For me, being successful is having a financial plan in place so that at some point someone becomes financially independent. That means they don't have to work anymore if they don't want to. And they're able to make decisions over the course of a lifetime as things come up, as life changes that enables them to maximize their resources, minimize their stress, and have that relationship that you mentioned of trusting confidence with an advisor. Welcome to Keen on Retirement, a show dedicated to helping you thrive before and during your retirement years.
If you are looking to grow and protect your wealth and want to make the second half of your life the best half, then listen in as well as advisor Bill Keen and his host sort through the key issues that you need to know in a lively and candid way. Hello everybody, welcome back to Keen on Retirement. I am your co-host Steve Sandusky and this is the podcast where we help you thrive before and during your retirement years. And I'm here with Mr.
Bill Keen and Bill, we have a special guest today. I think we should hold our listeners at bay a little bit before we bring this very smart gentleman on. What do you think? I think you're a tease.
Yes, in my old age. That's right. Yeah. We'll bring on our special guest here in a few moments.
I know we've got a listener question that we're going to be going through here today. We have a very detailed question from a listener. Lots of good thoughts in there that we'll be riffing on a little bit. But also Bill, I know you and Matt recently got back from a big conference in Florida.
So why don't we start with you? Tell us a little bit about the conference. For about the last 10 years, we have been invited to an invitation only event for the Behrens Magazine Top Independent Advisors Summit. And we always enjoy that event.
It's about a two and a half day event and we get to attend with other like-minded professionals, mostly fiduciary advisors and firms. But then Steve also firms like Schwab, which happens to be Arcostodian, TD Ameritrade, Fidelity, Pershing, talking about what they're seeing happening to trends in the marketplace and how they can support us and really support our clients, which is the objective. And so it really helps us to go down there and plug into that think tank of information. Well, Bill, I know you are a lifelong learner, so you love to continue to learn things.
You're curious. So I am curious. Is there anything that you picked up at that conference, any insight that you thought was pretty valuable? It's inspiring to be around what I would consider the best in the world at what they're doing.
I think one is we're all focused on bringing total life planning to our clients and not just talking about the numbers. So many times we sit down with folks who have got issues that go deeper than just, hey, what assets do you have in your pension, your 401Ks, your ESOPs. There are family issues. There are things that are happening behind the scenes that if we didn't ask about family tree, how did you get to the seat that you're in the day?
Tell me about your life experience, what was it like growing up, what was it like with money? What's your relationship with money? Do both spouses agree on the direction of their lives going forward and then all the anxiety around the retirement and making that transition? Pretty much across the board, all the firms were in agreement that we need to be having those conversations, especially as fiduciary advisors and providing perspective to folks.
I'm going to give you one more. We all know that technology is a big deal. It allows us to be even more precise. It allows us to provide a service in results of clients that are definitely better than they were.
Call it 10, 20 years ago. But the theme at this conference was technology will not replace the human relationship. The clients, we believe, even the millennials, we believe will still be looking for a human to human relationship and the technology while it will help our firms be more efficient. That ultimately the client be more efficient, which is what it's all about.
It will never replace the human to human relationship. And that was a theme as well. Yeah. Well, and I agree 100% with that as well.
So good to hear that. Bill, before we're going to keep teasing our special guest here. Yes. Are we teasing our listeners?
Are we teasing him? We're teasing the listeners. Yes. Okay.
The special guest knows who he is. Yes. Okay. All right.
Now, I also want to talk about the F word. Okay. fiduciary. This is okay.
I know we talk about we say fiduciary frequently on this podcast. And I think first of all, Bill, if you could give a definition of what a fiduciary is, and then let's just briefly talk about what legislation is happening here as it relates to this idea of being a fiduciary. Well, Steve, there's two ways that someone can work with a financial professional. And most investors don't know the difference and wouldn't know the difference unless they were advised about the difference.
The first way is called the suitability standard. And that's where a broker can make a product recommendation. In most cases, receive a commission for the transaction where no real advice was rendered about the transaction or about an overall financial situation. Now, a much higher standard is called the fiduciary standard.
And that's where an advisor has to step in and really look at what's in the client's best interest. This is where we believe that anyone should be receiving financial advice should be working with a fiduciary who's really not just looking at a product sale in a vacuum, but looking at the client's total picture. Yeah. And so there's been a lot of talk in our industry as you well know, Bill, about trying to require more financial advisors to fall under this higher fiduciary standard.
And you and I believe that's a good thing. But there are forces in the industry who are selling products who don't want to be held to that higher standard. So what just happened here recently with some legislation? The annuity industry and the brokerage industry were really putting up a fight.
And as of just a few weeks ago, they have prevailed in their fifth circuit appeal against the DOL fiduciary rule. And here was their argument. It's interesting. Now, this is not withstanding their advertising and the titles on their business cards for their brokers.
What they've made the case for is that their brokers and annuity agents are not advisors at all, but mere salespeople who do not have a relationship of trust and competence with their clients. That's their argument. Yeah. Now, their, so their commission based compensation is not in any way a payment for the delivery of advice, but merely for affecting a product sale.
And that's in their words. You know, is there a place for someone to go find a broker and get a product transatlantic act for them? I would say there is. If someone knows they need to go buy a term life insurance policy and they just want to go find the best price and they approach a broker and they get that, they get that bought for them, then maybe that doesn't have to be a fiduciary relationship.
I can see where there's places where it doesn't have to be this fiduciary relationship, but for me, it's about how is the broker holding themselves out to the public? What are they saying? What do people think is happening for them on the planning basis? And then what is really happening?
Yeah. I think that's the key point there, Bill, in that you cannot have your cake and eat it too when it comes to brokers. So brokers cannot be legally held to this lower suitability standard while to the consumer public. They're trying to hold themselves out as someone who is giving advice and they're not just a product salesperson.
So they can't have it both ways, but I agree with you. I think that there is a place for people who sell products. Okay. There's nothing wrong with products.
We need products. But the way you've structured your business bill like King wealth advisors is you guys are fiduciary advisors. So you're working with people who are looking for a meaningful, trustful relationship that goes beyond just products where people are looking for the lowest price. It's my opinion and my experience that for someone to be successful long term and for me being successful is having a financial plan in place so that at some point someone becomes financially independent.
That means they don't have to work anymore if they don't want to and they're able to make decisions over the course of a lifetime as things come up, as life changes that enables them to maximize their resources, minimize their stress and have that relationship that you mentioned of trust and confidence with an advisor. And I think that's so important. If someone goes into a firm where they're just being sold a product like a one off annuity or a stock or a mutual fund or something for a commission, they may think they're getting the depth and level of expertise and ongoing counseling and they're just simply not. So anyway, I thought it was good to bring this up.
I think this DOL rule, well, it might not be the DOL that brings it back. It could be the SEC. It could be some other agency. I think we're going to see it again in some form.
Yeah, it's something, as you know, it's been talked about a lot in our industry for the past few years. So we'll just have to see what happens over time. But I think that's a good segue into our special guest here because you were talking about the importance of planning. So Bill, why don't you introduce our special guest?
Today we have on the show the head of our financial planning division here at Keene Wealth. His name is Ray Ariano. Ray, welcome to the show. Thank you.
Thank you. Thank you. Ray is a longtime listener of the program. Now you listened to our program before you joined Keene Wealth.
I did, actually. Probably about four or five months before I joined the team. It was one of the reasons why I wanted to join the team because it gave me an insight of how the firm thinks when it comes to financial planning. Now Ray has his undergraduate business degree and then he also has his MBA with an emphasis in financial planning.
He's also a charter and retirement planning counselor and he is a certified financial planner as well. One of the other things I wanted to mention about Ray too, Steve, is I know you saw him when you were in town recording in our studio here in Linda. Ray is a military man. He did six years in the Air Force and correct me if I get any of this wrong, Ray, but he did six years in the Air Force and spent time in Kandahar.
Is that right? At the end of the time? And also in Iraq. Also in South Korea.
Yes. And then also sometime in Italy as well. Which one do you prefer? I would suppose.
Yeah. A little bit friendlier. A little friendlier. A little bit like us there.
You know, when some of the things that are happening right now with North Korea, we chatted with Ray about some of their operations. We always had exercises to be prepared because it only takes about eight minutes to get from North Korea to South Korea. So our time frame was those eight minutes to make sure everything's in mind so we can bunker down. Wow.
Wow. That's about once a month. Wow. Okay.
So coming into keen wealth is not quite as exciting I guess. It is for different reasons. Yes, that's right. You know, what you heard us talking about the fiduciary aspect of things.
Do you have any examples of things you can think of? Because I think one of the things that's fun about our podcast here is that we go behind the scenes. It's kind of a look behind the curtain. And we don't mind bringing things to the table that are happening in the firm.
Yeah, I was really excited to be on this podcast specifically because of the topic of the fiduciary rule. And about a month ago, we had a prospect come to us one in a second opinion because he worked for a company for 20 years. But before that, he worked for the state of New York for 20 years and he was getting all his paperwork ready to retire and develop a retirement plan. And the advisor he was talking to really wanted to cash in that New York pension plan and put it into annuity thinking that that would be the best outcome for the retirement plan.
So let's tell the listeners. If you have a pension, you've earned some cases. You can take it monthly for the rest of your life or they'll run a calculation and they'll give you a lump sum. Here's your money, take it and it's over.
You handle it as best you can. And you're saying this broker was recommending the person cash their pension and take the lump sum and put it into an annuity product. Right. And that's cash in the pension is not an automatic decision.
There's always ins and outs and intricacies and people's finances that we need to discuss to see what is the best outcome for the specific person. What kind of struck me was that I don't think that this advisor took the whole holistic picture into account because the lump sum or the pension is all part of the holistic plan. And what he didn't take into account is that the pension plan in New York has something called a cost of living allowance that grows as you age. Right.
And what we did here at Keenan that we took in all his retirement documents, his current 401k, his current pension, the monthly payout or the lump sum and we just did analysis on what would have the higher probability of success and retirement. What we came to the conclusion of is that we told him to turn on that pension, have that pension as a stream of income and have that as a supplement to the 401k as opposed to trying to take that and invest in it into an annuity because that pension grew at a very good rate. I think it was about 3.5% annually. And to get that guaranteed is very exceptional.
Oh sure. Especially at this time, we would have been better off had we recommended that this client roll the assets to us in a lump sum form. Now we wouldn't have put it into an annuity, but we would have been better off to have recommended him bring that asset to us in a lump sum, right? Absolutely.
So the firm made more money. Right. But as a fiduciary advisor, we have to advise clients of the conflicts of interest. And we also most importantly have to put the client's interest first.
And for this specific client, it was better for him to take the pension monthly, monthly, yes, and not to the lump sum because the probability of his success or retirement was much higher than taking a lump sum and putting it into a product. Even though the product was suitable for him, it wasn't holistic enough for the client. That's right. That's a great example, didn't it Steve?
It is. Yeah. And I think it just really points out as you said there, right? The difference between a broker who just follows the suitability standard and a fiduciary advisor, which really does what is in the client's best interest.
So good example. Yeah. Thank you. That's one thing that really I really appreciate about working with here at Keen.
I think we have the pressures or the constraints of trying to sell a product or trying to make a commission or trying to hit a quota. What people pay us is for our professional advice and recommendations. And there's no conflict of interest of being a product A or product B. We do what we do specifically for the best of our clients.
I think what it comes down to me, Bill and Ray, is one word, which is integrity. And what I like about being a fiduciary advisor is there is integrity there because you are doing what is in the client's best interest as opposed to what might be in your personal best interest as an advisor to sell something that might get you the biggest commission. Yeah, exactly. And I love that word.
That's something that's really hit someone with me because as we learn about our clients, we learn holistically about everything. We learn about their family tree. We learn about their goals and fears. Something that really touches me is that these people are real people with real families and real situations.
And I always think about it whenever they're crossing the table from me. How would I want my mom be treated? That's how I want to treat those clients. Excellent.
Well, Bill, I know we've got a listener question that we want to go through. And this listener has a lot of good points in there. And so why don't we dig into that here for a few minutes? I appreciate all of the listeners.
So thank you all for your attention and for your feedback. We have a lot of individual investors. We have clients of the firm that listen in to our thinking. And then we also have advisors that listen in.
And I get a lot of feedback. Now, I have one that came in after we issued our blog on how inflation can pummel your portfolio if you don't plan for it. That came out. You blog posts ago.
This person did a great job in articulating his slight disagreement with what we said, which we appreciate. We don't just read the ones that agree with us. Oh, he's doing great. It says, Bill, we usually agree on most everything.
Let me share my observations about inflation. And he uses his father and mother as an example. And he goes through and makes some really, really valid points on how spending can go down as people age. And we typically run inflation out over the course of someone's lifetime, don't we?
Right. We usually use it at 3%, which is higher than the actual historical number of inflation. But we do that intentionally because we don't know the future. We'd rather be conservative.
He mentioned that earlier in retirement, they do spend more money. And then it got slowed down. And then once people got a little bit older, the healthcare cost creeped up. And so usually that's how we see the practical part of retirement there.
We call it the go-go phase where you start spending money early in retirement because you're young and you want to travel and you want to spend money. Then you start slowing down. And we call that the slow go phase. And then at the end of life, we call that the no go phase where you really just start creeping up with cost because of healthcare.
In our listeners question, he says his parents actually retired in 1984. So he's got some good data set here in a home run. And he says certainly utilities, car, gas, travel, food and medical expenses paid in 84 compared to 2018 have gone up. But lots of other circumstances where their spending habits and his father's still alive today, by the way, says 100 years old.
So the theme of his note to us was inflation isn't quite the boogeyman that is often reported. He says that his parents lived in their mid 60s in a larger house. They traveled a lot. They ate out a few times a week and they helped brand kids who were failing, owned two cars, mom bought nice clothes regularly.
And he says it costs mom and dad about $72,000 a year to live on. Okay, so take that and then move it out 10 years or so to the mid 70s. Move to a smaller house, less taxes, less insurance, less utilities. After asking themselves why are we keeping this large house?
Traveled a bit less. Notice they didn't trade their cars as often. Finally now being the grandkids off from using them as a primary go-to for financial help and they ate out less. At that point, they still lived on 72,000 a year.
Now in the mid 80s, so go another 10 years, they traveled almost none, had landed on quote not me as financial aid to needy family members. Eight out only a few times a month enjoyed church and family events more now free of charge as the primary source of entertainment drove their cars about 6,000 miles a year, bought clothes almost never, had to add more technology to their lives which actually added cost, but it now cost them $60,000 a year to live that life. Interesting isn't it? Now in the mid 90s, his mother died at 91 and his dad was 96.
His expenses halved for eating, car insurance, medical. He sold his truck and now only had one vehicle. His family is now in the no go years and only traveled as a guest of his kids at no cost, no clothes, got them as gifts as a birthday Christmas. Eight out once a month at a church social social, watches TV more, became satisfied with hanging out with friend and his neighborhood daily.
It cost dad 42,000 a year to live that life. What do we see Ray as a problem with people coming in and saying we want to spend more money in the first five years or 10 years of retirement? Where they hear something like this and it's valid. It's valid.
But they say gross our distributions up in the first five to 10 years because we're younger, we're doing more. Where do we see a problem with that? And is there a balance? Well we actually do take that and count if they tell us that because one thing we do is we know what they spend on an annual basis in the first five or 10 years they want to spend more.
They want to go on more vacations. They want to buy new cars. So we implement them in the plan. We say we expect you to spend 15 to $20,000 more for those first 10 years.
And after that, then those expenses fall off because we expect you to slow down. And the part of the plan that makes it successful is that every year we renew those numbers. We have the discussion of what your expenses are they the same as the last year? What major changes are there to the plan?
I think that was a great example of someone that spent more younger in retirement and then it slowed down. That's a very great example because it went from probably down by 25%. But we expect that. We expect that.
And if we plan for it, then it gives us a forecast of what their retirement is going to look like. And if there's any wiggle room with increased expenditure, it's a key thing to get figured out before you retire is the spending because that's the lever that you can pull to make a plan or break a plan. Absolutely. We can see the plans that are kind of on the brink of breaking, can't we?
From overspending, we really want people to get clarity on the spending before they retire. So they don't come up and say, my goodness, we thought we needed 6,000 a month and we really need nine. Or they're almost in denial about it. Hoping that it works out.
And that's not a great place to be, is it? Right. No, it's not never fun to tell someone they need to cut their spending. But through this planning process, I've also had the exact opposite problem where we have to tell people to spend more money.
We don't have to tell them that. We tell them that they have the ability to spend more money. And it's one of the fun parts about being a planner is that we know what assets they have and we know what goals they have. And we've had to tell people we've actually had to force people to take vacations or have people in our meetings.
Well, wait, let's clarify that. Well, not force. Right. But in our planning, we say, hey, we have $12,000 for vacation.
We have it scheduled. We have it locked in there for 10 years. Now, you don't have to go on vacation, but we do have it accounted for. So if you put those tickets, you have rain, bill splicing.
Some advisors want you to save as much as you can and spin as little as you can. Right. Because they have more assets to get commissions on. Right.
And as a producer, we really want you to enjoy the money that you worked the whole life, your whole life building up. If it includes going on travels, then let's plan for it. If it includes giftings and grandchildren, let's plan for it. But as long as you have us all planned, we're confident that you'll have it since we're trying to throw out the rest of your life.
Control the controllable and then have a plan in place to be able to respond appropriately, not reactively, but appropriately to the things that come up that are unexpected. And there will be those things. I wanted to say thank you to Steve, who submitted this question to us. That's two weeks, two podcasts in a row.
We've had some really good and detailed questions that came in. And I'll read his final paragraph. He says, I'm sorry, this was such a long response to you. And I hope you had a few minutes to read it all.
My theme was inflation does not impact most retirees as badly as everyone preaches. I believe a financial planner's value can be enhanced by discussing spinning habits. I agree. Lifestyle evolution, that came from the Barons Conference I just mentioned, and aging.
And I agree with you, Steve. And I have no doubt that you are addressing these to your discussion with retirees' exclamation mark. Loyal listener and reader Steve H. I really do appreciate it when someone takes the time to submit a question like that.
It's fun, isn't it, Steve? It is, yeah. And it's great, Ray. Having you on the show here, I think you've got a future in broadcast journalism.
So really a nice job in communicating some of these complex ideas. Don't be giving him any ideas. I need him here to read a point of playing to work at King Wealth. So...
Yeah, that's right, Bill. We don't want Ray to be starting his own gig here. That's right. I'll support him and his journey over his career.
Well, hey, well, I think that'd be a good place for us to wrap up here, Bill. Any final thoughts? We always encourage folks whether they're working with us at King Wealth or they're working with another firm to go out and continue to stay educated on these topics, to plug in to resources like our podcasts. We do live events as well, their educational in nature, go out and learn the language, listen to what's happening and really get engaged.
We do think it's great that folks get engaged. If we've said something today that resonated with someone or we've given some information that has someone thinking about something they weren't, then I think we've been successful. So Steve, thank you for your continued efforts in producing and co-hosting the show with us. Ray, thank you so much for your efforts at King Wealth and for your passion and your integrity in how you operate.
I really appreciate it. I really appreciate it. Thank you. All right.
Thank you. All right. Thanks, Steve. The opinions expressed in this podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security.
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