of history. I as a mutual fund can average or can advertise an average 10 percent rate of return.

But after three years, I actually have less money than what I started with. And that's why the using of past performance to me is one of those inherent conflicts in the financial world that we need to be aware of. We need to do a better job in educating ourselves on. And again, armed with good information, knowing and understanding how this works. I think people can feel more comfortable and confident with what's going on with their money.

You are absolutely correct. And one of the number one conflicts that I run into a lot with my women's empowerment group is money. They ask a lot. How much money should they have? How much money should I have in the bank versus in investments? Yeah, I think I mean, the question of how much do I need to retire is probably the quintessential most common, most important question about financial planning.

Right. The the the deal that we make is we trade our time for money and we want to know when we can stop making that trade off because of the two. The time is actually the more valuable of the two. So we trade enough of our time that we can build up enough money so that we can stop making that trade ultimately.

But when, when, oh, when can I afford to stop making that trade off? So how much do I need or how much should I save in this case is the question. Now, specifically when it comes to banks, this is kind of one of those inherent conflicts in the financial world, because the banks love to tell you to save money, save money, save money. Guess what happens to your money when you save it? You imagine that it goes into some locker and sits on a table in the back of the bank under under lock and key and in a vault. Well, when you save money with a bank, that's a liability to the bank.

They're actually it's not much, but they're paying you to store your money there. That is a liability. It costs the bank.

It's it's a potential that, you know, there there are not the dollars there. When you go back, there's the potential for, you know, robberies or fires or that is a liability for the bank. The bank's not in business of having liability sitting on the books.

Now, you drive into any major city and the biggest buildings in the skyline are bank buildings. They don't build those buildings off of liabilities sitting. They, in turn, don't save the money. They've told you to save the money, save your money, save as much as you can.

Well, guess what? When the bank gets that money, they choose and try to deploy it as quickly as possible. They don't want it sitting there as a liability.

They try to create assets with it. So they loan it out. They invest it. That money that they're telling you to save, they're in fact doing the exact opposite with it.

So that's kind of the inherent conflict in the financial world. Again, we hear that we should save money, save money, save money. I think there is an appropriate amount to be saved. You need to have that emergency account. Right. Three to six months worth of living expenses. More than that, you're you're losing money safely and it's a liability, not an asset.

You're absolutely correct. They want you to buy and hold, but they do not always follow that advice themselves. Not following their own advice. So let's talk a little bit about tax and legal advice, Peter. Yeah, well, I mean, the again, standard language in the financial world is that this is not tax or legal advice. Financial recommendations are not do not constitute tax or legal advice. If you'd like tax or legal advice, consult your tax and or legal professional.

Here's the conflict. Every financial move has tax and legal consequences. So how can I make a financial recommendation and de facto default offset the fact that I am not making any tax or legal recommendations?

I absolutely, in fact, am. And as a qualified, experienced professional adviser, I better understand the tax and legal implications of the recommendations that I'm making. You should invest in an IRA versus you should invest in a Roth versus you should buy or sell a specific fund versus you should realize that gain or offset it versus how you set up your beneficiary designations. You know, you you've got a line of order of operations of primary and contingent beneficiaries. Those beneficiaries are listed within retirement accounts. Those beneficiaries haven't been updated since you had a divorce or a change in family situation.

Those are tax and legal. Qualifications and when financial recommendations are made, it absolutely does, in fact, involve tax and legal consequences. And so unless your team of professionals, your accountant or CPA, your attorney and your financial adviser are working in coordination for one of those professionals to just simply dismiss the other aspects of the advice that they're giving, you're not getting the best or comprehensive advice.

You could have the absolute best professional. But if they're not working together or at least cognizant of how those impact and affect each and every aspect, then you're not getting the full service of what you're paying for. And so, again, that's that's why we offer the complementary review, because a lot of people kind of have incomplete advice or incomplete plans. And then one of the big parts of of our service is that we work to optimize and complete your plan. You may have an IRA or a 401k or an investment account out there. How is it working in coordination with your total picture to make sure that you are making progress toward achieving your goals from a financial aspect, from a tax planning aspect, from a legal planning aspect?

They all work together in coordination. And so the advice that you're receiving needs to as well. Speaking of tax implications, no one wants to go into business with Uncle Sam, right, Peter?

No, but we are taught to. Another inherent conflict here in the financial world is that really for a generation, since the ERISA laws of the 1970s created the 401k and subsequently IRAs, and we were told to defer paying taxes on those retirement accounts. Well, guess what? We have entered into a business arrangement with Uncle Sam. And when you're in retirement, it really is more like owning your own business. During your working career for W-2 wage earning employees, you are paid after Uncle Sam has already taken a bite out of your income. Whatever you earn, if it's ten thousand dollars a month, you don't receive ten thousand dollars a month. You receive seventy five hundred dollars a month because Uncle Sam has already taxed your money by the time you see it. However, in retirement, it's much more like owning your own business where you take those IRA and 401k withdrawals. You've got to specifically and intentionally choose how to address the tax implications of each dollar of income that you create. And you're in a partnership with Uncle Sam. If you've got those tax deferred accounts, nobody wants to be in a partnership with Uncle Sam.

Nobody wants to be in business with the IRS because guess what? They can change the rules. They get to determine the rules. They set the rules. And that doesn't seem fair. I've worked so hard to save my money. And yet you get to set and change and control the rules on this.

And by the way, they do change the rules to a lot of people. I was in a room recently. We had a presentation to two rooms full of retirees or near retirees. And I asked the room, who knows about the secure act? And not a single hand went up.

We had about between the two different sessions, we had about 60 different people in the room. And these are not unsavvy savers and investors. Not a single person in the room knew about the secure act. The secure act was one of the largest changes to the rules regarding your retirement that has been passed in recent years. It was passed the week between Christmas and New Year's of 2019.

It went into effect January 1st of 2020. And it changes the rules when it comes to your IRA and retirement account. You need to be up to date on these things and you need to understand that the IRS and the government can and will likely continue to change the rules. In fact, tax laws as they stand today, the rules will change again in 2026 and taxes on income will go up. The 12% bracket will become the 15%.

The 22% becomes the 25% and it continues up the tax brackets. You've got to understand the implications of that and the opportunities that can be created by controlling some of that. The planning profession, I think, is about controlling risk. Well, what is risk? Risk is variables that are outside of our control that will determine our outcome. That's what risk is.

It's a variable that I cannot control that might determine what my outcome is. Well, there are opportunities to take control over certain variables, taxes being one of them. While we can't control what tax rates or brackets are, we can control when and how we choose to pay taxes and oftentimes being a little bit proactive, choosing short-term pain and paying a little bit right now might result in a significant savings in the overall tax bill that you end up being responsible for.

For those of you who are holding on currently to a traditional IRA and you have any questions about tax implications and tax rates, who are 100% excited to go up and are interested just to learn a little bit more for free about Roth conversions, pick up the phone and give us a call, 919-300-5886. And taxes are not the only way we can lose money from our accounts, right? No. Commissions, fees, compensations, expenses? You got to know what you're paying and what you're getting for what you're paying for, right? And in the financial world, what I've found is that fees and costs and expenses are like the layers of an onion. And a lot of times people can see that outside layer, right?

They know what the outside layer looks like, but it's hard sometimes to dig beneath the surface. And right there on the front page, the cover of your 401K statement or your brokerage account statement, it doesn't say you've paid X amount in fees, you've paid X percentage in fees. So that's one part of our financial analysis.

It's a forensic dive into fees, costs and expenses. And we can really identify how much your advice and your investments are costing you. There are certain vehicles out there that are very cost efficient. There are certain vehicles out there that are the exact opposite, that quite frankly cost way too much and unjustifiable expense for what you are getting. And then there's the service fees on top of that.

Are you getting the kind of advice that allows you to understand the difference between the two? So, you know, again, I think that any competent professional experience qualified that provides a service, there is a justifiable expense to that and studies show that the more affluent, more financially successful among us, they tend to use and rely on advisors and professional advice and understand that there is a cost to that. But you got to make sure that you're getting what you're paying for.

And I am cost conscious when I go out shopping, when I go out looking for a service, not that the cheapest option is always the best option, but I am cost conscious. And I'm going to try to make sure to do my due diligence to do my best to make sure that I am getting what I am paying for and understand what those costs are. You know, living in a world where social media is on the boom and our ever needing ability or want for information on demand, we've actually created a little bit of a problem for ourselves in the form of identity theft and fraud. So what are some things that we should be cautious of and what are some things that we can do to take precautionary measures? Well, you've got to be careful. And all of the other conflicts that we've spoken about so far, I don't think they're necessarily malicious in nature, right?

They're not intended to harm. But in this world, every minute of every day, there is somebody aiming to separate you from your money. That's just the cold, hard, ugly truth is that there are unscrupulous people out there. We have to be extra vigilant against fraud, identity theft every day.

It is so important. And studies have shown that the number one group that is susceptible and most often fall victim to financial fraud are actually successful men over the age of 70. Those that are actually pretty affluent now, it may not be a surprise that senior citizens end up being the most targeted. But for men in particular, financial status and success is a measure of our accomplishment. And therefore, we often extend ourselves into more vulnerable positions in the hopes of achieving that financial success. And unfortunately, that makes us more susceptible to potential fraud and unscrupulous financial moves. And so just be ever vigilant if you yourself are considering any financial moves, maybe run that by a trusted resource, whether friend, family, acquaintance, advisor, if you have one that you do trust. If you have family members that may be in that kind of situation, do your best to check up on them.

You know, I understand this can be like difficult and sensitive because sometimes money is like the last conversation people have with those that are closest to them. Discussing finances within the family can be a sensitive topic, but where possible, safeguard and help to protect those loved ones. And there's lots of resources on what to watch out for, how to be careful and cautious.

But in today's world of modern technology, you know, a touching of the wrong link in your email or your text message could ultimately result in you ending up with information that has been compromised. And so we've got to be vigilant. We've got to teach others how to use those devices and maneuver in this financial world and where possible, put safeguards in place so that we don't subject ourselves to that possibility. So, you know, a lot of information on today's show, a lot of different things to kind of think about, to reconsider as far as financial conflicts, to watch out for as far as like identity theft and potential fraud. You've got to do your due diligence. And again, we believe at Rishon planning that anyone has the ability and has the right to feel confident about what's going on with their money.

In order to achieve that, you've got to have good information. And that's our mission is to provide that information to listeners, to viewers, to clients, to maybe not yet clients, but proactive savers and investors. If you're serious about making that financial progress, give us a call. We'll have a conversation, answer any questions you have as directly as possible.

Run a report analysis on your current holdings for you, if you'd like. Put that optimized retirement plan together for you. And all of that is before ever becoming a client, before any kind of cost, expense or obligation. We will talk about what it entails if you choose to become a client and enter into that relationship.

But we are not for everyone and everyone is not a perfect fit for us. So that's what the initial conversations are really all about. To inform and educate you on if there is anything that we can spot and identify, or things that we would want to know if we were in your situation and working toward achieving the financial goals that are important to you. One of my favorite things here at Rishon planning is we actually take the time to get out into the community, to teach you how to generate more money, not just wait around for you to show up and give it to us so that we can invest for you. So I definitely appreciate you and all your hard work and everything that you do for the community and every person who comes into Rishon planning we treat as our family. So if you have an interesting show topic inside of you that you're just dying to get out or something that you would like for us to talk about, pick up the phone and give us a call.

919-300-5886. We're also here for you to offer you a one hour complimentary financial review whether in person or in zoom. We'd love to sit down and talk to you give you a better look or understanding of where you're going or if it's just to see if you're on the right track or not.

I've seen Peter turn plenty of people away and say hey guess what you've done a great job you've done a great job at planning. Let's stay on track and if we have any questions or concerns you can always bring them to our lap. Again, the telephone number is 919-300-5886. We'd love to chat with you. Thanks for tuning in for another amazing informative show with Rishon planning on Planning Matters Radio. And we look forward to talking with you again next week.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax or legal advice from an independent professional advisor. Any investments and or investment strategies mentioned involve risk, including the possible loss principle. Advisory services offered through Brooks' Own Capital Management, a registered investment advisor. Produciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission which may result in a conflict of interest regarding compensation.