Business Innovators Radio - Interview with Dan Hill, CFP®, AIF® CEO & Founder Hill Wealth Strategies Discussing Portfolio Asset Allocation

Episode Date: March 7, 2025

Dan Hill CFP®, AIF®, is a recognized Financial Educator, Best-Selling Author, Speaker, and Retirement Specialist who appears as a financial expert on CBS-Richmond’s Virginia This Morning and has contributed to USA Today, Wall Street Journal, Forbes, and others.Dan is a Co-Author of the Amazon # 1 bestseller Retire Like a Shark, with Kevin Harrington, the original ‘Shark’ from hit TV show Shark Tank.In his recent book release, Retire Abundantly, Dan explains how to separate facts from fiction in our dramatically changing retirement landscape. He’ll provide answers to some of your biggest questions, and answers to questions most of us do not even know to ask.As President of Hill Wealth Strategies, Dan and his team, using the Predictable Personal Pension Process, have been providing families and businesses with innovative financial strategies, solutions and planning leading to financial clarity and security since 1998.Dan, and his wife, Susan, reside in Williamsburg, VA. Their oldest son, Derek, and younger son, Brett, and his wife, Sarah live in Richmond, VA with their two-year-old daughter, Landon. Dan has been an active member of the community with his involvement in Youth League and American Legion Post 39 baseball as a coach for twenty-seven years.Dan can be reached at (833) DAN HILLLearn more: https://hillwealthstrategies.com/This content is developed from sources believed to be accurate and complete; however, no guarantee can or is given for such accuracy or completeness. Nor is the information in this material intended as tax or legal advice. Please consult your own legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale, or the solicitation of such an offer, of any security, insurance product, or annuity in any jurisdiction in which the persons represented on this site are not appropriate licensed, registered, appointed, or otherwise qualified by law and regulation to make or solicit such purchases and sales. Logos as displayed herein are not intended to imply any endorsement by the owners of such logos of Hill Wealth Strategies. All written content on this site is for information purposes only. Opinions expressed herein are solely those of Hill Wealth Strategies and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Fee-based financial planning and investment advisory services are offered by Hill Wealth Strategies a Registered Investment Advisor in the State of Virginia. Insurance products and services are offered through D. R. Hill & Associates, Inc. Hill Wealth Strategies and D. R. Hill & Associates, Inc. are affiliated companies. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of Virginia or where otherwise legally permitted. Hill Wealth Strategies/D. R. Hill & Associates, Inc. and Daniel Hill are not affiliated with or endorsed by the Social Security Administration or any other government agency. This content is for informational purposes only and should not be used to make any financial decisions. Unauthorized use of the material is prohibited.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-dan-hill-cfp-aif-ceo-founder-hill-wealth-strategies-discussing-portfolio-asset-allocation

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 Hill, who's the CEO and founder of Hill Wealth Strategies, and we'll be talking about portfolio, asset allocation. Dan, welcome back to the program. Thanks, Mike. Good to be back.

Hey, before we dive into what all these strategies are, let's first define it. What is portfolio asset allocation? Okay. Well, it's pretty much just what it says is I need to allocate my hard-earned money over different asset classes. Okay. So asset allocation is a, how much of this do I need? How much of that do I need, you know, to, get my to get the proper amount of risk that I need to take or want to take for for an expected

return yeah how do I allocate my monies into different asset classes for maximization of return and minimization of risk and that sounds really clear and concise and simple but it's way more difficult than just like oh well I just put 10% this and 30% in that because it differs for everybody, right? So when you're sitting down with someone, how do you determine the right allocation for their number one goals, but number two, risk tolerance? Because I'll tell you, there's some people out there that are like, roll the dice, let's just get big returns. And some people that say, I don't want a dime at risk. So where do you start that process? Well, it kind of goes back to what we talked to in our previous episode about comprehensive planning. Okay. So you really don't

them how much risk you need to take unless you do planning. And a lot of people are taking a lot more risk than they need to take because they just don't know. They just don't know, okay? And a lot of people are taking what we call uncompensated risk or unreimbursed risk because they're taking a lot more risk or they're exposed to a lot more volatility in their portfolio due to the lack of asset allocation slash diversification. So I'm taking a lot more risk. I'm not getting properly paid for Okay. Planning will help us solve that problem today. I'm on track. I'm going to be okay, so I don't need to take as much risk or I'm not on track, which very few people are not on track. They're very surprised when they come in and say, oh, I didn't realize it was doing such a great job.

And most people are on track. You say, yeah, you don't know you'd be taking that much risk, you know. And so it's like for all of this. 100%. It's like in life you need to have goals. If you don't have a goal, you're just heading all over the place. So with retirement, what are the retirement goals that someone would have? And, oh, well, we want to have whatever. And everyone's goals are different. But if you don't have that begin with the end in mind kind of goal, that North Star, then you don't know how much risk that is needed to get there, given the years ahead of time.

And people need to plan for retirement well ahead of when they need it because you can't just wait till 18 months before and go work your magic. You need time. So talk a little bit about how you factor in discovering what, some of these goals are so that you can make the right asset allocation recommendations. Yeah, it's very well said. The point you made a minute ago, it's kind of like we say Google Maps. Okay, you've got to give Google Maps a destination. Yeah.

Here's where I want to go. Okay. And it'll tell you how to get there. So we're the same way in developing that roadmap or that blueprint to go, okay, here you are today. Okay. How much do you have in liabilities? How much are your living expenses? And what does retirement mean to you?

What do you want to do? Okay. And our job is to try to help whatever their American dream is, to help them achieve that American dream. So again, just have a conversation. Have a conversation first and foremost about, you know, do I, we play tennis. So we want to go here.

Are you a baseball fan like me? And I want to go to all the major league baseball parks, whatever it is, you know, all the national parks. whatever it is that your retirement dream is that's what we need to get out in conversation. Okay. And the money is kind of secondary. Okay. Yeah.

Most people have already done all the hard work. We're just kind of, like I said, being an architect and help them design that plan. And I know we can never, ever eliminate risk. I mean, risk is part of life. You take a risk walking out of the house. But you can minimize or mitigate that risk. So it makes me think of a point that I made a minute ago about, you know, don't start planning for retirement 18 months before you want to retire. Give it some time. So talk a little bit about how your advice shifts if you have a client that is one certain age versus another because I'm I'm pretty sure that you would allow a little bit more risk if someone's in their 30s versus if someone's in their 60s, you know, in relation to retirement. That's absolutely correct.

So, you know, it's just, again, most of our, you know, demographics that we're doing in our planning are 65-year-olds and up. We don't do a lot of work with younger folks. We're just not really marketing to them. So, you know, we're retirement planners. And so we're marketing 55 and up. But it is, yeah, what's your time horizon is a key? And so we always say in our office, risk is neither good nor bad, kind of what you say, we just want to be able to expect it, to be able to measure it, and make sure we get

compensated for it, okay? So you can't avoid risk. Like you said, it's unavoidable. I always do like my mom and say, oh, better I'll put my money under my bed. You're going to get to eat up by inflation, what we call going broke safely. So we just say, hey, let's measure the risk you're taking. Let's see if you need to take that much risk and let's make sure you get paid for that risk. and and if risk is present and then they're actually and you don't have the right percentages of allocations and things and your portfolio takes a hit you might feel that temptation to catch up after a loss like oh well we took a 14% hit last year so let's catch up and and take a little bit more risk so we can catch up well then that almost is like you know chasing your tail because you to take more risk might mean you're going to lose a little bit more so i think having that measured approach like you're talking about is so so attractive to people. Yeah, definitely. Like I said, once we do the planning and we figure out, you know,

what return rate is our goal rate that we need to achieve, you know, that destination point that we're looking for, then once we allocate the portfolio, we go over to get a little bit sophisticated about volatility is measured by standard deviation. In layman's term, we call that a yo-yo strain. Okay. And one of the things I always say is,

you're going to be on the kitty coaster or the lock nest monster. And most people, you know, our candidates need to be more looking at the kitty coaster. Yep. Yep. Yep. They rode the Loch Ness in their 20s in their 30s and now they're ready for the kitty. There's a long time horizon. You could. But we, standard deviation will tell you like, hey, my portfolio can go up this much or it can go down this much. There's no perfect investment out there that just goes up, up, up, up, every year. The market's always volatile and volatility goes up and down. So then let's talk a little bit about what strategies that you use to diversify a portfolio. I know that there's in, if you Google around diversification, you're going to see like, oh, a 60-40 split between whatever, stocks and months.

Do you start with certain things that you're going to say, okay, let's take a look at what the goals are and all of that. But then are there certain percentages or strategies that you're going to look at first? What do those look like? Yeah. So the investing the philosophy that we follow, Mike, is almost 70 years of academic research. It's science, it's Nobel Prize winning economics, and it's math. Okay.

So there's only really one way, whether you're 60, 40, like you said, or 40, 60, or 75, 25, the components to that asset allocation are the same. The percentages will vary, of course. If you're, you know, 75% in equities versus 25% in equities, you're going to, of course, have a higher percentage of stock in the equity side of your portfolio. But, excuse me, the asset allocation like we talked about earlier is, I need to have both large companies in the U.S. and large companies in international. I need to have small companies in U.S. and small companies in international. I need to have large U.S. value companies and small U.S. value companies. And I need to have international large value companies and international small value companies.

So those three components are, you know, the market component is how much do I want in equities versus fixed income products or bonds? How much do I have in U.S. versus international? Because U.S. makes up about little more than half of the world market cap. and we believe even free markets and markets are efficient. So we're going to invest that way. U.S. makes a little more than 50% of the market. That means international makes up the other 50%, almost other 50%. With Japan and the UK and Germany being the larger three of the international components,

but we have close to 80 countries in our portfolio. Wherever capitalism exists, we want to invest, okay, based on that country's GDP, which is kind of what we were just talking about. U.S. is larger than Japan, Israel, Mexico, Portugal, et cetera, all those capitalistic countries, okay? So that's how we look at it, is using those academic research of diversification. Okay. And I really want to have more money in small companies than large companies. We know the name of all the large companies because they've been around, but at one point in time, I always ask people, Apple wasn't always worked $2 trillion. Okay. In fact, Apple did,

exist until it did. Okay? Yeah. And then in the same with Microsoft or any. I use those two as examples. And then I know Microsoft, for this, I think it was worth $3 a share back when Bill Gates dropped out of college. And now it's, you know, one of the mega caps, a trillion dollars with a market cap.

So we actually want to, science tells us that we should have more money in small companies than large companies. But 90% of portfolios we look at have more money in large companies than in small companies. And the math tells us that we're going to get a 2% better return on the small companies over time than the large companies. And the same thing with the value companies, which are companies that are in distress. One of the ones I talk about a lot now is Boeing. I don't want to pick on them because I fly a lot. So I'm on Boeing's a lot.

But Boeing's had some issues lately. Okay. With the doors flying off and the jet's disappearing. So those are companies in distress, okay? Yeah. And so using math, when a company gets into stress, it's market value drops, we actually will buy more of that company. If it keeps going down mathematically, then it goes out of there.

So we don't like to use a motion. We don't want to be political. Hey, the mass says we should buy more. The mass says we should dump it. So do you tend to keep everything in a portfolio in the market? or do you layer in other products as well, like annuities or just different things like that? That's a great point. Yeah.

So in our asset allocation, in the growth side of your portfolio, we kind of use what we call a T-square. And on one side we have income and one side we have growth, okay? One of the things we have to plan for in the risk, like you were talking about risk, managing risk. There's all kinds of risks. One of them is longevity. People are living longer and longer and longer, okay? And that means we're spending a little bit more time in retirement than we used to. Okay.

Back when Social Security first started in 1935, you could start at age 60, but the people weren't living much past age 60. This is what's put a lot of stress on the pension funds because they didn't think people would be living that long. They would have to fund that income from 20, 30 years like, yeah. So we have to plan for longevity. So we have to have a growth side to the port, kind of what we've talked about, a portfolio with whatever asset allocation to make sure that we never run out of money.

And then we do love to use a new. and I call them the good annuities because people sometimes have a bad taste in their mouth when they hear the word annuities. There's good ones. There's bad ones. There's ugly ones. You know, it's the good to bad to ugly. We do a lot of research making sure that we're bringing the best products to the table to fit it into the plan once we develop the plan. And those annuities can pay a critical part in the income side of their portfolio because they were sheltered from market volatility. Okay.

It's not going to affect income because my income is over here. guaranteed more or less. So when we're thinking about portfolio asset allocation, before you even get into big cap, small cap, small company, Japan, whatever, before we get into that kind of distribution, you got to think what percentage do you want in growth? What percentage do you want in kind of safety, preserved, you know, guaranteed? And then you go, okay, now with the growth side of the allocation,

now where do we put it? So that was a really great clarification because there is going to be some, you know, people that go, you know what, I want the majority of my portfolio and just safety and security, great. Maybe that's 80% of it into some good annuities or things like that. But then on the other side, okay, the 20% that you want to keep in the market, we need to make those same wise decisions that you talked about. So that's really smart. Yeah, we've had people come in here when we explain to them the annuities we used to go, oh, I want to put all my money in there. And we go, no, you don't. We will not do that for you because it's not the right thing to do. Now, we get paid a lot

better, but it's not the right thing to do for us or for the client. Like so, we're always going to be to do shares. Other people say, oh, I want to put all my money over here. We said, well, we won't do that for you because we know that's not going to be a good plan. There's going to be volatility. There's going to be another 2008 when the market has drastic drops, and that's going to crush your future if you don't have some of that money, as you said, in safety and preservation. Okay. Now, we do have clients that only have money in asset allocation models because they've already got enough Social Security pension, direct income sources that they don't need annuities.

So we don't sell them annuities. They don't need them. They got enough income. Okay, we're going to put Joe here in a portfolio. So, yeah, all those things we take into consideration in our planning process. Because there's never one solution that fits every single person or else you'd be monkeys going next, next, next. You've got to take everything into consideration. So it makes me think this.

How often do you review someone's allocations at portfolio? and, you know, do you have them come in every year, every six months? Because there could be some triggers that would come up to go, okay, when we made this plan, it was the best plan for when we put it into place. But it looks like inflation has blah, blah, blah. What are some of the, how often do you review and what are some of those triggers that you are looking for to make some make possible changes? Great question.

Yeah. So we are a fee-based advisor. So on the asset allocation, we get paid a fee. So I always tell people, now we're on retainer. We no longer charge him an hourly fee or a planning fee. Now we're managing money for you, so we're on retainer. And we spend a lot of time up front what I call my first and second year students, so my freshman and sophomores.

We spend a lot of time meeting quarterly. Okay, so up front there's probably five or six meetings before we ever onboard someone. Then we meet quarterly. And like I said, if you're talking about asset allocation based off 70 years of Nobel Prize winning in economics, they're going to get tired of hearing that story after a while. So we work for them. We tell them calls whenever there's a life change that might dictate a change or whenever you have a question about anything,

where your go-to resource. But after about three or four quarterly reviews, people pretty much got it. And then it's up to them. And then we probably cut back to about it to annual reviews. Yep, because then it's dialed in. And then you're just looking for major things like inflation or things like that. Yeah.

So one of the things I think we're getting ready to touch on Mike was rebalancing. So portfolios are rebalanced every quarter. So if the U.S. did better than international, we want to follow that. Got it. Got it. Got it. We'll investing, which is buy low, sell high.

So U.S. had, like last year, U.S. was up almost three times international. So simply put, okay, did exactly where we would sell some U.S. and buy some international, get everything back in balance. So we're looking at that every quarter on all the pieces of the pie on how they need to be rebalanced by selling things that went up more than the other things and buying the things that didn't go up as much or went down. Because it's almost like it. I know you can't be facetious and say, you know, what goes up must come down, but, you know,

buy low, sell high. But in your example there, if the U.S. was had some great, great years, take a little bit of that run and sell to lock in that profit. And then if we know that the international still is a solid play and they've been down a little bit, well, maybe their time's coming up here. so he puts them into that. And you're kind of watching those things for the percentage of the growth, percentage of their portfolio to kind of making those shifts.

And you're kind of doing those quarterly or annual reviews, just kind of updating the client on where some of those moves might be needed. Right. And mostly that is to manage the volatility in the portfolio way. So like I said, once we've gone through this process of planning and figuring out that you're a 60-40 person, okay. Well, then your yo-yo string is this, so to speak. You know, this is the up and down of your portfolio.

If we, U.S. goes up three times what international does and we don't rebalance, then that volatility number has changed. Yeah. And we didn't sign up for that much risk. We don't need that much risk. Let's rebalance, get back to the number that we planned for. 100%. Makes sense.

Well, I think this has been really, really eye-opening on just some strategies and thoughts on making sure that everything is asset allocation perfection, as much as possible with the information we know going in, because as we know, everything can change. But you kind of keep that your finger to the pulse of how things are moving for the benefit of the client. So if someone is interested in maybe getting a second opinion on how their portfolio is allocated, what's the best way that they can learn more about you guys and reach out and connect with you? Sure. So we have a very acute toll-free number. Another one, it's 833-D-A-N-H-I-L-L. Call in. You'll get one of the team members here and they'll get you scheduled for a complimentary consultation, or you can go to our website,

Hillwell Strategies.com and sign up for a complimentary consultation. And we love to talk to people. And like I said, make sure that they're on the right track. Perfect. Well, Dan, thank you so much for coming back on. It's been a real pleasure chatting with you. Thank you so much for having me. I appreciate it very much. 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.com.