Click on the image to access the recording or read the transcript below.
Announcer: Welcome to Impact makers radio. Helping you to find jargon-free information before choosing a professional to help solve your problems and live the life you love. Here's your host Stewart Andrew Alexander.
Stewart: Hi and welcome to another, "Let's Talk Retirement Conversation." During this segment of the show, ladies and gentlemen, I'm so pleased. You know something, I'm hopping, I'm skipping, I'm doing cartwheels because we finally have wealth adviser David Edwards, president of Heron Wealth, calling in all the way from New York. Now David, who has a wealth of experience in the area of retirement planning, as well as other things that I'm sure that he would allude to today. We'll be talking to you today about the glide path to retirement. Now, I'm sure David is going to expand on that. If you are one of the many individuals in New York and you're out there considering your retirement options. Then it might be a good idea for you just to take a break. Log out of Facebook, quit the Twittering and the Instagramming or anything else you happened to be doing which may cause a distraction. You know something, you might even want to grab a notepad and pen and get ready to take some notes as we're listening to what Dave has to share with us today. With that said, I can hear him in the background. Let's bring him onto the show. Welcome Dave.
David Edwards: Good morning Stewart.
Stewart: Good morning to you sir. Very happy to have you on the show. Very excited, looking forward to speaking with you. Let's jump feet first in then Dave. In your own words, briefly describe the kinds of people who you serve and the various types of situations they find themselves in when they reach out to you for your help?
David: Certainly, we specialize in executive families. That is a typically a two person household, husband and wife, perhaps a same sex family, couple of kids going to college. They want a comfortable retirement. They want that second home. They're somewhat worried about their aging parents. They have literally 10,000 choices and it's our job to guide them to the ten choices that matter to them most and help them pick the best three.
Stewart: Okay Dave. Now that we have an idea of who you help, it goes without saying that before we continue any further, that anything you share with us today is not legal advice, legal assistance, therapeutic assistance or any other kind of advice. It's purely for the purposes of disseminating information. Would you just care to expand on that in your own words please Dave, so everybody is clear with what we're doing today?
David: Sure. I am giving general advice about financial planning, investment advice and estate planning. Of course, you should always consult with an appropriately credentialed adviser on any of those topics before you make your own decisions.
Stewart: Great. Thanks for sharing that with us Dave. With that said, when you think about those executive families that you just described, the people you help, what's the most common misconception they have surrounding today's topic of the glide path to retirement?
David: The most common misconception is that you can postpone dealing with your retirement until the day that you retire. In our mind that's like a pilot flying into Kennedy but instead of making a decision 30 minutes out to reduce the air speed, line up with the runway and start gently gliding down to the airport, lowering and locking the landing gear, it's almost like they arrived at 35,000 feet and then just drop down onto the runway from directly above.
There are both financial issues to be addressed on retirement and also emotional issues. Such as, "Are we going to stay in this home? Are we going to downsize this home? Are we going to move to a different community?" People often get so overwhelmed with how many different options they have that they break down and do nothing.
We say to them, "Let us be your pilot. Why don't you sit comfortably in first class, we're going to take you through an exercise and ask you a lot of questions." Almost like the way an architect would ask a lot of questions about a family, when they're building a new house. "Then out of those answers, will come a subset of choices. Then you'll decide and then we'll implement it for you."
Stewart: Okay Dave. Based on what you just shared with us, obviously keeping your client's confidentiality in mind, please share an example, or even a case study so to speak, of how you have helped or even how you would go about helping somebody who had those challenges, those misconceptions and what kind of transformational results you were able to gain for them or would be able to gain for them?
David: I'm going to use our fictitious family, Frank and Joanna Miller, who are typical of our clients. They are currently 50 years old and 15 years from retirement. They have some money saved up, about a million so far between their 401ks and their investment plans. They're living comfortably right now, but they have an expensive lifestyle. We can tell them, based on reasonable projections of investment returns and spending, that if they made no changes, they would run out of money at age 85.
But we projected them to live to be 95, so that would be a problem. However, if you have that information 20 years in advance, you can make decisions to address that. For example, you can save more. Our financial planning platform allows us to show the effects of saving more or you can say, "Well, what if I work five years later?". I can click on a financial plan and show you a scenario.
If you work five years longer, your funds will last an additional five years, to 90. Maybe that's not enough. What if you do something like, sell the vacation home and drop the vacation house expenses? Well, that extends your financial plan to age 95, so that's good but still not as comfortable as we’d like it to be. We like to go to age a hundred, just to be sure. You tell us that you have inherited some money from a parent, $500,000. Well now, problem solved. You actually will have no problem lasting to a hundred. What if we increase annual savings, anyway? Not only will you have no trouble living to a hundred, but you will leave an estate of about four or five million dollars.
The most wonderful part of my job is that most people walk in to our conference room, at 10:30 in the morning, terrified. Because they don't know what's going to happen and they're just scared to death and after we take them through this process and show them the alternatives and show them what they can do to make things better or worse, they walk out all smiles at 12. That's what our job is all about. Taking fear and converting into joy.
Stewart: As a reminder ladies and gentlemen. My guest today is wealth adviser, David Edwards. President of Heron Wealth in New York, New York. So good they named it twice. Now, he's here today talking about the glide path to retirement. Now, with that in mind then Dave and for those individuals who are listening right now, for those executive families who you help, please share one common, but let's say unknown, pitfall that they need to be aware of. No matter what situation they find themselves in.
David: Just one pitfall?
Stewart: Yes. I know there's hundreds of them that you could share, but we are limited by time. I'll tell you what, just give me two or three quick fire bullet points then. How about that?
David: I would say one pitfall that's very common is having the wrong asset allocation. For example, some people are very leery of the stock market. They show us their 401k, which is invested 95% in a bond fund. We would say, "No, you're not touching that money for 10 or 15 years. You can afford maximum risk in that retirement account. Let's get it to 90% equities or a 100% equities or 80% equities".
Another common pitfall is having too much of their wealth in a single asset. A lot of our clients, because they're executives, have stock in the company. They have stock options and restrictive stock. Well, that's great, but if you have, for example, 10 or 11 million dollars in Amazon and Amazon falls from 1400 back to 250, which we think is not unreasonable, you could go from 11 million dollars in assets to two million dollars in assets pretty quickly.
A lot of our counseling revolves around saying to clients, "Yes, I know you love your company. I know you hate paying capital gains tax, but let me just show you all these examples of great companies that cratered. Let's sort out a plan where we sell off five percent of the stock per quarter or per year and put the money in other securities. So if something bad does happen to your company, you still have that retirement locked in".
Stewart: Okay Dave. With that said, I'm curious, how many years have you been practiced as a wealth adviser?
David: I started out in the early 1980s, at Morgan-Stanley, not in wealth management, actually, in computer systems. Within a year, I was transferred to the fixed income department, mortgage-backed securities, government securities, building trading models. I did that for several years at Morgan-Stanley and then, thereafter, I worked as a consultant at JP Morgan securities and the Moore securities, building value at risk models for them. Value at risk models are very esoteric ways of measuring what can happen to a bank, if markets go against them.
Eventually, I decided not to work a hundred hours a week anymore and get into a business that was more family-friendly. I ducked into business school for two years, studying marketing operations and then, started my firm within a year of graduating in 1996. When I first started the firm, I was still not a wealth manager, I was a stock picker, focusing on the US, mid-cap growth category.
Within a few years, I found my clients asking me a lot of questions that had nothing to do with stocks and everything to do with their lifestyle. "David, what about my retirement plan? David, what about my kid's education? David, what about my divorce?" At first, I said, well, call your accountant, call your financial planner, call your CPA or trust & estate attorney, but I realized that I was the guy, with my hands on their money and they wanted the answers from me. I began to educate myself about the other aspects of wealth management.
I was coming from the investment advice side and I also built up a team of CFPs and CFAs, so pretty much, any question the client has about their financial planning, investment advice or estate planning, we can answer it. On a few occasions, where we feel like we don't have the best possible answer, we also bring in a network of outside advisors. Perhaps life insurance sales people, perhaps, trust & estate attorneys, to make sure their client has the best possible advice at all times.
Stewart: Dave, when you think back to all of the clients that you've helped over the years-- Let's just say, on a deep down, personal level, what does it actually give you, how does that make you feel?
David: I love my job because, if I can show somebody that everything that they would like to have in their life, for their family, for their children, for their parents, for their retirement, can be delivered and here's the plan to make it happen, is that a great job or what? I often say, "Well, if you're a doctor and you have to tell somebody that they have cancer, that's the worst moment of their lives or if you're a defense attorney and you have to tell somebody that the jury has found them guilty and they're looking at 20 years in jail, well that's the worst moments of their lives. I get to be with my clients at the best moments of their lives, when they retire, when they're telling that their kid's college acceptance, when we're sitting at their beach house in the Hamptons, drinking margaritas or sitting in their ski lodge in Wyoming, drinking beers." What an amazing profession.
Stewart: It's really important for you to be able to create that transformation in your client's life then, right?
David: For sure.
Stewart: Okay, Dave. Then, for those executive families who are listening right now, all those people in the New York area, what final thoughts would you like to leave them with before we close out with our last question for today?
David: The most important thing when you're thinking about your retirement plan or any significant purchase in your life, is to not wait until the last minute to address it. You want to start-- I don't expect people to think about retirement planning in their 20s and 30s, but by the time you get to your mid-40s, early 50s, it should be a priority. If you're not working with our firm, find another firm that is equally expert and ask the questions and see the results and then, make sure you follow up with the results.
Stewart: Okay. Finally then, Dave, if someone feels they want to know more about the glide path to retirement, what's the best way for them to connect with you?
David: They can start by visiting our website www.heronwealth.com. We have numerous resources, videos, and guidebooks on different topics of financial planning. They can also call our 800-number, which is, 800-99-H-E-R-O-N or 800-994-3766. They can also email me directly at email@example.com.
Stewart: Fantastic. Let me just eliminate any doubt that the listener may have of picking up the phone and giving you a call, Dave. Can you, just briefly, explain what will exactly happen when they call that number you just shared with us?
David: Sure. On the initial call, they'll speak with Annelien, who's our Director of Client Experience and she will take down some basic details and set up a preliminary phone conversation with myself or one of our other advisors who will call back and spend half an hour or 45 minutes on the phone, understanding the basics of the client’s needs. If it seems like a good fit, we'll schedule them to come in for a more detailed interview in person.
If they can fill out a questionnaire in advance and bring some documents, terrific, if not, we can get those later. Eventually, we will go forward and create what we call, the baseline financial plan and that's complimentary. We spend about two hours on our side, polishing the basics. After that, we schedule a follow up appointment to review the baseline plan with both spouses, this is very important for us. Both husband and wife have to be involved in the conversation. If the prospect likes what they see, then we will ask them to review and sign our advisory agreement.
The reason why we stop at that point is because this conversation is creating rights and responsibilities on both sides and, before we go further, the client needs to understand what those rights and responsibilities are. Once we receive back the detailed advisory agreement, we go and build the detailed financial plan, followed by the detailed investment plan, followed by the onboarding process, where we bring all the assets to our custodian, Fidelity Investments in Boston.
We then run the assets through our re-balancing systems, re-orient the portfolio to the right asset allocation, the right mix of securities. Then, we schedule the next follow up meeting, which is six months later and 12 months later, and 24 months later and as often as the client needs to speak to us. It's not a one and done situation, it is a relationship that should last 15, 20, 25 years.
Stewart: Fantastic. I'm sure now, if there is anybody who's listening and they want to know more, they certainly know that there is no risk to pick up the phone and to give you a call. Dave, I know we could spend all day speaking about this topic, but unfortunately, we are out of time for today. Once more, ladies and gentleman, let me just remind you, we have been listening to wealth advisor, David Edwards.
Thank you so much for sharing so generously with us today, Dave. You have certainly, without a doubt, demonstrated in the very short amount of time that we've had today, you've certainly demonstrated that you are a true educator, advocate and most importantly, a trustworthy advisor for your clients’ success. Thank you, Dave.
David: Thank you, Stewart.
Stewart: You are so welcome, my friend. I'd also like to take a moment to say a big thank you to you, yes, our listeners. If you're out there in the New York area, thank you so much for taking the time out of your busy day. We've had a very informative conversation. Let me just remind you, once again, with wealth advisor, David Edwards. Make sure you do check him out, give him a call.
He's shared exactly what's going to happen when you do pick up the phone. There is no risk to do that. Visit his website, there are some great resources on there. I'm absolutely sure that after listening to Dave today, that whatever you do decide to do, you are going to be in good hands. That's it for today, folks. Again, my name is Stewart Andrew Alexander and we'll be back shortly with some more leading retirement professionals in this, our series of, "Let's Talk Retirement Conversations." Until then, take care, have a great day and we'll talk real soon.
Announcer: Thank you for tuning in to Impact Makers Radio. To listen to all past, present and future industry thought leaders and trendsetters, visit us at impactmakersradio.com.