Business Innovators Radio - Interview with Jonathan Leonard Founder of Leonard Financial Solutions Discussing Protected Income

Episode Date: February 5, 2024

Jonathan founded Leonard Financial Solutions out of his strong desire to improve the lives of everyone he meets. For the majority of his career, Jonathan has worked for non-profit companies and in church ministry. Seeking a career change while still passionate about helping people, Jonathan branched into the insurance and financial services industry to provide his clients with access to all of the best products available with holistic strategies to tie everything together into one comprehensive plan.It is Jonathan’s main focus to build his practice based off of honesty and integrity. He cares more about serving his client’s best interests rather than making a “sale.” If you have an existing policy or plan that already suits your needs, Jonathan will always let you know that you are in good hands. He prides himself on ensuring every client he meets finds value in investing their time with him.Learn More:http://www.leonardfs.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jonathan-leonard-founder-of-leonard-financial-solutions-discussing-protected-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 us Jonathan Leonard, who's the founder of Leonard Financial Solutions, and we'll be talking about protected income. Jonathan, welcome back to the program.

Hey, thanks, Mike. Thanks for having me again. You are welcome, and I love this topic because income is great. People love income, but I wanted to be protected. So let's start off with, let's define it. Explain what protected income actually is. Yeah, so protected income, we're looking at a vehicle that your money can be in, an investment that your money can be in where your principal is fully protected.

meaning that you can't lose money in that type of investment. Wow. I think that some people would be listening to that statement and going, that's new to me, news to me. I didn't even know that was available because I know for me in decades past, you know, you put your money in, quote unquote, the market, and you see up, years, down, years, downside risk, all of that. But, wow, protected accounts where you can't lose money,

that's pretty amazing to know that that could be a piece of a retirement plan. Yeah. So there's really three main vehicles that you can use as far as, you know, the type of investments that you can use that will fully, you know, guarantee and protect your principle, which is, you know, you can use money markets. You can use CDs and then there's varying types of annuities. You know, annuities is a very broad term. but there's a lot of different ways that annuities work and operate where they can give you that protected income as well. So when we think about other types of income, so you mentioned three right there, what are

other types of income in a retirement plan that might not be protected, but that now we can start thinking, okay, I like income, but I also like protected income. What are some other types that aren't protected? Well, anything in, you know, usually what we call in our growth bucket. So, you know, your stocks, your bonds, your ETFs, your mutual funds, those types of investments, they don't have principal protection in it. So, yes, in a good market year, if they do, you know, whatever you're invested in, if it does 20%, yeah, you're going to get a 20% return, right? But then in those down years, you know, the markets, you know, take a nosedive and they go down 20%, you're now down 20% as well, too. And as we're getting older and as we're nearing retirement, especially in retirement, we don't want all those eggs in one basket where we're riding those massive highs and lows.

So that's what we're talking about, that where it's not, your principal's not protected in those types of, in those types of vehicle. There's risk, there's market risk, all of those things. And I know that for me, I know that when you say one thing and you automatically think, you know, when I hear protected income, I would think something like, oh, well, a CD, you know,

you can't lose the principle there. But talk a little bit more about, you know, some of those other sources of protected income. I know you mentioned annuities. So what are some other sources that people would be considering in that bucket that you recommend to them? Yeah, I mean, in money markets and CDs, you know, know, there are usually going to be a fixed rate might be four, four and a half, five-ish percent right now. And they're going to be for varying degrees of a time length and commitment. Okay.

So, you know, it could be a six month or 12 months, somewhere along those lines where they say, okay, you give us X amount of dollars. You have to hold it here for six to 12 months, maybe longer. And then, you know, we'll give you that guaranteed, you know, five, five and a half percent, you know, whatever the current rates are. Then when we look at annuities, on the other hand, you know, for some people I hear the word annuity, and it's a four-letter word. And I say, you know, there's a, there's definitely a lot of bad things with annuities, but I'd say that there's also, you know, I like to not generalize or stereotype

anything. So there's so many different types of annuities and companies and products that sell annuities out there. And, you know, I'd say for the annuity antagonist, I'd say that there's, there's definitely ones that can work very well and be a very powerful part of your retirement, if that makes sense. And I always say at the very surface level, everyone loves social security. And all social security really is is a type of annuity as well. So you're already using it as part of your retirement planning, whether you like it or not. So interesting. Yeah. That's a so so I mean, it's not an actual annuity, but that that's the the function of what so security is. So you mentioned that there's a broad spectrum of of annuities

from maybe a 30,000 foot view. What are some of the typical options that people would, would have? Yeah. So there's two things to keep in mind to there's going through the annuitization process. then just using the annuity as a holding vessel. Okay. So two types of annuities we look at a lot are types of fixed index annuities. So one is a guaranteed income stream. Okay. And with the guaranteed income stream, that is going through the annuitization process.

And that's saying, you know, okay, Mike, I have $200,000 and I need, let's say, A typical payout rate might be, you know, five to six percent an annuity company might give you out of a, out of the annuity. Okay. So if you're giving them $200,000, they might say, okay, well, we'll give you $12,000 per year, you know, for the rest of your life. So you're giving the annuity company your money. And it doesn't matter when you die, all you're, you're getting $12,000 for the rest of your life.

okay so then some people like that idea of like okay well i'm getting a guaranteed income stream the rest of my life and i don't have to worry about it and that's that now now in that scenario what if they die 10 years later do their errors get whatever is left in that annuity the the principal balance right it depends on the company and the product um sometimes it you could um yeah you could get what's remaining in the account balance. Sometimes you may not. Again, it depends on the company and the product specifically. So it's not really a straight yes or no answer, Mike,

but it's, you know, I'd say it just depends on the product that you're using. I'd say the majority of the times it's usually no, but there are some companies where that answer could be yes. So that example was for income and cash flow and every month you're going to get X because you gave them this amount. What's another type of setup? Yeah, another type of setup is called an accumulating annuity where this is more we're just using the annuity as a holding vessel where the annuity company will say, okay, Mike, we are guaranteeing you that you cannot lose money in this annuity. And what they'll do then, let's say that same scenario, you give the annuity company $200,000, they will give you a different, like a, there's about 10 to 15 different indexes that you can,

you can choose from. You can choose all 15 if you want and allocate, you know, a small percentage to the, let's just say there's 10 indexes. And you put 10% of your funds into each index, right? So it's, you know, $20,000 going to each index. Depending on how that index performs, on an annual basis. So they usually call what's called point to point.

So if we started your contract on February 1st, 2024, they're going to see how did this index perform from February 1st, 2024 to January 31st, 2025. Whatever that performance was, that is what will get credited to your account. Okay? So if your index performed at 10%, let's just say you just did one,

you had $200,000 in there, it did 10%, then your account would grow to $220,000, right? Let's say same scenario, $200,000, if that index performed negatively, let's say it did negative 10%. So instead of it going down to $180,000, because you're losing 10%, $20,000, they'd say, okay, Mike, you just get a zero for that year.

Your account will stay at $200,000. And then what they'll also say is that, okay, they usually want you to keep your money in this investment for about 10 years where you can take out up to 10% of whatever is in the account without a penalty. Okay. So you can take out 10% per year. You're getting all the upside of the market. You're getting that principal protection. But they do put some rules and parameters in there where, you know, they'd like you to keep in their. for 10 years or else there could be a slight penalty, and you can only take out up to 10% of

what's in the account. And this is where we build this out as how we're going to use it for income for some of our clients, where if they want to use a fixed index duty, is that we do in a way that we know that if whatever 10% of that account is, that's what they'll need for their income purposes. And in this scenario, yeah, and in this scenario, too, if the client passes away. So let's say they keep this account for about 10 years, then they pass away. And there's $150,000 left in the account. That annuity then, whatever is in that, the annuity contract will then be over.

That $150,000 that was in the account will go to whoever the beneficiary was, whether it's the spouse or the spouse that already deceased, it could go to your children. So this type of account gives you some more flexibility. and also the potential to pass it on to whoever you want that money to go to. Yes. So many, many options. And there is not one type of solution for every single client. And I know that should sound, you know, logical.

But I think that a lot of times people are just told, you know, you go to the big companies, you see you on TV or whatnot. And everyone's told the same thing, get this, get this. And so what you're describing is when you have learned what the client is, client needs and when they want to retire and how all those things. Here's now an option for the, you know, a protected bucket. So I think that is powerful to think about.

And you mentioned at the first part when you mentioned annuities that there might be some misconceptions that people have because I think over decades and decades, you know, annuities have changed and improved. But what are some of those misconceptions that people may have? Oh, that there's, there's high fees. And again, there are some companies in products that do have high fees. We traditionally try to use ones that don't have any fees. So we want to find one for you that doesn't have any fees involved in it.

So we're not spending extra money that we don't have to. And part of the thing that we do too, Mike, is that we're independent. So, you know, we don't just represent one or two or a handful of, of companies. You know, we can truly work with any carrier that we want to. And so part of what we do is we're able to look at and compare and contrast different companies and give you the best rates and the best products. But to go back to what you were asking is, you know, as far as like what, you know,

kind of misconceptions about annuities is one, obviously, the fees, you know, the lack of liquidity inside some of the annuities. And so, like I said, you know, some of them, you. You can have 10%, about 10% liquidity. Some of them for a small fee for an extra rider, you can get almost like 20% out of the annuity. So, you know, again, it just depends on, again, what they're looking for. Not everything is, you know, black and white. Just depending on what clients are looking for.

There's a lot of different ways to kind of skin the cat here. But I think a lot of times we're people. people get the bad feelings or bad experiences with annuities. When an annuity was sold to them, that wasn't really part of a cohesive plan. It was just someone just trying to send them an annuity just to put them in the annuity. And it really didn't have any concise plan or function for what they were trying to accomplish. So I always say an annuity is a very powerful tool when it makes sense for your plan and for your goals. and there are a lot of different types of annuities out there.

So kind of depending on what you're needing and what you're looking for, we can probably find it. I know one thing we had talked about earlier was long-term care. And one of the things that a lot of these newer fixed index annuities are offering is a long-term care rider where, you know, if anything were to happen to you, they would essentially allow you to get out of the annuities. you know, contract then and whatever was in that account, you would have, instead of, you know,

I was saying that there was about a 10% maximum that you could take out. Yeah. They would waive that 10% maximum that you could take out. You could use the entire annuity fund that you had to pay career care then if you were in the, in a city. Yeah. You know, that makes me think like the misconception of high fees might have been the case back in the day, but annuity providers have now made better options.

And what you just described there with long-term care makes me think of like if you had car insurance and you didn't wreck your car this year, you can't call up your car insurance agent and say, give me my premiums back because, sorry, that's just how insurance works. If you have a standalone long-term care policy, that's how that works. You pay your premiums. If you need it, you use it. If you don't, you keep paying your premiums. But with that rider, it gives me the feeling and correct me if I'm wrong. But if you don't need the long-term care aspect, then that annuity keeps performing with. the returns the way that it is. But if you do, then now it gives you that option. So that's

kind of a neat additional thing that has come up in the last few decades, right? Yeah. And that's another way that we can utilize an annuity as a part of your plan too, is add a long-term care, you know, quote-unquote policy, okay? Because with a long-term care policy, like you said, if you don't use it, you'll lose it, right? So we can be paying thousands of dollars a year into a long-term care policy, and then, you know, they might just pass peacefully in their sleep, you know, in their 80s, and they never had to use that policy, right? And there's no death benefit that gets passed on to people. So just like, okay, it's over now.

But with an annuity, if people needed access to the money, they could access it. If they never have to be in a long-term care situation, they were still getting all the upside of the market and the growth of the annuity and adding to that. They still have access to the annuity if they did need it, if they wanted to use the money. But then when they do pass away then, all that money would go to whoever their beneficiary was. So it's a way to accomplish a lot of things using one type of investment. 100%.

You know, and everything you said there along with that other word you were using frequently guarantee, right? Because you can't lose principle. It's guaranteed. that kind of makes me think about the comment you made in a previous conversation. You can't put a price on peace of mind. And if you have your money in volatility and you're watching the news or you get your statements and here comes to this drop, it's a sock of the gut. And when you have these kind of strategies in whatever percentage of your bucket like you recommend, that peace of mind is a huge, huge aspect because it impacts your daily life.

Right. And so, like I said, once your peace of mind starts to go, you know, it's going to affect you everywhere else in your life. It's going to affect your mental health. It's going to affect your physical health. And by using, you know, a multi-bucket approach where, you know, we have the growth bucket that's getting the highs and lows, we're using a protected bucket or, you know, some type of annuity or, you know, whether it's a money market CD, usually the fixed index annuities are going to give you more of that upside, right? We can still capture all that upside of the market, opposed to the money market or a CD where you're just kind of locked into the, you know, four or five percent because, you know, we've had people that, you know, they want some of their money in a fixed account like that. But even in some of those fixed index annuities, I told you there's about usually like 10 or 15 different indexing options inside of the

annuity portfolio. They usually have a fixed rate option in there, too. And a lot of them are about four and a half percent right now. So you can kind of make your own. little CD in there for a part of your money if that's what you want. You know, so we, you know, they're, like you said, we want them to have that piece of mind. And when we lay out the two buckets strategy for them, you know, we have this, we use this kind of like this souped up Excel spreadsheet that kind of shows you how the money, even if

we're spending out of the, you know, the protected bucket, how your growth bucket, you know, is growing. A lot of times after 15 or 20 years of spending and their retirement. they're going to have more money than they even started with because we were able to differentiate those buckets and designate one bucket that's completely protected just for income purposes while we're allowing their growth bucket to do what it needs to do, which is growth for you. That's huge. So, Jonathan, let's kind of land the plane and wrap up with this last thought.

Can you think of an example where incorporating protected income slash annuities like we've been talking about made a pretty significant difference for a retiree when they came to you and they thought one thing and you showed them this strategy and then it really panned out to provide a really solid, guaranteed peace of mind solution for them. Yeah. So some of our clients that, you know, we took on, you know, let's say before, you know, the markets went down in 2022, you know, those are our clients that we put into a fixed index annuity. and one of those accumulating types of annuities that we're talking about, at the end of 2022, beginning of 2020, when they got their statement and they saw that they got a zero for the year.

Usually, most people aren't happy with a zero, but knowing that, you know, talking to their friends and family, and even on the other side of their portfolio, you know, where they got about negative 10%, negative 15%. that's what most people were getting in 2022. But when they got their statement from the annuity company saying that they got zero, they actually called us to thank us. And they said, yeah, it's kind of weird. You're getting thanked for a zero. But, you know, we tell people, like, it's odd enough that we usually get thanked for

those times because they said, well, you know, I'm so glad that my whole portfolio wasn't exposed, you know, to this downturn that, you know, we're still, able to have this safe, protected bucket that we know that, you know, we're getting all the upside in the good years, you know, and all we're getting is a zero in the down years. And we're, you know, so thank you for recommending this, you know, to us. And, you know, and this is just like what you said was going to happen. There's going to be good years and there's going to be bad years. But we know in those bad years, they're not as bad as they could be or should have been. So you know, it's so huge laying it out like that when it's a zero, but it could have been a big old negative.

That's a win. And it reminds me of like some of the tongue and cheek kind of advice that investors get, you know, rule number one, never take a loss. And rule number two, refer back to rule number one. Well, hopefully you can never take a loss. But in this case, with that guarantee that you've mentioned with these protected income accounts, boy, that zero in a horrible year is a huge win. If someone is listening to this, Jonathan, thinking, let's take a peek at what I've got and see what buckets could would be helpful. And I love the sound of that protected and guaranteed income. What's the best way that they can learn more than also reach out and connect with you?

Yeah. We're always just happy to help. And we understand, you know, obviously, I think what we do makes sense. But it might not be for everyone. But we always wanted to say, hey, let's show you what we can do for you. Just give you some ideas and some options. And if you like it, great. We'd love to work with you.

If not, you know, that's okay too. You know, but yeah, the best way to find us is on our website. Leonardfs.com and that's, you know, F as in financial S as in Solutions. Or you could type out the full word Leonard Financial Solutions.com. And right there on our homepage, there is a link to my calendar for a free consultation. So you can book any time that is convenient for you. Excellent. Well, Jonathan, thank you so much for coming back on. It's been a real pleasure talking with you today. Thanks for having, Mike. I appreciate 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.influentialentrepreneursradio.com.