Business Innovators Radio - Interview with Richard Hanson President of Generations Wealth Management Discussing Overcoming Fears of Market Volatility

Episode Date: December 13, 2024

Two generations of trusted Hanson financial professionals serve multiple generations of clients concerned with financial goals, wealth management, safety, security, and estate planning. Richard Hanson, President of Generations Financial & Insurance Services, began his career in 1983. He is currently an educational speaker on retirement and money management. Mr. Hanson is Designated as a Certified Senior Advisor (CSA). He Currently Holds a membership with the National Association of Life Underwriters. 2011 Insurmark Hall of Fame Inductee. Andrew Hanson, Vice President of Generations Financial began his career in January 2016. He is the Head of Case Design Team & Digital Outreach. He hosts numerous Seminars educating our community on such subjects as; Social Security, RMD’s, Asset Protection, Legacy Protection, College Funding and IRA / 401(k) Analysis.Learn more: https://www.generationswealthmgt.com/Registered Representative & Securities Offered Through Capital Synergy Partners, Member FINRA/SIPC , 2860 Michelle Dr. Suite 150 Irvine, CA 92606, Phone: [phone] Generations Wealth Management Group and Capital Synergy Partners are Unaffiliated Entities.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-richard-hanson-president-of-generations-wealth-management-discussing-overcoming-fears-of-market-volatility

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 Richard Hansen, who's the president of Generations Wealth Management, and we'll be talking about overcoming the fears of market volatility. Richard, welcome back to the program.

Thank you, Mike. Great to be here. Hey, so I know that when we think about market volatility as it relates to retirement, you know, you think about the day you got your first job and you were told, oh, set up this 401K and, oh, invest for the long term and all of that because things change. Well, in your 20s and 30s, you can take it on the chin easier when the market takes a turn because you've got the time for it to come back and you invest for the long term. when you're working with your clients, how are you describing market volatility?

Because definitely at the age where people are putting together their financial plan for retirement, there's some fears there. So where are you starting to help them overcome those fears of market volatility? Well, it's interesting you brought up at a younger age. Now, I started when I was 25 years old. And when I started, I was primarily looking at equity positions. things that are subjected to volatility. Well, why?

Well, I was 25 years old. History tells us over a 20-year period, even if we experienced significant losses in two, three, four of those years, and we're not withdrawing money that chances are we're going to have a great return over that period of time. Now, fast forward to be in 68, my clientele averaging, you know, starting at age 62, and beyond, we may not have that same 20-year period. So for me, as an example, if I'm 68 years old now,

I'm not going to put myself into a risky investment with a period of 20 years. Now, hey, you never know. I might make it until 88 or 90 years old. But I don't have the time to recover those kind of returns if there's a significant loss versus someone who might be younger. And our portfolios generally reflect that. The younger are folks, the more equity positions they have, the less bond or annuity positions they have.

The older we get, that begins to reverse itself, where we have a preponderance of bond-type vehicles, income-generating vehicles, permanent life insurance, and annuities. And what we're finding with annuities nowadays, back in the back, in the budget, past annuities have been in a position where they had a bit of a black eye and they weren't up to date as they are now. And so once we have opportunities to review with folks, we can put them in positions where we can guarantee not only their principal, but guarantee an income stream using vehicles outside of equities. You know, when I hear people say things, words jump out like guarantee. You know, people like to hear that guarantee and you can't lose money. And I think that is so strong to be able to have that. Talk a little bit about what you look for in that allocation. So if you think about, you know, the markets or volatility, you might still want to have a certain percentage of your retirement funds in the market. But as you get older, it's going to be a smaller and smaller percentage. What is your approach to diversification when you're planning that retirement plan, that fund?

Well, again, it goes back to what we discover in our discovery meetings earlier, which is, A, what's your risk tolerance, a scale of one to five, one, conservative, five aggressive, where are you? What's your tax bracket? What do you believe in inflation? What's your income? What's your expenses? What do you need to withdraw on an annual basis, a monthly basis, a quarterly basis? What's your RMDs? And so we'll structure that a portfolio based upon that information.

But the biggest issue you have, once you get to an age where you may be extracting dollars from your investments to provide you with a lifestyle and retirement that you desired from the minute you started. Well, if the market's dropped 10, 12, 20, whatever percentage and you are withdrawing, call it 40,000. thousand dollars a year, the market drops 20%. Now you're going to be withdrawing money. That's already lost money. So how do we prevent something like that? Well, again, it comes back to the things I had mentioned earlier. But what's most important is if we can put you in a position based upon everything we've

talked about and have some equity positions where when the markets go dramatically up, we've got an opportunity to increase our position there. But most of my folks at the age we talk about, we want to look at something that says, hey, if the markets go well, we're going to get a big piece of that market in different indexes. But you know what? There's a product out there.

And oh, by the way, annuities right now. And we've just finished our series, our consumer workshop series here in Nevada. We had 10 dinner workshops where we, We had overflow crowds. And the topic was everything you need to know about annuities. And one of the things that came out is right now, the reason we're talking about a vehicle like that is because we're in the baby boomer generation. Right now, globally, there was in 2023, $1 trillion in annuity sales.

and they are projecting in 2024, $1.5 trillion. So those are popular products. They're products that certainly provide our age clients and younger. We're working with folks in their 50s that are risk averted. That simply say, if you put an X amount of dollars in an account and that market goes up and you're going to get that credit. But if the market goes down, and let's assume a 10,000. percent downturn and you had 100,000 in there, well, in a regular equity position, that hundred would be 90.

But because we positioned some of your assets into an annuity vehicle, that 100 stays at 100. So you can't go less than a 0% return. Conversely, if during that one year period you had a 10% return, your value would now be 100 to 110 and I'm only using even numbers. But they will now lock in that 110. And then we take another one year trip. And if the markets are down 10 or 15 or 20%, you're going to get zero, but that zero is going to be on your new 110. Conversely, if it goes up 10%, you're getting 10% on your new principal rather than what you initially started with. So the benefits are, We're in the market, but we're not in the market.

As we have gains, we lock in those gains never to be taken away. So for the right folks and the folks we work with, it has given them sensational peace of mind that they know they're going to get the lion's share of returns in a good market. But boy, they sure are happy when the markets go down and people go, what do you mean? Because they don't lose any money. So a very good product in the right situation. After factoring in all the other things we have talked about, income expenses, inflation taxes, there's an awful lot of annuity business going around not only globally but nationally too. You know, we're talking about overcoming fears of market volatility and market volatility can't be a limited.

because it's just the indicative of the market. But what you're describing here is when you have a potential for putting a certain percentage of your portfolio in something that has a guarantee and you get a little bit of the taste of the upside, but zero of the downside. To me, that sounds very attractive. But I know that the word annuities brings, you know, some misconception from what are some of the things that people tend to have questions about on annuities like that are wrong? Well, it's interesting.

Again, this is fresh off my mind. we've just completed our series consumer workshops. And if you Google, what you're going to find is 50% of the pundits believe they're the worst thing in the world, 50% believe they're the greatest thing in the world. Now, we're on the side that believe that it's a real, real, real, real good position. But the things that come out from looking at Google or looking at things relating to annuities are the cons. They talk about parasitic fees, highly complex, difficult to exit, limited liquidity, which, you know, that's fairly negative. If you do not have someone advising you, that certainly is a

concern. And certainly there are annuity products that are out there that fulfill that negative confirmation. But some of the pros, low fees, principal protection. upside growth, income benefits. You can actually have investments in an annuity, provide you a guaranteed income for the rest of your life. They also have some of them have ADL benefits and death benefits attached. So when we review a position for our client, along with the other positions we've recommended. We want to make sure that we're working with products with low fees, some of the lowest on the market, high quality of company issuing those annuities, and obviously principal protection, and also how have their performances performed in comparison

to the regular indexes, S&P Dow Jones or NASDAQ. And what we've found for us is we work with two or three of those companies. And those are two of the three companies that fulfill our vetting process, which is, again, the low fees, a guaranteeability of that issuing insurance company, customer service, and how are those indexes performing. Yeah. Now, there are some types of annuities that could be a little riskier. than others because they're not fixed or guaranteed on that rate, right?

Yes. There are some of the products that we have seen, and particularly with the consumer workshops we've been working with, is really popular 10, 15, 20 years ago. A product came out called Variable Innuities. And Variable Inuities were a product that said, we're going to allow you to work with one of 20 or a, we have 20 mutual funds you can invest in into this annuity.

As the markets go up, you're going to get all of the market growth. But as the markets go down, you share in that downturn. And their fees were quite expensive. So after the review on most of those products, the variable annuity positions, really are not there anymore because there's no principal protection. We don't work with variable annuities. We will work with those what, again, we call fixed indexed annuities. What that basically means is it's fixed to the point you won't get less than zero.

It's tied to a number of different indexes that we and our clients choose. Some may be a NASDAQ oriented, an S&P, a Dow, or any other issuing index that we're looking for upside. potential, but we also work with fixed annuities, not fixed index, that say, hey, we'll give you a three, four, five percent rate of return based upon how long you hold it similar to a CD except issued by an insurance company. But for our age group and the folks we work with, if we're going to position some of our assets with annuities, some with equities, some maybe with bonds, some with permanent life insurance. Our goal is to minimize that risk to give them that confidence that if the markets go up, we get some of it.

The markets go down, which my age group nowadays, that's our biggest concern, is we don't want to outlive our income. And so we've been greeted very favorably in our recommendations on these fixed indexed annuities and fixed annuities. So a great product for the right positioning and the right portfolio that gives you a peace of mind that, quite frankly, is difficult to get anywhere else, including CDs. If you look at a CD that may be getting a certain percentage, but if inflation is above that, you know, you're going broke safely. Yep, you're not.

Yeah, exactly. And, you know, just like we've said before, there's never one cookie cutter templated solution for every single person in every single situation because everyone is different. And that's a big point for people to keep in mind. So the fact that we're mentioning some things to consider for annuities, it doesn't mean that it's always right for everyone. And there's different nuances. So get with someone that knows what to do and present some of these safe options. So I think that's a huge thing to keep in mind. Correct.

correct. You know, you mentioned a little bit ago about RMD's required minimum distributions. Let's talk a little bit about that as it relates to market volatility because I know that if people are afraid of market volatility and are being forced to take required minimum distributions out of different accounts, there could be a fear there of what they're going to do with it. And also at the same time, I feel like sometimes people don't really fully understand the ramifications of the RMDs and might go, oh, I'm good this year. I sold my RV. I got some cash.

I don't need to take the RMD. But if you don't take it, then there could be some big consequences there. Yes. Yeah. Well, and I will tell you, I believe eight out of ten of our folks when it comes to R&D time, they go, I don't want the money. Because we've, we fortunately have done our part. to solidify their retirement.

They've done their part, which is making sure their taxes are okay, their expenses are okay, but they don't really maybe sort of kind of need the RMDs. But again, the government says we want to get our dollars back. And I understand that. They were not taxed on that growth and the earnings on it. So, you know, there may be a position where they just take that money and reinvest it in another position. So if you've got an R&D you need to take out, you know you're going to get taxed. If it's 10,000, you're in a 30% tax bracket.

Well, you're going to net 7,000. What do you want to do with it? Buy a new jet ski or go on vacation? I don't want to do either. Well, then let's go ahead and put it somewhere that you're comfortable with. Maybe we do equities. Maybe we put it back into a different vehicle. but the important part is when you take that out, if the markets are low,

where you're going to be taking that out at a low watermark. Certainly we'd rather be taking it out when the market's high, but we have no control over that. But yeah, RMDs are a significant part once we get to that age. And if you don't take them, there could be big penalty. So then that's a big hole in that bucket there too, which then, of course, we've touched on several of these terms before, but inflation and taxes, when you do take out that RMD that required minimum distribution,

the reason is because it was in a non-taxed account for decades. The government hasn't gotten the taxes. So now you have to deal with the taxes. Now, there's some ways to mitigate and all of that. But what are some of your recommendations when people are having to redistribute some of those funds? And before they put it in the place that you goes, you got to make sure that you deal with the taxes that are involved there, right? Yeah. And one of the things that I always bring up with new customers and or the consumer worksheets is what do you think is going to happen to taxes in the next year, five years or 10 years? Do you, A, think they're all going to stay the same? Do you think they're going to go up or do you think they're going to go down? Well, I, for one, believe that they're not going down. I don't believe they're going to stay stable. I believe we're going to have federal tax increases. Depending on your state, that may be. part of it. So as we've talked with other discussions, the planning for RMDs may and probably

should occur 15 to 20 years earlier. Because we have opportunities now where you can minimize your future risk of taxes that are unknown at this point. If we believe they're going to go up, well, we know we're going to be paying more in taxes. Well, wouldn't it make sense if we're in probably lower tax brackets to convert some of those qualified IRAs, which you're going to have RMDs on. And there's going to be a significant tax implications later on. Wouldn't it be wise if, again, we don't affect your annual federal income tax bracket to take a significant amount of those IRAs now, pay your taxes on a known tax bracket and put the leftover into a Roth.

And if you do it over a 10-year period, five-year period, and then you need to supplement retirement where you're going to be taking out 100% tax-free dollars on an unknown tax bracket 10 or 15 or 20 years in the future. So we think it's important and specific to deal with what our tax consequences are be, are going to be, particularly those RMDs and any withdrawals, 20 years, 15 years prior. Because the government developed a Roth product, and we believe it's one of the greatest planning tools that you can possibly have. But if you believe tax brackets are going to go down, then, hey, we'll deal with it at that point. I'm not sure many folks are going to believe that.

But we try to mitigate that potential years before and make suggestions to our customers on a known federal income tax now. Let's pay that now. And let's not pay those taxes when we don't know what that federal tax might be later on. And of course, no one has a crystal ball. But I've heard it said that really taxes are tied to the deficit. So as big as the deficit is, if you want to reduce the deficit, let's reduce government spending. Well, we know that's not going to happen.

So the other way to reduce the deficit is taxes. So checking the box of, do you think taxes will go up or down? Probably it's yes. And it doesn't mean that you're making a wild prediction. It just means let's just look at the facts. But I want to just get back to the Roth conversion concept, whether it's right or best for someone that takes getting with a professional like yourself to run the numbers. But the big thing is time. You need to make sure that you've got a time well ahead to make sure that it is beneficial.

You can't do a Roth conversion at age 74 and think it's going to do me any good versus 54. And I think that if you go back to when you got your first job, most people getting the first job get shoved papers from HR saying, go out this 401K and here we go. And they're like, okay, I guess that's what I'm going to do. and then they have 401k money building up, not being taxed, so that now all of a sudden there is a huge need for the potential of revolve conversion because there's so many people with money that's never been taxed. Yes. And you're right on the age group.

We've got our program, obviously, most folks that do what we do have numerous programs. We have a social security estimator that says, hey, when does it make sense to begin your social Security is at age 65, 66.5, 67, 70, 72, factoring in inflation, taxes, after-tax rate of return, longevity. And we also have that for Roth conversions. And those Roth conversions generally, by and large, are a situation where you've got to look anywhere between a six to an eight year, maybe even 10 year, depending on prevailing rates, where it makes sense to do that. When you get to that latter stages and you're trying to do that at age 72, hey, we may not be able to do that break even over the next eight to 10 year period.

So like I said before, this is planning that we prepare for that we're going to deal with down the road, do it while we can now. We're even doing that structure now with folks that are 55. There are folks who have 401Ks, and those 401Ks have the ability to do what we call an in-service withdrawal generally at 55 or above. And we're extracting some of those 401k dollars converting that to a Roth for someone 55. And once we put the numbers together, which is your age, rates of return, inflation, et cetera, et cetera, et cetera, what does it look like 10 years from now? And if you see the numbers and you are compelled to act and they look specific for you, then it's probably a good decision to make.

But like most advisors, everyone's got the systems. It's how they use them. And more importantly, when you use them. We want to make sure that we are pro-act. and we're not going to be in a position when they're 68, 70 years old, and they say, why didn't you tell us about this? Well, guess what? We do that proactive.

And again, we're very proud of my staff and everybody that surrounds us that we've got that forward-thinking process. You know, I think once we kind of wrap up the thoughts here of overcoming fears of market volatility with many of the tools and tips that you've mentioned here, It kind of gets down to the net result of this is you've got that confidence in the financial plan that's been put into place, no matter what the market is doing, whether it's volatile, up, down, unpredictable. We know that. But it really gets down to that confidence and that peace of mind. And that becomes a really big gift that you're giving to your clients is when that plan is put into place. They see that there's guarantees that there's a good mix and good diversification and you know what to do even,

when some of that uncertainty happens, it really gives that confidence and peace of mind to your clients. Is that kind of like one of the overarching of things that you're focused on as an advisor? Well, that's A number one. And when we meet with folks and we diagnose their needs and they give us all the data that we need to diagnose those needs, we'll put together, and I always tell, we're putting together a blueprint, a game plan, a roadmap. And that blueprint, gain plan, and roadmap has certain criteria. And those are expenses, income inflation, taxes, et cetera, that are linear. Well, we know the world is not linear.

Things are going to go up and things are going to go down. So if we have planned starting at age 50 and you want to retire at 65, what do you have now that will get you to age 65? And what factors do we put in there? Well, all the aforementioned items from inflation to after tax rate or return, etc. What does your life look like? And here's a technique we might want to consider two years from now, three years from now, five years from now. Here's what we might want to consider later on down the road where we do a Roth conversion or we gift some dollars. But nothing is happenstance with us.

It simply is, here's what. where you are today. Here's what you've got to get you to tomorrow. And how do we do that? Well, I can put you out all the greatest graphs, charts and everything and show you what we can do. But you've got to be a big part of it, number one. And then we've got to be a big part. I make sure that we get together twice a year. Now, I can't go to your house and drag you out, but I want you to know we're going to be there because if we've assumed inflation is going to be 2%, but it's 7. Or if we assumed we're going to get a 5% return and we got zero. If we expected your expenses at this number, but they were 10% higher, we need to change and we need to update.

We need to do all those things. So, you know, not only is that I believe and we are blessed to have that leadership capability, but we back it up with facts. So much of financial planning is dreams, wishes, aspirations. But you also have to have the clinical stuff, the wills, the trust, the powers of attorneys, the inflation and all those other factors. And if you mold those properly and the confidence with the client is there and we do our professional work, it's a marriage made in heaven. And that's why I've been doing it for 43 years is it's an actual joy to continue to do this

with a lot of folks. Well, Richard, as it's been our custom and our conversation, It's always a fresh encouragement to hear your approach to serving your clients. And if someone is listening to this, wanting to smooth out that market volatility fear that they have, what's the best way that they can reach out and connect with you? Well, a couple different things. They can certainly get a hold of us at www. GenerationswealthMGT.com.

Or I'm old school, so feel free to pick up the phone. Someone will find me. That number is 833-948-2466. And we welcome any questions that you might have. Excellent. Richard, thank you so much for coming back on. It was a real pleasure talking with you.

Thanks, Mike. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www. com.