Business Innovators Radio - Interview with David Smart, CEO of Smart Benefit Group Discussing Transitioning from Accumulation to Distribution Mindset

Episode Date: September 5, 2024

With over 20 years of experience in financial services, I have focused for the last 12 years on providing retirement planning services. Our approach is guided by the golden rule of treating others as we would like to be treated. We prioritize understanding the needs of our clients before seeking to be understood.Learn More: https://www.smartbenefitgroupllc.com/The following concepts have been simplified; however, each individual has a distinct situation and should, therefore, consult a tax preparer about how the concepts will impact their tax outcome.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-david-smart-ceo-of-smart-benefit-group-discussing-transitioning-from-accumulation-to-distribution-mindset

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 with us David Smart, who's the CEO of Smart Benefit Group, and we'll be talking about transitioning from accumulation. to distribution mindset. David, welcome to the program. Well, thank you, Mike.

Looking forward to chatting with you today. Yeah, I was, I'm a big personal development, a student of learning and how to improve things. So I love when we're seeing here, we're going to talk about mindset. So I'm excited to learn what you have implemented over your career and how you serve your clients with that. But before we dive into that mindset, give us a little bit of your story and background and how did you get into the financial services space? Well, Mike, I started about 30 years ago just selling life insurance products.

And then I got my securities license and was selling then in addition to that mutual funds and whatever else that my series 6 and 65 license could do it. Then I transitioned into where I had in a mortgage company and did that along with my financial services of life insurance and securities products. And then I had a little bit of a break. I had a health issue. Matter of fact, it was a five-way bypass that I had. And I decided to retire. And my wife, after I got through doing six months of to-does,

she said it was time for me to go back to work. So I decided that I'd go back. in and I went into the Medicare space because I was a baby boomer. Yeah. However, I found that as I was dealing with people, that there's a lot of pieces that go into this retirement puzzle. And one of the things that is the biggest obstacle that I found is that getting people to going from what we call this accumulation mindset to distribution.

And the problem line is, is that there's people wanting to know, am I going to outlive my income? How do I make sure that, you know, when the market is in a downturn, how do I recover from that because I'm no longer putting money back into my account? And then the big issue is the taxes that comes with. So over the last 12, 15 years, I've really become a student, and I really consider myself to be a retirement planner and taking all these pieces and putting together that picture perfect puzzle for that individual's retirement needs.

And so it's interesting you said retirement planner because I know that there's a lot of people in financial services that call themselves a wealth planner. And that would be more of the accumulation side of things, you know, where then I'm going to help you create wealth. Well, at some point, you need to, you know, reduce that risk and volatility of building that wealth because you've got plenty of runway to, you know, kind of take it on the chin in your 20s or 30s if, you know, there's some market losses. But now at some point, at some age, you need to start going, okay, we've accumulated. Now let's put that retirement planner hat on and start talking about that distribution. And I think that it really is a powerful aspect of mindset.

So talk a little bit about how people need to shift that mindset from saving to then managing their retirement income. Okay, Mike, it really begins. You know, my ideal candidate is somebody who's about 55, 60. It's about 5 to 10 years away from retiring. And the reason for that is that because now they've accumulated over the last 20, maybe 30 years in their retirement funds. these monies, but they can no longer suffer a loss that can come about because they don't have enough time to make up for that difference. So in that, what I have found is that creating that distribution mindset is to learn to coach

the individuals and saying you need to have a certain percentage of your assets still working in the marketplace, but then you need to turn around and take a certain part of your assets and put them into guarantees, things that it's not going to be affected by that roller coaster we call the stock market. And that is where it starts at there. Because now we have a secure foundation that we know that regardless, if we have another 2008, I mean, that was just when I was ending up my mortgage business, 2008, I mean, the conversation I had with people at that time was, you know, my 401k is half of what it is. I said, oh, so you have a

201K. That's right. I remember hearing that, you know, and there's, but yet come, you know, after 2019, we started having one of the most unprecedented growths in the market, but then along came the dot com and the market dipped again. And so, there's that accumulation mindset that people are always looking to get the most for their dollar. But the time comes when we now need to put that dollar into a distribution phase and says it now needs to become my paycheck for my life. Yeah, I think that's for so long, people are just like go, go, go, grow, grow, build. And then they're actually probably if they looked back on their, you know, investment, you know, time, they would probably find times where they're like, oh, you know what,

my portfolio took a hit because we put it in whatever sector, right, whatever that might be. But, you know, yeah, the next quarter, it came on back and we just went, went and go, go, go. And that's great if you have the time to recover from that, but that mindset to make that shift, that's kind of where you're going there of going, okay, around 55 or so is when you need to start going, okay, let's start kind of downshifting a little and putting some this into guaranteed accounts. And I think that that number one makes people go, ooh, that really is a different mindset because I didn't really know that there are some guarantees out there. So what are you finding are some of the key challenges that people face?

When you start talking to them about let's transition from the growth or, you know, accumulation side of things to start now going distribution. Where's some of the pushbacks that people run into. Well, I guess because people have been listening to this one voice of whoever is managing their funds, this accumulation process, that when all of a sudden they're now having to move monies from that 401K out of a fidelity, a vanguard, a Schwab, Dean Witter, or whatever investment house, those are the voices that come back and say, oh, you don't want to do that because, you know, you're going to lose out on this growth.

Yeah. So the bottom line is, is that, no, you need to move this into a secure position so that you don't have to worry about it. One of the favorite stories I like to tell people, I said, you know, everybody's familiar with the name of Babe Ruth, right? Yeah. And Babe Ruth, when the Depression came, never missed a paycheck. His manager turned around and put money into annuities.

Now, you think about it, in the worst times that we've ever seen in our country's financial history, Babe Ruth never missed a paycheck. People were jumping out of windows. People were totally financially devised. because they lost everything. And Babe Ruth was not somebody who you would call to be a thrifty individual. There are stories about his exuberant lifestyle and how he spent his money. But imagine one day you turn around and there's no money in your bank account because it went south.

Just recently in the last, what, year, year and a half, is the first time we've ever heard about banks? failing again. So, you know, so my biggest hurdle, I guess, is to getting people from wanting to make 20, 15 percent on maybe a stock tip to putting it into something that's going to give them five, six, eight percent on the average returns on their monies, but they're guaranteed. It kind of reminds me of the tortoise and the hair story. You know, it's like, oh, that hair might be spritten up, but then you waste all your energy and you take a break and then here comes the tortoise slow and steady. And that kind of is the concept of what we're talking about here of that mindset.

When you make that shift to the distribution or the kind of we're seeing in retirement a little bit clearer there on the horizon. Talk a little bit about when someone fully embraces that. distribution mindset, what kind of long-term financial security and peace of mind does that bring them when then they look back and go, man, when I was having it in the market and when I was seeing that volatility, I just would have a pit in my stomach when I opened up my portfolio statement or when I watched the news. But now it's a whole different story. How does that work? Well, because we're using an insurance product, the product is called. called an annuity. It's a contractual agreement. And so therefore, the insurance companies,

as an example, when they receive somebody's money to fund an annuity, they automatically buy notes and bonds, treasure notes and bonds. And therefore, they have a legal reserve, where for every dollar that ever goes into that company, they have to back it by a dollar. Whereas with the bank, every time you put money into your savings account, that bank is now leveraging that dollar nine different ways. Yeah.

Two is that you have a state guarantee fund. Every state that an insurance company will do business in has to have a guarantee fund. Most of the guaranteed funds are somewhere between 250,000 up to 350,000, depending upon the state you live in. And every insurance company has to back that. So that's one of the guarantees there. But, you know, the thing is, is when people begin to do this mind shift, I think about, you know, all of a sudden they start getting their social security check. they know that's going to come in there on that second Wednesday or the third Wednesday or the fourth Wednesday of the month.

But they know that check is going to be in their banking account on that very Wednesday. Is that not a peace of mind? Yeah. Now, think about this. What if you had another second check, we'll call it another paycheck coming to you, that regardless of what was happening in the economic world, was there coming into your bank account on the 15th of every month for as long as you lived. Did that give you a peace of mind? It really would, especially when you compare that to what people typically are facing,

which is I'm tentative in opening up my portfolio statement because I've been watching the news and I've been seeing how crazy the markets I've been doing. And to know that here comes this guaranteed steady return, that's like you're, you're, issuing sleep insurance because you're helping people sleep better at night? Well, it is. You know, other words, you know that you always have sufficient funds to cover your daily activities or your activity schedule, if you want to call it that. You know, the groceries are there. You know, maybe you still have a house payment or whatever, but you have that assurance that that dollar is going to be there.

There's a lot of conversation that a lot of people that, especially in the younger mindset with my kids, they says, oh, dad, Social Security's not going to be there. Well, I've said that for 40 years. Well, that's it. It's a mainstay. I want to tell you, if an official wants to get reelected, he'd better make sure that he keeps Social Security in place.

Yeah. There will be changes. but the bottom line is, you know, I guess my, there was a story that I always tell people. I said there was a farmer who wanted to hire some help. And this one applicant said, the reason you want to hire me is because I can sleep when the wind blows. The farmer said, well, I don't know what that means, but I've never heard that, so you're hired. Well, within a week or two, a horrendous storm is hitting the country, the rain, the lightning, the wind. It wakes the farmer.

He gets up and goes checks on his hired help. This individual was sleeping like a baby. And the farmer says, well, I better check up on these things. Well, he checks everything that he needs to be done. barn doors were locked. The hay was covered. Everything was in place. And then the farmer says, now I know why he can sleep at night when the wind blows. What if we have another 2018 again? And that's your retirement fund that is now dropped 50%. And you don't have the time. You know, if you're, if you're 55 and that happened, you don't have the time. And you don't have the

time to have it slowly start creeping back up and then get back to the level it was and then get back and grow, whereas maybe in your 20s you do. So that's an excellent point. Well, you know, the other thing is, too, is that in our accumulation phase, one of the things that happens, when we're putting money into our retirement account and we're doing it on a regular basis, we create a phenomenon, which they call dollar cost averaging. So when equities are at a high point, you're buying fewer shares. But when that value of that equity drops, you're buying more shares. So at the time when you want to get out, all of a sudden you have a greater pot of money

because you've been averaging the ups and downs by the constant input of funds. when you're retired, you're no longer putting money into your account on a regular basis to offset that roller coaster. So when you're able to park your money into an account and that it gives a distribution percentage that regardless of what happens, that dollar amount will come out to you over a lifetime. Now, people say, well, yeah, but my advisor, my financial advisor, my wealth consultant says, I could probably take maybe 4% out of my account. But wait a second, when you're at the peak, 4% is pretty great.

But when you're in a valley, that 4% becomes a lot less. Yeah. But I have annuities today. that pay anywhere from 7 to 8% on your income guaranteed for your life. So whether you have that up and down roller coaster, you now are getting a paycheck that you can count on, just like your Social Security. If you should happen to have a pension,

you now have another source of income that's coming to you that's guaranteed. So that is what I have the challenge in helping people to understand. There's a difference between accumulating your money and distributing your money. So that distribution factor is so important to be able to have that peace of mind that you want to have in retirement. I love it. So I think a lot of times people want to hear that and they go, okay, that makes logical sense. but then they want to kind of learn a little bit more. What are some of the ways that you help to educate your clients in understanding

that shift from accumulation to distribution? Well, one of the things that I feel that is an advantage when somebody works with me is that I'm a broker. What does that mean to you? It means that whatever your unique situation, is, I'm not limited in finding the right solution for it, number one. Now, the other thing is that I'm also able to provide my clients several different options for them to take a look at and go through the positive and the negatives of each one.

So when they make a decision, they're very confident about their decision because they understand why they chose the solution that they wanted to serve them with. And in that aspect, an individual feels like, whoa, he understands my needs, and I have been able to fulfill that need by providing them with that. Now, the guarantees, once again, it's a contract. So whenever we have have this contract through all the fine print with the individual so that they understand what they can and they cannot do what is and what isn't available to them so that they know that that particular solution is the solution that is best designed for them. So Mike, your needs are going to be different than my needs or your neighbor's needs.

but the color of yellow doesn't meet everybody's needs, right? Correct. So it's the same way. So that's where as a planner, I'm able to now put people on the course that is going to best fulfill their needs with the right solution. and they will know that it's right the solution when they can be able to see the whole picture. Because I'll take and do what we call a spreadsheet,

and on one sheet of paper, I'll have an individual's entire financial history laid out and show this is where you're at. Here is the solution one, solution two, solution three. And they can see exactly how it will impact the end result, and that is, how much money am I going to have on a monthly or an annual basis? And it's on one sheet. That's a huge.

It's not a 30-page document that sometimes these financial planners produce. I kind of chuckle. I had a client of mine said, yeah, I said, I paid X number of dollars for this financial plan. It came to me in a three-ring binder. I said, well, if you look at it, he says, hell no, I haven't got that kind of time. Yeah, that's funny. Yep.

It takes a lot more thought process to make a big, long report like that, really concise and right to the point and clear and understandable. That's, you know, that's exactly the point about it. So being able to see how the numbers work and the intricacies that are involved and showing, okay, if this is, if this is what you want and this is the decision you're going to make, Let's see how it impacts the end result. Yeah. Sometimes an individual, especially when they're in that accumulation mindset, say, whoa, you're absolutely correct. In other words, as an example, a lot of people won't touch their monies in their 401ks or IRAs or 403Bs or TSPs

until that required minimum distribution because they're somewhat hesitant about drawing down on their retirement. retirement account. Well, it's interesting is that they forget that those are an IOU to the IRS. Yep. And it doesn't be better. It continues to get worse. But when you can turn around and you can show to a client how you can start minimizing that risk and putting it into income for you, then all of a sudden an individual

can see the cause and the effect of do I delay the decision or do I make the decision now? Well, I'll tell you, David, it's been real interesting hearing about just that simple, easy shift in the way you look at accumulation versus distribution can really make all the difference in the world to peace of mind and guaranteed income in retirement years. If someone is interested in learning more and getting educated and then reaching out and connecting with you. What's the best way they can do that? Well, they can always text me. You know, my phone number at 480-6-308-6. They can go to my website, which is smart benefit group LLC.com, or they can email me, D-Smart, N-A-Z at gmail.com. And I'm more than happy to send

whatever information they require and begin the conversation with them. Excellent. David, thank you so much for coming on. It's been a real pleasure talking with you. Well, thank you, Mike, and I appreciate the opportunity to spend some time with 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,

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