Business Innovators Radio - Interview with Tim Dern, Retirement Income Certified Professional, and Managing Partner with Mana Financial Group Discussing Asset Allocat

Episode Date: July 7, 2023

With decades of experience in the industry as a 65 securities licensed professional, he brings a wealth of expertise to his clients. Unlike traditional broker-dealer models, his fee-based approach puts you first. He leads a private wealth team, offering top-notch asset management services focusing on retirement strategies.As an RICP (Retirement Income Certified Professional), he is uniquely skilled in creating customized plans that maximize your income during retirement. His impressive portfolio includes AUM, Fixed Index Annuities, IUL, Medicare Supplements, Advantage & Drug Plans, and more.But what truly sets him apart is his dedication to education. As an NSSA (National Social Security Advisor), he offers educational seminars on social security, Medicare, proper asset allocation, Roth conversion, and tax-saving strategies. And for those unable to attend in person, he hosts online webinars nationally – using Facebook ads to reach a wider audience.With unparalleled knowledge and commitment to your financial success, he is ready to help you plan for a secure future. Contact us today to schedule a consultation and experience the difference for yourself.Learn More: https://www.manafg.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-tim-dern-retirement-income-certified-professional-and-managing-partner-with-mana-financial-group-discussing-asset-allocation

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 Tim Dern, who's a retirement income certified professional and managing partner with Manna Financial Group. we'll be talking today about asset allocation.

Tim, welcome back to the program. Hey, Mike, how are you doing today? That'll be back. Doing great. You know, it's always really wonderful to learn from different people and their perspectives. And I know that a lot of people think, oh, retirement, I'll get to that. And then all of a sudden, it creeps up on them. So I know that asset allocation is a really popular term, but I want to start off first with,

what's the definition? What is asset allocation? Yeah, that's a real common thing. And as a financial advisor, we're looking at people's finances, whether it be a 401k or a 403B, 457, TSP, whatever kind of retirement account they have or any kind of an investment account they might have with some kind of a brokerage firm. You know, how your money is invested inside of that account is what we call asset allocations. When you're working for a company and maybe it's a 401K, they're going to, HR department,

is going to give you a form and you're going to actually choose. Do you want to be in stocks or bonds or a combination of both? Sometimes you'll be in a target fund, which is usually when the fund itself will allocate your money, your contributions, more towards equities in the beginning. And then some of it will be in bonds. And then later on, as you age, getting closer to retirement, they kind of switch that more to the bond portfolio and sort of minimize the equities trying to reduce some of the risk because your time frame is now shorter. But I see people that are invested most of the time 60% in stocks or 40% in bonds. We call it the 60-40 model.

That used to be kind of what everybody has in these portfolios. But what we found is that's not the best portfolio as we age. And even in the last two years where we've had a downturn in the market, that 60-40 model has lost close to 30%. Wow. So this is where we start talking about maybe it's time to reallocate, especially when you get older. You know, that's a huge point because you mentioned 401K, which is a type of retirement account you have typically when you work for a company. Now, if you're self-employed or if you have the ability to set up different individual retirement accounts, and things like that, you have more flexibility of what you choose.

But it starts getting to the point where people just don't realize I can go 60, 40, this, and I just am so confused. But the huge takeaway to what you just said is sometimes taking that extra risk is wonderful in the 20s, 30s, 40s, you know, of your age bracket. But once you get to a certain age and start approaching retirement closer and closer, talk a little bit about how important it is to now assess and then reallocate because that risk tolerance you don't have the runway left anymore. Yeah, that's kind of the most common thing that I see is when people were younger,

they were very aggressive, which we would probably tell a younger person to be more aggressive because you've got a long runway like you say before you're going to use these funds. And obviously your stocks, if you're in some kind of an equity portfolio, even individual, stocks for that matter. You tend to get more growth on some of the stocks or equity portfolios. It could be designed that way, so maybe you're heavier on there. But what we find is people have a very high risk tolerance when they're younger. And then later on, they've made money. They've invested in these accounts have grown over 20 years, 25 years. They have a lot of money now. But they've never reallocated. And all of a sudden, now we have these downturns in the market.

people's accounts are getting hammered. And they're really concerned why. So we have to go in and start talking about, well, right now you're all in stocks or bonds. And today, especially the last two years, equities have lost money. All our stocks or ETF portfolios have lost. But even the bond funds, when they raise interest rates like they're doing, that really causes the bond funds to start losing money. So people are losing in stocks and bonds. And they're coming to us saying, you know, where do I go? What do I do to try to start protecting some of that money? So then we have to have alternatives there are really outside the market. Yeah. You know, you bring up several times here, like losses in the market dropped.

And someone listening to this may be thinking, you know, I've just been going about my life thinking, here's my retirement account. And I don't know about what brackets or, you know, categories and asset allocation. So let me take a look at that. But oops, I got that quarterly statement and there was a big hit. It dropped 10, 20 percent, whatever. Isn't the temptation sometimes, Tim, they come to you and go, we need to catch up. But the problem then is to catch up, it means you take a lot more risk. And secondly, sometimes it takes, you know, if you drop 20%, you got to, you know, make 40% to get that 20 or whatever those numbers would be. So talk a little bit about the catch up. And at some point, you'd need to just release it and go, Look, cut our losses, and let's reallocate, and here's the safe path forward.

Yeah, that's kind of the common practices, I would say, when people start to get older. I don't, you know, I see people that are young, and when you're just working, getting a regular paycheck, contributing to 401K or 403B, most people aren't really even looking at their portfolios as much. And even if they take a loss, they're still working, they're still contributing. Where this gets a little more frightful is when you're within a few years of retiring and you start seeing, you know, you've lost several hundred thousand dollars in a large portfolio and now you're starting to get worried because, as you said, if you lose 25%, you've got to make 37, 38% to get back to even. It starts to be lost later in life is not what you want. But it's confusing. People don't realize that you can invest in individual.

You can take a mutual fund, which is a basket of these stocks and bonds, which is what common happened over the years is you didn't have to pick anything. The mutual funds have a lot of expenses in there, a lot of fees. Most people will see this when they stop contributing to their account, and they notice that as they're working stops, paychecks and stops, and they start drawing down on these accounts, Now you start seeing the account drinking faster than you would think because you're taking money out. The account is losing. And there's a drag on the account of fees.

So we start talking about ETFs, which is sort of the idea of mutual funds in that term of a basket. But what's nice about that is the expense ratios are lower. So we start coaching people on what they're invested in or how. And we see people, sometimes I have people come in. They've got a great job of saving. They'll have a million dollars. and they're 401 pay at the end of this, and they get ready to retire. And now they might have lost $200,000 and we'll say,

listen, you got all your eggs in one basket. You're in stocks and bonds, and they're both losing money in the situation we're in today. So we might want to start pulling apart those dollars and start reallocating and changing the investment risk. Not everything necessarily could be in the market. So we can talk about a few ideas of what we do to help people produce. protect their money, just not stocks and bonds. That's not the only investment choice we have today. Yeah, I think we've established the fact that you have, right now, everyone that has a retirement

account has asset allocation happening for them. It's just, is it the right allocation for your age and given how much runway you have to retirement? So when you look at reallocating, now if you want to get out of some of the riskier market type, you know, movement things, stocks, bonds, mutual funds, what is that option? So I know that sometimes people kind of get all antsy about certain phrases like life insurance annuities, but I think that sometimes annuities gets a bad rap. So talk a little bit about that category and if that could be a good option for adding that into your allocation. Yeah, I think today it is. We've seen as annuities, a big topic today. In fact, I was yesterday in with a group that 38 million. people searched on Google last month for annuities. Wow. Mainly because their stocks and bonds are getting hit and they're looking for alternatives.

But I would like to say first up front, annuities are offered by insurance companies. So if you're talking about an annuity, you're not necessarily going into a brokerage account. You're giving money to an insurance company. And there's probably 25, 26 different companies, multi-billion dollars insurance companies that are offering annuities. And they used to be, I would say years ago, not that great of an opportunity. And we would talk to people about protecting their money with an annuity, because if you go in some of the indexed annuities, fixed indexed annuities, you're necessarily not in the stock market. You're putting money with an insurance company and you're really not invested. That's the way if the

market goes down. You don't lose a penny. And you can grow your money based on guaranteed rates or even indexes, all types of index, S&P, Dow, NASDAQ, and you're sort of betting on those indexes from one year at a time. So today, if you got in one of these annuities, you would track that index, let's say the S&P, which, you know, a couple of years ago, the S&P was at 4,900. It's running around 4,100 today, so it's down. So if you put your money in and you sort of bet on that S&P index and it went from 4,100 to 4,300 next year, you would cap. gains of that, it would be credited to your account, and you would never give gains back to the market after that. All the gains are locked in. If the market was less, so let's say it started

4,100, and it dropped to 3,800, well, you didn't lose any money, even though the index dropped, you don't lose any money, but they'll reset the index from 4,100. Now next year, it'll start at 3,800. So if that market just bounced back to 4,100, which is back to even, in the end. In the end, the annuity, the indexed annuity, you're actually capturing gains just on the rebound back to even. I can't do that in a stock account or a bond account. So the offers are really strong today for annuities. That's why they're popular. You can have a chance to actually capture up to 85, sometimes 100% of the gains of these

indexes with none of the market risk. So now it doesn't make sense to have all of your money at risk in stocks and bonds. we think one of the buckets needs to be an indexed annuity to try to protect some of your money for market risk. That's popular today. You know, and I think there are a couple words that you brought up that I catch my ear, which is guarantee and can't lose any money. So talk a little bit about that because I think sometimes in the marketing and advertising world that we're in, we hear these big, you know, words and it's like, too good to be true. So in fact, is your money, is your money,

money in an annuity guaranteed at a certain rate? And do you know that rate of return guarantee? Or is there a guarantee that you just will not lose money? How does that guarantee work? Yeah. So this is where you really need an advisor that understands the insurance products. In my practice, I have securities license. So we manage money. We do private wealth management. But we also know and have insurance licenses. We do a lot of annuities, Medicare, life insurance, that kind of stuff. So some of my friends who are only insurance license, they think they can solve all of your problems with stock. I mean, I'm sorry, with annuities or life insurance. My stockbroker friends are the ones that think they can solve everything with stock market.

And I'm a believer as an independent advisor, what I've learned is there's no Swiss Army knife. There's no one investment that does all of these. So we like to create up different buckets. We do have buckets in the market, and we like the stock market, but we like some of our money in these annuities. Now, I would like to tell people that are listening, there's different types of annuities. One's called a variable annuity. So if you're in a variable annuity, or you hear the word variable life insurance, variable annuity, you're with an insurance company, but your money is still invested in the market.

So you really didn't get any protection from the market on a variable annuity. you're going to go up and down with the market. And that's sometimes the confusion. People have purchased a variable annuity and they are losing money. So the term is indexed fixed indexed annuity. If you hear that term, indexed universal lifer, indexed annuity, well, now you're not invested. Your money is actually held. I like to say similar to cash or money market. You're actually in a very secure bond fund inside the insurance company. So you're, you're not invested in the market and you take none of the loss. If the market drops and you're in an indexed account, you get none of the loss. But the difference between a fixed annuity and a fixed indexed annuity, the fixed annuity pays a fixed rate for a set period of time. It works just like a CD. Today, we can get 5% guaranteed by an insurance company for three years.

Guaranteed rate, no risk. and a lot of them don't have any charges or expenses. And even, you know, five-year term right now, we got 5.65 percent guaranteed for five years. Now, you might be getting 5 percent at the bank or, you know, in a CD, but they won't hold it for five years. You can actually lock those numbers in for five years. The indexed annuity is a little different. The indexed annuity says, I'm going to try to beat the 5 percent because the stock market indexes are way down. And if I have an index on an S&P, and let's say the market goes up 15 or 20% next year,

I can actually capture up to 80% of those gains with none of the risk. So the indexed annuity, you're trying to still play the market without taking any of the risk. You're going to sidestep losses. But for a portion of your money, if you wanted to park it in one of these accounts for five years or seven years or 10 years, you know, you had a million dollars and you took a portion of your money. Let's just make a number up and say $300,000 goes into an indexed annuity. Now, you have to put it in there and they work like a CD, maybe for five years. Well, that means you're not going to have access to all of your money for the next five years. Most of them will let you take 10% a year out. But if you had a million dollars, you took $300,000, you parked it somewhere for five years and you still had $700,000 liquid to live on. This is how we do it in our planning, because that's what we try to tell people. If you've got all this money, we want 25 years in retirement, let's set a couple of buckets up that you're going to live on for the next 10 years.

And then let's switch over to these buckets, and you're going to live on those buckets for the next 10 years or next 15 years, something like that. That's where we see annuities. They defer growth and its accounts that you're going to use later. And it really kind of helps you take some of your money off the table from stock market risk. All of your money isn't at risk. That's what they're popular for today. And I like that comparison you gave of fixed and fixed index.

That made it really, really clear. The bottom line is you're guaranteed not to lose your principle. So that helps you sleep better at night. And no more you're going to open up your accounts and go, ooh, it dropped. and now look at my number of a million dropped to 900,000 or 800, and so that's a great feeling there. And then what's the best type of annuity to meet the needs that you have? Is it a fixed index?

Is it a fixed? That's where you need to go away from the, let's just go to Google and see what they say. Nope, let's work with someone that can look at your situation. So you mentioned earlier about 6040. That's kind of the traditional bond or stock or whatever. How does now, if you were working with, someone, how does that percentage allocation work if you're considering annuities? Is there still

going to be a time at a certain age like 60 years old that you still do want some money in the market? Or are you going to be, you know, this percentage in annuies? And I know it changes for everyone, but what should that broad stroke be considered? Well, we still like the market. Obviously, we think we're best growth is going to be in the market. But when you're in times like right now, and you think maybe the next year or two might still be volatile, and you've made a lot of money. We're just more interprotecting money if somebody's already made a lot of money. So what we usually do with our clients because we do both.

We have investments in the market and we have investments with insurance companies. We like to say both for each person might be how much goes in those buckets, depends on the client. We have some simple software that we run our clients through. they answer a few questions and it kind of helps us with risk and when do they need the money and what's the plans for the money and all that. And we can actually talk about, based off their questionnaire, we can design a plan that makes sense for them.

And I think that's the thing that separates us, at least our business away. If you have an Edward Jones broker, Merrill Lynch broker, maybe you've got your money given somebody investments and they've got you to buy and hold strategy. they're really not reallocating on a regular basis. They're kind of maybe having a once a year review, and then if you want to change, they can. They're not really diversifying people into annuities and setting up different buckets or even planning.

What is the income plan? As an RICP, we specialize in my firm, and I do, in planning. Okay, in retirement, when the paycheck stops, where will you get your money? So security might be one of those. income stream. Maybe you've got a pension. But now we're going to start drawing down on the assets that you have. And now you're going to pull money out. You're going to start paying tax. This is a little different ride. So when we have the markets that are losing like they have been the last couple of years, we prefer a bucket

that's not in the market. So when you make a draw today, you're pulling maybe from an account that can't lose money and protecting some of those stock accounts and hoping that the rebound will come and those accounts will come back. So that's the reason I went independent. I wanted to have all the assets that I could have, I mean all the options for my clients. I wanted the insurance options and I wanted also the stock market. And we do so many different things to try to help protect people's money, but we don't want to get all of our money into an annuity. We went up, we don't want all of our money in one equity basket either. We like diversify it. That's where we think it is. So some money for growth, some money might be for income. These are things we can do in the stock

market and some money for annuities, growth. You can also turn on a guaranteed income with these annuities like a pension. So people are trying to get more guaranteed income. That's where we use annuities, even though I do have a lot of clients today that are coming to me and they just want to protect their money and they'll say they want an annuity just for cash. And many people tell me they didn't even know they could do an annuity just for cash. I mean, I could take $300,000 and maybe grow it over years and it becomes $600,000 and I still have access to all $600,000. Yeah, when the surrender period is over, that $600,000 is all years. So the nice part is the money grows tax deferred inside the annuity. If you have a TOD account and you have a CD, for instance, you're going to get

earnings every year, but you're going to get a 1099 every year on those gains. If you're in an annuity with a TOD account, well, then that money is tax deferred while it's inside the annuity. You're going to be deferred to pay in tax later. If you have qualified money, you can open up an IRA in an annuity or in a brokerage account. So taxation is another thing that we consider when we're talking about what investments do you have. But I think today, what I would tell all the listeners here is annuities are really popular. When I get people that are negative on annuities or said I heard annuities were bad, my first question to them is when's the last time you looked at one because I would probably agree years ago they were not a viable option. Today, they're strong.

The offers are at, you know, these rates are at an all time high. I've been doing this for over 20 years. I haven't seen rates like this. So it's a good time if you're somebody who's interested in protecting money and you want some of your money into one of these protected accounts, this would be the time you might want to look at that. And with asset allocation, we've talked a lot about annuities as that way to get guarantees and protecting your principal. What are some other investments just briefly at a broad stroke that also offer principal protection to be considered? Yeah, great question, Mike, because even inside the stock market, we have options. For instance, we have something called structured notes. Now, these would be offered by large companies, JP Morgan. They have principal protection. So if you took $100,000 and invested into one of these structured notes,

your principal would be protected inside the stock market. And again, you could capture gains of the market. Some of them have fixed rate interest, same thing. And they run short term. So they could be 10 months, 12 months, 15 months, something like that. And they're inside the market. There's also something called barrier ETS. So the barrier ETFs will give a set income, like a dividend or even, you know, making money from selling covered calls. So there's income coming in guaranteed in the account.

Some of it might be 8% a year guaranteed. But they'll also provide some protection against the market. They'll call it a barrier. They might offer a 20% barrier with an 8% income factor, you know, dividends at the end of year. So you're going to get the 8%. And if the market from the start you get in, they track it for one year or whatever the length of that barrier is. Could be 12 months, could be 15 months. But at the end of the term, if the market didn't drop below the barrier, so let's just say that the market, you know, dropped 15 and you had a 20% barrier.

You would maintain 100% of your principal because you did not go below the barrier. So you'd keep your money and you would get the dividend. If the market drop below that 20%, let's say if they went down 22, well, now you're going to take the 22% loss, but you're going to get the guaranteed dividends. So I've had people down 22, but they've made 11. So overall, they're down 9. So it's kind of the way we offset some of the losses inside the market. but the annuities are the ones that have no fees. They give principal protection on these indexed annuities,

principal protection with no fee. There are fees associated with the barriers and the structured notes and things of that nature. But again, today, you need to have an advice that it understands how to diversify your money. It's not just stocks and bonds anymore. It's just not that. You need more than that today. Yeah. And today, I think that's a huge word, because we've heard that,

certain asset classes like that but how recently have you looked into that because today there have been some things that have changed over the last decade or so that made certain products and financial tools that much better so if someone is thinking about you know i've i've really not heard that term asset allocation it makes sense to me i need to make sure that the mix of my money is in the best spot for me um i'm approaching retirement the next whatever, five, 10, 15 years, they need to work with someone like yourself who is now going to look at their situation and you're not locked into a certain company. You're not locked into investments only, insurance only. You can look at the broad spectrum and make recommendations. And the bottom

line is to protect their principle. So, Tim, thank you so much for coming on. If someone is interested in learning more and reaching out to you, what's the best way that they can do that? Well, the best way is to go to my website. It's manna, M-A-N-A-F-G-com. My company is Manna-F-G-G-com. My company is Manna-financial group. All my contact information, email, all that stuff is on my website. And we'll be happy to do a free consultation to anybody. We would actually take a review of what you're currently invested in. We could look at all of the fees you're paying and what is the performance you're getting. And we usually compare that. that to other options and we say, well, maybe we could make a few tweaks in those allocations and this is what your fees would be and this is what your performance might be and this is what your protection might be. So we always look at what you have and what do you want. And if you're not happy with the allocation and you're feeling you're losing too much money, well, then we need to make some changes and we would help you do those changes. Well, Tim, thank you so much for coming on today.

It's been a real pleasure talking with you. Thanks, Mike. Talk to you soon. 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. www.Influential Entrepreneurs Radio.com.