Business Innovators Radio - Interview with Steven Michael England, President of Capstone Estate Planning, Discussing Fees & Fiduciary Relationship

Episode Date: November 1, 2024

Financial advisor and Retirement Planner since 1982, Best Selling Author of “The Wealth Lifestyle”, honored with numerous industry awards and honors of achievement. I value close business relationships with clients and treat them the way I would want to be treated.Learn more: http://www.thewealthlifestyle.com/This podcast is for informational purposes only and should not be considered legal, health, investment, tax, profession advice. We are not responsible for any losses, damages, or liabilities that may arise from the use of this podcast. This podcast is not intended to replace professional investment, tax, or legal advice. The views expressed in this podcast may not be the views of the host or the management.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-steven-michael-england-president-of-capstone-estate-planning-discussing-fees-fiduciary-relationship

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 the Stephen Michael England, who's the president of Capstone Estate Planning and will be talking about fees and fiduciary relationships. Stephen, welcome back to the program.

Thanks for having me, Mike. Hey, so I know that I'm a big believer in, or I like to observe things where it's like, hey, when you say this word, what do you think? When you say this word, what does it make you feel? And the word fees, oh, how many times do we read our cell phone bill, our power bill, you know, and go, what is this? And you just throw your hands up going, I'm just feed to death and fees all over the place.

So this is a huge factor of leakage in finances. So I'm excited to talk about this and then how you correlate that in with dealing with your clients in an equitable relationship. So let's get started first with you mentioned fiduciary relationship. Let's define fiduciary. What is a fiduciary and why do clients need to understand what it is and why their advisor must be a fiduciary? Well, let me first tell you that first of all, I am not. fiduciary. I'm just want to tell you that up front. I'm 65 years old. I started in the business in 1982. And do you know, Mike, when I started and at that time, and for a long time, there was no

such thing as a fiduciary. So this is a newer phenomenon. I'm not sure when it starts. A fiduciary is where an advisor, and they have to, you know, be licensed to be a fiduciary, but they legally have to put your interests. They legally have to put your interests above their own on these investment decisions. So it's been marketed quite well, but I love this story of a man I talked to who's just a few years older than me who lived down in Texas. And he said, Steve, he said, I need a fiduciary. He said, I don't know what a fiduciary is, but I need a fiduciary. And I love that.

But he knew he needed a fiduciary. And yes, you do need a fiduciary because they legally have to put your interest ahead of their own. And many advisors that aren't, they don't have that same level of responsibility. So it's the highest level of care to the consumer. And I work with several lead fiduciaries. They're, you know, some of the top fiduciaries in the United States. And I try to match up our people with fiduciary. So I'm part of a team.

Perfect. And I'm a coordinator. But yes, you need a fiduciary today. And if you don't have one as part of the team, then you're with the wrong group. And the other thing that you mentioned was fees. Well, the fee world has changed, Mike. So I would compare this almost like to Real Estate Commission. For years and years, real estate commission,

stayed about the same as five or six percent. And nowadays, you see groups do this exact same service, same advertising, same, really almost the same thing for maybe half the cost. And so real estate commissions and even some of the laws are changing, but real estate commissions and fees are coming down. And so the same thing on the investment area. There are so many groups, though, that are still under the old way of doing business and they charge. They charge quite a bit. So they may have their management fee.

And many time they put you in mutual funds and there's mutual fund fees. And then sometimes there's variable annuities and those have fees upon fees upon fees. So you have a big difference between some of the, I'm not sure if I'm supposed to name names, but if you had like a T-Roe price or Vanguard or Fidelity or Schwab. Some of these big groups have very low fee structures. Now, none of them do business for free. I don't think any of them are non-profit companies. They all make a profit.

So there'll be some fee somewhere. But some of the traditional money management groups and their layers of management and just how they're structured offices, et cetera, they have probably double the fees. And so we're seeing that a lot of people are really fee conscious and they're very smart in doing so because fees can make a 30 to 40% difference in the growth of your money. Yeah. Wow. It's amazing.

You wouldn't think it was that high. But fees can make a huge difference in your retirement plan. So the way I look at it is, and I've looked at it this way ever since, really, we had the pandemic, is that some people are working in a fashion where they can have lower fees. We have in our group. And where we keep our costs down so we can keep the cost low for the consumer. And then when you're dealing with the fiduciary, you're paying a flat fee. You're not paying every time that you make changes and buy and sell and all that. So they, you know, they're making money.

The fiduciary is making money when you make money. So if you make money, they're making money. Yeah, back, because back in the old days, you know, the quote unquote stockbroker, when they call you up with that hot idea and move money into whatever that it is, then it's shaving off a little bit of commissions off of that because they get paid. And then next week they got another idea because they keep generating commissions. So that's a good point there. But then the other fees, if you can look at and understand.

fees, that's going to really help save, like you said, 20 to 30 percent or whatever that number is, that could be monstrous over time. Well, I see it all the time because we do evaluations that we call it an EKG, but it tells you what the fees are, the stated fees and the hidden fees, but you know what the real fees are. And one was just completed from a very prominent person who retired from the post office. And the company that he was with, which is a household name, and they have offices on every and every nook and cranny, I won't mention their name. But his total fees were approximately 24,000 a year.

And so we're talking about the fees from the investment group. And then they had the mutual fund fees. They use mostly mutual funds. And then he had several variable annuities, and the variable annuities have mortality and expense fees and other fees. They're probably the highest fees. So when you put all that together, it was almost 24,000 a year. And the fiduciary that I had set them up with quoted them for the same. It was actually they would have higher returns, less risk and volatility.

et cetera, et cetera. But just on the fees alone, he was $4,500 compared to $24,000. Wow. I know that's kind of an example that's, I guess, exaggerated, but it's a true one. But all the time I see fees in half. So if someone was paying $10,000 a year, they could do it for five. And then the other thing that I noticed, Mike, is that a lot of people, when they do this evaluation, it shows their fees. They didn't realize, you could see from their reaction, they did not realize they were paying

that much. Well, here's something that jumps into my mind. That scenario that you mentioned about the whatever, 24,000 or whatever that one is. And I don't care to know exact numbers, of course, but hypothetically, that person may have been told or looked at a statement of, hey, your rate of return on your portfolio last year was X. Whatever that rate of return number is. But in reality, the net return was way less because of those 24,000 in fees. So the client is hearing in their ears and seeing with their eyes and going, oh, I made a rate of return of whatever that bigger number is because that's what the portfolio brought in. But then the true net, net, net goes in their back pocket, so to speak, was way less. And when you look at that rate of return, it probably would be paltry.

It's so true. And then some of the fees, it's not the client's fault, but they don't really show up. So we call them hidden fees. But can you imagine if, you know, what I say is it's easy to risk somebody else's money, especially, you know, when you're getting paid to do it. And what if you're getting paid to do it when you're losing them money? And that does happen. Like in 2022, you know, this has been a great year.

But in 2022, a lot of people lost. 20 to 25 percent and they may have been paying high fees but yet they were still losing money. So what we try to do with the testing is just make sure people are paying the low fees under today's most competitive plans because if you're not looking at it, there are still, I would say, investment world is still under the kind of like the real estate group where they're still charging that five or six percent and then you have the other maybe half where they're doing it the newer way and they're charging the lower fees but you need to know what your fees are and it can have a big difference on your returns because they're saying

it can affect 30 to 40 percent of the growth on your money which it's it sounds very high but that's how the math works out it's really amazing you know so how do you balance getting the best advice, but not paying those exorbitant fees? Well, I think, you know, the fact is you have some people want to do everything. I think they, some people try to do it themselves. And there are some groups where you can just call in, you have an 800 number, you get a different person each time. They can help you, the fees are lower. But I really think you need a fiduciary and you need a person.

that you can have a relationship with, that you can call and they'll do reviews and try to fit a plan to you. But you definitely need low fees. So I think you need a test to find out what you're paying. Can you pay less? What's a fair price for what you're getting? And then on top of that, for getting the fees, do you have a competitive program? And does it fit you? as far as, you know, the risk and volatility.

But far too many people today do not have what I call the full plan. And that's because no one has ever talked to them about things like tax strategies and how do you get the money over to the tax-free Roth and how do you do all that? Or how do you ensure that your children don't end up with, you know, a ticking tax time bomb? and there's a big tax to them. And what happens, you know, if I need money because I have serious illness and I need care and all those kind of things, social security planning. So there's a lot of planning that goes into it, which is why I think you need a team and you certainly need a fiduciary on that team. So it's more than just about investments.

It's really about financial. Yeah, holistic, the whole picture. You know, I want to go a little bit deeper on something you said about the fiduciary. responsibility is they're legally obligated to give you the best advice. What would it look like if a client didn't get that best advice? Because I would wonder that, you know, typically someone would go, oh, you just told me to get into some investment that went horribly south. But I think that it's a little bit deeper than that where it's like, you know, a fiduciary

needs to give someone all of the picture and it might not be some catastrophic negative thing. It might just be you didn't give them the full array of options for them. Well, that's true. A fiduciary is supposed to cover all these, they call it style boxes, all the different boxes so that you're well diversified. And they're supposed to pick the best of the best. So if you had one group and they only use certain types of funds or certain programs because they're getting a kickback, they're getting money from that group and they just use them, they're supposed to, you know, a fiduciary is supposed to look for funds. five-star, the best of the best in each category. So it makes a big difference in what they're coming up with. So, Mike, if you looked at it this way, if I charged you a fee, and I'm not the fiduciary, but let's just say a fiduciary charged you the fee, and you were okay with the fee that they were being charged. And their job for that fee was to find the best plan to fit you, and it was all five-star, and it covered every style box, and it also covered the planning,

then that could potentially be a very good plan. But if you had something that's more cookie cutter, where it's designed by a group, really, because it's what they want to put you in, and they want to sell their funds, or they have special relationship with just certain groups. and there's no one group that's the best in every category. So you need someone that really can put it together with your best interest. And that's really what a fiduciary does. So it's really needed.

When you have one that isn't, what tends to happen is they put their own interests above yours. That's what happened. Because they know they got a little bit better compensation on this versus the other one. or whatever. It's not necessarily that you're going to take a horrible hit. It might just be the advisor is getting something better. So that really clears it up a lot. And the bottom line is it's legally their responsibility. So it's not just like, oh, just keep it in mind when you work with a fiduciary like who's on your team, now all of a sudden they're like, I have to do this or else I'm in big trouble. So let's talk a little bit more about that team, you know, because

Stephen England is a smart guy, but you don't know everything. about everything. And if you can bring in experts to fill in the gaps and provide that great overall comprehensive service to your clients, that team approach really is powerful. You know, Mike, when you said, I don't know everything, you know, my wife, Cindy, who I've been married to 35 years, she tells me that. I don't know everything. Right. And she'll say, listen to your wife. But no, it's true. Today you need a team. I've been in the business a long time, So I have a lot of, I've seen a lot of things. I have a lot of experience.

But I don't have, I'm not a fiduciary. I don't do that part. So to me, you need someone such as myself who's seen a lot. You certainly, you know, the worst thing that you can do is have someone that's, let's say, younger, trying to design something that they would pick out for them. And here you are in retirement. They might want to do things. a little different. You think about, you know, decisions and how your children do things versus what you want. So you want, you know, I'm in, I'm at the age of most of the people that I talk to. So I understand what they, what they want. And I can relate to them. Let's put it that way. But you need a fiduciary. You may need, you know, estate planning. So there may need to be for, let's say, legal documents, an attorney brought in or a,

tax, a CPA or tax specialist brought in or other professionals. So you need someone who can put it together. But on the investment side, you certainly today need a fiduciary. And what we see is that fiduciaries are talked about, but still, I would say 70% of the people I talk to are dealing with people that, you know, for instance, Mike, if they're in a 401k plan at work or they still have a 401k, they can't give them investment advice. So they have no one helping them. And then you have money management groups who they have the licenses to do stocks, bonds, mutual funds, and put them in certain things, but they're not fiduciaries and the company is not set up to work in that fashion.

So you really need someone who's a fiduciary but is really on the independent channel so they can, they have access to everything that exists out there and they can put together, you know, an A plus. That's another big one. I came out of the mortgage industry and I know that it's probably the exact same in what you are mentioning there. If you worked for a bank, let's say, you only have a certain number of products to offer. And you might be sitting in front of someone needing a certain mortgage loan that you. cannot offer, but, you know, the independent broker down the road, they can do anything. So you, as an independent advisor, you're not captive and you're not structuring certain recommendations only on what you can offer through your captive provider. Stephen England can provide anything that the client needs because you're independent.

I think that's a pretty big aha for people to realize. Right. So as an example, and you could look at any type of, you know, I've looked at either auto homeowners insurance or car insurance or anything. And it's amazing. If you shop around, you can see big differences. But there are some groups that so your advisor could be, you know, the best person in the world. But if they work for a certain company, their hands are tied by the company and what they have access to.

And you'd be very surprised and the average consumer would not know the lot of investment groups maybe only have access. to half of what's out there in the marketplace for investments. And so they're not shopping around. But for instance, on my end, if someone needs income and they want a pension-type guaranteed income, and I shop for that, I can shop with every company out there. So the only thing that limits me is I'm going to pick a high-quality company. So that's going to be the standard. But within that, all the high-quality A-rated companies, we're going to try to find the highest

income, the highest guaranteed income. And can you imagine if I only had one or two? So you have to be independent and have everything available on the fiduciary side and then on the planning side. And you would be surprised if there's a very small percentage, maybe 20, 30 percent of advisors that really have access to everything that exists. Yes. That's, you know, and I think that, you know, the old saying, I'm sure there's a phrase for this, but you'll recognize it, but you don't know what you don't know.

And I think some people just don't realize what you just said. They just think they're financial guy or gal that works at whatever, big name, whatever. They don't realize that there could be potentially some limitations. So having that independent approach, having that team approach, having fiduciaries on the team that are legally obligated to do the right thing for you or else. That kind of keeps those protections in place for the client. I really think that's a big piece that people are not picking up on. It really does, Mike.

And, you know, it's for retirement planning, which also includes estate planning, it's not as simple as I'm making money. I'm not. This is my risk. And sometimes people don't even know that. But so you do have to have a fiduciary to pick five have, you know, low costs and all that. But there's other things that go with your planning that the average advisor that's out there never ask the client because they don't do planning. For instance, are they making the most money over three, five, and ten years?

So you might be having a great year, but are you making money consistently over those periods of time? What about the risk and volatility on your life? savings. You know, what's the potential for, you know, how much up, how much down? The fees, and do you have a fiduciary relationship? What about retirement income? Is your plan designed and set up so that you can take income if the market's not, you know, there? And then the Roth conversion strategy, do you have one in place? Are you minimizing taxes? Are you filling your tax bracket? And then what's your plan if you had a serious illness or catastrophic or something happened. I mean, it's expensive. It can wipe anyone else. So do you have a,

how do you pay for that? And then, uh, you want to minimize taxes, not only in your lifetime, but if something happens to you, you don't want a tax bomb to your, to your wife or your children or grandchildren. So you think, I just went through those questions because I have asked clients those questions and I've had people say to me, well, my broker-advisor never asked me those questions. So to me, you have to have a fiduciary relationship, but where I come in is on the planning to make sure those questions are being addressed and those things are built into your plan. Nothing's perfect. There's no silver bullet to some serious problems, but you have to plan for all these things.

it's not just how much money am I making. It's not that simple. And it kind of reminds me of like when you play chess and you make a move and you keep your finger on it and you're looking around like should this should this be my move? And then when you take your finger off, okay, now it's the move. Well, with the team approach, with you being kind of like the coach or quarterback of the whole team and you're coordinating with maybe people you're bringing in for the client, maybe it's legal or maybe it's tax, maybe you're coordinating with their current people,

with their professionals, but you're making sure that each one of these recommendations for their retirement plan doesn't have a negative domino effect with the rest of their team. So you don't want to create a legal issue or a tax issue or vice versa. So I think that's a huge thing to remember, too, you know, Stephen England has taken the 30,000 foot view making these recommendations for what they need, but making sure it fits in with everything else they've got going on. It's so true. And it's, it's, you know, if you have people that have hundreds of millions of dollars and they're in a family office practice, then they have all these advisors and they work together. But for the average person, the upper middle income or the person that's, you know, saved hard and has some money, they have an advisor. But really, the planning.

They just haven't had the planning. And they don't know how to tie it together. And that's why I work with, you know, the. the fiduciaries I work with are, you know, late 30s, early 40s, and I'm 65. So I've seen some things. They will not pull the wool over my eye. Yeah. You've got their back.

You've got the clients back to make sure that what's being recommended, you know, because it's kind of like I remember a commercial back in the day, it's like, I've seen a thing or two. Well, you've seen like this recommendation. You know what? One time we did it this way and this happened. So let's go ahead and make sure that we're doing it. way. So I think that's a huge piece. Not to dissuade people from ever working with someone with less experience, but when you're 65 and you've got 30 years plus in the industry, you've seen a thing

or two. And that's a, the only thing they asked me, Mike, is like, how long are you going to do this, Steve? But you ask my wife, this is what I do. This is what I love. And I'm beholden to my clients. I return phone calls. I treat them. I'd like to be treated. So, It's, I guess you'd call it boutique. I don't know what the word is, but it's, I have some very, very close long-term relationships, and I just love the people I work with. So it's- Well, you said a keyword, relationship.

You build relationships. You're not looking at, you know, people aren't dealing with a robo-advisor where it's like, set them up, knock them down, here's your plan, see you later, goodbye. You're building long-term relationships. I resonate with that. That's how I treat my business. And I think that your clients can just tell that and just how that you're interacting with them. So that is just spectacular.

So I think, Stephen, if this is a concern for some people to go, maybe I need to make sure that I'm getting as little fees as possible to make sure my returns are strong and working with a team that has my best interest at heart, what's the best way that someone can reach out and connect with you? They can email me at Steve at capstoneestateplanning.com. Excellent. Well, I will also put the link to your website in the show notes. And thank you so much for coming back on. This has been a real pleasure talking with you today.

Thanks so much, 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. influential entrepreneursradio.com.