Business Innovators Radio - Interview with Nicolas J. McLeod Wealth Preservation Specialist-Navigating Fed rate hikes that impact retirement

Episode Date: August 16, 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 “friends” 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 well-being. 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 is 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 me 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 underprivileged 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-navigating-fed-rate-hikes-that-impact-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 us Nicholas J. McLeod, who's a wealth preservation specialists and will be talking about navigating Fed rate hikes that impact retirement. Nick, welcome back to the program. Great to be here, my friend. You know, I know we're going to talk about rate hikes and the Fed rate hikes, but I love the

word navigating because we're not going to talk about how to avoid things. I mean, we can't avoid that it's going to happen. How do you navigate it? Because when you know that it's a certainty that it's going to happen, now we got to go up around or to the left to the right underneath. We've got to navigate through it. So talk a little bit about some of the ways that you start educating and guiding your clients on how to properly assess these rate hikes. Well, rule number one, listen.

We've got to start listening and doing a better job of listen. Listen, you know, we've had three people that have been at the helm or have controlled the Fed, three people since 2004 when Greenspan stepped down. Bernacki only wanted the job for a few years until he realized it was going to ruin. and his reputation. And since then, it's been Janet Yellen and Jerome Powell. When they speak, we need to listen because those are the people that have the biggest impact on bulls and bears and the interest rates that make the world go around. Oh, my, right? So now we're seeing the impact on the banking industry just because of rate hike. So rule number one, when he says for six months,

hey, we've got inflation. Things are getting a little stagnant. We're going to have to slow down spending. I'm going to raise rates. Maybe he's serious. Now we know that he is heavy-handed and he's serious. Rule number two. Because maybe he was talking about it behind closed doors to his advisors, and they haven't breathed the word publicly. So when you get to the point of saying something about it, you better sit up and take notice. A hundred percent. How often do we talk to our wives about what our next steps are going to be? Or unfortunately, do we have to discipline one of our children and keep them on the straight and narrow? We don't talk to them about the conversation before we have the until it's time to really get down to breastbacks.

Yeah, 100%. And I think rule number two and a strong number two that's equally as important as number one, understand the history and the ramifications of rate hikes. What happened back in 1922, 195, 67, 77, 81, 1994 to 96, understanding how massive rate hike periods were laid out, right? And what happened as a result, vitally important. We're in this generation, and I think you would agree, and so would our listeners. We're in a generation where we're not paying attention to history anymore.

In fact, if we don't like the way it makes us feel, we just do away with that part of history and come up with something else. We revise it and say that it was different when in reality, maybe it wasn't. But I think that's a huge point. If this happened in the past and then as a result, these things happened because of that and the domino effect happens, we should pay attention and go, okay, well, if this is happening now, what could happen similarly to what happened in the past. Yes, sir. 98% of the time, the market reacts in a negative manner after rates start to go down. I want to remind everyone, we've raised interest rates 525%, okay, since March of 22.

So it's barely been a year and a quarter. And this is the highest margin, including Volker, back in the late 70s, early 80s when we had our peak inflation numbers. They never raised interest rates this fast. It was a steady eddy over a long period of time. So when people are talking about, and I see these people that call. themselves financial advisors on CNBC and Fox every single day. It's puzzling and troubling all at the same time that no one is talking about the true ramifications and historical ramifications of a high interest rate environment and what comes next. So what do we know now? We know that Powell

will raise rates once or twice more, okay? And we know that he's going to hold them longer than expected. He said that at every Fed meeting from the beginning of this year to the last Fed meeting. So September and November, I expect another rate hike. Inflation is roaring its ugly head. Gas is way back up. The current CPI and PPI numbers didn't equate for that. So all that to say, the true fear is what happens next. So that we're talking about third, fourth quarter of 2024, my friend. Yeah. Because at some point, the rate hikes will peak whenever that is, we're not going to name dates because nobody knows. But when it does and peaks and then starts to come down, you're saying that's when to start looking over your shoulder because you would think that, oh, good, the rates are easing. That's going to domino effect positively. You're saying,

watch out because there could be some things coming around the corner we need to be prepared for. Four to nine months is the resounding effect. If all of our PPI and CPI numbers are always 60 days behind rate hikes are six to nine months behind in their effect on the economy. So we're not feeling the effects of last rate hike. We're feeling the effects of the rate hike from last November right now. And I got news for you. It hasn't really done a lot. So once you flick that first domino, once rates come back down and our prime rates lower, so more people are buying automobiles, building houses, buying houses, credit card debt goes down. They're not being feed out the wazoo, that will restimulate the service sector and the economy as a whole, right?

So all of those things are two, three years out. And we've got to understand that unless you want to participate in what could be one of the largest sell-offs in U.S. history, you may need to heed the warning and start doing something about it. Take control yourself. So let's say that that scenario plays out. what are some of the things that should be considered to do. And this is not a cookie cutter template.

Everyone should do this no matter what because it depends on your situation. We know that. But what would a scenario look like that you're saying, hey, when rates peak and start coming down four to nine months, we're going to have this window of time to be making some moves to be cautious about? What would some of those examples of moves to be? We dollar cost average out of our more high PE holdings, the riskier holdings that we've milked the turnip on and we've gotten all the good we can get out of it.

That's a great time to dollar cost average those dollars in the most tax efficient way possible into safe, high yield alternatives. Listen, you can get a six month T bill that pays 5.5% right now. That's a 10.5 to 11% rate of return depending on the T bill and the time you buy it in a year. So why in the world would we sit there and tread water when we're hitting near all times? high is again. I want to remind you to call this a bull market is not only a lie. You heard me say it. It's a travesty. In order for it to be a bull market, you have to retrace the last high.

We haven't hit 4,700 in the S&P, period. So until we hit that number and we eclipse it, this isn't a bull market. We're simply making back a portion of what was stolen from you in January of 2022. So why in the world will we not only tread water and not get back to even in 24 months, you're going to do that to yourself for another two, three years? That doesn't sound like a prudent, conservative, logical approach to protecting what you spent your whole life amassing, does it? Yeah. Yeah, that's, it's all perception. What you just said is perception. People might think, bull, because, but in reality, we got to look at that indicator in the past and go, The peak was here. We need to wait until we hit that before we call it bull market. So in an

interest rate hike environment, what are some of the ramifications that that, and impacts to a portfolio? So as reach are going up, what is happening? What were some of the hits that people take? So first and foremost on bonds. You look at 2022, we had the worst bond market, I believe, since the 50s. It was the first time since 1955 that bonds took a negative nose dive alongside equities. Let me repeat that again. It's the first time since after World War II. Eisenhower is building out the infrastructure that built this country to get from coast to coast to go on a family vacation. He had the highest taxes in U.S. history at that time. So in order to stimulate the money necessary for that infrastructure costs, what did they have to do? Generate income. How did they do that?

Taxes. What did that do to the economy? So again, go back to that history piece. You have to understand how these things played out. So to your point, central bank rates, what does that do? It crushed bonds. Just simply corporate bonds, treasury notes, banks, short-term provisions, any derivative related to the bond market. When you're in a zero percent interest rate environment, Mike, and you purchase bonds for any duration, all of a sudden you find yourself in a three, four, five percent risk-free bond or treasury note environment, what does that do to the paper? It's not worth anything. So people took a bath on what should have been safe money. But see, that's the misconception. A bond is a fancy word for a loan. It's not necessarily safe.

Is it safer than equities historically, but not last year? So that is the ramifications on a fast, rapid rising interest rate environment versus a steady, consistent interest rate environment, which is what we need. Yeah. You know, what you said about the four to nine months after rates, hikes peak and start coming down, I know that someone would hear that and think in their mind, probably not going to happen. But we look back historically, you can make that case.

What if you made moves in advance of that happening and you wanted to make moves for safety and maybe it didn't happen the way that you projected, what's the worst case scenario there? So in other words, if you went to cash as an example, is that such a bad, horrible thing? At least you didn't lose your money. So what are what is some examples of moves that you could make given the rates coming down? And even if it didn't work on the pendulum like you were predicting, what's the worst that could happen? Well, number one, I believe that that is the intelligent, logical thing to do. Warren Buffett just told us yesterday, and I quote, we've got 1.1% more room for improvement.

And what he's saying is the Buffett indicator is so high at 185 plus that he doesn't see the market for the rest of the year producing 1%. What is the current money market rate at your bank right now? Well, I think it's probably 0.000 and then we keep going with some O's. I've got 4.8% cash account, no minimums or maximums right now. And that's the most liquid short-term high-yield account that I know of, period. Other than that, you could buy the six-month T bill for five and a half. You could go a one-year treasury, which is even safer than those first two I mentioned. And that's paying about 5%.

So let me, the better question is, would you rather sit on the sidelines and make nothing, sit in equities and take a 3% dividend and make nothing or potentially lose your shirt? Because we're at highs right now, right? There's only one way to go. Or do you sit on the sidelines and make 5%. If you did that for two years, that's 10%. That would help repair the rest of the damage that was done to you last year. And you can have all that dry powder to go back.

into the new market low as it's created because it's coming whether you like it or not. Because then you're making these decisions from a rational mindset. It's like they've said so many times, don't go shopping for your week's groceries when you're just starving and just super hungry. You're going to just buy everything on the shelf. So approach it from a rational standpoint where it's like, let me make some decisions. So that kind of makes me think about, you know, with volatility or when Rachel going up, you know, oh, Nick, I need to do this.

Maybe you do. But how do you guide your clients in making these asset allocation decisions related to the Fed rate hikes and what could happen when they level off to make them in a methodical calculated manner? So what we do first is ask each and every person what their goals are. What are your needs? What are we trying to accomplish with this conversation? So most people would tell you, most people, not all people, that a 6 to 7% rate of return would make them. happy as a clam. Yeah. So it's not hard to find six or seven right now. We really are in a glass half full situation if you know what you're looking for and know what to do. You know, the last time we

had rates raised to this level, we didn't have three percent bank CDs. We didn't even have three and a half percent fixed annuities. You have five and a half and six and a half bank CDs in annuities right now. You've got structured notes paying as high as 10 and 11 percent. So this really, for is a flowering cherry tree environment. You look out, you see all this chaos around you. And then I look over here, Mike, and I look out this proverbial window. And I go, oh, man, safe money is way more attractive than it's been in 24 years. If I've already gotten everything the market is going to give me, thank you, Lord. I'm going to cash that in. I'm going to go take that big bundle and go put it in an account where I could make five to seven percent safe. What else do you need? We're in preservation mode.

And again, I want to repeat, if that's not your goal, if you are an avarice driven human being and you're rolling the dice, you're more apt to go to the concedo than to go to the church, I'm not for you anyway. I'm looking for good, prudent, conservative people that have already done the heavy lifting. They've got the money. Now we want to keep it. And I'm not saying like the story of the three talents. We're going to hide it under the rock, okay? Right. But I'm saying, let's be a good steward of what we were getting.

Let's make sure that we're not reckless and haphazard. Because in that parable of the talents, the ones that got the rate of return and the accolades from the master, they had to put it into work. They had some calculated risk that they, whatever it was, they got a better rate of return than the dumb bank would have given. Bingo.

Bingo. So not really, nilly crazy volatility chasing, but calculated risk, making wise investments. But it really does get down to something. you just said, which is we ask, we assess what the client's risk tolerance is. If you would get nervous at night, if whatever happened, you need to be in the safest of the

safe. But if you can take a little bit of risk, then here would be some considerations. So I think that's the whole thing that people need to keep in mind, which is when these markets move, it is never a static decision that you could just set it and forget it. When it moves, there's certain assessments that, you know, assessments that. you need to make. How was that going to affect your portfolio? Boy, Google's not your help. No, no. Our blended approach allows you to be successful regardless of the market moving erratically in one direction or another because the majority of the time, the market doesn't

move 30% plus up or down. In fact, the market's only lost more than 35% of its value in a single year three times since 1922. So you have a 97% chance. You have a 97% chance. of that not happening. But the market does move negative 10 and positive 10 the majority of the time. So that is something that how can you control that negative 10 and how do we capture most of that positive 10? That's what we become, in my opinion, experts at. And crafting a plan that is, you can pivot is crucial. So you heard me in a previous podcast together talk about how I wasn't a big fan of locking assets up for 10, 15, 20 years. Unless you have an exit strategy built into that, I don't advise it. And here's why. Chances are we're going to see a peak in rates before Christmas.

So this could be your last opportunity. I want you to put yourself for a second in a 75-year-old Mike's shoes. Okay. We're 75 years old. You've made the money. Ask yourself, When's the next time that I'm going to see 6.85% guaranteed for five years? Yeah. So imagine if rates two years later inevitably go back down to the two and a half to four percent category, which our economy loves to thrive in, you just set yourself up for an additional three years at the highest interest rates we've seen since the late 90s. So this could be for people that have done the hard work and they've made all the money,

this could be your opportunity literally for half a decade to put massive amounts of guaranteed money with no fee in your pocket and completely walk away from the stress. I want to remind people, quality of life matters a whole lot as well. Replacing stress and that wall of worry with laughter and joy and comfort and peace. Oh, man, that's the gift that I enjoy giving people. Once you feel. And when you make that decision to go to that safety, don't look back over your shoulder and go, what was, what happened?

Because if it went up and you're like, oh, see, I should have stayed there, it could have easily gone down. So once you make the decision, eyes forward, step ahead and know that you are walking in that plan that is providing you that safety. I think that we all do that at the grocery store. It's like, I'm going to change lanes. And then you look back over and go, oh, look, that one was faster, slower. So make your decision and keep moving forward. You know, here's a great strategy for those that are listening, okay? We've got a million dollar portfolio.

If 70% of your allocation is earning 7%, okay, that's 700,000 earning 7%, that's $49,000. If another 10% of your allocation is cash, it's liquid, but it's earning close to 5%. That's another 5 grand. So how much did we make guaranteed so far, my friend? We're up to 54 grand, right? Yeah. So 20% of our allocation is somewhat risk. but it's intelligent risk. Now, let's say the market drops 25%, which a lot of experts believe

it'll drop close to 30. But because we were really smart and pragmatic and educated about that risk we took with 20% of the portfolio, we only lost 10% instead of 25. A 10% loss on 200 is 20. So what's our overall portfolio return? We're up, remember, we're up 54 grand because we built the proper foundation. And that's steady eddy money that we're not charging a fee on. So you've only got a fee on 20% of the money that had a rough year. We'll walk it off. We'll do better next time. But that still put you in a position, my friend, where you're still up 44 grand. That's a total return on your portfolio of 4.4%. That's an example of something that anyone could do for themselves in an interest rate environment this high.

So what we do that's different than our competition that I haven't told you before is instead of making the choice for you per position or per bucket, right? We give you three to four options per. And not only that, we'll show you what their performance ratios were in 2022. Why would you care what we do in a good year? I'd rather you see what we did in a bad year. And then you choose for yourself. Here's the best 12 potential investments from 22.

They go from conservative and safe to moderate to risky. Now, you tell me how you want to build this thing out. Yeah. Yeah. Now, there were 112 choices. You brought it down to these and you're letting someone assess, think, learn for what you've taught them and make the decision. That scenario right there, I don't feel pushed.

I feel like I'm empowered. I agree. I would like to think so. I appreciate you saying that. This also comes from, you know, going through the process with hundreds and hundreds and hundreds of clients and virtual clients and understanding that they don't know us from Adam. We're building a relationship each and every minute we talk. So I want to remove that idea, that shadow of doubt by showing you my cards. We're trying to give you a glimpse behind the curtain of office.

and say, hey, there's nothing to see here. Here's the top five annuities. Here's the top five structured notes. Here's the top five ETFs. Here's the top five value stocks, really strong PE Warren Buffett-style stocks. Here's the top five bank CDs. How about some treasury notes? How about some T-bills?

We show you everything. And you can go out. Our dividend model is fantastic. Haven't even had a chance to talk about that because we're talking about protection so much. And that gives you the tools, the access to choose the right tool for the right job to your risk tolerance, to your expectations, to meet your needs and your goals. And that, my friend, is the journey of self-discovery. Yes. Well, if we had a microphone, I'd drop it right there because that just summed it up perfectly. So once again, my friend,

you were just a sage advice giver. I just love your approach. If someone is interested in learning more, I know you give a lot of educational workshops and things on your website, what's the best way they can reach out, connect with you, and learn more. Our website or my initials, NJMNWA.com. Again, NJMNWA.com. We'd love to serve you there. Thanks for listening. Nick, thanks so much for coming back on.

It's been a real pleasure. Always. Thank you, my friend. 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 episode, visit www. www.

www. www. Influential Entrepreneurs Radio.