Business Innovators Radio - Interview with Dan Brooks Founder of Xexis Private Wealth Discussing Things Your Current Advisors Haven’t Explained That Could Negatively

Episode Date: April 18, 2024

Dan entered the U.S. Navy’s Nuclear Power program after high school and upon discharge, he purchased the family business which he operated for 7 years.After his father’s death, he discovered his father lost a small fortune due to bad advice from a stock broker. Dan decided to enter financial services to find out how this could happen and help others avoid it.In 2004 he completed the Certified Financial Planner coursework and in 2005 opened a Registered Investment Advisor firm.He owns both a Financial Advisor firm and a tax firm based in Lake Mary, Florida. Dan works with a Registered Investment Advisor firm that manages over $3 billion dollars and is one of the fastest-growing firms in the nation.Dan’s specialty is comprehensive retirement planning, including income planning, tax mitigation, catastrophic health care planning, Medicare, Estate Planning, and Generational Wealth.On a personal level, his proudest accomplishment was being a single father to his daughter, who is a Police Officer. He enjoys golf, hiking, traveling, cooking, and discovering new restaurants.Learn More: http://www.xexiswealth.com/Investment advisory services offered through Virtue Capital Management, LLC (VCM), a registered investment advisor. VCM and Xexis Private Wealth, LLC are independent of each other. For a complete description of investment risks, fees, and services, review the Virtue Capital Management firm brochure (ADV Part 2A) which is available from your Investment Advisor Representative, or by contacting Virtue Capital Management. Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-dan-brooks-founder-of-xexis-private-wealth-discussing-things-your-current-advisors-havent-explained-that-could-negatively-impact-your-retirement

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of influential entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us, Dan Brooks, who's the founder of Zexas Private Wealth, and we'll be talking about things your current advisors haven't explained that could negative impact your retirement. Dan, welcome back to the program. Hi, Mike. Thanks for having me again.

You know, it really kind of is a scary thing because, you know, you think you trust this person or this group or this company and what if there's some things that, you know, weren't really fully explained that could really impact us for retirement. So do you find that you're running into people that their advisors have kind of left some things out of the equation that could really impact them? Well, yes, almost always, but I want to preface that with, I don't think that is because it's intentional. I don't think it's, you know, they're not trying to leave things out. It's just perhaps not their area of expertise, you know, and that's usually the case, is that they do one or two things and they, that's all they do. So they're not trying to hide anything necessarily.

Sometimes they are. I mean, some of them are just lazy, right? It's amazing. They just don't want to do the extra education or studying or get the, you know, you know what I mean. They're not being mean-spirited. They just didn't take the extra effort to really fully know what they could be advising their clients on. Yeah, that's exactly right. Well, why do you think that is other than, you know, they just don't take the extra effort?

Why do you think that? And let's be honest, too, there are some people that are just going, I want to do this for me in my back pocket. But other than just kind of not having access to that information, why do you think that sometimes a retiree is not told some of those opportunities? Well, there's a number of reasons. The most common one is that they're working with somebody that is employed by a big financial firm, right? Big Wall Street, a regional firm, or big insurance company, whatever, some big financial firm. Well, they work for that firm. They don't work for you, the client, right?

They're allegedly giving you advice, but they work for that firm. So they have to do what the firm says or they lose their job. So sometimes there's things that they're not allowed to tell you in addition to things that they don't know about. many times their training doesn't include, you know, the comprehensive advice that you, that you could be receiving. So when people ask me, you know, how would I know what I don't know? Yeah. That's a scary thought.

It is. And it's true of all of us. We don't know what we don't know. But in the financial planning, retirement planning arena, you know, there's some ways to put the odds in your favor. And first one would be work with somebody that's an independent firm. They're not tied to some huge company. Because if they are, they work for that company, not for you.

You want a firm that's comprehensive. And by comprehensive, I mean that they have the experts in all the different areas, that they will talk to you about Social Security choices and explain Medicare and the Irma rules and required minimum distributions and Medicare decisions and, you know, maybe I already said it, but taxes. You need somebody that covers all of those things and creates a comprehensive plan for you. So you need a comprehensive planner. Of course you want somebody that their licensing makes them a fiduciary where they're legally responsible to do what's in your best interest. You need somebody with experience. You know, if you've got somebody with three or four years of experience, I remember when I had three or four years of experience, you know, I was advising people without really understanding the implications of it.

But I worked for one of those big firms. Yeah. And, you know, that's what they taught me to do. And you were just following what the corporate guidance was and you just kind of cookie cutter templated it to everybody. That's a good way to put it. And I didn't know anybody. I got, let me try and got my training from them. You know, it wasn't until I became independent, did my own research that I realized all the stuff that they didn't tell me that people really needed to know. You know, and you know, you know, the reason I got in this business is my dad got taken advantage of with some terrible financial advice, impacted him dramatically, you know, not just. financially, but affected his health, affected his five kids. And that led me to get in this industry

decades ago. Yeah, that's, that is, that, that's a shot in the gut. And then when you can go, okay, I can help this family and this, you can't help everyone in the world, but you can help this one and you can help that family. And if you can help them be, prevent what you went through, boy, that just is a nice notch in your belt and feathering your cap, I would suspect. It is. And people say to me, Dan, when are you going to retire? I never. I don't want to retire.

I won't retire unless I have to. Yeah. I love my job. I love helping people. It's a lot of fun. You know, when people go through our planning process at the end, they're always saying, thank you, Dan. I appreciate that very much.

We feel so much at ease. And, you know, what a payoff to have a job where, you know, I make money and I get to do that as well. Pretty lucky. You know it. That's amazing. So let's now transition to, into some specifics because we've established the fact that sometimes clients aren't told certain

things. Maybe it's not on purpose. Maybe it's just because the advisor's working for a company that restricts what they can offer. But what are some of these things? What are some specifics that people are not being told? My first one comes to mind, Mike, is the hidden fees in some products. Legally, some advisors are not required to tell you all the costs and fees. They don't have to. Well, with my licensing, I'm required to. But there are plenty of advisors where they didn't bother to get that licensing, and they don't

have to tell you. I'll give you what the most egregious example is a type of annuity called a variable annuity. and these are sold mostly by the big firms, and I meet a lot of people that have been sold one over the years. Well, the internal fees of these variable annuities, and by variable, that's only one type of annuity. I'm not casting dispersions on the entire annuity industry, but the variable annuity can have fees ranging from two to four, four and a half percent. And a lot of times you're not even receiving anything for those fees. And what I always say about fees is that if you're getting more value than you're paying for a fee, that's a good decision. But if you're paying a fee and you're getting nothing for it, that was a poor decision.

But if you were never told about the fee, you don't even know that you made poor decision. So that might be the most egregious one. But when we analyze somebody's portfolio, when we see them for the first time, we do a deep dive and show them what the internal costs and fees are. And many times, you know, they're surprised. You know, in that case, that client might be shown their portfolio at their annual review and they see a certain rate of return and their mind goes to, ooh, that's good. That's about what I was expecting. But then when they see or don't see, like to your point, those fees, in reality, that top line rate of return is not necessarily accurate to what they got because you have to take out the fees. and now your net return could be dramatically lower, right?

Yeah, and it goes even deeper than that. You know, generally speaking, if somebody had a good quarter or a good year, they're up, their money went up. They're happy. And if it went down, they're unhappy. But if you're up 10%, but based on the way your portfolio is constructed, you should have been up 15% instead of 10. People would want to know that.

So it's important to measure a portfolio. So we'll measure a portfolio and say, you know, based on the structure of your portfolio, it should have done 15% last year, but you only did 10. So that's concerning. On the other hand, if they're down 10, but the portfolio, the way it's constructed, should have been down 15. Well, that's a good thing. Yeah. So, yeah, that's a, you measure yourself against what could have been, not, you know, just your specific results on that piece of paper.

Yeah. And the big thing is you need to measure it. And apples, apples comparison so that you know, because doing good is only good if you're doing against, you know, against the standard. Hmm. That's huge. So now, I'm glad when I asked a question a few minutes ago about, you know, advisors not explain. things fully. You clarified that sometimes it's not a matter of this advisor as being evil. Maybe they just didn't know. Maybe they weren't trained. Maybe they didn't. So I want to keep that

thought in mind. But how often do you feel that financial advisors underestimate or miscommunicate risk? Often. You know, the industry, my industry, has basically three risk scores. They call you conservative, moderate, or aggressive, right? And they ask you a bunch of questions about how you feel about risk and they put you into one of those categories or somewhere in between. You're a moderately aggressive investor. Well, in reality, we measure risk on a scale of one to 99 because it's a way more complicated than just the three different standards that the industry uses.

And they use three because that's what law rates. acquires. But, you know, the key to this is that most people are taking way more risk than they want to. When we find out where on the one to 99 scale a person is or a couple is, and then we measured against the portfolio that they own, almost always they're taking a lot more risk than they thought they would. And they won't find out how bad it was until it's too late, because once you've lost the money, it's gone. You know, and my industry will go, oh, you haven't lost the money yet. You know, it's down. It's just a paper loss. Don't worry. It always comes back. Always has. Always will. Those are the things that people hear, right?

Until it doesn't. Yeah. And yeah, it may come back, but how long is it going to take? And if this happens to you when you're 74 years old, how much time do you have to wait for it to come back? So risk, risk is critical. I think that's a huge. Yeah. So what about an individual and a retiree thinking about assessing risk for themselves? given what they're being told. So for instance, you know, you're being told a certain line or explanation about risk from the advisor. Isn't it always prudent for the retiree, the client to also go, okay, I know enough about the markets or risk or assessment to realize they're spot on. I really resonate with that or maybe a little red flag. So how do individuals need to approach

assessing risk for themselves? Well, in my business, we have them take a very comprehensive assessment. You know, a number, number of questions that is psychologically designed to find out what they really feel inside. You know, not just a simple, I'm a moderately aggressive investor, which is what they were told by somebody in the past. I'll bet that maybe there's some people that took that assessment and realized, oh, my word, I would have called myself this, but the assessment shows I'm that and that might be eye-opening for them. It is, yeah. and almost inevitably people internally are less aggressive than their portfolio was constructed. Yeah, exactly. Well, let's talk a little bit about another aspect that I think sometimes can be left out of the conversation.

Inflation, do you think that advisors are properly preparing clients for how inflation will impact their retirement savings? In most cases, no. They do give it lip service. They'll say, well, we're going to pull 5% out from your portfolio every year. And then every year we'll pull another 3% to account for inflation. And I call that a hope and a pray plan. I hope it works out. I pray it works out.

So they give it lip service of it, you know, here's kind of in theory what we're going to do. But they don't really have a solid plan for, you know, accounting for inflation. I need to. You know, retirement can be 20, 25, 30 years long, and inflation is going to have a huge impact on people. So it should be built in a not in the theoretical way, but in a very solid way that people can see, here's what we're going to do in the future to account for inflation. And if you did that plan and inflation wasn't as aggressive as you had planned for, then good. But if it was, then you're prepared.

Yeah, that's right. That's right. Exactly right. Because a good plan is going to be malleable and changeable. Right. It's not locked in that you have to do one thing or the other because, you know, economies, administrations in Washington, tax laws, all things, all these things change. So a good plan is built to be malleable and changeable. You know, I think that a lot of times when we're thinking about, you know, the way we've always done things, it's always, you know, oh, we put our money into this, you know, 4 1K or we keep our money, quote, unquote, in the market. I think that a lot of times retirees have their money. in the market, and it's so tied to that market performance, talk a little bit about some safeguards that would help retirees against volatility, that maybe advisors aren't fully updating their clients on.

Well, there's a number of ways to control volatility, and the thing that's important, Mike, is you know that we start everything with education. Yes. When a new client understands what their options are, and I mean all of their options, not just the one that my big Wall Street firm wants me to tell you, but give you all of your options, the positive and negative consequences of each of those, people are smart when they have accurate information. They can decide which one they want to do once they trust that this is accurate information, and they're not being pushed or coerced to take a certain route. And that's the danger of, you know, working with a large, you know, a large firm where the advisor works for the firm and not for you. It doesn't necessarily mean they're going to do that, but they can be incentivized to do what the firm says rather than telling you everything. And sometimes they can't even tell you everything.

So again, when people, when people have this complex explain to them in a very simple way of, here's your choices and here's the pluses and minuses of each choice. they're smart enough to make a decision. It's when they don't have the information or it's not accurate or it's couched in a sales script that people can make really tragic mistakes. That's huge. Yeah. Because people are pretty smart these days. And if they don't understand a certain topic, I feel like these days they'll go out

and research it, especially a retiree who might have a couple extra minutes in their day to go learn something. So combined with the education that their advisors giving them, guiding them through that process, I think that that makes a great combination. Excellent. Yeah. And speaking to that, of course, there's so much information available to day. You do a Google search on any financial topic.

What are you going to get? 80 million hits of possible things to look at. And so you find a topic that you like and you dig a little deeper into the Google search. And it looks like this particular site is going to answer your question or questions that you have and you open it up. and then it wants to gather information about you, right? And then it's going to send you a book or a white paper or whatever if you give them your information. Well, that's a sales site, right? They're gathering your information to sell it to somebody in the financial services industry

so they can contact you and try to sell you something. So what happens is people are trying to do their own due diligence and figure things out on their own, but they end up back in that sales cycle where they're not getting the full story. They're not hearing the positive and negatives, and they're not hearing all their options in a, you know, in a comprehensive and honest way. 100%. And I think that it kind of gets back to that word you were mentioning before fiduciary. When you're working with an advisor that's legally obligated to do the best thing for the client, then that information should be geared to your best interest. So I think that's a huge piece. You know, and in some of those, you know, websites and information you'll search online, you're going to see things like annuities and IRAs.

What are some of the downsides of those kinds of products that advisors might not discuss with their clients? Because sometimes it's like we talk about all the shiny, wonderful things about this or this or this. But let's talk about some of the misconceptions and the downsides, too. Yeah. Well, you mentioned annuities. I mean, that's a huge topic. I mean, there's hundreds of billions of dollars a year going into. annuities. And like any financial product, there are annuities that are awful, right? There are a whole

bunch of average ones and there are very exceptional ones. And annuities have a very specific purpose. And they can be a good part of a financial retirement plan. But there's also annuities, you know, a lot of times people will buy annuity because they want lifetime income. And that's a huge advantage to annuities. They offer a guaranteed lifetime stream of income. Lifetime meaning if you're still around in 106, the income from that annuity is still coming in. Well, people like that aspect of annuities. This is a little guaranteed lifetime income. Guaranteed is good. Lifetime is good. And income is good. You know, three good things. Yeah, I love those words. Right. But there's annuities that will give you guaranteed lifetime income. But if you die after receiving one check, the insurance

company keeps the rest of the money. Well, that's no good. Yep. But there's other ones that will pay you the same amount of money, but if you die a month later, then your family gets to keep what's left over. Well, that's a lot better. It's how it's structured.

Yes, it's, it's, you need to know the positive and negatives. And like any financial product, annuities have, they're all over the port. So again, if you, you know, if a client is given the truth and the options,

they're very smart at making the right, decision because it's their life, right? It's, again, when you don't have all the information or you're being sold something, salesman doesn't generally tell you the negatives. A hundred percent. You don't need to hear it all. You know, you had mentioned, too, that there comes a time in someone's life when they've got enough assets accumulated and there's a lot to deal with and plan for. You need to stop thinking in the accumulation phase and start like circling the wagons and protecting and conserving and knowing where to distribute. And I think that comes at the end of kind of like the conversation thought process of like

legacy and estate planning. How often do financial advisors neglect to integrate a good estate planning approach into advising their clients? Well, like the previous questions, quite often that they do. And again, it's not because they don't want to. It's because maybe they're not allowed to or they just don't understand it. And if they do, if they do mention it, they might just offshoot you to some estate planning attorney that they have some sort of arrangement with. You know, they most of the time don't have somebody as a specialist as part of their business.

Their team, yeah. Yeah, part of their team. So if it's not properly addressed estate planning, what are some of those aspects that could negatively impact a retiree in retirement? because estate planning and legacy, that's a huge aspect to consider, right? It is. And, you know, most people want to leave their kids and grandkids something. I have a few clients that say, hey, look, I earned it myself. I raised my kids.

They're fine. And I don't want to leave them anything. If there's something left over, they can have it. But I'm not planning and leaving them anything. But most people want to leave something. And some people are the opposite. They look, I struggled and fought and clawed and worked since I was 12 years old. And I don't want my kids and grandkids.

kids to have to do that. I want to, you know, help them out. So neither one of those are right or wrong. It's just, you know, what are people trying to do? But if you do want to leave money behind, here's, here's a big one. People don't realize that IRAs are a terrible thing to inherit because they have the tax implications still attached to them. You know, and the new law is if you're a child and you inherit your parents IRA, you've got to spend it within 10 years. In other words, you got to pay the tax on it over a 10 year. period. It didn't used to be that way. You used to be able to stretch it over a generation or two, but they changed all that. So you think about this. If you're, if you're 85 and you pass away and

you leave your child an IRA or two or three, how old is your child when you're 85? You know, they're probably 60, right? 55. They're in their prime earning years. And you have just dumped this taxable IRA in their lap that they have to have. to spend over the next 10 years and they're in the highest tax bracket they've ever been in so you could book them in a higher tax bracket without even knowing it and they end up paying a lot more tax than you could have had you done some tax planning while you're alive. So that's just one big example of it. And there are other things that are really great to leave behind. But people need to be educated on how to do it and the pluses and minuses of all the different

strategies. And I guess it just kind of comes down to what we've been talking about so frequently, which is if you don't have the right person, guide, advisor, giving you what's best for you from the perspective of your benefit, not the firm, that's a big red flag. And when they lead off with product versus process, another big red flag. And so I think that that's huge in what we're discussing here in this conversation is, you know, there's some advisors out there that either just don't know, they're not telling you on purpose, or they're with a firm that has such limited products that it's not benefiting you. So sometimes it would benefit someone from getting that second opinion saying, hey, give me a second look here. What is my retirement situation looking like? Am I on the right path? And what if, you know,

Dan can uncover some opportunities there? So I think that's a really huge thing that people can can recognize. And if they're interested in getting that second look, what's the best way that they can reach out and connect with you? EASE way is at this website. The process that we use is called Ease, EASE. And so we've developed a website called Easeplanning.com. It's EASE-S-E-S-E-Lanning.com. Ease-dash planning.com. Excellent. Well, Dan, thank you so much for coming back on. and teaching us some of these concepts to look out for. It's been a real pleasure talking with you again. I always enjoy it, Mike.

Thank you. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www. www. influential entrepreneursradio.com.