Business Innovators Radio - Interview with Jim Phillips, SVP – Managing Director of BRB Wealth Discussing Guaranteed Income

Episode Date: September 18, 2024

Jim has over 30 years of investment and wealth management experience. Jim started his career with Merrill Lynch in Richmond, and most recently developed and managed the investment program at CB&T Wealth Management. Jim believes in a personalized approach to get to know his clients and their financial goals, and then develops a strategy to work toward achieving them. He helps his clients understand the current financial, economic, and political climate to better position their assets to address their preservation, growth, income, or legacy needs. Jim is a graduate of the University of Florida. He lives in Chesterfield with his wife, Nina. Jim enjoys distance running, travel, and spending time with his family.Learn More: https://www.mybrb.financial/WealthSecurities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Blue Ridge Bank and BRB Wealth are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using BRB Wealth and may also be employees of Blue Ridge Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Blue Ridge Bank or BRB Wealth. Securities and insurance offered through LPL or its affiliates are: Not Insured by FDIC or Any Other Government Agency Not Bank Guaranteed Not Bank Deposits or Obligations May Lose ValueInfluential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jim-phillips-svp-managing-director-of-brb-wealth-discussing-guaranteed-income

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 this Jim Phillips, who's the managing director of BRB wealth and will be talking about guaranteed income. Jim, welcome back to the program. Ah, thanks, Mike. Appreciate it.

Hey, you're welcome. You know, I know that there's certain words that kind of trigger, you know, good feelings, good vibes and negative feelings. And I think that guarantee, the word guarantee is such a powerful word. And when we couple that with guaranteed income, now you're talking. People really want to hear about guaranteed income. So first, let's kind of define what is guaranteed income. And why is that so important for people to factor into their income? retirement plan. Yeah, I think that's the two favorite words that people mention when I talk to

them. It's guarantee, everybody loves guaranteed, and of course, we love income. So you put them together, oh my gosh, this is incredible. Guaranteed income, it refers to, it's a consistent and reliable stream of income. So it could be for a specific period of time. It could be for the rest of your life. You could have guaranteed income for life, which, which is really nice. And the big point about guaranteed income is it provides its stability. You know that check is coming in the mail every month. And the big thing I think it does for a lot of people is it just gives them peace of mind. They know that, you know, I've got this money coming in and I've got, you know, some of my basic expenses taken care of and I don't have to worry about it no matter what's going on outside my

house. You know, it makes me think about something where it fills in the gaps. meaning I think if you sit down with someone and say, okay, in retirement, how much money are you going to need? And let's talk about that. And how much money then do you have right now? And where's the gap? So to get from A to B, you're going to want to close that gap. And I think if you can close that gap with guaranteed income, it helps put people's minds at ease to know that it's not just some pie in the sky. So where do you have that conversation with people regarding kind of planning realistic expectations of what income?

they need and then how to close that gap. Yeah, a lot of people usually talk with Social Security, like, okay, what's my Social Security payment going to be? That is a source of guaranteed income. And if you're working for at least 10 years, you qualify for that benefit. A lot of people can get that. A lot of people get it early. You can get it as early as 62 years old.

full retirement age is usually around 66 to 67 these days. If you're looking at, and a lot of people want to know, well, how much can I get in Social Security? Because I know that's a guaranteed source of income. And, you know, maybe I can live off of that. But the average monthly check this year for Social Security was $1,860. So that was the average. I don't think you can live very well. Not many parts of the country.

Yeah, that's interesting. Yeah. And then, okay, what's the, what's the most I could make? What if I have a very high earner and I should get this gigantic Social Security check, right? Well, the maximum you can get for someone who applies for Social Security at 67 is $3,849. So that's the max. Doesn't matter if you made, you know, $500,000 a year for your entire working career. That's the max.

Social Security is a great place to start. It is designed to give you about 40% of your pre-retirement income. So it's not designed for an income that will take care of your retirement completely. It's just not enough. We can't afford to give everybody this gigantic check for the rest of their life. A lot of people have, pensions, although they are disappearing quite quickly. Companies have realized that they can't fund that. That's a lot of money. They make a lot of decisions on pensions because they don't have to fund them now.

We don't have to even look at this for another 10 or 20 or 30 years down the road. Well, guess what? The 10 or 20, 30 years down the road is here and they realize they can't afford it. So pensions are going away. So you've got Social Security. probably not a pension. So you're going to have to rely on another source of income to provide you your retirement lifestyle. You know, and I think a lot of people would agree with you on, you know, pension. I've heard about that being available in decades. So I think that's, that's true. What do you, what do you say to people that hear or would be worried about, well, Social Security, I've heard that we're going to run out in whatever year. Now, I know personally for me,

I've been hearing that for 30 years. But given today's environment we're in, what do you say to someone that would go, hey, we keep hearing headlines about so security benefits might run out? Is that viable or is it like, come on, it's like the old, we're too big to fail. You know, the government's not going to let Social Security go away. Yeah, I know. I hear that from everybody. That's one of the reasons why a lot of people take it early.

They're like, I'm going to take it now before it runs out in 62, which is probably not the best way to do it, but I know a lot of people do that. The Social Security benefits right now, they can pay, you know, all the, all the Social Security payments that you make that come out of your paycheck every month, go to the government, and they take that money, and they pay the current retirees. Right now, they've got more money coming in than they've got going out. So we're good. in about, I don't know, somewhere in the 30s. It could be, you know, 20, 30, 25, somewhere in that range. It looks like the money coming in is going to be less than the money going out.

And that I think is a, I'm not sure of the percentage, but it might be somewhere around 15 or 20 percent, maybe more. So if they do nothing, that is a possibility that people will get a cut in their retirement. retirement benefits. Social Security is such a big deal. And if you mess with Social Security, you're going to have a riot on your hands. There are some relatively easy things you could do to alleviate that and get more money coming in so that everybody can still get full benefits. You could raise the retirement age. You could raise the amount of income that you have that will pay the social security taxes as you're working.

You can do a lot of different things that are not too difficult that can make sure that the Social Security is solvent. I think the people that are close to retirement age or in retirement age, they're probably going to be okay. The ones that are younger, you know, if you're 20s or 30s or 40s, you might see some,

you might see some benefit changes. And obviously we here, you know, don't know what's going to happen and can't, you know, guarantee anything that way. But it sounds to me like it's not a matter of social security will go away. It's a matter of if people don't put a little bit of thought process into it. Maybe the benefits will drop a little bit. But it's not a matter of you might retire with zero social security benefits because it is too big of a benefit to let fail. Yeah, it is. And unfortunately, politicians like to kick the can down the road and worry about it later.

We're getting to the point where, you know, we're at the end of the road. You can't kick the can down any further. So they're going to have to do something. But again, it doesn't look like it's major, but it is a concern. It is a risk. And people are concerned about it as they should be. Well, you know, Jim, when we're talking here about guaranteed income, we've talked about how that makes people feel really good. Because, you know, if you have your retirement income that you've saved up over decades sitting

into the stock market, we know how volatile that can be. We know how much risk that could be. And you open up your portfolio statement at every quarter or year or whatever the case is or watch the news for that matter and watch, you know, stock market drop X percent. And you're like, oh, no, that's my retirement. And I need it in a very short period of time. So to be able to eliminate that or dramatically mitigate that, guaranteed income is where it's at. So talk a little bit about what that does.

Yes, the actual guarantee is important. But I feel like, you know, the peace of mind and the life, you know, you sleep better at night. You know, what are some of those non-tangibles that start to factor in when here's this couple that goes, you know, hey, we had friends over for game night. and they were bemoaning the fact that their retirement income dropped 30 percent. And we said ours didn't move an ounce because we've got those protections in place. Yeah, that's a great feeling. I have clients that call me, you know, when they see a lot of negative news, they get their statement and it's dropped. And that happens, of course, and they get nervous and they get worried.

Oh, my gosh, what am I going to do? And I have several clients that do have some guarantee. income sources, and it does make them feel better because they realize that maybe the account values have dropped. But the most important thing is that check that comes every month is the same and it hasn't moved. And I can still pay my bills and take care of the things I've got to take care of. So the peace of mind and the ability to sleep at night, especially when you're older, because you're not going to, you don't want to go back to work and make more money. This is it. So I want to make sure that I'm taking care of.

So it really makes you feel good that you do have some sources of guaranteed income that are not going to go away. So we've mentioned a couple sources like security and pension. What are some other sources of guaranteed income that people might not have thought about? Well, the big one out there that provides a source of guaranteed income are annuities. And these are insurance contracts that you have with a contract. company and what they will do is they will guarantee you an income that will never go down as long as you live. It can actually go up, but it won't go down. And so that is a big source of guaranteed income. The misconception on annuities with a lot of people is there is one type of

annuity, which is called an immediate annuity where you basically give the insurance companies, some money and then they pay you some income for a certain amount of time or for your life. And then when that period is exhausted, the money's gone. So you can't ever, you give the money to the insurance company, you can never get it back. So a lot of people are like, I don't really like to. I'd like to maybe get my money if I want to or need to or give some money to my spouse or my kids. I don't want it to go away. So that's a big misconception of a lot of annuities. But there are some benefits and there's some features that they've added in the last several years that are just terrific for people that are looking for guaranteed income. You know, I think that's interesting

because I've heard that same kind of concern before, like, oh, annuity is bad. You know, you hear a word and it triggers you to go, nope, and you didn't, you know, listen further. But I found that when I heard that, that, you know, when the industry started hearing people, you know, not understanding this or This is not a good thing. They started changing the way annuities provide value. So talk a little bit about some of those changes over the years that now might make annuities a good decision to at least consider. Yeah, I have been in this business for over 30 years. I've seen a lot of changes with annuity companies. And back in the day when I first started, they were not very good. The insurance companies managed the money on their own and they were not very good money managers. They were good at actuarial tables and life insurance, but as far as investments were concerned, they just weren't making any money. So what they decided to do was they went, okay, we're going to go hire the best money managers

in the country, and we're going to bring them in and let them manage the money. So one of the big drawbacks at the beginning was that one of the returns are not very, you're not making any money in these things. Well, now you can't really say that because you've got all the big companies out there that you recognize are managing money for these insurance companies. So they fixed the performance part. The next piece was, well, they're just too expensive. My gosh, they have fees and fees.

Why would I do that? And yeah, they were expensive again, back in the day. But the insurance company realized, you know what? We've got to figure out a way to reduce these fees to make it more competitive. and they have done that. There are actually some annuities companies that charge zero fees. I mean, no fees. So if you want an index fund and there are index funds out there that you can invest in,

they don't charge very much, but they charge something. And there are some annuity companies that don't charge anything. But the big thing, I think, with the annuity companies over the years is they realize, and heard people wanted income. They wanted guaranteed. They didn't want it to go away. They still wanted to invest. They still wanted to have access to their money. They still wanted their money to grow because they liked all of that. That's great. I've got these mutual funds. I've got this stock portfolio. I love it. It's making money. But the income is not necessarily stable or sturdy or guaranteed.

So what they did was they tied guaranteed income in these variable annuity policies, a lot of them. You can pick a lot of different mutual funds. You can put it in technology and growth and value and all sorts of stuff. And you can have your assets grow, but you set a guaranteed income and you can set that up for life. And it can be for just you. Or you can actually add. your spouse. So one spouse passes away. The other spouse just continues it on for the rest of her life. So there's some great benefits as far as the investment performance, the fee structure, and the

actual income that's guaranteed. You know, and you were mentioning variable or, you know, things like that. Aren't there types of annuities where, you know, you can, you can track or have the return based on a certain index, like let's say the S&P 500, where, you know, it's not going to be as volatile as moving up and down. But if the S&P 500 is really good, then your annuity will go up. And there's a limit where it can go up. But talk a little bit about some of those indexes that people can still participate in the movement of the market without having the risk of the market. Yeah, that's the other thing. You know, people like, I like variable annuities, but they're still variable. I can get my account statement and it went down. What happened, Jim? You said, you know,

I know I got the guaranteed income, but the value of the investments can fluctuate. So the other, the, I guess the biggest thing that people would love to have is I would like all the upside of the stock market, but I don't ever want it to go down. I never want to see a negative. Like that's, that's the perfect investment, right? So I don't know if there is. an investment like that yet, but we can get close so we can set it up. And this is this is more of a fixed index annuity. So it's a different type of annuity. But you can invest in the S&P 500. You can invest in an index. And you can get the gains of the index. Now the tradeoff is that it's going to be capped. So if the S&P 500 is up 30 or 40 percent, you're not going to get 30 or 40 percent. Maybe

you're going to get 10%, maybe you're going to get 8 or 12. But there is a cap. And that's a tradeoff because when the market goes down and maybe it's down 10 or 15 or 20%, you don't go down at all. You just stay where you are. So that is a great way to capture some of the upside. But every time you get a statement, you're going to look at it and go, it didn't go down, it didn't go down. So a lot of people, even though they realize they can recover from small drops in their portfolio, Some people are like, and I don't want to see any drops of my portfolio. So, yes, we have an answer for you. You know, and I think that the mindset of that cap is just a re-shift, meaning, you know, you might talk to your friends at that game night and go, oh, we were up 20%.

What were you up? And maybe, let's just say hypothetically, you know, it was 10%. Oh, we were up 10%. Oh, will we win? We were up 20. You were up 10. But then the next game night, they come in, they're like, we were down 20%. what were you down zero so i think that having those those caps gives you the the benefit of the

upside but then having that floor where you can't lose money what a huge relief that is and those other people that were down 20 percent now they've got to wait you know long long long longer time to get back up to just even even much less you know recouping whereas the people that didn't lose anything they still are at ground zero and then when it goes up a little bit and a little bit the next time it's like the tortoise in the hair. You're just making steady progress, steady progress, but you can't lose principle. And to me, boy, that's the ultimate piece of mind. It is.

It is. And it's all about risk management, right? You want to manage the risk in your investment portfolio because it's very important. You're relying on this usually for your retirement income later in life. And if you can not only just reduce the risk, but it's, eliminate the risk. My gosh, you are, you're ahead of the game. Huge. You know, and, and, and then that makes you actually sleep better at night, which maybe makes you live a little bit longer because you've got a more calm lifestyle. So all of that just works out to be great. Hey, have you ever

worked with someone, Jim, that, you know, they came to you dealing with that volatility and you implemented some guaranteed income kind of strategies. And then they came back in and said, let me just tell you, here is what we have experienced. Yeah. There's a lot of, lot of people that come in and are looking for some type of investment. They just don't know what it is. You know, like I say, some people like, I don't want it to go down and I want it to go up as much as a stock market. Is that even possible? And, you know, not quite. So they're looking, they're looking for something. And when I explain how annuities work, a lot of people just say, well, this is like too good to be true. I've never heard of these benefits. All I hear is all the negative about annuities. So once people

sit down and they understand how they work, and yes, there are expenses, but you get some, you get some features from there, you get tax deferral, you get death benefits, you get guaranteed income. You don't want to add anything that you don't need. You don't want to necessarily add anything to add some costs. But, you know, you're getting something for these. just not piled oners. Aren't there some annuities that also provide some long-term care benefits if needed? Yeah, there are. There are some, there are some annuities. Yeah, that you can, a lot of them that you get guaranteed income from, maybe you're having guaranteed income for two or three years, and then you have to go to a nursing home. A lot of them will actually double

the amount of guaranteed income for a number of years, like five years. And so you have, you have a rider that will help you deal with the increased expenses in case you need long-term care. So drastic difference from the early days when maybe annuity's got a little bit of a black eye. Now it's just so much more vibrant, opportunity-wise, security guaranteed-wise, less fees. So if someone is interested in learning more and seeing how annuities or any kind of guaranteed income should fit into their retirement portfolio, what's the best way that they can reach out and connect with you, Jim? Yes, you can go to myBRB.financial, and you'll see our website, click on the wealth tab, and you can contact us there.

Excellent. Well, Jim, thank you so much for coming back on. It's been a real pleasure talking with you today. I appreciate it, Mike. 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.