Business Innovators Radio - Interview with Michael Opp Founder of Opp Financial – Guaranteed Investment Income to meet an RMD Strategy

Episode Date: May 10, 2024

Michael has been working in wealth management for over 25 years. He holds a Series 65 license and Insurance license. As a Fiduciary, he has provided financial services to business owners, families, and individuals. Michael has access to a wide array of financial assets. Enabling him to successfully meet the financial planning needs of his clients while building long-lasting, meaningful relationships with them.Michael received a B.S. in Business Administration and a minor in Economics in 1992. Michael’s belief in being a well-rounded individual, allowed him to compete in college football and track at the University of Redlands in California. He continued to compete in the track and field circuit until just after the 1996 U.S. Olympic Trials. This experience compelled him to give something back to his community. Michael coached high school, youth football, and track and field for over 17 years. He also has been married to his wife, Tamalynn since 1996. They are proud parents of three children Brady, Lance, and Elena.Learn More: https://www.oppfinancial.com/Advisory services offered by Wealth Watch Advisors, LLC. All other services are offered through Opp Financial Group, LLC. Wealth Watch Advisors, LLC and Opp Financial Group, LLC are not affiliated.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-michael-opp-founder-of-opp-financial-guaranteed-investment-income-to-meet-an-rmd-strategy

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 Michael Op, who's the founder of Op Financial and we'll be discussing guaranteed investment income to meet an RMD strategy. Michael, welcome to the program. Thank you, Mike. Glad to be here.

I'm glad to talk to you because I always love learning new things and picking up perspectives from people. And I think a lot of people, you know, their ears perk up when they hear guaranteed investment income. So great. That's awesome. But before we dive into the topic, tell us a little bit about yourself and your story. And how did you get into financial services? Yeah.

You know, Mike, you know, I kind of, you know, I grew up. in the business. You know, you know, my father, he worked at Merrill Lynch. He was financial advisor. He became an investment banker. And so it really was something that I was exposed to on a daily basis, asking my dad, you know, coming home from work, you know, what's happening. And, you know, the interesting thing is, you know, my father, he retired at age 70. And six months later, he went back to work, managing a bank. So, you know, here's my dad. He was 84. And he's still, managing a large bank here and so

it's just kind of in the blood really I mean that's kind of how I started and that was the interest and then of course I got my training out of Prudential Securities, worked at Payne Weber and really in about you know that was back in

the late 90s and you know great training program but I realized that I wanted to go on an independent chassis and I started off financial back in 2004. So, been, you know, independent fiduciary since then. Yeah, I think that is really, really important to keep in mind. And I know we want to dive into that at some point is, you know, let's define how critical being a fiduciary is and what being

independent brings to the table. Because I know there's some great power there. But let's jump into guaranteed investment income to meet an RMD strategy. Like I mentioned, you know, everyone is ears perks up with guaranteed and we know what income is, but define for us what an RMD strategy is, and then let's jump into, you know, how we tie guaranteed investment income into that. Absolutely. So, you know, when you get to, you know, a certain age, you know, 73, the government is going to force you to start taking required minimum distributions. And as such, there's a lot of people that say, you know, I don't know what to do. either they don't need the distribution or they want to make sure, you know, how do I make this R&D?

How do I live on that without touching my principal? And I think, you know, that's the big thing that most advisors might fall short on is that you want in the ideal world and what my firm does is we want to make sure that you are living off your RMDs, but you're really not touching your principal. And I think that is the key to having really, you know, longevity success with your retirement accounts. Well, you said something that catches my attention. And I always like to approach these conversations through the lens of like if I think many other people would too. Because you said RMD required minimum distribution and, you know, oh, well, what if I don't need it? So what if someone comes to that certain age and they have to take X number dollars out for this required minimum distribution? And they go, you know, I just don't need it this year because our expenses were low or we had, we sold a vehicle or whatever.

We just don't need that. So we're not going to take it. That's a big problem, right? Yeah, it is. I mean, you know, again, you take a look at, gosh, you know, what am I going to do with this money? You know, I don't really need it. And so one of the things that we do is we do a comprehensive analysis of, okay, what are your options? What can you, what can you do with it?

Like, you don't need that money. you're forced to take it out. Should you gift it or is there a way that we can turn that into, because you have to be a taxes, right? We know that you've got to force it out and that's going to be, you know, last end, you know, it's going to hit your highest tax bracket. So we want to make sure that we devise a strategy that maximizes tax efficiency. And fortunately, through, you know, our tax team that we have,

we've come up with some great ways that we can mitigate that tax and or show you a way that we can turn that into a tax-free benefit or income down the road for you. So there's a lot of good planning that can be done to help those families that are, you know, struggling with, gosh, I don't want that RMD and I got to get the tax on it. Okay, let's figure out the options out there so that we can turn it into a positive for you. And if you know the gap of what you need to live on and what you have currently and here's a gap or whatever those things might look like, then you're pulling out your RMD and then you've got some guaranteed income. And then to your point that you were making a minute ago, you want to hopefully accomplish that without, you know, delving too much into your main portfolio and maybe leaving the principal there. So let's talk a little bit about guaranteed income. Obviously, the word guaranteed is a nice, you know, comforting word, but what is guaranteed income? And then obviously it's important to financial planning, but give us some ideas of what some of those guaranteed income streams could be.

Yeah, absolutely. When we define guaranteed income, what we're talking about is something that is reoccurring, stable, money that you can count on, right? It's like your paycheck, your social security, some sort of pension that you know is going to come. And you know, every month you look in your bank account it's there and i think one of the problems well one of the problems but one of the challenges that retirees have is that their whole life they've been getting this dependable income this paycheck right it's guaranteed income from your job things like that but then you get to retirement and that stops right you know you get a little security if you're lucky enough you're going to get a pension but what you don't you have this pot of money

And this part of money sitting in your oral and K and your IRA. And you're like, gosh, you know, now you're like, you're on your own. It's up to you to figure out how do I take that money that has to be guaranteed, it has to be certain for the rest of your life and turn it into a reoccurring stream of income for you. That you can count on. Yeah, exactly. You got to count on. And so what we do is we say, okay, let's, what are you?

your needs? What are the things you absolutely have? How much do you need? And as soon as we can satisfy that through various different investments in the universe, then we know we've got that covered for you, right? Now you can sleep at night because one of the biggest mistakes that investor can make is that when they get to retirement and now they're going to need to live on that 401k, they've got to live in that IRA, and they just leave it all. to the variable whims of the market, you know, now you're hoping that the performance works for you. You're hoping that that money's stable.

But what happens if you have a 2000, 2001 or 2002, or even a 2008, which was devastating, and you lose 30 to 50% of that portfolio? See, that's, if you don't make that transition, then you're going to have some real problems in retirement. So having that guaranteed income strategy, which is what we do, a comprehensive analysis, put that together. Hey, let's satisfy you there. Now you don't have to worry about you sleep at night. And hey, the rest of the money, you can grow whatever way you need.

So how is guaranteed income different than other kinds of income in a retirement plan? And I'm assuming that there's going to be an aspect of volatility and risk involved where you go, hey, there's some kind of income streams. but it could be big, but it could be a lot of risk. So talk a little bit about how that differs than some of the traditional income streams that people typically think about. Yeah, I think one of the big fallacies that we've seen in this industry is that people assume that they're satisfying their income strategy by buying a bond fund, right? They say, okay, you know, hey, you know, I got that covered, right?

I've got half of my portfolio in bonds and not bonds, but actually bond funds, because that's what most people invest in is mutual funds. And the problem is that with a bond fund, which people associate with income, is guess what? You don't own the bonds. In fact, bond funds had one of their worst years in the last 39 years. They lost on average 13, 14% in 2022. And the traditional 6040 funds, which people, you know, most investors and advisors say, you know, hey, this is, you know, traditionally where you want to be. Guess what?

That had its worst year in, I mean, on record, lost money. So you need to have something that is you actually have the investment vehicles. that pay income, not within a fund, because when you have it within a fund, you don't own them. And if interest rates are going up, the value of those bonds drop, and guess what? The value of your fund goes down.

And you also need to know what type of bonds you have there. Are you, do you have high yield? Well, guess what if we have high yield bonds, you know what high yield really means junk bonds? And if there is any sort of burper, you know, in the economy, you know, if we have some sort of issues that occur, well, guess what? We have businesses go out a bit, you know, I mean, companies will go out of business and those, you can have defaults on those. And the value of those junk bonds are very volatile, much more than, you know, treasuries. And you can see swings of even 30, 40 percent drops on them.

So you really got to make sure you know. what you own if you're trying to create a guaranteed income strategy. Mm-hmm. You know, it reminds me of something that I know you've heard of because it's a cliche in the industry, but Warren Buffett is known for his two rules. Rule number one in investing, don't lose any money. And rule number two, refer back to rule number one. That's right.

That's right. I mean, it's easy to say, and I know, I know it's easy to say, but if you don't achieve that 100%, but you're shooting for that, you're going to get a lot closer than the traditional portfolio of volatility and risk and all that? Absolutely. And I think one of the things that investors need to know out there is that, look, there is a difference of investment strategies from when you're in your 30s or 40s and your 50s versus when you're in your 60s or 70s, right?

Because the strategy you can have in your 30s and 40s, you know, for our clients, well, you know, they've got time on their side. they're able to ride out these economic terms. I mean, look, we've got, you know, potentially a really bad mix coming called stagflation. And we haven't seen that since the Carter administration where actually you have no growth or declining growth in the economy and interest rates going up. And that's a very tough environment for stocks to be in. But, you know, if you're in your 30s, 40s, you can have the time on your side to write it out. But if you are retired and you're depending on that money, see, that's where the transition has to come.

Because if you suffer a 20, 30 percent loss in a portfolio and trust me, Mike, I've seen it. I saw this for my retirees back in the early 2000s. You know, that's life changing. I mean, that's game over. So having the proper strategy when you get into retirement, and knowing where the pitfalls are, boy, that's essential to living out your retirement the way you want. Yeah, like a 30, 40% drop on a million dollar portfolio, $300,000 or $400,000 drop. That's a sock in the gut.

So I think that's a huge, huge aha for people. Can you think of a case study or an example of a client without mentioning details or names where you kind of put into place some guaranteed income, strategies and then, you know, maybe the market dropped and they came back and said, oh, my word, back of the day, this would have been horrible, but boy, I didn't even worry and didn't even lose a wink to sleep. Yeah. You know, and that's funny to say that because I go back to the early 2000s when, you know, the market dropped three straight years. And that was a real wake-up call for me as an advisor that, wow, you know, you have to really try. You have to really try. You know, you, you have to really treat those retirees much differently than those clients who are younger, who have time on

their side. And so the big takeaway that I came up after that is, you know, I was going to ensure that, you know, better get really good at RMD retirement strategies, guaranteed income. And then when we left that market, I made sure that, you know, like, you know, I had a client who had suffered losses in the 2000, 2001, 2002 crash, kind of built it back up, but wanted to make sure that that was not going to happen again. Because we always know markets, like, you know, there were always, we're only one terrorist attack or one economic crisis away from, you know, a 30% drop coming.

And so after we had secured their account and they were living comfortably on this guaranteed income strike, that was coming to them every single month. You know what came? The financial meltdown in 2008. And I remember getting a call from them panicking. Is my money okay? Are we okay? I said, look, Tom, you're okay.

Trust me. You're all right. Your money's safe. And not only did I get a call from, you know, Tom at that time, but I got a call from several clients want to make sure that, hey, have we lost any money? Because there was a lot of panic. I mean, that was a. we were headed towards a depression, truthfully.

100%. So that in itself, for those retirees and fines of mine, that we're getting that reoccurring stream of revenue every month covering their bills, they didn't lose any. And I can't tell you. I mean, just how gratifying it was as a financial plan. Because isn't it true, the alternative of that is you've got your little can spiel. Oh, it'll come back and everyone's feeling the same, whatever that all the other advisors that have money in the market and risk and volatility, you've got your old little thing.

And deep down, you're going, I am so tired of saying this. So for you to be able to say, we're good to go. The income's coming in. Nothing's changed. Your principle's not at risk. And we're fine. You can almost hear them exhale with relief. Oh, yeah.

I mean, the sigh of relief, the gratification that I had person for, you know, my, my job, which is here to help people, protect them with such night and day from 2000, when you're talking to people in 2000, 2001, 2002, when it's despair and like, what am I going to do? Oh, my gosh, you know, do I have to go back to work? And so, you know, I think what gets lost is, you know, when I'd worked at, you know, Prudential Securities, I started there in the 90s and some of my other warehouse broker dealers, again, just what you said, Mike, that coin phrase, hey, you know, buy low, sell high. Well, sure, that sounds great. Or it's time in the market, nighttime in the market. You know, that does work.

When you are doing what? when your dollar cost averaging in. And you know when your dollar cost average in, when you're still working and you're working years. And when you're in your 20s to 30s. Not when you have less runway. That's right. And because when you're not putting money in and buying when the market drops,

you get the opposite effect. You get what's called reverse dollar cost averaging, which actually means that when you're not buying there, you sell more of your investments, more units when the market drops, and it becomes this cannibalizing effect on people's foreign Ks and retirement accounts that they just don't have the time to recover from. It's called sequence of return risk. And, you know, we do a whole presentation to show our, you know, investors on what that looks

like. So, you know, great question. You know, the, you know, by-lo, so. or time in or write it up. Well, okay, it depends on the age and the risk horizon, but not forever. Exactly. Well, Michael, it's been so great learning some of these strategies. Let's wrap up with any final pieces of advice or words of wisdom that you would give to listeners

who are just starting to think about the concept of guaranteed income to protect their retirement. Yeah, absolutely. I think what I would recommend to those listeners, day that are making that transition is you're at a crossroads here, right? You're about to retire. You've got this pot of money. In all your life, you've been getting this guaranteed income that's basically filled your your lifestyle. It's paid for things. You have to create, replicate a strategy that is going to ensure that that that occurs with, that pot of money that you're getting when you retire because that is going to make sure that

you live the lifestyle that you want to, that you have certainty in your life. And so start with getting a guaranteed income strategy that's going to cover your bills, it's going to cover the things that you need in your life. And then you can, you know, do what you want with the rest. But give yourself that peace of mind and start, you know, again, I would recommend if you're looking at this, today. You want to work with a fiduciary who's going to look at all products, all aspects, to make sure that you accomplish your lifestyle goals, your lifestyle needs. 100%. Well, Michael, it's been such a pleasure talking with you. If someone is interested in learning more and also reaching out and connecting with you, what's the best way that they can do that?

Yeah, absolutely. You know, there's a couple ways that we can be reached. You have questions. You can visit our website at opfinancial.com, and that's OPPfinancial.com. Schedule the time there, or you can call us direct at 720-9-89-4295, and we can have a brief conversation to see, hey, what would a guaranteed income strategy look like? How could we accomplish that? And what would that mean for you? And, you know, we just have a little talk, see what your needs and goals are and see how we could help you out there. Excellent. Well, Michael, thank you so much for coming on. It's been a real pleasure talking with you today.

My pleasure, Mike. Enjoyed it. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.com.com.commercial entrepreneurs radio. com