Speaker 1: Good morning, folks. My name is Martin Shields, and I'm
Speaker 1: gonna be your host today, but let's talk money. It's
Speaker 1: great to be here with you on this Sunday morning,
Speaker 1: a little jurys. I look out the window, fairly mild,
Speaker 1: but I think we're getting for some really cold temperatures
Speaker 1: but this week. But when you look down south, I
Speaker 1: mean way south, I saw Houston, Texas three to five
Speaker 1: inches of snow. You know, just you know, they're not
Speaker 1: prepared for it, whether they have in the rate gear
Speaker 1: or infrastructure. So hopefully they'll get through it okay. But
Speaker 1: it's great to be here with you to answer any
Speaker 1: questions you may have regarding your financial planning or investment
Speaker 1: manager concerns, and I encourage you calling with those questions.
Speaker 1: You can reach me at eight hundred eight two five
Speaker 1: five nine four nine. Again that's eight hundred eight two
Speaker 1: five five nine four nine. Or as you know now,
Speaker 1: we have an email you can email me if you're
Speaker 1: too shy to calling out the radio, and that email
Speaker 1: address is ask Bouche at bouchet dot com. Again, it's
Speaker 1: ask Bouche at bouche dot com and Bouche spelled b
Speaker 1: O U C h e y. So if you have
Speaker 1: a question you want to email me, go ahead and
Speaker 1: I can get you an answer. But as I always say,
Speaker 1: there's no dumb or silly question except for the one
Speaker 1: you don't ask, and you may be doing your fellow
Speaker 1: listener a favor by asking the question that they have.
Speaker 1: We have a lot to discuss today where now I'm
Speaker 1: on LinkedIn, So if you want to follow me on LinkedIn,
Speaker 1: please do and put a lot of posts out there
Speaker 1: on different topics and also post out what we're gonna
Speaker 1: be talking about on the show every week. So me
Speaker 1: highlights for this week is a discussion on all the
Speaker 1: global risks that are out there, and it certainly are
Speaker 1: the risks that we are somewhat aware of, but certainly,
Speaker 1: any given years we start the year, the actual risks
Speaker 1: that come through may be completely different than the ones
Speaker 1: we have identified as a risk. But how do you
Speaker 1: construct your portfolio and have that set up a way
Speaker 1: to manage that risk? Right? We recently had an initial
Speaker 1: meeting with a client very concerned about global risk and
Speaker 1: this and that, and you know, she was talking about
Speaker 1: tailing her portfolio on investments and whatever, and we had
Speaker 1: a great discussion that really kind of set her mind
Speaker 1: at ease. So talk about that. We're going to talk
Speaker 1: about distributions from a ross. When you make row of contributions,
Speaker 1: your ability to access something is really much different than
Speaker 1: a traditional ray. So we're going to highlight those options.
Speaker 1: And then finally we'll talk about small business owners and
Speaker 1: what that process looks like to sell your small business.
Speaker 1: You know, many of our clients, we have a wide
Speaker 1: range of clients from executives to family wealth, to divorces
Speaker 1: to you know, people that just save a lot during
Speaker 1: working years are now retiring, but we have a lot
Speaker 1: of small business owners. As a small business owner, there's
Speaker 1: different nuances that you have that other clients of ours
Speaker 1: don't have. And in particular, when if you're looking to
Speaker 1: go and sell your business, that's a major process that
Speaker 1: you have to be aware of, starting much sooner than
Speaker 1: most people do, getting it all lined up, and there's
Speaker 1: certain things you need to be aware of as you
Speaker 1: go through that. So talk about that and certainly talk
Speaker 1: about the markets. It was a good week for the markets,
Speaker 1: starting off the year well. The S and P is
Speaker 1: up one point five percent, and this week has some
Speaker 1: inflation data that came out that was a little bit
Speaker 1: cooler than what the expectation was, and that is certainly
Speaker 1: a good thing. Right, So we've talked all along about
Speaker 1: where do we stand with this soft landing, and that
Speaker 1: soft landing is simply the building for the economy continue
Speaker 1: to grow by you have inflation moved to the FEDS
Speaker 1: two percent target. Now, I think it's going to be
Speaker 1: challenging to continue to have that move to the two
Speaker 1: percent target. But one of the things you definitely don't
Speaker 1: want to see is inflation start to rise higher. That's
Speaker 1: really where you get to be in a problematic situation.
Speaker 1: And you know, we had a good labor report last
Speaker 1: week where the unemployment rate actually dropped to four point
Speaker 1: one percent. We added over two hundred thousand jobs, which
Speaker 1: is a great number, and this week we had lower
Speaker 1: than expected inflation. So really, you know, it's one of
Speaker 1: those things where it is a never it's continuous, so
Speaker 1: there is never officially a off landing announcement because the
Speaker 1: next month, the next week, whatever, it continues. But I
Speaker 1: would say that all teams considered, this is about as
Speaker 1: soft landing as you're going to get, meaning that you know,
Speaker 1: you've got a situation where the Fed has started to
Speaker 1: reduce rates or you know, we'll see if they could
Speaker 1: team or reduce rates in twenty twenty five, but maybe
Speaker 1: pause them and not raise them. And you have inflation
Speaker 1: much lower than where we were, and then you have
Speaker 1: the economy still remaining strong. As we've talked about before.
Speaker 1: Historically speaking, that is very rare for that to happen.
Speaker 1: That you have the Federal Reserve raised interest rates by
Speaker 1: five hundred basis points, that's five percent in a year
Speaker 1: and a half and not had the economy really weak
Speaker 1: and much at all, a little bit here and there,
Speaker 1: but not much, and or certainly not go into a recession.
Speaker 1: That that was very unusual for this to happen. So,
Speaker 1: you know, again to declare a soft landing is funny
Speaker 1: because I think you know, this concept of declaring, everybody's
Speaker 1: concerned about doing that because as soon as you do that,
Speaker 1: maybe something could happen and things go awry, which is
Speaker 1: certainly uh. You know, what happens from an economic perspective
Speaker 1: is dynamic, right, it's not static. It's always changing. So
Speaker 1: you know where we are right now is just one
Speaker 1: snapshot in time. You know where it will be next
Speaker 1: week or next month. Is that evolution. So but this
Speaker 1: is about as close as you get to be able
Speaker 1: to say, you know, thumbs up that there has been
Speaker 1: a soft landing, and you know, really things continue. When
Speaker 1: we look at what we see for twenty twenty five,
Speaker 1: things continue to be very strong. Now I want to
Speaker 1: see with the Trump administration, you know, in general from
Speaker 1: a business environment perspective, people are pretty happy with maybe
Speaker 1: perhaps less regulation, but there's going to be some unknowns,
Speaker 1: in particular with his immigration stance and also with tariffs,
Speaker 1: just to the extent that what does this mean for inflation? Right,
Speaker 1: because certainly tariffs can be inflationary, So we'll have to
Speaker 1: see exactly how that plays out. Uh, you know, I
Speaker 1: think it's important not to jump to conclusions. Do we
Speaker 1: see what the actual plans are. Uh, you know, I
Speaker 1: think all along there's been a view that some of
Speaker 1: the tariff discussion is certainly a negotiating tool from a
Speaker 1: trade perspective, But we'll have to see what the reality
Speaker 1: is and how that what that means for inflation. So
Speaker 1: we'll talk about that as well. But again, if you
Speaker 1: have any questions, you could give me a call. You
Speaker 1: can reach me at eight hundred eight two five five
Speaker 1: nine four nine. Again, that's eight hundred eight two five
Speaker 1: five nine four nine and uh again. I hope you
Speaker 1: get out to enjoy this long Martin Luther King weekend.
Speaker 1: I think most people have Monday off and today my
Speaker 1: wife and I are daughter tests are gonna go skat it.
Speaker 1: Or we haven't been up there yet. I've heard it
Speaker 1: has been great, so hopefully today the conditions are good.
Speaker 1: And then begin if you follow me on LinkedIn, I
Speaker 1: put some pictures of our ice rink. It's been a
Speaker 1: great year for you know, cold enough to have our
Speaker 1: ice break out front of the yard, put it up
Speaker 1: in faithgiving, that's how early we put it up. And
Speaker 1: lots of great skating. And this week it's gonna be phenomenal.
Speaker 1: Now it's gonna be cold. I think a high a
Speaker 1: couple of these days is in the single digits. That's
Speaker 1: the high. So it is gonna be cold, but that's
Speaker 1: perfect weather for good for them to blow snow at
Speaker 1: the mountains to go out skating. And you know, as
Speaker 1: I always say, if you got the right gear this stuff,
Speaker 1: you know you can stay nice and warm. It's all
Speaker 1: about the gear. And also with a lot of these activities,
Speaker 1: whether it's walking or skating or cross country skiing. Once
Speaker 1: you get out and get doing it, if you have
Speaker 1: the right gear, you're actually pretty warm. Now downhill skiing
Speaker 1: could be a different thing, right, if you're skiing downhill
Speaker 1: and you're on the lift, and if it's as cold
Speaker 1: as is going to be, you can still get cold.
Speaker 1: I think the main element with that is you want
Speaker 1: to have that heated vest. Maybe not. You get heated
Speaker 1: gloveacy days, get heated boots, heated everything, right, so I
Speaker 1: think all those things will keep you warm. But yeah,
Speaker 1: today maybe the data to get out and do it.
Speaker 1: Let's first dive into the discussion on small business owners.
Speaker 1: So this kind of came to light. We had a
Speaker 1: prospective client that came in, a great, very successful individual.
Speaker 1: It's done a great job of growing in his business
Speaker 1: and now he's got an offer perhaps to sell the
Speaker 1: business and a very good opportunity for him. But it
Speaker 1: brought to light some ideas that you need to be
Speaker 1: aware of if you're a small business owner and either
Speaker 1: if you've got an off on the table or you
Speaker 1: think that at some point down the road you might
Speaker 1: want to sell it. And you know, all I would
Speaker 1: tell you is the earlier you could start planning for it,
Speaker 1: the better. So you know, just try to be you know,
Speaker 1: seeking out ahead multiple years. You know what you don't
Speaker 1: want to do is you know, you you know, want
Speaker 1: to sell the business this year and you start the
Speaker 1: process that at that point you could do it, but
Speaker 1: you are going to be behind the eight ball and
Speaker 1: you may not get the maximum value of the business.
Speaker 1: But before I continue, let's go to the throone lines.
Speaker 1: I have Bob Castleton, Bobby.
Speaker 2: There, Yes, Hi, Hi Martin, good morning, Hi, Bob, good morning, Hi,
Speaker 2: good morning. The incoming administration. I happened to be listening
Speaker 2: to one of his rallies, President Trump, and he goes,
Speaker 2: harkens back to the McKinley administration, and back then we
Speaker 2: had a tariffs and we didn't have you know, this
Speaker 2: is you know, eighteen ninety eight something like that, and
Speaker 2: we didn't have any income taxes at that pot at
Speaker 2: that time. But he said we had plenty of money.
Speaker 2: In fact, we had so much money we didn't know
Speaker 2: what to do with it. I guess this is how
Speaker 2: he describes it. But as I look at what he
Speaker 2: wants to do, tell me if this is I think
Speaker 2: probably an equalizer. He wants to you know, they want
Speaker 2: to continue with the tax cuts that they put in
Speaker 2: place in seventeen but then additionally reduced taxes, so that's
Speaker 2: stimulative to the economy. And then you can say, okay,
Speaker 2: maybe he's going to put in a tariff of ten
Speaker 2: percent or something to that effect, so that could you know,
Speaker 2: obviously have a challenge with inflation and maybe be be
Speaker 2: stimulative in the economy. So I think that it's kind
Speaker 2: of a maybe a wash or maybe a positive. I mean,
Speaker 2: what do you think about that?
Speaker 1: Yeah, so great question. I think the most important thing
Speaker 1: to remember is we have a very he has a
Speaker 1: very slight margin of the majority in the House, only
Speaker 1: three representatives, that's it. And that's that's very tight, because
Speaker 1: it could even be less than that. That know, what's
Speaker 1: going on. And the thing to appreciate too is you
Speaker 1: know you have the Freedom Caucus that you saw a
Speaker 1: little bit where they they voted in Mike Johnson is speaker.
Speaker 1: You know, there's a number of these folks there are
Speaker 1: their budget hawks. I mean, you know, they really really
Speaker 1: really do not want to be increasing the deficit. So
Speaker 1: you know, for them to both keep in the tax
Speaker 1: cuts that was in past twenty seventeen plus any concept
Speaker 1: of do you think taxes more? You know, I don't know,
Speaker 1: Like you never never know how this plays out. But
Speaker 1: my guess is they're not gonna be able to do that.
Speaker 1: You know, that would be very difficult to do it
Speaker 1: because you know, it is problematic where we are with
Speaker 1: our current deficit, and even individuals in his administration that
Speaker 1: are coming in, you know, have talked about trying to
Speaker 1: get that lower. So this year we're going to be
Speaker 1: at one point eight trillion dougl theres one point eight
Speaker 1: trillion dollars and if you don't change things either reduced
Speaker 1: to spending or increase the revenue, that's going to continue. So,
Speaker 1: you know, my my only observation is, I do think
Speaker 1: this is probably going to be some sort of agreement
Speaker 1: that exists that gets this passed. I do not think
Speaker 1: if I had to put any money on it. If
Speaker 1: they keep twenty seventeen task cuts, that might be one thing,
Speaker 1: even that might be difficult, But I just do not
Speaker 1: see how they're able to pass additional task cuts. So
Speaker 1: to your point, that would be a stimulus if they
Speaker 1: if they did that, I don't I don't see it happening,
Speaker 1: I think, you know, and and you know, I do
Speaker 1: think they're gonna be able to cut some spending. But
Speaker 1: even that is difficult too, right, which is you know,
Speaker 1: you got the doze, which is you know, Elon Musk
Speaker 1: and but you know, but we hit this before go ahead. Yeah.
Speaker 2: The thing, the thing I'm thinking in terms of is
Speaker 2: that you we've raised we've raised our spending because of
Speaker 2: the pandemic, but we haven't cut it back. The pandemic ended,
Speaker 2: and we're still spending an extra what trillion dollars? Yeah,
Speaker 2: that has to they have to put the brakes on that,
Speaker 2: I would think, you know, that's my thinking, you know,
Speaker 2: and I think they've spent a lot of that money
Speaker 2: on bringing in newcomers into the country. Uh, you know,
Speaker 2: there's current administration and that that's going to end. So
Speaker 2: I think there's there's room to reduce the budget and
Speaker 2: that'll make that'll placate the Freedom Caucus, I believe. But anyway,
Speaker 2: that's yeah, I think. So anyway, I think I'm positive
Speaker 2: on the market and the stocks going.
Speaker 1: Forward, So I guess I'm agree.
Speaker 2: Yeah, but I can.
Speaker 1: Say that, yeah, well, I think we can also agree
Speaker 1: there's so many different movie variables that how it plays
Speaker 1: I said, as we began to show, I could sit
Speaker 1: here and tell you how I think it's going to
Speaker 1: play out. Chances are is going to help completely differently.
Speaker 1: But from a broad economic perspective, things continue to be
Speaker 1: very good, right. Inflation's trending in the right direction, the economy,
Speaker 1: strong housing market, strong labor markets, strong corporate profits are good.
Speaker 1: So from an investor perspective, that's all positive. What plays
Speaker 1: out from a political perspective, you know, any bets are off,
Speaker 1: and some of them are going to be good, some
Speaker 1: of them are going to be bad, but you know
Speaker 1: it's it's I think as an investor, the bigger question is, well,
Speaker 1: two things. What is your time horizon right, and what
Speaker 1: is your risk tolerant, so make sure you have that correct.
Speaker 1: And then two in general, what is the economics set
Speaker 1: up looking like? And you know, for as we start
Speaker 1: this year twenty twenty five, there's nothing out there to
Speaker 1: be overly pessimistic by any means, and so to me,
Speaker 1: that's a good reason to be an investor. Yes, very good, Well,
Speaker 1: thank you, Yeah, all right, you take care of Bob.
Speaker 2: Yeah, I listen.
Speaker 1: I'm a big believer in the concept of kiss keep
Speaker 1: it simple, right, and so often in our lives, whether
Speaker 1: it's personal or business or investing, we make it more complicated,
Speaker 1: and you know, you tend to kind of trip up
Speaker 1: yourself in doing that. There's not much value that you
Speaker 1: get in doing that. So just keep things simple and
Speaker 1: you're going to be successful. If you do that, you
Speaker 1: try to make it too complicated, or you start to
Speaker 1: think you're too smart and that you know what's going
Speaker 1: to happen. You're probably going to make a mistake and
Speaker 1: you're going to regret that. So a great question from Bob.
Speaker 1: Let's continue the discussion on the small business so again,
Speaker 1: so here's some real key things to think about. Uh,
Speaker 1: if you're a small business owner, one again, start earlier,
Speaker 1: you know, four or five, six, seven, eight, ten years out.
Speaker 1: If you start thinking about, hey, at some point I
Speaker 1: want to sell this business and it could be an
Speaker 1: internal sale. Uh, you know, maybe you have family that
Speaker 1: works in the business, or it could be an external sale,
Speaker 1: whatever that process is. The earlier you start and you
Speaker 1: and you you engage the right group of experts. So
Speaker 1: you know, with our firm, we work with our clients
Speaker 1: to the personal CFO, so we're giving them guidance. We
Speaker 1: bring in people from evaluation perspective, you know CPAs and
Speaker 1: their accountants that really know uh, the tax elements and
Speaker 1: kind of how that should be set up. From a
Speaker 1: books perspective, they're bookkeeping, and then you know the right
Speaker 1: attorney and legal guidance. But if you can kind of
Speaker 1: get this in place and kind of have the right
Speaker 1: vision as to how you're going to do this, going
Speaker 1: to be able to maximize your the value and the
Speaker 1: dollars you get. But also the deal structure is going
Speaker 1: to be what you're going to be most happy with,
Speaker 1: and that's important. Most people don't think about that, but
Speaker 1: that's that's important. So one, you've got to have a
Speaker 1: good valuation. What is your company worth? And there's really
Speaker 1: there's a number of different factors on this, but one
Speaker 1: of them, you know, one of them is cash flow.
Speaker 1: How much cash flow is your business generating? Two, what
Speaker 1: is the growth that you're going to see? So you
Speaker 1: think about this. If you had a company that had
Speaker 1: good cash flow, but you have no future growth prospects
Speaker 1: or limited then that's going to limit what somebody's going
Speaker 1: to value your company. But if you've got good current
Speaker 1: cash flow, I mean the company's profitable. If you have
Speaker 1: limited debt and your growth uh has been and the
Speaker 1: future growth is going to be good, well, people are
Speaker 1: going to want to pay up for that. So that's
Speaker 1: you can you know, that's going to really determine the
Speaker 1: valuation of your company. It can vary from industry to industry,
Speaker 1: but that's very important. The other thing too, is that
Speaker 1: you've got to make your business more than just yourself, right.
Speaker 1: So we see this a little bit with these entrepreneurs
Speaker 1: that they just carry the way of running the business.
Speaker 1: But the problem is if somebody's going to buy the business,
Speaker 1: they're going to, you know, at some point have it
Speaker 1: run without you. So you've got to make sure that
Speaker 1: that business entity is an ncy that runs on its own.
Speaker 1: We have the right team in place, the right technology
Speaker 1: in place. You think about it. If you of a
Speaker 1: business where somebody else can step in and from day
Speaker 1: one start operating and running it and be successful, and
Speaker 1: again that's because you have all the right processes in
Speaker 1: place and people, then that is a very valuable business.
Speaker 1: So you have to be thinking about your business along
Speaker 1: those lines. The other thing is your deal structure, right,
Speaker 1: so when you actually go ahead and you have this
Speaker 1: acquisition occur, there's a lot of different ways for the
Speaker 1: payout to occur. You know that many times this was
Speaker 1: called an earnout where you get a certain amount up front,
Speaker 1: but then you get a certain amount over the next
Speaker 1: you know, three to five years, depending on how the
Speaker 1: business does. And also there could be an employment contract.
Speaker 1: UH maybe you know you want or they probably want
Speaker 1: you to stay on for three to five years afterwards
Speaker 1: to help continue to run the business. Uh, and make
Speaker 1: sure that that transition process goes smoothly. The other thing
Speaker 1: is you know what's going to happen with your team,
Speaker 1: your people, your company. Uh, that is extremely important. You
Speaker 1: want to make sure that the most people want to
Speaker 1: make sure that the team is well taken care of,
Speaker 1: and so that's a big part of what that deal
Speaker 1: structure looks like, what is going to happen with them? Uh.
Speaker 1: And you know you've got to make sure that if
Speaker 1: you're getting acquired, that the culture of that acquiring firm
Speaker 1: lines up with your business. I mean I talk about
Speaker 1: it all the time with our firm, our culture is
Speaker 1: so important. The way we interact with each other, the
Speaker 1: way we interact with our clients. Our culture is so important.
Speaker 1: You've got to make sure that the culture of your
Speaker 1: organization lines up with that acquiring organization because otherwise it
Speaker 1: gets to be really problematic. And that's what you hear
Speaker 1: very quickly. If these deals go south, it's quite often
Speaker 1: because the cultures don't line up. The other thing to
Speaker 1: appreciate is when you have that acquiring company, there's going
Speaker 1: to be some element of financing, whether they have their
Speaker 1: own cash or they're getting a loan to buy your company.
Speaker 1: But that financing part of that equation is very important,
Speaker 1: especially as these deals get bigger. You know, the bigger
Speaker 1: the price tag on these acquisitions, the more important you've
Speaker 1: got to know how is this acquired funding this because
Speaker 1: you know, if they've got to go out and get
Speaker 1: a loan or they're getting other backing for it, that's
Speaker 1: going to come through. And that's where we see sometimes
Speaker 1: these issues come up, is that they don't have the
Speaker 1: proper financing and that's where it becomes problematic. And the
Speaker 1: other element, too is having the right team and advisors
Speaker 1: in place to move you through this emotionally right, so
Speaker 1: you know it is these transactions are about the numbers
Speaker 1: that's a very important part of this. But it's going
Speaker 1: to be an emotional process. Right, this is your baby.
Speaker 1: You built the business. H you know, you're you're invested
Speaker 1: in it, uh in so much. You know you you
Speaker 1: started in many cases from it being nothing. You've grown
Speaker 1: it to be the successful thing. That transition process to now.
Speaker 1: You know, again, whether it's an internal sale or external sale,
Speaker 1: it's going to be emotional. You have to appreciate that.
Speaker 1: And so if you have the right team of advisors
Speaker 1: in place, they're going to help you not get caught
Speaker 1: up on the little things that just don't matter and
Speaker 1: be more aware of the big things that do matter.
Speaker 1: And that's where again, having the right set of advisors
Speaker 1: to walk you through that is going to be very important.
Speaker 1: And you know, we always talk about from an investment
Speaker 1: perspective the value of uh you know, I mean the
Speaker 1: right team from an emotional perspective, which is what we
Speaker 1: do for our advisors our clients. We help remove the
Speaker 1: emotion from investing. Well, the same thing holds true when
Speaker 1: selling your business. You've got to really make sure you
Speaker 1: have that right group to walk you through from the
Speaker 1: quantitative perspective but also emotional well, folks, we're going to
Speaker 1: go to commercial break. Well, come back and join us
Speaker 1: as we continue to take your questions. You'll listen to
Speaker 1: Let's Talk Money, brought to you by Bouchet Financial Group,
Speaker 1: where we help our clients prioritize their health while we
Speaker 1: manage their wealth for life. Come back and join us,
Speaker 1: folks as we take your questions. Good morning, folks. My
Speaker 1: name is Martin Shields and I'm your host today for
Speaker 1: Let's Talk Money. It's great to be here with you
Speaker 1: and answer any questions you may have regarding your financial
Speaker 1: planning or investment manager concerns, and I encourage you to
Speaker 1: call in with those questions. You can reach me at
Speaker 1: eight hundre eight two five five nine four nine. That
Speaker 1: is eight hundred eight two five five nine four nine,
Speaker 1: or if you're too shy to call in with your question,
Speaker 1: email me. You can reach me at ask Bouche at
Speaker 1: Brusche dot com. That's ask Bouche at Bouche dot com
Speaker 1: and it's b O U c h E Y is
Speaker 1: the way to spell Bouche. I hope that you're doing well.
Speaker 1: A couple of things we want to mention in the
Speaker 1: beginning show that I want to talk about one of
Speaker 1: which is let's talk about your how to handle global
Speaker 1: risk in your portfolio. And as I mentioned, I had it.
Speaker 1: We had a situation where an individual came in. It
Speaker 1: was an initial meeting perspective client and very concerned about
Speaker 1: just the economy and what's going on globally and all
Speaker 1: these different concerns from a risk perspective, and uh, you
Speaker 1: know she was already working with an advisor and you know,
Speaker 1: trying to figure out where to invest in how to
Speaker 1: mitigate these risks. And we had a great conversation with
Speaker 1: her just thinking a little broadly about the really the
Speaker 1: main way to basically look at those global risks and
Speaker 1: then to basically look at your portfolio and make the
Speaker 1: adjustments is thinking as I've talked about before, keeping it
Speaker 1: simple and thinking much more high level. Right, you start
Speaker 1: to talk about different sectors and countries and all these
Speaker 1: different things, you're overthinking. You're definitely overthinking when it looks
Speaker 1: at when it comes down to managing risk within a portfolio.
Speaker 1: You could do any research out of this. It's pretty
Speaker 1: well well documented. It primarily comes down to asset classes, right,
Speaker 1: And this makes sense if you move from an all
Speaker 1: equity portfolio that you're going to have if you're in
Speaker 1: a diversified all equity portfolio. So I'm not talking about
Speaker 1: just highly concentrated positions, but a diversified all equity portfolio,
Speaker 1: whether that's an internetational one or a US focus one.
Speaker 1: Like our portfolios, as you move from all equity to
Speaker 1: something that has bonds, cash or alternative investments, you're going
Speaker 1: to start to reduce the risk. And all that means
Speaker 1: is we talk about this in general. Again, if you're
Speaker 1: talking about well diversityed portfolio, you're not talking about capital
Speaker 1: risks that you could lose your investment. Now, there are certainly,
Speaker 1: you know, if you're all in, you know, risky stock
Speaker 1: positions and individual positions, or there are other investments you
Speaker 1: can have that you can lose all your money, right,
Speaker 1: it can go to zero. But in a diversified portfolio
Speaker 1: and the portfolios that we have for our clients, you
Speaker 1: have what's called market risk. And what that means is
Speaker 1: when the market goes down, you're going to experience some
Speaker 1: of that downdraft that is being a long term investor.
Speaker 1: But you know, over time, as the market recovers, which
Speaker 1: they do, you're going to see that recovery. So if
Speaker 1: you move to more conservative investments like bonds that can't
Speaker 1: be volatile, we saw that in twenty twenty two, and
Speaker 1: we have alternatives in that sleeve as well, which frankly
Speaker 1: did much better than bonds did in twenty twenty two,
Speaker 1: but can have some volatility. And then certainly cash that
Speaker 1: really has no volatility if you're in a money market
Speaker 1: or whatnot. I mean, there are rare, rare exceptions, but
Speaker 1: in general it's pretty much a SETI eddy but with
Speaker 1: those they're going to protect better on a downdraft and
Speaker 1: a downturn in the market or the economy. And really, again,
Speaker 1: I could we could sit here and talk about the
Speaker 1: risk that exists for twenty twenty five. What I think
Speaker 1: is really amazing is that almost any giving year, the
Speaker 1: ashole risk, the things that actually come up and are
Speaker 1: actually problematic, are something we're not even discussing, right. You know.
Speaker 1: The perfect example of that was COVID when it was
Speaker 1: you know, when if twenty twenties first started, you know,
Speaker 1: there was just that few cases that were occurring in
Speaker 1: twenty twenty four, nobody really knew about it, if there
Speaker 1: was much discussion about it, it was that they would be
Speaker 1: handled just like any of the other kind of beginning
Speaker 1: issues that were occurring from a global perspective with any
Speaker 1: diseases or viruses. But yet it turned out to be
Speaker 1: a real problem. And that's true with many times in
Speaker 1: any given year, is that the risk that we talk
Speaker 1: about are not even the ones that actually have to
Speaker 1: be concerned about. But if you want to mitigate those risks,
Speaker 1: and you said, hey, I think these are real risk
Speaker 1: out there, I want to make sure I'm not going
Speaker 1: to be impacted in a real negative fashion, then really
Speaker 1: what it's about is moving your portfolio to a more
Speaker 1: conservative allocation. And for our clients, we have what we
Speaker 1: called our risk tolerance statement, and it's very simple. It
Speaker 1: basically breaks out our six portfolios from our most aggressive
Speaker 1: being all equity to our most conservative being thirty percent
Speaker 1: in bonds, cash and alternative sorry set thirty percent being
Speaker 1: in stocks and seventy percent being bonds castional alternatives. That's
Speaker 1: our most conservative, and it basically breaks out those six
Speaker 1: portfolios with what the allocation is the stocks and what
Speaker 1: it is to bonds castional alternatives, and then you basically
Speaker 1: just initial next to that allocation, and that's how we
Speaker 1: manage your portfolio. So what was great for this individual
Speaker 1: came in. It just helped her appreciate, oh, this is
Speaker 1: how simple it is that I can mitigate risk. So
Speaker 1: you know, we found the appropriate allocation from her. We
Speaker 1: talked about what her expective return would be in that allocation,
Speaker 1: what type of expective volatility, and we talk about expected
Speaker 1: is based on historical figures, right, and you know it
Speaker 1: could change. You know, what history was over the last
Speaker 1: fifty years certainly doesn't mean what's going to be next year. Now.
Speaker 1: It might mean it might be a good indicator was
Speaker 1: going to be longer term in nature, but it doesn't
Speaker 1: mean anything about what's going to happen next year as
Speaker 1: far as those allocations. But it really helped her understand, Okay,
Speaker 1: so this is how I handle global risk. I just
Speaker 1: dial back my allocation to stocks and that's really going
Speaker 1: to do the trick. The thing to appreciate too, And
Speaker 1: this is one of the things we talked about with her,
Speaker 1: which is, you know, right now, for many of our clients,
Speaker 1: we have individual bond portfolios where it's a bond ladder
Speaker 1: that we have bonds, primarily treasuries, but it could be
Speaker 1: investment grade corporate bonds that go out from a one
Speaker 1: year bond that the matures in a year, one, that
Speaker 1: matures in three years, five years, seven, and ten. In general,
Speaker 1: that's the makeup of these bond ladders. And right now
Speaker 1: the US Treasury ten your US Treasury hit four point
Speaker 1: eight percent this week. Now it's back down with that
Speaker 1: lower inflation print is back down to four point six
Speaker 1: four percent something in that neighborhood. But that's a pretty
Speaker 1: good yield about for historically speaking, you think about this,
Speaker 1: if you could build out a bond portfolio ladder that
Speaker 1: you could lock in for ten years and get four
Speaker 1: point six percent, and that's the conservative part of your portfolio,
Speaker 1: that's pretty good that that is, that is a pretty
Speaker 1: good yield to be able to lock into it. And
Speaker 1: so in some respects, if if you're concerned about global risk,
Speaker 1: or you're moving into retirement or something's happening, it's not
Speaker 1: a bad time to become more conservative. Uh, you know,
Speaker 1: we're not I would ever encourage people to become overly
Speaker 1: conservative because they're to give up on long term growth.
Speaker 1: But you know, if you let's say you're you know,
Speaker 1: you're sixty years old, you're maybe going to retire in
Speaker 1: the next uh, you know, a few years. Let's say
Speaker 1: you're in the all equity or let's say you're even
Speaker 1: the growth and you know, you want to kind of
Speaker 1: dial back that a little bit. You know, our growth
Speaker 1: and income is sixty forty. You know, that's a nice
Speaker 1: mix for somebody that is in retirement. Many of our
Speaker 1: retire diaries are in that growth and income. They could
Speaker 1: be in the growth. And one of the things we've
Speaker 1: talked about before is what we do is if you're
Speaker 1: retired and you're taking distributions, we put up to two
Speaker 1: years worth of distributions in a more conservative allocation, so
Speaker 1: that even if there's market volatility, that you could get
Speaker 1: through that downturn and not sell equities when they're down.
Speaker 1: And that's really what it comes down to. It is
Speaker 1: the most important thing is either not panicking when the
Speaker 1: market's down and selling or not having liquidity needs, not
Speaker 1: having cash flow needs they have to sell stocks when
Speaker 1: they're down. If you can do that even in the
Speaker 1: you know, really long down terms like two thousand to
Speaker 1: two thousand and two, or like two thousand and eight,
Speaker 1: two thousand and nine, if you could get through those downturns,
Speaker 1: you could be very successful from a folio perspective. And
Speaker 1: what that allows our clients as well is to maybe
Speaker 1: be a little more aggressive than they might otherwise be.
Speaker 1: So we do have some clients that are in the
Speaker 1: growth Allocation eighty twenty who are retired, but we put
Speaker 1: their distributions up to two years worth in that market
Speaker 1: serve of allocation and it really puts them in a
Speaker 1: good spot to be able to sustain through and have
Speaker 1: those distributions occur in down markets. And again, what it's
Speaker 1: about is peace of mind. Right, if you're not up
Speaker 1: at night concerned as to how this is going to happen,
Speaker 1: that changes everything. That changes the equation. And I talked
Speaker 1: about the emotion and the psychology of selling a business,
Speaker 1: well the emotion in psychology of retiring, it's the same
Speaker 1: thing just about right. There's a lot of quantitative elements
Speaker 1: of being prepared for retirement, but there's also we do
Speaker 1: a lot of handholding for individuals from an emotional and
Speaker 1: psychological perspective. I just met with the clients on Friday
Speaker 1: who are talking about retiring. We went through the plan
Speaker 1: for the first time with them, and you know, I
Speaker 1: could just feel the difference in kind of what the
Speaker 1: stress and the tension is before we have those meetings
Speaker 1: and after we have those meetings. If and here's the
Speaker 1: if they've done all the right things financially to get
Speaker 1: them in the right spot. And you know it, really
Speaker 1: it goes from lots of concerns and unknowns to an
Speaker 1: element of excitement, right because usually what we're doing is
Speaker 1: pushing our clients to spend money, and it's hard for
Speaker 1: them to kind of fathom that, right. There have been
Speaker 1: so many years of saving, saving, saving, saving, and you know,
Speaker 1: and they're saving while they have a paycheck, and now
Speaker 1: we're flipping that script and now we're asking them to
Speaker 1: take a distribution and not and this is going to
Speaker 1: be doing this without a paycheck. That's just very concerning
Speaker 1: for most folks. But that's where we come in with
Speaker 1: a handholding, making sure they understand that this is okay,
Speaker 1: and then we're going to manage that risk. And you know, again,
Speaker 1: that's where them delegating that responsibility to us can be
Speaker 1: so valuable. And another new client situation where uh, you know,
Speaker 1: great couple, uh, you know much older, you know, almost
Speaker 1: in the nineties, literally almost in their nineties, amazing couple
Speaker 1: and they're just like, you know what, the husband really
Speaker 1: wants to make sure that the whites protected if something
Speaker 1: would happen. He handles all the finances he used to
Speaker 1: manage his own portfolios all the way up to then.
Speaker 1: But you gotta where that challenge with that is is
Speaker 1: feeling comfortable to delegate. You know that that is that's
Speaker 1: a mind shift change. And many of our clients they
Speaker 1: have managed their portfolios in the past and even when
Speaker 1: they you know, turn over the range to us to
Speaker 1: manage their portfolio. Though quite often we call it a
Speaker 1: sandbox account. It's an account that you can make your
Speaker 1: own trades. Uh. You know, we can see it if
Speaker 1: you want us to, but we won't bill on it.
Speaker 1: But allows you to have that out that you've got
Speaker 1: an idea, you know, you want to go ahead and investigate.
Speaker 1: You don't have to call us to be putting in
Speaker 1: your portfolio, which would rather not do because we have
Speaker 1: our own allocation that we're going to be using. And
Speaker 1: having that sandbox account is for many people the out
Speaker 1: that allows them to delegate the vast majority of the
Speaker 1: portfolio to us, uh, while at the same time allowing
Speaker 1: them to have, uh, you know, the ability to put
Speaker 1: some trades in a in a smaller account that they
Speaker 1: can handle all that themselves. And and so that that
Speaker 1: ability to delegate that also is very emotional, right, This
Speaker 1: is you know, in this case I describe, uh, you know,
Speaker 1: this person has been doing this for decades and frankly
Speaker 1: it's done a nice job with it. So you know,
Speaker 1: but even in that situation, just as time's gone on
Speaker 1: and they've got more comfortable with working with our firm
Speaker 1: and our communication as a firm, uh, it's really helped
Speaker 1: put them at ease that that was the right decision, right.
Speaker 1: And I always say, listen, when a client comes on
Speaker 1: and starts working with us, that's a big decision. We
Speaker 1: do not take that lightly. We appreciate that, you know,
Speaker 1: you're putting your wealth with us, whether it's you know,
Speaker 1: half a million dollars or ten million dollars, that's a
Speaker 1: lot of money. In most cases, you know, we work
Speaker 1: with our clients in their full well from a wealth perspective,
Speaker 1: their full portfolio, and so we don't take that lightly.
Speaker 1: But what I always say is within that first year,
Speaker 1: if there's any concerns, they usually get mitigated. Within that
Speaker 1: first year we go through the planning process. They understand
Speaker 1: how we manage the portfolio and how we communicate. And
Speaker 1: then after that first year they're like, I get it.
Speaker 1: I understand how this works. Now, you know there's an
Speaker 1: element where they've kind of mentally come to terms with
Speaker 1: that delegation and it just gets to be a much
Speaker 1: easier process for them at that point. Let's move on.
Speaker 1: I want to talk about raw THI rays and when
Speaker 1: you can act has those. But before I do, if
Speaker 1: you have any questions, you can give me a call.
Speaker 1: You can reach me at eight hundred eight two five
Speaker 1: five nine four nine. Again that's eight hundred eight two
Speaker 1: five five nine four nine, or you can email me
Speaker 1: at ask Bouche at bouchet dot com. Again that is
Speaker 1: ask Bouche at Bouchet dot com and Bouchet is spelled
Speaker 1: b O U c h e y dot com. But
Speaker 1: before I jump in the row, I just want to
Speaker 1: highlight coming up in about this over a week and
Speaker 1: a half, we have our Stateday economy presentations and uh,
Speaker 1: this is this would be the tenth year that we
Speaker 1: will have done these. Uh. We have one in Troy
Speaker 1: at Frankoplaza, one in Saratoga at the eighteen sixty three Club,
Speaker 1: And I'm telling you these are are one of our
Speaker 1: hallmark events. You know, what we really really focus on
Speaker 1: as a firm is community caating well with our clients.
Speaker 1: If we can communicate well, they know what's going on,
Speaker 1: if there's any concerns they have with the markets, the economy,
Speaker 1: whatever that is. We want to be able to communicate,
Speaker 1: whether it's via email, phone calls, zoom calls, in person,
Speaker 1: but our State of the Economy presentations one, it just
Speaker 1: gives us an opportunity to meet with a large number
Speaker 1: of our clients in person and that's always a great
Speaker 1: thing that we always enjoy doing. And then you know,
Speaker 1: have a dinner for the presentation and then really outline
Speaker 1: for the year what they need to be aware of
Speaker 1: from an economic perspective, from a portfolio perspective, and we
Speaker 1: also talk and highlight about from a tax and financial
Speaker 1: planning perspective, and even what's going on with our firm.
Speaker 1: You know, you think about our firm has been around
Speaker 1: for thirty five years. We're celebrating thirty five years now.
Speaker 1: We manage close to one point five billion for our
Speaker 1: clients and you know, the future of this firm is important.
Speaker 1: As Steve would say, we're set up for the next
Speaker 1: thirty five years. Uh, and that's important because our clients
Speaker 1: hire us from a long term perspective, so that having that,
Speaker 1: you know, understanding what we're doing as a firm to grow.
Speaker 1: And as I've always said, you know, as we've grown,
Speaker 1: it's really only only added value to our clients. It's
Speaker 1: you know, you're always concerned as you grow, do you
Speaker 1: lose that culture and how you work with our clients.
Speaker 1: And I'll say from my perspective, and I think most
Speaker 1: of our clients would agree that it's only gotten better.
Speaker 1: Our communications, improved, our internal processes, the people we've brought
Speaker 1: on or just add so much value, you know. And
Speaker 1: really what's great too is that now we as we grow,
Speaker 1: we've had people that kind of specialize in certain areas,
Speaker 1: so it would be tax planning, a state planning, what's
Speaker 1: more on the investment side, charitable giving, all these different areas.
Speaker 1: We've got advisors now that have expertise in those areas.
Speaker 1: And it's just really added a tremendous amount of value
Speaker 1: with our relationship with our clients and uh, and how
Speaker 1: we work with them. So to me, it's been more
Speaker 1: all about the good of us growing and getting bigger, uh,
Speaker 1: versus really any of the downsides that can occur. And
Speaker 1: I will tell you that that's that's intentional. It doesn't
Speaker 1: happen by chance. We've made sure that as we grow,
Speaker 1: both the people we hire, what our culture is internally,
Speaker 1: that that that becomes just a real important part of
Speaker 1: how we design the firm and really where the future
Speaker 1: is with the firm, because that has to stay intact.
Speaker 1: Let's talk about the law THI rays and those distributions.
Speaker 1: But again, if you have any questions, you can reach
Speaker 1: me at eight hundred eight two five five nine four nine.
Speaker 1: That's eight hundred eight two five five nine four nine,
Speaker 1: or you can email me at ask Bouchet at Bouchet
Speaker 1: dot com. I actually I have an email that came
Speaker 1: in here, he says from at Clifton Park. Hi, Joe,
Speaker 1: I am seventy one. I am in a high tax
Speaker 1: bracket with a portfolio of fifty percent stocks and fifty
Speaker 1: percent cash. I soon have to take my rm D
Speaker 1: on multiple counts, which will drive me into an even
Speaker 1: higher bracket. What are my options to reduce taxes? Should
Speaker 1: I move cash? To non dividend e t FS ETFs,
Speaker 1: any device would be appreciated. So so great question here.
Speaker 1: So a couple of things just to clarify. So if
Speaker 1: you're seventy one now, then you'll when you turn seventy three,
Speaker 1: that's the new age that you have your rm D.
Speaker 1: And you know, this is something we talk about with
Speaker 1: our clients quite a bit, right, which is you know,
Speaker 1: many times they're not taking distributions from their IRA because
Speaker 1: they don't need to. Uh. And then you know, you
Speaker 1: get you know, we have the requirement of distribution and
Speaker 1: when you first start taking it, it's going to be
Speaker 1: about three point six percent of your portfolio. That's the
Speaker 1: actual equation and number to calculate that. But it comes
Speaker 1: down to about a three point six percent distribution. So
Speaker 1: you know, if you've got a million dollar portfolio or
Speaker 1: two million dollar portfolio, it's in your IRA. You know,
Speaker 1: you're talking about another thirty five thousand dollars, you're talking
Speaker 1: about another seventy thousand dollars. So Joe to your point
Speaker 1: your question, you know, what are your options to reduce taxes?
Speaker 1: Not a lot unfortunately, you know, because you probably have
Speaker 1: Social Security, maybe have a pension, I don't know what
Speaker 1: other retirement income you have, but you know, really if
Speaker 1: you have now I'm assuming you're talking about a taxable
Speaker 1: account where you have dividend paying ETFs. That is correct,
Speaker 1: So in your taxable account you can make adjustments. So
Speaker 1: now a couple of things you can do is if
Speaker 1: you have bonds, you can move them to muni bonds,
Speaker 1: So municipal bonds you don't pay federal taxes on it.
Speaker 1: And if they're in New York State or Puerto Rican
Speaker 1: UNI bonds, you don't pay state taxes as well. So
Speaker 1: again for your tax will account for your bond allocation.
Speaker 1: You could do that. Now, the thing to appreciate is
Speaker 1: you have to really look at what's your after tax
Speaker 1: yield to see if that's worth it, right, because for
Speaker 1: most of our clients we don't put them in a
Speaker 1: UNI bond allocation unless they have are making you know,
Speaker 1: four hundred thousand dollars five hundred thousand dollars plus maybe
Speaker 1: three point fifty, because you've got to be in that
Speaker 1: high tax bracket to make it work a worthwhile because
Speaker 1: you're what you're looking at is what is your after
Speaker 1: tax yield? But you know, for people who are making
Speaker 1: that much, they're in those very high tax brackets, both
Speaker 1: federal and state. It does become worth it. The after
Speaker 1: tax yield is higher on those media bonds, but that's
Speaker 1: something you can consider. And then yes, moving from non
Speaker 1: dividend ETFs, you know, now chances are you're going to
Speaker 1: be in a qualified many of those dividends maybe what's
Speaker 1: called qualified dividends, so they're only going get taxed from
Speaker 1: about fifteen percent. So it's now you're going to be
Speaker 1: as ordinary income. They could be taxed at fifteen percent,
Speaker 1: So in that regard, it is going to add to
Speaker 1: your overall income having those dividend ETFs. So you could
Speaker 1: move to more of a growth ETF like QQQ that
Speaker 1: has you know, a yield that's you know, around one percent,
Speaker 1: or even the S and P five hundred that has
Speaker 1: a yield of about one point five percent versus h
Speaker 1: an ETF that's more focused on dividends and could have
Speaker 1: a yield of three or four percent. So that's a
Speaker 1: possibility as well. Beyond that, you know, the only other
Speaker 1: thing is that I'm assuming you don't have any earned income.
Speaker 1: You know, if you have earned income, there's things you
Speaker 1: can do. You know you can if you're still working,
Speaker 1: you know, you can obviously save some of that into
Speaker 1: a traditional IRA that would work. It would be good.
Speaker 1: But you know that's you know, in general we have
Speaker 1: to think about is you know, we're talking about going
Speaker 1: from one hundred thousand dollars to you know, one hundred
Speaker 1: and fifty or if you're in the more in the
Speaker 1: three to four five hundred thousand dollars range. That's really
Speaker 1: you know, kind of the question is what range are
Speaker 1: you in? And that's the determination as to what you
Speaker 1: should be doing. Let's go on. So with the raw
Speaker 1: Thier raise, what you need to be aware of is
Speaker 1: that and the most important thing is your contributions into
Speaker 1: the raws. If you make them, you can access them
Speaker 1: at any point. The contribution, now, the growth, you can
Speaker 1: only access if you've held them for five years, and
Speaker 1: it is important you're fifty nine and a half. The
Speaker 1: only exception of that is if you are building or
Speaker 1: a home there you can access ten thousand dollars for
Speaker 1: a first time home buyer, so that's always a nice thing,
Speaker 1: but otherwise you have to wait into your five years
Speaker 1: and a half. Now, the other thing I want to
Speaker 1: highlight before the show up here is that if you
Speaker 1: do a wroth conversion, you have to you can't access
Speaker 1: that money even though you paid taxes on it. You've
Speaker 1: got to wait for five years to go by before
Speaker 1: you can access that those dollares you're converted without paying
Speaker 1: that ten percent penalty, So that's very important. That's different
Speaker 1: than if you've made those contributions yourself directly into the Wroth. Well, folks,
Speaker 1: we spend another hour together. I hope you learned a
Speaker 1: little bit. As always, I've enjoyed being here with you.
Speaker 1: You'll listen to Let's Talk Money, brought to you by
Speaker 1: a Bouchet finance group, where we help our clients prioritize
Speaker 1: their health while we manage their wealth for life. Take
Speaker 1: care of yourself, take care of each other.