Business Innovators Radio - Interview with Nicolas J. McLeod Wealth Preservation Specialist Discussing Asset Allocation Design for Retirement

Episode Date: August 15, 2023

Nicolas (Nic) J. McLeod is a man of determination and grit. No matter if he’s spending time with his wife and kids, creating music, honing his body-building skills, or helping the many families he now calls “friend” find the best ways for them to preserve their wealth and build their retirement savings—he brings a high level of intensity and passion to whatever he’s doing in any given moment.Nic is a second-generation Wealth Preservation specialist. He grew up watching his dad help families in the community with their financial needs. It impacted him at an early age, and it has now been over forty years since his father first started his practice in 1982. In 2005, Nic decided to launch his own firm and now has helped nearly 1000 families spread across the nation who have entrusted him with their financial wellbeing. Nic’s client base is diverse in both their professional backgrounds & financial needs. No matter who he is working with, his number one job is to protect and preserve their wealth and retirement savings.Nic proudly owns a record free of any consumer complaints. This is a direct result of the core values at McLeod Consulting Group. As Nic says, “As fiduciaries, our job is to foster a relationship of trust, both legally and ethically. This is what drives us, so our client’s best interests are always first. But we take it to the next level and make sure that all of the work we do is transparent to both our clients and the financial companies we work with. Many of our clients have become like family, and we could not be more thankful for them. We look forward to inviting you to experience how our team can help you successfully navigate the years leading up to your retirement as well as continue to prosper financially, emotionally, and spiritually throughout your retirement years.”Nic’s relationship with God and his family are at his core. “My daily goal is to be a humble servant. This is what gives me my moral compass and keeps it all together.” Nic’s cherished soulmate is his lovely wife Shayda. Theirs is a true love story, and they bring the same core values to their marriage that they do to all their work. Nic and Shayda have two young and wonderful children who are very active in their school and in sports—following in their father’s footsteps. While the couple spends weekdays working hard to ensure their clients remain financially secure, weekends are packed with sporting events and other family activities.“Giving my all can make me vulnerable. I care deeply about my clients,” Nic says adamantly.“It goes far beyond just ‘being about the money.’ Money isn’t what makes the world go ‘round. It’s our relationships and our health, and I find when you give everything you got, that vulnerability can leave you exposed—to the good, the bad, and the ugly. But I’ll take it all if it means that together we create success for you.”Nic can add “gifted athlete” and “seasoned musician,” to his list of accomplishments. He was a highly touted D1 football prospect, but his aspirations were cut short due to a severe foot injury. He was determined to continue being part of the sport’s world becoming a top bodybuilder, consulting for the University of Arkansas strength coaches, but his passion is helping troubled adolescents and under-privileged youth in his community. As a musician, he has successfully recorded LPs, enjoying quick success on local and national radio as well as sold-out shows in the largest and most well-known regional venues. He studied at the prestigious Musicians Institute in Los Angeles, majoring in Lead Guitar Theory and single-string improv. Music continues to be a major player in his life, as he plays and composes music for his family and personal enjoyment.Nic’s commitment to making people better and more able at whatever they choose permeates all his work—from volunteering with his community to helping individuals and families secure and preserve their wealthLearn More:https://www.njmnwa.com/GeneralInvestment Advisory Services offered by James Jurica CFP® CLU® CHFC® RICP® through Wealth Watch Advisors, an SEC Registered Investment Advisor. Wealth Watch Advisors has no affiliation with the website represented. Wealth Watch Advisors is not responsible for their views and opinions and makes no representations or warranties about the accuracy, reliability, completeness, or timeliness of the content, and does not recommend or endorse any specific information herein. NJM Wealth Preservation Strategies is not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed as written or recorded are subject to change at any time without notice and are not intended to be used as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.This information is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that NJM Wealth Preservation Strategies and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney for any legal or tax advice.Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Wealth Watch Advisors.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-nicolas-j-mcleod-wealth-preservation-specialist-discussing-asset-allocation-design-for-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 back with this Nicholas J. McLeod with wealth, who's a wealth preservation specialist, and we'll be talking today about asset allocation design. for retirement. Nick, welcome back to the program. Thank you. You know, like last time when we talked, I key in on certain words and design just jumps out at me. And I love how you phrase asset allocation design because it's not just a boilerplate, cookie cutter template. Here's what you should do.

It's you're designing something, customizing it for your client. So let's start off with what is asset allocation. And then what is your first step in approaching designing an asset allocation strategy for retirement. Thank you for the question. Listen, that is probably the most misconstrued, misunderstood portion of financial advice. And most of the time, they're not getting it, right? So let's go back 30 years ago, 40 years ago. You remember the term 60, 40, right?

Yeah. Well, what a great business plan for the advisor. The advisor. Unbelievable. It's simple and easy. It's simple and easy, and it shuts you up. and I don't have to attend to my cattle. I just tell you that everything will eventually come back and you need to be patient

and that's what it's all about, blah, blah, blah. Well, all of that rhetoric really started around year 2000. It's a newer concept. Milton Friedman didn't believe in that. Most people understand that you have to weed a garden. So what do we do that's different? Well, last time we spoke about how the S&P has dramatically changed in the way it's weighting its sectors, right?

And why do I bring up the S&P so often? It's the benchmark. It's the most prolific index of all time. So in the bond world, we would compare that to the U.S. aggregate. That's the S&P of bonds. So we've got to ask ourselves, when you're starting to design a portfolio for distribution age people, the premier focus at a wealth preservation firm should be preservation. So first and foremost, let's build the foundation. for the house before we're picking out mirrors and wallpaper. Let's make sure we've got a strong foundation. So the first key there is, well, Mike, we've got to identify what this person's purpose is. What are we trying to accomplish here? Are we income driven? Are we converting to Roth? Or do we have enough income and we're not worried about the tax implication? We're worried about legacy planning.

What's the most tax-efficient way to get older and for our errors to inherit this money? That's rule number one. I think a quick rule number two is what is the most risk-averse way to get there, right? Don't go looking for a fight just for the sake of a fight. Can we accomplish this goal with less risk versus more risk? Again, we're not anti-risk. We're just looking to make educated, logical, pragmatic decisions. based on the economic environment we're in at that time.

And rule number three, what is the most practical tax efficient road? So with those three in mind, everyone's different. Some people want more risk than less. So we'd take a different approach with them. Some people need more income, right, to stimulate those ancillary sources that maybe aren't where they need to be like Social Security and rental income pensions. And then that third piece, which really is a big, spoke on the wheel because it could mean so many things. How do you stop unnecessary 1099s on non-IRA

money? Right. How do we make sure that as we age, RMDs don't grow so large that they're pushing us into a higher tax bracket? And then what is the step up basis for our trust on non-qualified funds? And what's the actual tax implication for not only my spouse but non-spouse beneficiaries? So I know that's a large brush stroke, but this really is quite the process. So I believe in being a part of your journey of self-discovery, it shouldn't just be a fast transaction. I want time with you. You know, you've said a lot there.

And one of the main things is that word foundational. And it reminds me of, you know, I know you were a D1 football player. And, you know, before you start learning the fancy plays, blocking and tackling, you know, if you can get that. right now we can build on that and then we can do something a little bit better because you've got the basics down pat um so many of those things that you touched on and are foundational but then within that there's these little things that could fall between the cracks you know you mentioned the word spouse and it made me think about something i've heard of literally just today i was listening to an interview

and someone goes oh hey i was talking to someone and they still had their ex spouse on as a beneficiary these are teeny little things that can just blow a hole in your your retirement plans and all of a sudden it's like, I just didn't think of that, but you need that outside external perspective to bring those things to light. 100%. What you're talking about is this new spousal continuation clause that we've really got to pay attention to. You ready for this?

Corporate sponsored plans. They have found a way to not only weasel their way into your pocketbook, but they've also discontinued the per Sturpe's first designation. This is huge. Here's what this means. This means we've got John and Sally. John has two children. Sally has two children.

Mom and dad unfortunately get taken home early. But because it was per capita, John's kids get nothing. Sally gets everything. With the per-sturpe's designation, it flows like a family tree the way that it should. And John's kids would get a portion of their grandparents' estate. You see, that, my friend, is one form. one question and prior proper planning. Those are little nooks and crannies that we pay attention to.

And that goes so far beyond just here's this mutual fund, stock bond, insurance. That's just that's the easy stuff. A wealth preservation retirement planner should know all of that, of course. But when you start getting into what you just described, that's an eye opener. It's like, I hope you know all these other things. But tell me, tell me what I don't even know to ask because you don't know what you don't know. It's right. Amen to that. And there's so many new unknowns. Secure Act 1, Secure Act 2, this 2026 sunsetting of our tax code. I believe wholeheartedly, they never tell you anything that would

trouble the investor and the largest investment group in this country is who. It's your age group to your grandparents age group. So why would you ruffle their feathers? Because a fear-induced sell-off is not what they need right now. It's not going to take much fear with $34 trillion in debt by Christmas and continued rate heights, which we'll talk about later. But all that to say, when you're looking at asset allocation as a whole, I think what we can take away from this conversation so far is there's much more than how much money do we want to make. There's so many other questions that take precedence. And when you're building a plan that works 100% of the time, regardless of market conditions so that that money can last as long as you do.

That's what that 35 years of sacrifice putting the portfolio together is worth, in my opinion. You know, when you design the correct asset allocation using all the things you just mentioned, and it's for someone in the accumulation phase. Like you've mentioned accumulation and then distribution. It's a shift. You know, you're climbing the mountain. You're at the mountain for a little bit and you start coming down. and you need to have that different plan for each one of those segments.

How do you start working with your clients and preparing them for that transition? Because it's not like overnight change. It's, you know, you're summiting, you're at the summit, you're coming down. So you do have some time, but there is a shift in how you need to change your asset allocation design, right? I agree. And that's different for everyone. I would answer that by saying, depending on your personal, goals, how much income you do or do not have, your longevity, your health, right? And a slew of other

factors, I think, do apply. How much debt do you still have? Are you 59 and a half yet? It's important to really unpack it in the most simplistic way possible. My question to even you, Mike, would be, how much money can you afford to lose? What's your number? Yeah. If you don't not I mean, a lot of people would say, I don't want to lose anything. Why would I say any number, right? Sure. Right. And so that's a great place to start because my number is irrelevant. My number is irrelevant. It's your money. So it's got to be subjective. And I feel that as that pendulum swings from 59 to 70, people tend to get more conservative with a downside number. But if you're unsure on where to start, let's go back to that 60-40 phrase again. How about you start with a problem? How about you start with a

proper bond replacement, something that is outperformed bonds consistently for 20 years that's more safe, has higher guarantees. You get your principal back in a much higher stated rate of return. That would mean at least 40% of your money would be protected from the rigors of another economic disaster or 2022, which wasn't crazy terrible in comparison to say, you know, 2020 and also 2008 and 2003, but still nonetheless, losing any money while you're taking an income, like we talked about last time we were together, is just you cannot do that. That is rule number one, right? Yeah.

When you're withdrawing and you take a loss, it's just, it's accelerating that, that downward spiral. We can't do that. So I think a good place to start that conversation is look at 6040 portfolios, replace that 40, like some of the major banks, Morgan Stanley and even BlackRock in Goldman Sachs have started to replace bonds in their 60, 40 portfolio with alternative tools that are safer and higher yield. We're in the highest interest rate environment we've been in in 24 years. So at least if the sky falls and you're really attentive to the 60% that's exposed to some volatility, you're going to be okay, right?

And that's, that's a, so in essence of your question, I think that's a great place to start for a younger person and then move up from there. Yeah. So, you know, we've mentioned before even just a few minutes ago where people are living longer. We're treating ourselves better health-wise, mentally, spiritually, physically, we're doing more exercises, eating better. And so that distribution phase now is becoming longer and longer. You know, back in the day, you would live, you know, at a certain age and and your money needs to last. then, what are some of the strategies that you're putting into place regarding the asset allocation design to make sure that you're not going to outlive your money, knowing that that distribution phase could be longer than expected?

The first thing that we've started to do is we recognize that the Fed was going to increase interest rates about six, seven months before they did. So with that type of planning, it enabled us to look and see what we had available at that time to not only mitigate risk, but smooth out the volatility pattern and put our clients on a positive growth pattern instead of a stagnant or negative growth pattern. Why is that important? Because when you're making your money back this year, I'm two years ahead of you. So how do you allow your portfolio to last longer? That's simple. Don't make the biggest mistake most investors make, which is running and chasing recovery mode from behind. If you never

lose massive amounts of money and you're able to capture even the majority of the bull market, you win. That is the sequence of return, my friend. It's real simple. Don't ever put yourself in a position where you're losing massive amounts of money. A little bit here and there, depending on your risk tolerance and how old you are and what your plans are and income, that could be okay. But for me, people don't choose to join us. us and our family here at NJM wealth preservation strategies to lose money. You should never pay a professional to lose your money. You can do that for free all on your own. Right. You can Google that and find some way that you can figure that on your own. And speaking of, it makes me think of another

question when we all go on TV or social media we see ads from the big boxes, whoever they may be, right? We don't need the name names. But when you think of the bigger firms out there, I don't feel like they would have this personal touch and they would probably typically have some templated cookie cutter. What is setting you guys apart in how you approach serving your clients compared to someone that you go, yeah, but so and so I see them on TV. Well, they just have big purse strings because they put big national ads out there, but are you getting the service that you deserve? Sure. A few things. Number one, time. Be it that we don't have 100,000 clients, it enables us to spend more time as a team on each individual client.

So that goes a long way. Number two, I would say the restrictions that are put in place with these big box firms, you got to remember, 90% of what they do, name one, any of the big box firms, it's equities. It's all equities driven. So they're going to be the last people to tell you to go buy a treasury note or a fixed hybrid annuity or a structured note with a barrier floor. And it makes sense. Most people we talked to were in business.

or high level of business throughout their career. These people aren't dummies. They're well read. They're astute. So they understand that if I'm going to a risk first firm, they're going to advise me risk first. So independence like me have the ability to choose which tools we use if they're smart about it.

And so we've gone out of our way to find a place to park our RIA designation that doesn't limit the other tools we can use in banking and insurance and and outside money managers. People really don't see the benefit because they've never had access to institutional money management. See, there's still tinkering around with retail rates, Mike. And with a hundred grand, what are you going to get with that? But if you were able to parlay into our institutional side, when we're doing five to $20 million in business every six to eight weeks, we can get rates that you can never even imagine with a $100,000 type investment. So everyone's benefiting from that, right?

So those are just a few of the ways that we're able to do things that these big box firms can't because of restriction. On the other hand, if you own the big box firm and you sit on that council, you would prefer a streamlined fast food approach where everybody's eating. eating the same hamburger and fries because you make more money. You're more efficient that way. Right. But what you've got to ask yourself is, has that been working for me? Is my portfolio recession proof? Here's a quick pressure check. How'd you do last year? Yeah. If you lost money last year, you could have done better all on your own. It didn't take a whole lot of effort to listen to

Jerome Powell pounding his hand on the pulpit from October of 21 to March of 22. He told you what he was going to do. He showed you his playbook. And then Jamie Diamond from J.P. Morgan and Warren Buffett himself got on television and harmonized with that information. All you had to do was pivot to the sidelines, and you'd still have for some people hundreds of thousands of dollars more in their portfolio. And then by all means, after the hurricane leaves, what did we say last time we spoke? Then you can go back to the beach. Let's just wait for the hurricane to pass. If you've got to be a, inequities, do it when you should. Yeah. That's huge. You know, it's like when you, when you listen to the people and someone

says something, should you jump right then? Maybe not. You listen to some other well-respected person and they're harmonizing with what that first person said. Maybe you should take notice. And then the third person in the fourth and then you as the advisor is going, hey, here, here's a trend here. So I was thinking about design, the asset allocation design. Can you think of an example, you know, without mentioning names or specifics, but where someone came in and you were meeting with a couple or a family and you were like, and they thought they had it designed right. Maybe they walked in and they were like, I'm good to go, but, you know, give me another look. And you said, hey, here's something to consider.

Here's an opportunity right here. Here's a potential pitfall. We need to plug up this hole. And when you redesign things, now all of a sudden, you know, like the light bulb comes on for them and then they're now down a more profitable path. Absolutely. In fact, I've got one that had 50% to do with us. So they visited a local workshop, and this is a client of ours in Minnesota, and they had given half of their money, right, to a 10-year fixed index annuity. Now, I'm not a big fan of 10-year anything. We don't know what's going to happen in 24 months, much less 10 years. But there was a lot of worse things they can do with their money, especially when PE ratios are at 40 when they did it. So the market then fell last year. We met them around November.

All the damage was done. S&P was still down around 23, 24% at that point, 27 at its lowest, right? And so they're really hurting on that other 50% that they still had in mutual funds and bond funds. So they're just taking a bludgeoning. But guess what happened? They didn't lose a nickel on the fixed index annuities. Now, they just bought them. Was it my favorite company?

Absolutely not. Was it a top 10 performer? No, but they didn't lose any money. They not only had what they put in, they got paid a small bonus, and they had made 3% fixed interest rate on it. So after you take all the bonus and interest rate of consideration, that half a million dollars earned 50 grand for them guaranteed no fees.

How could you really argue with that in a down market? So what we did, because they already had the foundation in place. You remember the foundation? They chose, Hey, listen, we feel that 50% of our portfolio, which was around half a million dollars, we feel that that's adequate in a safe money tool. And that time horizon is already, you know, pretty egregious, right?

So we decided to show them some alternative tools that were 18 and 21 months in length that had a higher average rate of return closer to 8.5% and that interest was paid out monthly. And if you're shaking your head right now, you're shaking your head because you don't know about this, that doesn't mean it doesn't exist. There are a lot of people that are using these alternative tools that are used by major banks, pensions, endowments, and hospital systems to manage general account money for 40 years. Guess what, my friend, usually things that are great for pension funds, which is a consistent, safe return, are great for retirement.

So because they know that they have all their pension clients money in there and they can't lose it. So if they're doing it, you might want to sit up and take notice. 100%. And there's a reason why. We do a really great job as a team of explaining to people what your options are there, what this process looks like and showing you the top three banks in the nation to get that done. But just that small readjustment coming out of bond funds that were down 16% last year and mutual funds that were down 20, they made half that money back in six months. They eliminated their fees. by about 85%. And by now, right now, they're back to not only good, but they're up, right?

So now they're profiting on their total portfolio because they did the heavy lifting up front, which was let's get at least half this money safe. And then before the bottom. With no worry about volatility. Amen. So that worked out for them. Yeah. That's like sleep insurance.

You know, I could sleep at night. I don't have the, you know, wrenching in my gut because I just saw the news. They can look at that and go, Nick's got it covered. That's a huge, huge opportunity. We're not one of those firms that expects you to give us everything you've got. You know, and that's a great example of a couple that already had someone they trust. They go to church with the guy that put them in these insurance products. Why would I break that relationship?

You love that person. Let me be an extra arrow in your quiver. And then over time, when he inevitably retired, I'll finally hit 40, Mike, and then we'll. So it's a great. I've heard it said if you stand in line in the second position in enough lines and second position, ultimately you're going to pop into number one for whatever the reason is. Someone might fumble the ball, stumble.

You know, so yeah, that's a good point. But, you know, that statement right there makes you think, Nick's not greedy trying to get it all. Let me give good advice. And when I give that good advice and treat people the right way, Things just happen because, number one, that you're putting their desires ahead of yours. You're making sure that they are being taken care of. That's just such a huge mindset shift that a lot of advisors, I feel like a lot of people feel pushed and bullied.

You know, like some couples would sit down with someone and go, I don't know. I just didn't feel like, I just feel pushed about that. So then they don't make a decision. So you take a very educational approach. Well, it came from making some of those poor choices in my use. youth. I've been in this business 20 years. I'm a very competitive person. And now 20 years later, you know, where your treasure lies, there will your heart be also. I think with age and wisdom comes failure. And if you're going to, you've got to learn from those mistakes. And I feel

like I have. And that maturation process isn't over yet. I learn every day. I learn from you. You're a great new friend and mentor, as well as many other people. in the industry that I respect massively that have put in the, here comes that T word again, time. Time is the best teacher. And so I appreciate what you said, but I want everybody to understand that no one is perfect. But we're all able and available to do the right thing. And so I call everybody, not only financial advisors, but the people watching this video right

now wondering what to do, you've got to do the right thing too for you. Yeah. So use that discernment as a tool and make sure that you have synergy and that your goals align in more ways than one. Because if we commit to one another, I'm with you for 10 to 20 years. We've got to enjoy each other and make sure that the things we believe in and the things we're fighting for align, right? Align and a congruent. Well, Nick, it's been a real pleasure of chatting with you here. This asset allocation design is such a broad, huge topic. We laid the foundation of some of the foundational principles. So if someone is interested in learning more and maybe seeing how you could give some

suggestions or guidance to them, what's the best way that they can do that? Please visit our website at www. NJMNWA.com. We'd love to talk to you further and hopefully see you on our next live webcast. Awesome. Thank you, Nick. It's been a real pleasure talking with you. Hey, thank you.

Bye-bye. 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. www.com.