Doug Houser:
From Rea & Associates Studio, this is unsuitable, a management and financial services podcast for entrepreneurs, tenured business leaders, and others who are ready to look beyond the suit and tie culture for meaningful measurable results. I'm Doug Houser. On this weekly podcast, thought leaders and business professionals break down complicated and mundane topics and give you the tips and insight you actually need to grow as a leader while helping your organization to grow and thrive. If you haven't already, hit the subscribe button so you don't miss future episodes. And if you want access to even more information, show notes, and exclusive content, visit our website at www.reacpa.com/podcast and sign up for updates. Today, Chris Hensel, Principal at Investment Partners, is here to share insight on how you can calm your financial anxiety about retirement. Welcome to unsuitable, Chris.
Chris Hensel:
Thank you. I appreciate you having me on.
Doug:
Absolutely. It's always a great topic to discuss, particularly at this time. I mean, I know this episode is recorded and going to air here just prior to the election, I think the week before, so a lot of unknowns. And there are so many things that we can't control, right, such as the political environment.
Chris:
No doubt.
Doug:
So, let's talk about to our folks in the audience about what they can control and what they should be thinking about. Let's start there. What are your thoughts?
Chris:
Well, I mean, the thing that most people can control is, first of all, the relationships that they have with advisors. And I'm really referring to all types of advisors, not just investment advisors but CPAs, attorneys. Those people do what they do depend on their specialty, but they also, especially in a year like 2020, they also can provide some advice and a bridge to less stress when that is needed. And if you don't have those kinds of relationships and you're doing it all on your own, sometimes it's difficult, especially in a year like 2020.
Doug:
As we said, and I think that's something that's very important, beyond just the investment advice itself, right, it's just, it's having that expert to talk to, to just kind of talk through things and all of that. Do you find yourself doing a lot of that?
Chris:
Absolutely. Absolutely. And the nice thing about building those kinds of relationships, oftentimes, what happens is you begin to build relationships across advisors where advisors have relationships with your other advisors, and that makes it very convenient because there's the interaction among your advisors as well. That kind of interaction can only be beneficial to a client.
Doug:
Yeah, absolutely. And I know you probably deal with people at all different age ranges and those kinds of things, but given the current environment, what are the key age ranges for you for somebody to really get involved with an investment advisor? And by that, I mean not just have one, but I mean, really sit down and go through and develop the plan and all of that.
Chris:
We definitely work with people of all ages as you just mentioned, and we do our best to provide investment advice and to provide a good approach to those people based upon the needs that they have. But most of us are really getting serious with people when they are approaching retirement or either in retirement because they're taking their life's savings. And no matter how they accumulate that wealth, they're taking that wealth and all of a sudden transitioning from accumulation to decumulation or really to providing a reliable stream of income that they can take into their retirement. And that type of planning and all the things that surround that really need to be done well in advance for retirement because there's a lot of things that need to be discussed and talked about, not just financial either, talking a little bit about what their retirement might look like, how they might spend their time. And we talk about things that are beyond money, really, and I think that, again, those kinds of discussions help tremendously as people approach retirement.
Doug:
I think that's so important too. I know I've dealt with clients that many of whom have sold their business, and the ones where they seem to have been least successful were they walked away cold turkey. And it wasn't the financial part, as you mentioned. It was their whole life was wrapped up in that business, their friends, their connections. So, I'm sure you've seen that too and you try to help.
Chris:
Absolutely. Creating a plan to produce reliable income streams is very challenging in today's low-interest rate environment. And a lot of people are stretching for yield in things that take on a lot more risks than they understand. And so, we need to be able to talk through that and to understand that sometimes, stretching for yield seems like a good idea, but it might not, in the end, be the best avenue.
Doug:
Yeah. That's a great point. I know I was in corporate banking back when the financial crisis hit the '08, '09, '10 timeframe, and here we are, whatever, 12 years on, and rates are still essentially zero. I mean, who'd have thunk it, right? But to your point, it's created a lot of different issues because you can't get essentially return on cash that protects that principle at this point in time. So to your earlier point, we see that. We see people chasing alternative investments and doing things like that. I mean, so do you help people walk through those discussions as well when they bring some of those ideas to the table?
Chris:
We definitely do. And sometimes, the sacrifices that you may not be able to achieve a yield level that you're looking for, but you need to do that in an environment from an investment standpoint that makes sense moving down the road.
Doug:
Yeah. So, say I'm the owner of a business. We have lots of clients obviously that are in this situation, and I've got maybe a five-year time horizon. I'm thinking, "Okay, another four, five years I'm going to try to get out." And they've got a plan already in place to make that investment or that ownership of that business liquid. What then would you suggest? I mean, how do you approach that person from trying to put together a plan for them?
Chris:
Well, it, again, in that situation, it really begins with having some conversations about what they might feel comfortable within the way of investment volatility. Stock investments are great, especially high-quality companies paying reliable dividends that grow over time, which is a very good way to perhaps create some income. But that is a lot different than a fixed bond, for example, where you don't have volatility, especially in light of what we've experienced here the last year or so, so beginning to have those kinds of conversations about what they're comfortable with regards to risk and trying to set the stage for creating an investment portfolio that might satisfy their income needs but also satisfy their need to have investments that may or may not be volatile depending upon their risk tolerance.
Doug:
Yeah. Because everybody, ultimately, it's a big part of it is being able to, sage advice, you want to be able to sleep at night, right? And everybody's got a different tolerance that allows them to sleep at night and get rid of that anxiety.
Chris:
Correct. And the problem in today's environment is that the fixed income side of the bond side, which typically provided much lower longer-term rates of return but steadier rates of return through yield or the distribution of interest payment to whoever holds those bonds, are starting to become very difficult to find from a yield standpoint. And so, the other part of that equation is, what mix of stocks and bonds or other types of investments will achieve that yield component without, again, taking too much risk? And there's a number of things that are available depending on the type of investment that you're looking for, but it's still one of those things that come down to, what am I going to need in the way of income versus what am I willing to hold in a portfolio that definitely will have possibly some volatility over time?
Doug:
Yeah. And you bring up a great point there in terms of what somebody needs in terms of income. Do you find yourself as an investment advisor sitting down and kind of going through that part of the plan in terms of thinking about lifestyle and all that and...
Chris:
You do quite a bit. And what we also try to do to arrive at what's actually needed to be generated from investments, we try to help people pull together different sources of income that they may be receiving. Social security comes into that equation. Other income-producing assets that they may have, so we try to piece all that together. We actually have some very, I hate to use the word robust because everybody uses that word, but some very robust software that allows us to build that situation for clients so that we can actually see how that might play out over time-based upon a range of investment returns and give them a sense that as they begin to piece that together, that in fact, it gives them confidence that in fact, what they're looking for is achievable. And that's very eye-opening for most clients.
Doug:
Oh, absolutely, and obviously, you've got to build in what are plans for other family members, children, or charitable wishes, and all those things. Do you find that from a lifestyle perspective, do people, do tend to underestimate, overestimate, or do they really change much? What's your experience with all that? I'm curious.
Chris:
It's sort of all over the board. As you probably suspect, we work with all kinds of clients that have done different things in their lives. Some are more detail-oriented, and others are not. And so oftentimes, it's all across the board. Sometimes, we have somebody that might be a little too optimistic, and we sort of have to bring them back to reality. And other times, we might be working with somebody that's too pessimistic and also need to bring them to a sense that maybe they're being a little bit too negative as far as what's possible for them.
Doug:
Yeah. That's interesting. And I suppose that goes to just personality and how they've lived, but do you often see people though where it really significantly changed their lifestyle in retirement? I'm just curious more about a human...
Chris:
We haven't found that. It's a fairly consistent, I think, transition. People will definitely make some adjustments. I mean, I'm not saying that they don't make adjustments, but I haven't really seen somebody that has significantly pulled in their lifestyle in order to retire. I mean, that's just not the normal situation.
Doug:
Yeah, most people want to continue to do what they've probably been able to do and try to enjoy themselves.
Chris:
If they feel that way and they have the option to continue working, they typically would continue working until it makes more sense to them.
Doug:
Yeah. How do you help somebody kind of prepare for that financial anxiety as you get maybe just a couple of years out from retirement, that kind of thing?
Chris:
Well, again, it comes down to looking at different scenarios. It comes down to trying to cover all the bases. I mean, we talk a lot obviously about the risk of volatility and diversification and asset allocation, interest rates, but we also spend a tremendous time addressing a lot of the other issues that surround retirement, taxes, estate planning, dealing with aging parents, Medicare, social security, when is the best time to elect social security. So, there's a lot of different things that roll into a retirement decision. We try to educate and inform using the knowledge and resources that we have. But we also, as I mentioned earlier, have an opportunity to introduce people to other professionals, CPAs, and attorneys, that can also help address some of those issues as well. We're not the ultimate expert, for example, in taxes or estate planning, but we can be a partner in helping them address those things as they head to retirement.
Doug:
Yeah. That's such a great point that you bring up there, Chris, and I think that's something we always try to emphasize, bring your advisors together at least once a year and do that. Not only is it more efficient because we're not all filtering information separately, but it oftentimes generates a lot of great ideas as everybody sort of talks about their different perspective. And you get that kind of diverse viewpoint because everybody's got these different areas of expertise and then you hear directly from the individual or individuals involved in it's family or whatever as to their goals. And everybody kind of... I've just always enjoyed those types of meetings.
Chris:
Those are really good.
Doug:
Yeah. Do you find much the same or you see that?
Chris:
We have those kinds of relationships with clients where we do cross advisors and work hand-in-hand with the other advisors. And you mentioned something about retirement or big changes in life creating some stress and anxiety. And we don't want this process to be stressful. We want to try to help people navigate things so that they get better clarity and insight. And a meeting like that, I think when you come out of that, it does a tremendous job of sort of giving people confidence that they can move forward.
Doug:
Yeah. That's a great, certainly, a great point. It's the feeling and the emotion that comes out of that, I think, as you said, the confidence is so much better. But yeah, you see all kinds. It's interesting. I was involved in one once where a successful business entrepreneur had built it up and run it. And actually, his son was in the business. Came time for him to really kind of hand over the reigns. And he drew all this stuff up and really never involved the son in that part of it though. And I remember there was a meeting. I wasn't involved in it. I heard about it after the fact. Brought his son in and said, "We've got all this setup. I want to execute all these things and turn this thing over to you." And the son just looked at him and said, "Dad, I have no interest in running this business." And I'm-
Chris:
That's not a great time to find that out, is it?
Doug:
Right, but it went to that communication and just the son loved working there, but he just, that's all he wanted to do. He had no desire to run it. So, it's just interesting. But it brings me, speaking of younger folks, what should people... I've got three 20 somethings. How about some advice for those folks looking to start their kind of journey on retirement?
Chris:
I've got some children also in their late 20s and early 30s, and retirement for them seemed like a long, long way off. And it's difficult at that age to begin to "plan" for retirement. And I guess the best advice I could give them is that if you do nothing else but commit to saving a little bit of money today, okay, and it doesn't have to be a tremendous amount of money, but if you begin to be methodical, save some money today through your twenties and into your 30s, by the time you're in your mid-40s, you'll be surprised at how much you've been able to accumulate. And from that point on, once you began to think about retirement or maybe consider it, especially in your 50s, all of a sudden, you've got a nest egg that can create a much easier ride into retirement from that point forward. If you wait until you're considering retirement, if you wait that long to get started, it becomes much, much more difficult to push that rock up the hill.
Doug:
Yeah, yeah. For sure. I love that term you used there, be methodical about it. I think that's a great approach. As you said, it doesn't have to be a lot early on. But just get started, right? Be consistent.
Chris:
Yes, absolutely. And the biggest thing that they have on their side right now is time, the ability to compound earnings and interest in whatever they're investing in. In order to compound that overtime is their biggest asset at this point. So, that's what they have to really take advantage of.
Doug:
Yeah, well, that's certainly sage advice, Chris, and greatly appreciate having you on. I could see where somebody would really benefit obviously sitting down with an advisor like yourself, hoping kind of just talk through these things and relieve some of that anxiety. You've got a very calming presence about you, which is great. That's what you need.
Chris:
Well, I mean, knowledge and expertise are certainly critical for us to be successful working with clients but really caring about people and putting them and their needs first is, I think, paramount. And I think we have a pretty good reputation in the industry, but it really starts with that, making sure that you do right by people and that they understand that you really care about the outcome of what they're trying to achieve.
Doug:
Yeah, absolutely. Very, very well said. And if you want more business tips and insight or to hear previous episodes of unsuitable, visit our podcast page at www.reacpa.com/podcast. And while you're there, sign up for exclusive content and show notes. Thanks for listening to this week's show. Be sure to subscribe to unsuitable on Apple Podcasts, Google Podcasts, or wherever you're listening to us right now, including YouTube. I'm Doug Houser, join us next week for another unsuitable interview with an industry professional.
Disclaimer:
The views expressed on unsuitable on Rea Radio are our own and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation so they can expertly guide you to the best solution for your specific circumstance.
