Living On Limited Information

Episode Transcript

Speaker 1 (00:00):
Welcome to the Greg Hicks Show this beautiful summer day.
And boy, we have been in the throes of summer
with some definite heat going on, and that was last week.
It had some awful, awful heat. But as hot as
the weather was, you're joining an even hotter show today,
so it's gonna be a hot show. BO and I
are here today to have a chat with you. Imagine

(00:22):
being around the pool with your favorite beverage and just
chatting with us today. That's exactly what we're going to
be doing. We're here every Saturday and Sunday at two pm.
So call your friends and let them know we have
a show going on and they need to tune in.
We do have two offices. I want to make sure
you remember that is the two offices, one here in

(00:43):
Raleigh and one at the beach, so we can meet
you anywhere. And the beach is where Greg is right
now enjoying some time off with his family. So you
have Bo and I today. We are blessed and honored
to meet with you, our radio listener. So remember you
can meet with either of us complimentary anytime. Just call
nine one nine A five six nineteen sixty eight and

(01:04):
one of our team members will call you right back
as usual. There's always news out there, so we have
to start our program today with letting you know the
news and how it relates and how it impacts us financially.
And at Financial Resource Management, we like to stay on
top of that. I'm always reading. I know you are both,
So let's get into it. Let's get into what's going

(01:25):
on that's impacting us today.

Speaker 2 (01:27):
Yeah.

Speaker 3 (01:27):
Well, you know, one thing I've kind of noticed recently,
and I think with every global conflict, is that the
market is heartless.

Speaker 2 (01:36):
It.

Speaker 3 (01:36):
War is great ignore markets. War is fantastic for markets.
Israel's market hit an all time high last week, the
S and P five hundred. It's Thursday today, the market's
back up. By Friday, the market may have hit an
all time high. So we're very close to one as well.
World War one was the best time the for the
dal Jones. And it's interesting to see like the Middle

(01:57):
East is burning, the Ukrainian war is in a bloody stalemate.
The Strait of Hormuz, however you call it that Iranian
that's straight there where a lot of the oil, the
global oil goes through. It's teetering on shutdown. And markets
are soaring. But like we've talked about before, markets move
on confidence in the future. So a stock price is

(02:20):
today's value multiplied by a story about tomorrow. And I
think the majority of people out there have a lot
of confidence in tomorrow.

Speaker 2 (02:28):
And by tomorrow, I mean.

Speaker 3 (02:29):
Tomorrow, next week, next month, next year. I'm not so
sure we'd have that same confidence with everything going on
right now under different leadership. And I'm not praising Trump
for everything he did, but I'm just pointing out that
there's a lot of people out there. There's tons of noise,
especially with everything happening in New York with the mayoral
candidate up there of it just got elected.

Speaker 2 (02:49):
It's just crazy times.

Speaker 3 (02:51):
I think a lot of people hate Trump more than
they love America. And so what what I'm getting at,
what I'm getting at is just tune out the noise.
And I think a lot of retail investors have done
a great job doing that recently and just saying, Okay,
all this stuff is happening. Yeah, CNN says the world's
gonna end. I turn on CNBC and I got Kramer
yelling at me about how the stock market's not gonna

(03:13):
come back for fifteen years.

Speaker 2 (03:14):
I don't care.

Speaker 3 (03:14):
I'm just gonna keep investing, and in a way, that
is the best way to do it. Keep your head down,
especially if you're an individual investor not working with an
advisor who can be your sounding board. Just keep your
head down and turn off the noise and you're gonna
do better. Continue to invest because the market doesn't seem
to care as of late.

Speaker 1 (03:32):
Well, you do that, most of you that are still
working or doing that in your for one ks nobody's complaining,
you know that, about the fact their money's coming out
of the paycheck gave them going into the market and
the market's going down. So that's the reason people believe
for one k's do so well, but they don't realize
their dollar cost averaging. Now. The other thing is, you know,
we we've had economists on our show before. In one

(03:54):
I cannot remember her name, Gosh, she was so good.
She talked about you can always see the forward of
the market by what's going on in when they're building
multi family units like apartments and things like that.

Speaker 2 (04:08):
They haven't slowed down on that.

Speaker 1 (04:09):
No, they haven't slowed down. And Briar Creek just announced
they're building a whole brand new set, and then where
I'm at in Clayton, they're just knocking it out, and
I'm like, how where are these people going to go
to school? Because you know, so they that looks forward. Also,
she said, look at the sale of trucks, interesting trucks,

(04:29):
and you you can go try to find a truck,
but you're most likely gonna have to wait if you
want a new one and you want everything on it
that you want, And the used truck market is just
about as expensive as the.

Speaker 2 (04:40):
New down here in the South, right.

Speaker 1 (04:43):
So she made that point that's always stuck in my head.
You have to look at what's going on to project
what's gonna happen. And I do think. I don't think
we're headed for recession unless something's out there that I
don't know about, which I always reserve and say that
because you know, we had the nine to eleven and
that was a shock and you know all that. But

(05:04):
I don't think that's coming. I don't, and I've talked
to other money managers who don't feel that the recession
is in the near future either.

Speaker 2 (05:14):
I agree with that.

Speaker 3 (05:14):
I think we're out of the woods for the obvious recession,
but I will say, I think true risk is what
exists when you think you've thought of everything. Yeah, exactly,
and so you know, you let your guard down. You're like, hey, look,
everything's great, everything's peachy. Maybe the situation in the Middle
East gets resolved, in the Ukrainian War gets resolved, everything
starts to look.

Speaker 2 (05:34):
Like it's gonna be okay.

Speaker 3 (05:37):
And then all of a sudden, you start taking a
little more risk than maybe you should with where you
are in your financial journey and what you know, and
then you have a black Swan event that comes out
of nowhere.

Speaker 2 (05:48):
Yeah, and the market drops byt fifty percent.

Speaker 3 (05:50):
Because again, true risk is what happens when you think
you've thought of everything.

Speaker 2 (05:54):
And so it's always.

Speaker 3 (05:55):
Important to maintain a strategy that is based on where
you are in your life, not really what is going
on in the market. And you know, I remind clients
of that all the time, because we have a lot
of clients that will not get in touch with us
as much as they need to. It is it is
shocking to some people out there. I'm sure that we

(06:18):
have clients I do at least that have It's been
two plus years since I've talked with them. And it's
not for lack of trying. I'll call them, leaving voicemails.
I'll send them emails. Meanwhile, they've got a couple million
bucks with us, and they're paying a management fee. But
I think they're just complacent and they're just happy with
what's going on, which is great, which is fine. But
I tell them, look, it's not so much about me

(06:40):
giving you an update and letting you know, hey, we're
moving a little bit of money to small cap stocks
and towards international and away from bonds.

Speaker 2 (06:48):
Whatever it is.

Speaker 3 (06:49):
It's more all right, John, when we sat down two
years ago, one year ago, six months ago, here's what
you had going on. You were saving up for a
new car. You're gonna do some porchs renovations, you're gonna
do ABCDE. You know your parents were in ill health.
What's happened since we last met, because that is what
is going to encourage us to make an update potentially

(07:11):
in your plan. It's not that okay, this is happening
in the global front.

Speaker 2 (07:16):
No.

Speaker 3 (07:16):
I mean that stuff's important, and that's what the money
managers do with these little changes they make along the way.
But we're not going to make overhaul changes to your
plan unless there's a major update in your life. And
that's something that we have to stay in tune with
what's going on in your life. And that's why we
urge all of our clients to have at least an
annual update. Some clients like to meet quarterly, some clients
like to meet twice a year. So this is a

(07:37):
good time. If you haven't talked to your advisor in
quite some time, or maybe you just are looking for
a fresh perspective and a new opinion, we'd love to
sit down with you kind of show you how we
work and we look at the full picture. I met
with a client yesterday and it was a younger client,
and I was talking to them about the need for insurance,
and they're like, why didn't my previous advisor ever talk
to me about this stuff. They didn't talk to me
about anything but like how they basically wanted all my

(08:00):
money under management. And then I'd come into their office
and they'd show me all these charts and graphs about
the exposure I had to different parts of the world.
Ninety nine percent of clients don't care about it.

Speaker 1 (08:10):
If you do.

Speaker 2 (08:12):
That's fine, we'll go into it.

Speaker 3 (08:13):
But We're going to talk about what matters to you
and why it matters, and really explain everything in detail.
So again we'd love to meet you our number nine
one nine eight five six one nine six eight.

Speaker 1 (08:24):
I find what's most appalling to me as I've had
clients go, you know, I am sixty five getting ready
to retire, and I need to know about Medicare and
social security. And the reason I'm here today as a
radio listener is because my advisor, when I went to
him and tried to talk to him about that, he said,
I don't do that, And I said, are you serious?

(08:46):
And they said, YE know that they only manage money.
I said, I kind of do both because it all matters,
you know. So and we have you know, other like
we've had Hal Edams on our show and he manages
his money, so that that relieves me of manageing a
client's life, you know. So it's about managing life and money.

Speaker 2 (09:05):
It is.

Speaker 3 (09:06):
And we've got a lot to talk about today, including
more on this information and just why it's important to understand.

Speaker 2 (09:13):
What's going on.

Speaker 3 (09:15):
Today's going to be a good lesson in financial markets
and some things that confuse a lot of investors.

Speaker 2 (09:19):
So y'all, please stick with us. We'll be right back.

Speaker 1 (09:21):
Welcome back to the second segment of The Great Hicks Show. Today,
we're here to update you on things that are happening
and things that you might want to think about in
your financial picture. And today's show is it's kind of interesting.
It's called living on limited information. It's interesting that I
will meet with people and I tend to sometimes use

(09:42):
the lingo that we use and they'll say, I'm not
sure what that is, So I have to get on
a different hat. And remember when I'm talking to radio
listeners and clients, not to use symbols as much, but
just to spell it out. And we're going to talk
about those today a little bit. But anyway, you're listening
to The Great Hicks Show. In case you tuned into

(10:04):
the second half, we're so glad that you joined us.
We're here in Raleigh. A Financial Resource Management is the
name of the firm, and we do offer complimentary meetings
for radio listeners, So give us a call. Nine one,
nine eight five six nineteen sixty eight. Now, many of
you out there have probably done investing for a while,
so you know some of this terminology, but it never

(10:26):
hurts to break it down again, and I don't want
to undermine the things that people know sometimes. But you know,
there are things that we do in the investment world
like stocks, bonds, mutual funds, and I think that our
radio listeners probably know that. But the thing that has
only been around a few years is ETF and I

(10:48):
want to talk about that a little more and maybe
loop in the mutual fund idea and stuff with it.
But I love exchange traded funds. That's what that stands for,
and we use them quite a bit.

Speaker 3 (10:59):
Yeah, it's a passive investment, which basically means it's run
on a formula or an algorithm. And so, for example,
if you wanted to invest in large cap stocks, large
US companies, you could buy an ETF that tracks the
S and P five hundred. If you wanted to get
granular with it and say, okay, I feel confident about

(11:20):
India's debt, for example, I want Indian bonds. Well you
could find an ETF that did that, or any you know,
crazy subsector that you thought about. The ETF market is
huge and it's a great way to get exposure into
some of those markets as opposed to you know, if
you have an idea that whatever I think the consumer
discretionary is going to be a you know, a positive theme.

Speaker 2 (11:43):
Over the next two years, they are to one AI.

Speaker 3 (11:45):
Instead of going in and choosing like one or two
or three names with the fifty thousand dollars that you
have to invest there, you just buy an ETF that
tracks the whole index. And so just going over the
basics real quick on stocks and bonds and mutual funds.
Stock a lot of people know it's an ownership in
a company. So like you're buying a tiny piece of
Apple or Costco. If Apple does well, you benefit. If

(12:08):
Tim Cook trips over a charger cord, well you know
you're so do you. In a sense a bond, you're
the lender, not the owner, so the company pays you back.

Speaker 2 (12:17):
Ideally doesn't always happen.

Speaker 3 (12:20):
So let's say like your buddy Steve borrows one hundred
bucks from you and pays you one hundred and five
next year. That's a bond, unless he's my buddy Steve,
then that's a donation. A mutual fund is a group
much like an ETF, but it's actively managed, and so
mutual funds are what you have in your four oh
one K. You know, you invest in inside of a
four oh one K, you've got fifteen to twenty five

(12:42):
different mutual funds you can choose from. Some of them
are target date funds, to say I want to retire
in twenty forty five, twenty forty.

Speaker 2 (12:49):
Whatever it is.

Speaker 3 (12:49):
You put your money in that thing, and ideally what
it's supposed to do is automate your risks, so your
higher risk now and then lower risk later. We've talked
about the pitfalls of target date funds and why they
can oftentimes have a lot more risk than people think,
particularly as you get closer to retirement. Then there's other
mutual funds like large cap growth and bond mutual funds. Well,

(13:13):
they're managed. So like you if you listen to this,
if you have an investment account with an advisor that
you're paying a fee on and it's one hundred percent
of mutual funds, well you're then oh yeah, for sure.
I know several institutions that do basically solely that you're
paying layers of fees. So you're paying your one one
and a half percent management fee that your advisor gets,

(13:36):
plus you're paying mutual fund fees, and those mutual fund
fees can sometimes be an excess of one percent. When
you really start digging into your fee and what you
have in your account, you can see that you're likely
paying more than you're comfortable with. And so I've done this,
Want has done this for several clients and prospects that
have come into our office. I heard you mention that

(13:56):
thing about the fee. I'd like to understand what my
true fee is.

Speaker 2 (13:59):
Give what's a call?

Speaker 3 (14:00):
We will you know, dissect your portfolio and let you
know nine one nine eight five six one nine six
eight and then the last one. Like we mentioned Wanda, ETFs,
like a mutual fund, trades like a stock.

Speaker 2 (14:11):
Oh here's another thing.

Speaker 3 (14:13):
Much better tax properties than a mutual fund. Mutual funds
have very adverse tax properties. All that trading that happens
inside of the fund throughout the course of the year
is passed on to the end investor. And so if
you're holding lots of mutual funds in taxable accounts, consider
changing those over to ETFs if you like that broad diversification.

(14:34):
ETFs are more nimble, better from a tax standpoint. They're
not going to pass you a tax bill after a
year of it. You didn't make any trades like a
mutual fund is nine one nine eight five six one
nine six eight if you'd like a breakdown in terms
of fees or what you own or whatever in your
current portfolio.

Speaker 1 (14:52):
Right, and then the thing is mutual funds. I've seen
people come in with mutual funds in the RAS, which
is okay, but if you're headed into retirement, typical mutual
funds don't pay a lot of dividend and I like
to be to create income for the client to be
able to take income. So that's the analysis that we
will do for you. So again call us nine one

(15:14):
nine A five six nineteen sixty eight.

Speaker 3 (15:17):
And before we move on really quick, last thing I'll
say about mutual funds is there's a staggering stat that shows,
I think it's ninety two percent of active managers. Active
managers are the people who run the mutual funds have
not beaten their index. And so if you're buying, excuse me,
for example, a large cap mutual fund, large cap growth,
that's the S and P five hundred, ninety two percent

(15:39):
of those funds that you're maybe paying one percent to
be in are going to underperform the S and P
five hundred, So why not go out and just buy
the index. That's what an ETF is, and you're paying
a fraction of what you would pay in the mutual fund.
So there's so many reasons that we prefer in most
cases ETFs over mutual funds.

Speaker 1 (15:57):
Absolutely. Now the next term that I tend to use
the acronym four and I have to take a step back,
is RMD. That's required minimum distribution. Now, I realize that
doesn't mean a lot for a big segment of the
population listening. But if you are headed to age seventy three,

(16:17):
let's say you're sixty eight, sixty nine to seventy, you
get to seventy three, the IRS says you have to
start taking some distribution. Now I think there's that's gonna
be delayed to seventy five at some age or some year,
but I can't remember what that year that is. But
for the most part is age seventy three, unless you
go back aways and you had to start at seventy

(16:38):
and a half. But anyway, that's when the government says, hey,
you've got to start taking some of this money. And
I'm finding that people don't realize that. They'll say, do
I have to take this money. Oh absolutely, you're going
to have to take some of this money. And that's
why we like to do an income portfolio so that
you're not liquidating so much to take what the government says.

(17:00):
And typically it's about four percent of your RA four
to one K portfolio value.

Speaker 3 (17:06):
That's true, and that's in the first year, and that
percent goes up because it's based on your life table.
And so the way to think about it, you take one,
you put it in the numerator, and then the denominator
is how many years the life expectancy table thinks you
have left. And so if you're in your late eighties
or nineties, that percentage could be well in the twenty
percent range. And so think about it this way when

(17:27):
you're doing some planning and you're saving for retirement. Not
to discourage anybody from saving for retirement, but think about
where that money's going. If you're a higher earner right
now and you're getting a tax break, you know you're
in your forties or fifties, highest earning years, and you
know you're making several hundred thousand dollars and you're putting
twenty five thousand into a retirement account, it feels good to.

Speaker 2 (17:49):
Get that tax break. I get it.

Speaker 3 (17:50):
Well, then you get to retirement and maybe you're fifty five,
sixty years old and you've got between you and your
spouse several million dollars in pre tax four oh one
K money. Okay, that's great, but is it really could
there have possibly been a better way? I think so,
because that three million dollars, Let's say, if you need it, well,

(18:11):
we'll start drawing it down. But if not, it's gonna grow,
so that three will grow to six, potentially grow to
ten or twelve. Then you get to RMD age at
seventy three. If you don't need that money and you're
having to take four percent off of it, just do
the math on how much that is that's going to
keep you in the highest tax bracket for the rest
of your life. I can't tell you how many people
I've run into that have had this problem. A lot

(18:33):
of corporate executives, a lot of people that have done
very well, but taking their money and put it all
into the pre tax account and kind of foregone the
other side, which is the WROTH account. Now want to
mention RMD required minimum distribution. You got a tax break
up front, for that pre tax money. By the time
you're seventy three, soon to be seventy five, Uncle Sam says, okay, buddy,

(18:55):
you've had your fun. Time to take four percent out
if you've already paid taxes on your retirement account, which.

Speaker 2 (19:00):
Is a roth.

Speaker 3 (19:01):
There is no rmd R, no rm D at all,
and there are strategies if you don't need your rm
D want. I know, we love doing this charitable remainder
or sorry, what are they called? Qualified charitable distributions? So
when you hit seventy and a half, a lot of
numbers to keep up with here, a lot of ages.
But when you hit seventy and a half, you can
take money up to one hundred thousand dollars from your

(19:23):
retirement accounts pre tax and send them to charities or
a charity of your choice, church and Saint Jude's and
Children's Flat, to hope and wounded warriors whoever. You can
bless a lot of people. What you've done there is
you've gotten money out of your retirement account. You have
blessed these organizations. Uncle Sam gets nothing because it's a

(19:45):
tax free transfer. And the big thing is you've kept
your standard deduction intact.

Speaker 1 (19:51):
Absolutely and you know, when I meet with people that
are five years from retirement, they're maxing out their four
oh one K I have a conversation with them, how
would it be to wise for you if we switch
to a four toh one k WROTH, Because if they're
doing thirty thousand a year, which is the max, you're
talking about one hundred and fifty thousand dollars towards a

(20:11):
ROTH account. Now, yeah, contributions, right, So yes, you'll pay
taxes now, but think about the fact that in retirement
you'll have this bucket of tax free money to use
for whatever.

Speaker 3 (20:21):
And it gives you flexibility. And that's what we're all about,
is making your journey easier. And it's not very easy
when you've got one significant pot of money to pull
from that's one hundred percent taxable, because then you know,
we're always having to deal with those associated tax rates.
And by October November of each year, it's, oh, gosh,
you know, I've pulled out enough money so that I'm

(20:42):
at that next tax rate. The next dollars I pull
out of this IRA that's pre tax is going to
be a whole lot more expensive. So Wanda is exactly right.
Sometimes it makes sense to pay the taxes before the growth,
especially if you're my age. I'm in my late thirties,
and so I'd much rather take ten thousand dollars and
pay twenty five hundred dollars on it to get it
into an account so that that ten can go to twenty,

(21:04):
can go to forty, can go to eighty and be mine.

Speaker 2 (21:07):
One hundred percent.

Speaker 3 (21:07):
And looking in the rearview mirror, that eighty thousand dollars
that has no taxes on it, I only paid twenty
five hundred dollars on that years and years and years ago.
So again, there are some creative ways to do things here,
and y'all, we've got so much more to educate you on,
so please stick with us and we'll be right back.

Speaker 1 (21:24):
Welcome back to the third segment of the Great Hicks
Show with Bo and Wanda. Today here educating you on
some of life's most important things, which is your money
and your future. So we're glad that you joined us today.
You can reach us by calling nine one nine eight
five six nineteen sixty eight to schedule your schedule your
complimentary meeting. Today we're talking about living on limited information

(21:47):
and some of the things that you hear but maybe
have never really understood. So that's what our job is
is to inform you, let you be have some knowledge,
and knowledge is power. But anyway, to follow up and
to finish today some of the acronyms that we have,
I want to talk a little bit about private equity
because that's something that you do hear that term, and

(22:07):
I have actually invested some of my client's money in
private equity. But you know, being that I've been in
the industry a while, you know, I'm very selective on
when I do that type of investment because it sometimes
can be illiquid, and so you have to be careful
in putting so much in that area to not be
able to get your money out. But anyway, private equity

(22:28):
is investments in privately held companies that are not public,
and sometimes you have to wait a little while, and
sometimes you can get very good dividends and very good
tax strategies for giving up your money for an extended
amount of time. But you know, there are some type
private equities that can be liquid quarterly in that kind
of thing, but for the most part, it takes a

(22:50):
very special type of situation for me to consider private
equity because I just want to make sure the client
understands the illiquidity of it.

Speaker 3 (23:00):
Yeah, and there's a lot of access points nowadays because
they have gotten so much interest and so excuse me,
I think I'm catching something for my son's daycare. By
the way, speaking of my son, quick segment, Bill william
snow Nicholson, my son. His second birthday is today, So
happy birthday, young Bill, wherever you are probably hanging with me. Okay,

(23:24):
So anyways, Yes, private equity has been kind of a
hot topic recently, and because of that, there are now
a lot of access points for the average investor. Private
equity and alternative investments used to be kind of reserved
for the ultra high net worth, very accredited investor. Now
there are access points through interval funds, which are a

(23:46):
lot like mutual funds and other things, so that you
can gain access to some of these private markets. And
for the right person, it can make a lot of
sense to take ten to fifteen percent of your total
portfolio allocation and put it in private equity or some
sort of an alternative allocation like a head strategy or whatever,
because what it does is it smooths out the ride,

(24:09):
it increases your alpha if that means anything to anybody.

Speaker 1 (24:14):
And well, it's a diversification.

Speaker 2 (24:17):
It's good diversification.

Speaker 3 (24:18):
Yeah, you know, you have traditional stocks and bonds and
people are oftentimes looking for other things and so alternative investments.

Speaker 2 (24:24):
Yeah.

Speaker 3 (24:25):
We are all about showing clients the solutions that are
out there that might make sense for them. We, as
our clients will tell you, are not pushy at all,
and we don't scare you into a corner and say hey,
this is the next new hot thing and this is
what you should do and sign here and get out
of our office. We know that there's some people out there,
unfortunately that do that and try to put you know,

(24:47):
too much of your money in a certain area.

Speaker 2 (24:50):
We're not like that with alternatives.

Speaker 3 (24:51):
We don't shy away from them, but we do limit
clients exposure to alternatives to about ten to fifteen percent. Yeah.

Speaker 1 (24:57):
Absolutely. Now the other term, that's throw out a lot.
And even on this station with other advisory firms, not
gonna name any I'm sure you've heard it, but I
hate when someone says, oh, we are fiduciary. I mean,
when I was in banking, we were told that our
whole mantra was being a fiduciary because fiduciary is a

(25:20):
person who holds a legal or ethical relationship of trust
with one or more parties. So if you're a registered
investment advisor or certified financial planner, you are fiduciary because
you're looking after someone else's money and they're putting faith
and trust in you. So for someone to throw that
out I think pretty carelessly and brag. I mean, yeah,

(25:44):
that maybe that is something to brag about, but you
should have that innately as a person that cares for
other people and their money exactly.

Speaker 3 (25:53):
And if you're using it as a marketing term, is
what you're getting that one up?

Speaker 2 (25:56):
I think.

Speaker 3 (25:58):
I think clients and prospect are much better off getting
to know us sitting across from the table from us.
We take things slow, like I just mentioned, like we're
gonna spend that first meeting learning about you. We're gonna
take that second meeting and we're gonna talk to you
about what we think a good solution for your situation
might be. We're not gonna make any decisions then, We're
gonna take this.

Speaker 2 (26:17):
At your pace. We want you to be comfortable with that.

Speaker 3 (26:19):
We want you to ask questions along the way, We
don't want you to feel rushed. This is a relationship
based business. What I'm getting at though, is I think
that I think that our clients have more faith in
who we are as people and just our personal ethics
than they do the stamp of approval.

Speaker 2 (26:36):
Hey, I'm a fiduciary.

Speaker 3 (26:37):
So if you're out there marketing yourself as a fiduciary,
or if you're a consumer out there falling for someone
who's marketing themselves as a fiduciary, understand this. Like Wanda mentioned, sure,
yes we are fiduciaries if you're asking the question. We
are fiduciaries and multiple capacities, but we are also governed
by FENRA and the SEC. There's there are some professionals

(27:02):
I know who are on the radio and elsewhere, you
know whose clients have come in contact with who are
not governed by FINRA in the SEC because they dropped
their licenses with FINRA in the SEC. They are now
only licensed with the Insurance Commission. Or with the Insurance Commission.
You're held to a different standard. You're held to a
suitability standard. So as long as that thing was suitable,

(27:25):
well then that's fine.

Speaker 2 (27:26):
At the time. You know, think about this.

Speaker 3 (27:28):
You're at a restaurant, nice restaurant, and you're asking the waiter,
who seems like a nice guy. He tells you he's
a fiduciary, what's the best thing on the menu, and
he sends you home with the most expensive appetizer and
the most expensive steak, and the most expensive dessert and
the most expensive bottle of wine. You had a decent dinner,
Did you get the best thing on the menu?

Speaker 2 (27:48):
No, no, absolutely not.

Speaker 3 (27:50):
The pork chop was the best thing on the venue, exactly.
But that waiter went home at the end of the
night with full pockets because of you, because he steered
you in the most expensive stuff. And so it's important
to kind of understand the nuances behind the scenes on
who are you governed by? Why are you recommending me
this particular investment? And again, so simple. If something sounds

(28:12):
too good to be true, it probably is the people
out there who get hoodwinked. It happens because it happens
very quickly, and these professionals and air quotes play on
their emotions, So don't fall for it. We always encourage
second opinions. Come see us, Go see one of them.
After you see us, I mean, we have enough confidence
in the way that we do business and the way that.

Speaker 1 (28:33):
To send you out.

Speaker 2 (28:35):
That's exactly right.

Speaker 3 (28:35):
We fully endorse second opinions, and so don't fall victim
to that kind of stuff. Just give us a call
nine one nine eight five six one nine six eight
if you'd like us to review your situation, we'd be
happy to.

Speaker 1 (28:46):
And yes, absolutely, And not only have I heard that,
but also you know the people that are only insurance licensed. Yes,
you listen to that person. They told you they didn't
want to take ris. That doesn't mean you put them
all in annuities that I mean, And that's what I've seen.

Speaker 2 (29:04):
Because there's risk there too.

Speaker 1 (29:05):
Yeah, exactly, I've seen these widows. The widows come in
and they have all annuities and they're like, Wanda, I
don't I don't have any money. I'm like, what do
you mean, don't have any money? You got this much money?
I can't get it. I said, what do you mean?
So when I start digging, they're in ten and fifteen
years surrender periods and every bit of their money is
in it. So you're not a fiduciary at that point.

(29:29):
And just because just because it was suitable because of
what you heard doesn't mean it was right exactly. So anyway,
moving on, don't want to be too negative, but it's
hard not to be. So. The other term this out
there that can you know people will kind of accept
what you say but that really don't understand is a

(29:50):
retr e I T. Some people have called it WRIT
in the past, but it's reaped real estate investment trust.
It just some of them are publicly traded, some are
non publicly traded. It's just a company that owns, operates,
or finances typically income producing real estate. Essentially, it's a
way for individuals to invest in a portfolio of properties,

(30:14):
similar to investing a stock or mutual fund, but it's
real estate and they don't have to own it or
take care of it. And typically the dividends very nice.
And in the publicly traded I like to use it
as a diversification tool. The non public publicly traded sometimes
there's tax advantages to that go along with that. But
again you have to be willing to wait to get
your money exactly.

Speaker 3 (30:35):
Yeah, And so you're right, Wanda. You think about apartments, smalls,
storage units, hospitals, data centers, these are all things that
could be owned inside of a reate, and it's a
way to get real estate exposure in your investment account
like your IRA, your retirement account. How do I buy
real estate my IRA without going to like an equity
trust type custodian in dealing with a bunch of tax situations.

(30:57):
But you buy a reate and you obviously have to
analyze that read and sit down with your advisor and
make sure that what you're getting in makes a lot
of sense for you. But it's better than being a landlord.
You know you're never going to unclog a toilet I
owning a red well.

Speaker 1 (31:10):
Speaking of that, many of you out there are probably
especially in the Johnston County the other end of Wake County,
are experiencing five point forty getting ready to go through.
They've already started the process, and some of you have
been approached about selling your land and if you didn't,
they kind of took it anyway and did this condination thing.
But there is a ten thirty one exchange that you

(31:31):
can do which is sort of like a real estate
investment trust if you will, but then you can then
it's an upbreach of seven twenty one ten thirty one
to seven twenty one. And what the upreach means is
you have more liquidity features, so you sometimes can get
out of that systematically as compared to being in a
ten thirty one solely. So if you're out there and

(31:52):
you're experiencing, you know, needing to get rid of your land,
whether whether it's retirement or maybe the the state has
approached you because five forty is coming in, give us
a call. We have some tools for you. Nine one, nine, eight,
five six, nineteen sixty eight.

Speaker 2 (32:08):
Very good point.

Speaker 3 (32:09):
Yeah, if the government's going to take your land through
imminent domain or through condemnation, or if you're going to
sell your land, don't pay them more taxes than you
need to. And what Wand is talking about is exactly right.
Ten thirty onees through an uprate, maybe an opportunity zone.
There's tons of different ways that you can save taxes

(32:29):
and not to not give the government more than they need.
And if the government's not going to take your land,
and if you're not going to sell property, you still
shouldn't pay more taxes than you need to. You should
never pay more taxes than you need to. One thing
that we kind of pride ourselves on as Financial Planners
is how closely we look at tax impact for all
client situations, and not all investment advisors do that. It

(32:51):
is a huge piece of the puzzle saving you money
in taxes, and we actively do it for all of
our clients. So if that's it's not an area that
you're getting service on currently and you'd like to learn
more about some ways that we can reduce your tax impact,
give us a call nine one nine eight five six
one nine six eight. We've got so much more to

(33:12):
talk to you guys about. Please stick with us and
we'll be right back.

Speaker 1 (33:15):
Welcome back to the last segment of the Greg Hicks Show.
Boy that went fast, but you can re listen to
this on the iHeart what I want to say, iHeartMedia
or you Spotify, Apple Podcast all that, so you can
go back and relisten even on our website frm NC

(33:37):
dot com. We're talking about living on limited information and
the terminology that's thrown out there that sometimes you don't
know what that is and you might need to some
of it you're leaving up to your advisor, and we
encourage that as well. But still knowledge is power, So
you do want to kind of understand what's going on now.
The other term that I use quite a bit when
I meet with with radio listeners or with clients is

(34:00):
risk tolerance. That is really important. If you don't leave
with knowing anything today from what we've talked about, know
your risk tolerance because that is critical to surviving ups
and downs in the market. And the risk tolerance really
refers to an individual's willingness and ability to accept potential

(34:21):
losses or volatility in exchange for the possibility of higher returns.
I mean, that's the bottom line. It's a measure of
how comfortable you are with being in the market. Now.
We use a questionnaire and just so you know, our
questionnaire covers a lot of things like your age, which
matters for risk tolerance, how much cash you have in

(34:42):
the bank to cover your expenses, how long you have
before you'll need to tap into income on your portfolio.
And we also go into even more depth if the
market fail suddenly by fifteen percent one day, how would
you feel. But I do tell people be careful how
you answer, because if you do answer this this risk
tolerance questionnaire very conservative, I am obligated to invest.

Speaker 3 (35:05):
You that way.

Speaker 1 (35:06):
So but it's still a good gauge of where you
are as far as risk.

Speaker 3 (35:11):
Yeah, and we'll kind of walk you through it too,
and maybe nudge you in certain directions. Because here's my
beef with the risk tolerance questionnaire. I think there's a
lot of recency bias in the results that come out
of that. And what I mean is, if you fill
it out a risk tolerance questionnaire at the bottom of

(35:32):
the market in two thousand and eight, you're going to
be incredibly conservative. Well, your advisor at that point should
be encouraging you to, if you're far enough away from retirement,
to take on a little more risk than you really
feel like you need to in that point in time,
because hey, look, the market's down fifty five percent. Surely
we're going to bounce back at some point, and when
that happens, we don't want to be sitting in cash.

(35:54):
Same thing's true for after the market's high like it
has been these past two years. There's been shaking us
at the start of this year. But when you're at
the tail end of a bull market and everything feels
good and your Robinhood account has doubled in two years,
and you know you're a genius, you feel like I
can take as much risk as I want to. I'm
gonna go all in, balls to the wall.

Speaker 2 (36:15):
Let's do this.

Speaker 3 (36:16):
Well, retirement's five years away, and then we have a
situation like we did in April, the market drops close
to twenty percent in just.

Speaker 2 (36:23):
A few weeks.

Speaker 3 (36:24):
Well, all of a sudden, you're no longer high risk.
You're like, oh my gosh, how did I lose two
hundred thousand dollars of my million dollar portfolio? Because this
is the way you set it up when you were
feeling good. And so it's all about being objective with
the answers that you give. Where are you in your journey?
What can you stomach if the market does this Wanda

(36:45):
alluded to it, if the market does this real life impact,
This is how that might look on your portfolio with
your current risk tolerance as it's set right now. Are
you okay with that? Would you be okay opening that
statement across the table from your sp else you know,
and your retirement dreams are sitting right there, and your
accounts are down three hundred thousand dollars from three months before?

(37:09):
Is that okay? Because if it is, that's what we'll do.
And so it's all about yeah, identifying where you are
and really making sure that you're comfortable before we move
forward with that risk.

Speaker 1 (37:18):
We have tools though, and I'm very proud of us
for this because in the annuity world, I know some people,
I don't really think there's a lot of people that
think that's a bad word anymore because we've used them
so much. Our clients are comfortable with them and they
like them. But in the annuity world, which they have
sometimes have all kinds of ways to solve a problem.
But they do have a product that allows you to

(37:40):
pick your risk tolerance, your risk buffer, and so you
can pick a buffer that allows you to take a
lot of risk but minimize the downside. And I love
that because I can position a portion in that and
they can even take more risk over here. So we
kind of do that with bigger pictures because that way

(38:03):
my client can take risk but buffer the risk on
the other side.

Speaker 3 (38:07):
Yeah, And so an example would be like, okay, client's
got a million dollars, we might take two hundred and
fifty thousand and put it over into the strategy that
you got to commit your money for six years. But
there's two three year segments within there, and each one
of those three year segments tracks the S and P
five hundred or whatever index you want. Let's just say
the S and P five hundred twenty percent protection on

(38:30):
the downside of the market, but there's a fifty percent cap.
So if the market goes up by sixty percent, you'll
get fifty percent in those next three years. If the
market goes up by forty five percent and you get
all of it, you're up forty five percent. But the
benefit there why you gave up some upside as. If
the market goes down Let's say the market goes down
eighteen percent over the next three years, you're not down
at all because you're within that twenty percent level of protection.

(38:53):
You go down outside of that twenty five percent, you're
only down five percent. And so it is a good
way I mentioned this. Alternatives can do this too.

Speaker 2 (39:02):
In a way. This is an alternative investment. It can
smooth out your ride.

Speaker 3 (39:05):
A little bit, because if we go through a nasty market,
it's likely to be your best performing investment, depending on
what else you have in your account. And so if
these kind of things are not what's your advisor is
talking to you about, or maybe you're not working with
an advisor, and you want to talk about how you
can mitigate the risk on your portfolio because you're getting
towards retirement, or maybe you're in retirement and you're concerned
about you know, the tariffs take effect again in two

(39:27):
weeks and there's maybe gonna be some volatility. I want
to make sure I'm not overextended. Call us nine one
nine eight five six one nine six eight is the
place to start. We'd love to just have a conversation
or anything else. Nine one nine eight five six one
nine six eight.

Speaker 1 (39:43):
Yes. Absolutely. And also in our world we talk about
probate and what that means and the terminology T O,
D and POD, which are which are good things to
look at if in your world, if you have bank
accounts and things like that. But anyway, probate I want,
I don't want to spend a whole lot of time

(40:04):
on it. It's it's just a way of passing your
money to the next generation. But you can avoid It's
not a big, scary, expensive process. I don't know why
people keep saying that, but you can avoid that by
doing certain things. All the the iras four one ks,
those annuities, they're beneficiary driven Roth iras beneficiary driven, so

(40:25):
they go directly to your beneficiary. But bank accounts and
regular brokerage accounts will pass by way of the will
unless in bank accounts you add the terminology TOD which
means transfer on death, And in the brokerage world, brokerage
accounts like you know, e Trade or whatever you might have,

(40:46):
it's POD payable upon death. So when you do that,
you're making that a beneficiary driven situation. So you realistically,
other than real estate, could make your whole estate beneficiary driven.

Speaker 2 (40:59):
Yeah, it's a great thing to do.

Speaker 3 (41:01):
I mean, if you know who your beneficiaries are going
to be and your wills in place, I think I
would argue that probate is a scary thing and has
a negative reputation for a reason.

Speaker 2 (41:12):
I don't like probate.

Speaker 3 (41:13):
If a client can avoid probate, I think they should
do it because it can be lengthy, it can be costly.

Speaker 2 (41:18):
It can take upwards of a year and a half.

Speaker 3 (41:20):
I've had clients deal with that before, and one is
exactly right. The money that is in bank accounts or
brokerage accounts, that money will go according to your will
when you pass. However, that means your next generation. Your
beneficiaries don't have that immediate liquidity. They don't have access
to that money until probate is settled, which could be

(41:40):
upwards of a year year and a half. If you
just go to the bank and you say, hey, I
want that one page form, POD, let me sign that form. Well,
now that account at the bank that was going to
go by probate is immediate to your next generation or
your beneficiary. All your insurance accounts, all your retirement accounts, annuities,

(42:01):
everything are already that way, and so I would get
everything you can set up in beneficiary driven format.

Speaker 1 (42:07):
Yeah. Absolutely, it just makes it easier and it really
spells it out from the grave for you, for your
heirs and that kind of thing. But yeah, I agree,
probate is something you don't want to go through. But
a lot of people advertise it it's expensive and it's scary.
It's not. But you still don't want to go that
way if you don't have to, And we love to

(42:28):
recommend that clients do tod and pods. I always recommend
it for that. And also, you know, if when you're
going through a situation where you're getting and maybe you're
losing a parent, maybe they're you know, they're in the
end days. I had this situation yesterday. Everything they have
is kind of tied up, like beneficiary driven. He wanted

(42:50):
to know what he could do to have access to funds. Now,
well it's too late to do that because mom or
dad is not able to sign anymore. So sometimes it
could be beneficial to add a child, an adult child
that you trust to a joint checking account just so.
And I'm not talking it big money. I'm talking about
just enough that they can can survive, you know, and

(43:12):
get through paying your bills and that kind of thing.

Speaker 3 (43:15):
So, and it's fine on a checking account, it's fine
on a savings account.

Speaker 2 (43:19):
Never do it. I should never say never.

Speaker 3 (43:22):
I don't see any reason that you would ever do
it on a brokerage account. I don't either brokerage account
has investments in it that likely have capital gains. If
you're planning to pass that on to your children anyways,
well just do it that way, because when you pass
it on to your children, either through todpod, probate, whatever,

(43:43):
they get a stepped up cost basis. So all that
Microsoft that you bought back in the nineties and you
put fifty thousand dollars in and it's now worth one
and a half million dollars. You haven't been able to
do much with it because you're locked in and you
have that large capital gain. If you add your kids
to that account, they also assume that capital gain. If
you leave it to them after you pass, they get

(44:03):
a stepped up cost basis, and so their cost basis
is now the value when you pass that one and
a half million dollars you have in Microsoft. Well, in
the IRS's eyes, it looks like your kids paid one
and a half million dollars for it. They can take
it and sell it immediately with no tax consequence. Let's
talk a little bit about capital gains.

Speaker 1 (44:21):
Yeah, yeah, dude, because well, yeah, let's do because capital
games do matter. If you sell a highly appreciated I set,
especially real estate or even a stock, you're going to
pay taxes on the capital gains. Now it's typically a
lower rate, but capital gains taxes can also impact other
areas of your finances, like if you are on Medicare,

(44:42):
for instance, in your Medicare Part B premium, it's means driven,
so whatever the income is is what you're going to
pay in premium. So in our world. When I'm looking
at a non qualified account i e. Adjoint account, individual account,
I take that in consideration because capital games can cost
you very.

Speaker 2 (45:00):
Good point and understand this. Also.

Speaker 3 (45:03):
The capital gains rate is typically fifteen percent or twenty percent,
but if you are married filing jointly in retirement, you
can make ninety four thousand dollars or less and pay
a zero percent capital gains rate. If you're single, forty
seven thousand dollars or less, you pay zero percent capital gains.
Don't forget that. This is why it's important to have

(45:24):
an advisor, if it looks at the full picture, including
taxes and everything else we talked about today.

Speaker 2 (45:29):
Y'ah.

Speaker 3 (45:29):
We had so much fun taking you to school this afternoon,
So please.

Speaker 2 (45:33):
Remember our number.

Speaker 3 (45:34):
We'd love to meet you nine eight five six one
nine six eight. We know there's a lot of listeners
out there that have been listened for a very long time.
We appreciate everyone who listens to this show, and we
would love the opportunity to help you out. So give
us a call, come meet us nine one nine eight
five six one nine six eight, and remember this, it's
your money, it's your future, don't blow it. Advisory services
through Capital Investment Advisory Services LLC.

Speaker 2 (45:56):
Security is offered.

Speaker 3 (45:57):
Through Capital Investment Group, Bank Remember Finra and SIPIC on
East six Forks Road, Raleigh, North Carolina nine one nine
eight three one twenty three seventy.

Speaker 2 (46:03):
Past performance is not indicative of future results