Business Innovators Radio - Interview With Jeff Brummett Financial Advisor with Greenline Financial Services-Subtle risks to our success in retirement

Episode Date: November 16, 2023

Jeff is an Amazon #1 best-selling author, past two-time Inc. 500 Company president, public speaker, popular radio talk show host, and a 25-year executive management and entrepreneurial leader. He is one of the most prolific and sought-after financial public speakers for tax-efficient retirement planning.My team and I take the time to educate each client as to how the game is played. We customize that educational process to fit your individual goals, concerns, and financial capacity. No smoke and mirrors. Only hard facts, and proven financial strategies have weathered even the most volatile of hard times.Learn More:https://www.greenlinefinancialservices.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jeff-brummett-financial-advisor-with-greenline-financial-services-subtle-risks-to-our-success-in-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 with us, Jeff Brummet, who's a financial advisor with Greenline Financial Services, and we'll be talking about subtle risk to our success in retirement. Jeff, welcome to the program.

Thanks, Mike. It's great to be here. Hey, so I'm excited to talk about risks because I know we all want to avoid risk. And I want to hear about subtle ones because those are the ones we don't notice. So I'm excited to learn from you. But before we jump into that, get started with your story and background. How did you get into financial services in the first place? Yeah, sure.

That is a great story, actually. This is not something that I ever saw happening by any stretch of the imagination. But, you know, hey, sometimes the things that just happen are some of the best things. So you weren't in third grade career day going, I want to be a financial advisor. No, I know, not at all. In fact, I wasn't even college saying that for even several years after. And I think that's probably what has given me the unique perspective. perspective that I think a lot of people have enjoyed because they, you know, when you sit down and look, I love our business. I love our industry. Like every other business and industry, it has its ups and downs and problems. But I think one of the things that when people sit down with financial advisors, the industry itself has really positioned us kind of like, you know, these financial demigods, right? I remember.

and maybe you'll remember this too. I'll date myself a little bit here, but I remember back in the 80s watching television commercials and this one particular within the financial services industry. And this one particular one really stands out. And actually, Mike, it's the only one that stands out. I mean, of all the things that I've, you know, commercials I've seen, this one just blazily stands out. And you'll probably remember it.

So the commercial opens and there's this, you know, highbrow dinner setting where all of these people in suits and, you know, ties and, you know, they've got their wives there and they're all, you got jewelry and everything and they're having sophisticated chatter and conversation and they're all enjoying themselves. And then all of a sudden, some guy at the front of the room clears his throat. Right. And everybody instantly stops, whips their heads around. And they are now in the presence of God.

Is that E. F. Hutton? E. F. Hutton. When E.F. Hutton speaks. People listen. Yep. Isn't that amazing? Yeah. Everybody, you know, if you grew up and were, you know, an adult, you know, even in college back in those days, you probably remember that.

So, but, but it's true. I mean, that's the, these people, they're very good at setting expectations. and, you know, putting themselves on a pedestal, even a lot of times the nomenclatures that we use in this industry when you think about it. But part of the, I think the intimidating factor for the average client is they just, they feel like they're lost and don't understand. Even when they sit down with an advisor, a lot of times, they'll walk out thinking, well, I'm sure glad he's that smart because I couldn't understand anything that he said, you know, because we use. words that are different. For instance, one of the just simple examples is in our business, we refer to the word securities, right? Everybody's heard that word. What is a security? Well, it's a, you know, it's a stock bond, mutual fund, et cetera. But the word security in the normal

everyday person lifestyle actually means something of, you know, safety, right? Safe and secure. Yeah. That's right. Security. If I'm talking about your security on an individual personal level, I'm talking about your safety, right? But in the financial world, we use that term to define the exact opposite. It stands for a product or a strategy of risk. That can have volatility. That can have volatility. Right.

Use it your own risk. Yeah. It just, it, and it, it amazes me when I look at having come from the other side of things. So you asked me, how did I get into business? Yeah. So when I first started out as a young man, I kind of always had this entrepreneurial drive. And so I spent most of my life, professional life, adult life, on the other side of the fence.

I was a businessman. I was an entrepreneur and fairly successful. I back in the late 90s I founded a company that along with my father that grew to be a two-time Inc 500 company. And so, you know, when you are one of the 500 fastest growing most successful private owned companies in the country, that's a level of success. Most people obviously never get to experience. So we've had all kinds of opportunities and you learn a lot during that process. but I never said, you know, it wasn't in the financial world. You know, we were manufacturing electronic goods back in those days, physical security products.

And so I had a guy, right? I had an advisor. My dad and I both did. And we trusted that financial advisor and followed the advice religiously because we didn't want to screw up, right? And so for most of my life, that's my experience within the financial world. And then something happened. We had, when we started the company, we were using our own, you know,

resources, family resources to fund the company. And my father had actually retired from Ford Motor Company after about 38 years, very successful, actually retired when he was 56 the first time. So very successful. And I had started this little company and about two or three years into it. we were ready to get into some bank lines of credit to go into national distribution. At that time, my father was not involved, really, in the company. And I was down visiting over Christmas holiday, and I was explaining to him, you know,

what was going on with the company. And I had three different banks that were offering, you know, warehouse lines of credit. And I had to make a decision. Well, as, you know, my father, I said he retired from Ford Motor Company. He worked for 38 years. and was in the cost analysis and cost accounting divisions. At the local plant level, he was the manager. So this is a guy who, you know, he knows finance, right?

So he said, well, let me look at your, let me look at your bank offers and your business plan. And I'll give you some advice. And I said, great. So that started. And at the end of the day, about not that day, but three days later, he comes back and he says, hey, take, take my advice. Don't bring the banks in yet. Let your mom and I help you.

and I'm bored, basically. He'd been retired for three or four years, and, you know, he's bored. And so I said, you're kidding. And that's how we got started kind of in business together. And that's when the company began to grow. But we eventually, because we grew so fast, we outstripped our ability to fund the international letters of credit that you have to have as an electronic manufacturer because nothing's made here in the United States on that side of Vince anymore, right?

So we're needing those letters of credit to finance, you know, cash flows and receivables, et cetera. And so we had to bring in the banks. And it was great for, you know, through four years. But then in 2008, when the credit facility, you know, the banking collapse, mortgage credit collapse, commercial credit collapse, when all of that happened, one of the things that the banks did is, you know, they came to, I think, the middle you know, small, medium-sized business market, and they, they took that money that had been here to four earmarked to support those companies, and they froze it so that they could go

support their large clients. Now, I can't prove any of that, but I think, you know, most people as they look back, they realize that's exactly what happened. Because you didn't see huge companies go out of business. You saw huge companies and huge bank get lots of financing available. Banks got belled out. And you saw Middle America crushed. Yeah. Too big to fail. Yeah, yeah, that's right. That's right. Well, unfortunately, we weren't too big to fail. And so they didn't call the lines of credit, but they essentially, you know, froze them in place and said, hey, you've got to figure out a way to survive on the existing credit facility because we can't continue to increase it like we've been doing. They were, in fact, we had met with them in June of 2008 for our annual credit facility review. And

they were going to more than triple it to support the growth for the next year. And within a month later, before we closed on that facility, they were backing away and, and, you know, crying, you know, broke. And so at the end of the year, what happened is we went from being one of the fastest growing companies in the country privately owned to losing everything. And Mike, I mean, I mean, we lost everything. We listened to our financial advisors, both. both on a personal basis with our personal finance and then, of course, the bankers.

And we tried to bridge that gap because they said this is not going to last forever. You know, the credit will eventually come back. The credit markets will eventually come back. So we tried to throw our own money to make a bridge and that just, we had no idea how huge that bridge was. And we ended up losing everything. So I was in my early, I'm in. 40s, I think it was 42, 43 then. And it got really bad for me. I mean, within about six months,

my wife left my two teenage boys and I. And within a year, we lost our house. And I had to move back in with my parents because that's how broke I was. And the only reason they had a home is because they had a home in Florida, which as you know, is a homestead state. I mean, if he had not purchased that home when they retired in Florida, probably none of us at that time would have had a place to live. That's how broke I was. Now, here's the thing that I learned through this. My father, what saved him was his pension from Ford Motor Company. Mike, he had a pension and he had Social Security between the pension and Social Security.

He had more than enough money to make his, you know, monthly budgets, even though he had lost virtually all of his wealth. at the age of 65. And so I moved down there and about a week or so into our settling in together, you know, and I was pretty depressed. I've lost a marriage. I'd lost a home. I'd lost a business. I mean, I was just about at the bottom as bottom you can get. So my mom and dad that came to me and they said, hey, we, we've been talking. We want to sit down and have a talk with you. And I'll never remember. I'll never forget this. My dad looks at me and he says, he said,

you know, your mom and I have been watching you mope around here for about a week now. And we've come to the conclusion that if that's how it's going to be, you're going to have to go mope someplace else. We don't want that energy around here. Not going to happen. He said, that's not the way we raised you.

And I just, I about fell out of my chair. And he said, look, we know, you have every right to be depressed. And we, and we understand that, but this is not how you were raised.

And you need to start, you know, thinking about pulling your head out of your rear in and acting like, you know, you have purpose again because, you know, he told me, he said, you think you, you know, you're depressed because you've lost all your honor and respect, you know, because when you go through the financial, you know, situation like that, that's kind of what it feels like. And he said, but that's not how you were raised, you know, the only way you give up or lose your honor and respect is if you give them up through a lack of integrity. And, and, you know, that's a decision that you make. So anyway, I sat and listened to him. And it really,

I mean, it was the talk that I probably needed because it probably saved my life because that's how desperate I was and how depressed I was at the time. So I, you know, in talking with him, he had made a recommendation that I kind of learned the financial markets because he retired in 1998. And from the time that he retired through, this was probably 2000 and I'm going to guess 10 when we were having this talk finally. But so basic the first 10 or 12 years, he saw two global financial collapse. Think about that, Mike. He went through the dot. He hangs up his shoes, working shoes, right?

And within a couple of years, we have the dot-com bubble, which was a three-year slide starting back in 2000. And then we know we no more get to even from recovery of that. The housing crisis. Yeah. We have the housing crisis. And boom, it all happens over again. And so by the time the markets are back to where they were to the pre, you know, housing bubble, which essentially was also where they were during the pre.

dot com bubble. It was almost, for most people, it was about 14 years. Wow. And, and he said, you know, this has happened twice in my lifetime. And it's, it's, it's, it's never happened like that ever. I mean, you'd have to go all the way back to the Great Depression to see a market to destroy the economy for such a long period of time. And of course, everybody was reckoning the Great Depression and using it as a parallel to the Great Recession, right? And so he said, I would go back and study the financial markets. And so I did because he was right. I had, you know, I was in my early mid-40s by that point.

And I had time to recover. He didn't, by the way. Right, right. I mean, there's no way at six, he was 65 when all of this, 66, when all of this happened, there's no way you recover from those losses. But I had time to recover. but I also instinctively knew I couldn't take another big hit like this, let alone too like he took,

you know, at the end of my working career. So that's what got me, believe it or not, I got into this business really to protect myself, to learn. So I was never, you know,

at the whim or at the mercy of other people, uh, where my money just didn't matter to them as much as it mattered to me. But if I'm going to listen to a guide, mentor, guru. I want someone that's got battle scars and that has felt the pain of suffering or noticed this.

And I want someone that is going to say, I hit rock bottom and then I studied. Then I researched and I noticed a trend. And then I figured out how to, if we could turn back time, you know, avoid it or make it through it unscathed or less unscathed than I did. And then moving forward,

I'm looking forward to indicators that might be, ooh, when this happens, happens. That's three steps ahead of when something really bad is going to happen. So now here's what I'm going to do. And I want that person to be telling me some guidance because I can still see the, you know, stitches from the bottle scar. So through that, what are some of those risks to retirement that you notice that you call subtle? Yeah. So one of the, that's a great question. And it's always the subtle things that end up biting us the, because we just, don't see them or we don't see them in time. And I think that probably one of the most subtle as

I started understanding the financial systems, and particularly, got to remember, I'm, you know, when I start in this, I'm in my mid 40s, you know, so I'm well into my working career. I'm starting really on the backside of that career. So I need to, I need to grow my assets, but I also have got to do it in such a way that I, you know, I don't go backwards very much at all. So here's one of the things. It's really the probably the most subtle and and the most defining risk that that I have found and or that I found as I was studying for myself. It's called sequence of return risks. And I had never heard of it before. And so let's let's just first, let's understand what sequence, what I mean when I say sequence of return risk. Because I think once a person understands what it actually

is and the impact that it brings to bear on our investments and our savings, they really become self-apparent and actually pretty obvious. So at its core, sequence of returns has to do with the mathematical impact of negative numbers as they're introduced to a client's investment portfolio. And really, over a very specific sequential period of time. And I probably need to add or maybe emphasize, we're not only talking about a sequential period of time, but we're talking about a very unique sequential period of time, because the truth is sequence of returns risks, these are not always, they're not always present over every sequential period of time that we have throughout our financial life. For instance, I was just down in Florida here a

couple of weeks ago. In fact, when we first spoke, and you were trying to schedule me for this, I was down there visiting my parents. It was my mom's 79th birthday. And while we were there, I had this very conversation with my father, who again, worked very high level with four motor company as a manager over financial matters at the local accounting division. So this is a guy who knew finance and accounting, you know, very high level. And so we're talking. And dad, he'd been listening to one of my radio shows where I had been talking about this very, you know, sequence of return concept and how it literally multiplies, really by orders of magnitude, our financial risks during certain unique periods of time. So he says to me, he says,

now, I want you, I want you to walk me through this math because I'm not sure you've actually got this right. As I said, all right. So I said, what, what's your, you know, where are you confused? He said, well, I've done some math here myself. And I'm just not seeing that the sequence of return makes even a penny's worth of difference, Jeff, in the end. And so I said, well, show me your math. So he pulls out this spreadsheet that he made and he walks me through his scenario. And he had about 20 lines of various losses and gains, losses and gains with an initial investment dollar amount, about a half a million, I think. And at the end of the day, both of those accounts average 10.4% over that, you know, 20 year period and both had exactly it to the penny the same balance.

And, and he had, you know, he had just kind of mixed up the, the, you know, one year, the first year had maybe a higher return than the first year of the other account, that sort of thing. And I said, well, I, here's your problem, dad. I said, you never took any money out of the account. And he looked at me and he said, well, what's that got to do with it? And I said, oh, everything. He said, what do you mean? I said, well, here, let me put some withdraws in it. So, you know, I can build a spreadsheet almost as good as he can, not quite.

He got a lot more experience than I had. But I started messing around. I started putting into his little calculator withdrawals. And we took the same withdrawals. out of both accounts and it was amazing what and he looked at it and he just scratched he says he said I just I can't believe that I would have never thought that because then what was the difference then with withdrawals then there was a big disparity right oh my goodness there was yeah there was a huge disparity if if if you looked at you know account one versus account two uh the difference was one had uh when they both started with about a half a million one had about uh one point million left in it. That's a pretty good result when you're taking money out, right, all the time. And the other one was broke, I mean, totally out of money by about the 11th or 12th year. And they both have the same. Yeah, it was the same. It was the same withdrawal,

same at the end of the day, over 20 year periods, same return, average return. But taking money out during that, that's why I say unique period of time, because most of us, we never take money out of our savings, particularly our retirement savings, until the very end of our financial life, right? It's always about accumulation. In fact, they've got the rules set up so that it's, it's pretty punitive for you to touch it even before you're, you know, basically 60 years old. So, and then even then, a lot of people don't start withdrawals, you know, until they retire. So, but once you start taking money out, the math, the negative numbers in the math, it's just, it turns logic on its head.

And that's so subtle because nobody's taught this. Nobody's taught. And people might say, oh, well, I just won't take money out, but A, you need to many times just to live. B, you might be required to legally. And C, you might have a health issue where you need some care, long-term care, that kind of things. Yeah, there are all kinds of reasons.

Yeah, right. We have wealthy clients who said, I, you know, I'm never going to touch this. I've got plenty of other assets to draw from. I'm trying to figure out how to leave this to the, that's fine. but there are all kinds of things that are outside of the normal, you know, this is how life goes, that can happen that can force people to take withdrawals. But the truth is, the vast majority of us in the middle class,

I mean, we're going to need some of that money. And if it's in a qualified account, even if you don't need it, as I'm sure you probably know, Mike, these required minimum distributions, their law. It's not a maybe suggestion. You have to, once you hit, today at 73, but once you hit a certain age, you have to start taking money out. And not only do you have to take it out, but you have to take more and more out because those required minimum

distributions get more onerous as a percent of the overall asset each year that you age through retirement. So, and it can become, I mean, it can become quite onerous as you get into your late 70s, mid-80s, particularly. That's how people end up going broke, even though they didn't maybe want to take the money or need the money. It still happens. But to your point, someone might be sitting there going, yeah, yeah, I've got all these other accounts and I don't need to take it out. But if you don't at that certain time, it triggers very specific consequences and penalties and all those kind of things. So make sure that you're working with someone that has, you know, hewn the way forward and said, here's what you need to understand because these required distributions are actually

required, not suggested. So I think that's huge. You know, I think that sequence of return becomes a subtle risk because people don't really know about it or understand it. I think the one that comes to my mind is tax risk, and that doesn't seem subtle, but talk a little bit about the subtleties regarding tax risks because I think that a lot of times people just think, oh, yeah, yeah, taxes will be lower in the future or I'll be in a lower tax bracket, but I don't think that things are trending to where the tax brackets or tax rates will be lower given the deficits that we see today. No, and that's a great topic in and of itself. I mean, taxes at the end of the day, you know, they're a form of loss.

Are they not? Oh, yeah, it's a hole in the bucket. Think about it. What's the difference? What's the difference of, you know, seeing a market pullback of 20% or so and a tax increase of 20%? I mean, either way, you got less money in your in your account, right? So it's just like a loss. It's just like a loss, really.

Yeah, 100%. I tell you what, we could probably go on for about seven and a half more hours and still be taking our first breath than saying, and here's another risk. But I think that the big thing that people need to realize is there are these subtle risks that, you know, I'll bet you're nine out of 10 people didn't even know what a sequence of returns was. And to your dad's point, he thought he had it. But oh, this one little factor changes things dramatically. So what I would like to say is wrap us up with just a final thought of, you know,

one thing to keep in mind regarding these risks. And then if someone is interested in learning more about secrets of return and how to minimize tax liability, what's the best way that they can reach out and connect with you? Sure, sure. Well, so just on a very broad brush basis, the strategies that you need, to deploy are strategies that condense the volatility in an account and specifically have the potential to virtually eliminate the volatility entirely. Now, you can't always do that with your entire portfolio, but you can set aside a portion of the portfolio that's maybe dedicated to

fulfill those income, you know, responsibilities that you're going to have, whether you want them or not. And that's really the portion that you need to protect from the, uh, from the sequence of return risk. And there are, there are those strategies out there. We're looking at, you know, interest and dividend yielding, uh, type strategies where the, the asset is spinning off, uh, income, uh, rather than having to take income out of the asset, which is depleting the asset. And if people want to know more specifics, they can reach out to us at greenline financial services.com. That's our main website. From there, you can get to all my radio shows, our books, and even access my calendar from that site. So that's the best place.

Greenlinefinancialservices.com. Perfect. Well, Jeff, thank you so much for coming on. It's been a real pleasure talking with you today. Great to be here. Mike. I've enjoyed it. 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.