Senior Financial Security, Inc.

Today we will be diving into the understandability myth. The promoters of living trusts claim these documents are easy to understand. My thirty years of experience in reading these, in helping people to understand them, in trying to weed through the legal swamp if you will, has been the opposite. These are not easy to understand. If you’ve ever had one drawn up and you tried to read it yourself, you know what I mean. If you get the chance to look at a living trust or a book containing a sample living trust, review the language in these trusts. You should be able to get a sample from an attorney, or we could provide you with one, and see if you’re able to understand what these trusts are attempting to accomplish. If you can’t understand the document that is to be used to dispose of your entire estate, you shouldn’t buy or use that document.

It seems that common sense would require that anyone who has worked all their life to create an estate should have an estate planning document that they can read and understand. People come into my office all the time and they bring their documents, and when I ask them what their document says before I read it, they go, “To be honest with you, I really don’t know. I don’t know how to read this.” Now, these are people just like you and I. I came from nothing. Everything that I have earned in my life has been by myself on my own, and most of my clients, they tell a similar story. So, when we’ve built our estate portfolios and we now have something, we certainly don’t want to lose it to poor planning, whether that be poor tax planning, poor legal planning, poor financial planning, or worse yet, all of the above, which we see quite often.

We are a full-service firm here at Senior Financial Security, we can look over all of those items for you. If you have a living trust, pull it out right now. Sometimes people tell me “I haven’t looked at mine in 10 years.” Pull it out. Is it easy to understand? Do you understand what it says? Because if you can’t understand it and you gave the instructions for distribution to the attorney to set that up, how is somebody else who didn’t want those items going to be able to understand it? And guess what happens when you can’t understand it? It gets sued because it’s not a public document. It’s a private document, unlike wills.

Wills are a public document. So, you want to disown a child or maybe set aside a portion of their money where they can’t get to it all at once or somebody else should be in charge of it, then the will spells that out really clearly and they very rarely get sued. In the case where they have been sued, most courts will uphold what your wills say because they are public record. That does not hold true with a living trust. So, please be careful if you’re considering a living trust.

One good thing is that they’re known as revocable living trusts. If you have an irrevocable trust, that’s different. We’re talking about the most common type, which is a revocable living trust. That just means you can revoke it. You can change it. You can cancel it if you decide you don’t want it. You don’t have to go back to the attorney. So, if you would like a second opinion on that, come to one of our workshops. We’ll get into more depth on this, or you can book your complimentary consultation to come on in. You are also welcomed to download any of the number of items on our website for your perusal if you’re thinking of getting a living trust or maybe even if you’re thinking of getting rid of yours.

This is why picking a financial advisor is one of the most important decisions you’ll ever make. You don’t treat it like you would when shopping for a car. These complex techniques are a unique wheelhouse for Jean Dorrell and her team of fiduciaries.

What is revenue sharing? It is an organized kickback. When a financial advisor participates in revenue sharing they’re not recommending the best investment for you, they’re recommending ones that paid them a kickback to push their mutual funds.

If you go to any company’s website, by law they must tell you in their disclosures if they’re taking money and if they’re getting a kickback. However, it is hard to find on their website besides also being cumbersome. One of the things we offer at Senior Financial is that if you come in to the office, we’ll show you what whichever company you’re with is getting in kickbacks and how it works. Listen to this disclosure from Merrill Lynch as an example; “Merrill Lynch makes available to its clients shares of those mutual funds whose affiliates have entered into contractual arrangements with Merrill Lynch that generally include the payment of one or more of the following fees described below. Funds that do not enter into these arrangements with Merrill Lynch are generally not offered to the clients.” Now, does that sound like a good deal for you as the investor or Merrill Lynch the company? Another disclosure example from Wells Fargo says, “This additional cash compensation may influence the selection of mutual funds that Wells Fargo advisors and its associates make available for recommendation. Wells Fargo advisors reserves the right to restrict the mutual fund companies that we offer to clients based on the payment of additional cash compensation.” There are similar disclosures from LPL Financial, RBC, Morgan Stanley, the list goes on. Everybody’s heard of Raymond James, they list every single company that gives them kickbacks so they can pay $32 million to name the stadium the Tampa Bay Buccaneers’s play at.

We have people come in and some people have never heard this before, they don’t realize that their advisor is recommending products that are not best for them, but that are best for the advisor and the company. They say, “I don’t believe you. I’m going to go ask my guy.” When they always come back, they respond in one of two ways.

The first thing they come back with is, “I asked my advisor. He said it’s no big deal, everybody does it.” Well, we don’t do it. And even if everybody else is doing it, does that mean it’s a good deal for you as the investor? Number one, it costs you money on your returns. Number two, it’s a conflict of interest. Your advisor is someone you need to be able to trust, and when they have a conflict of interest that creates a dilemma with what they’re recommending. When someone comes in from Edward Jones, I automatically know they have American funds in their portfolio. You can read right on their disclosure how much money they give back to Edward Jones for recommending those products. In 2019, American funds gave $92.8 million to Edward Jones in a kickback to recommend their products.

The second answer we always get is, “It’s really not that much money, $92 million from one company.” In this same disclosure, they disclosed that Edward Jones received revenue-sharing payments of approximately $228 million in 2019. During that same time, their net profit was a billion dollars. 20% of their net profit is coming from kickbacks and most of the people that are paying them don’t even realize they’re giving that away.

Here’s why companies are able to hide their revenue sharing so well. Looking at the disclosure from Amerprise, it’s 91 pages long. Do you think they’re going to put it on the first or second page that they’re ripping you off? Do you think they’re going to put it up in bold on the top? No, you have to go 65 pages into the disclosure to get to where they talk about revenue sharing and kickbacks and conflicts of interest fro...

In this video, Senior Financial Security advisor Lee Shielka talks about why inflation is harmful, in addition to discussing some options for protecting your portfolio from inflation and some other interesting investment advice.

Who remembers the time period when there was super high inflation and super high interest rates between 1965 and 1985?

For some of you, this term may be elementary to you; “The time value of money.” The time value of money basically states that $1 today is worth more than $1 next week, and this is solely because of inflation. Recently, it came out that the consumer price index, which is how much you and I as consumers are paying for products was up 5% between May 2020 and May 2021. This increase is going up at the fastest pace since 2008. And we all know what the financial markets looked like in 2008.

What can we do to protect against inflation? Some of you might say gold. I read a lot of articles that point to gold as the best thing for inflation. Some of those can be a little bit biased as they’re trying to sell you gold. Gold did have a price increase of about 30% annually in the 1970s. If any of you have any asset that you can show me that’s going to do that in the next 10 years, I would really appreciate it. There is no guarantee currently that gold is going to be following inflation like it did in the 1970s. In 1973, the gold standard was erased by the US Government, so they were no longer paying a set price for gold. The market basically set the price, which is why it gained so much during the 1970s.

So now you’re probably thinking if not gold, then where can we put our money? Well, there are many answers to that question, and there was only one certainty that I found while doing my research.

That bottom line is going to be cash; cash that is either under your mattress or in a checking account earning little to no interest like they all are today. That cash between 1965 and 1985 lost about 75% of its value. For example, if you had a million dollars in 1965 and you put it under your mattress, in 1985 when you go to take it out, assuming your kids have not found it, you will be pulling out a million dollars in cash money, but with that money, you are only going to be able to purchase about 25% of the items that you would have been able to purchase in 1965.

If instead of placing that million dollars under your mattress and you placed it in the S&P 500, you would have had in 1985 $1.6 million in purchasing power instead of that $260,000 that you would have had if it was in your mattress. You would have had cash worth $5.5 million.

Now I know that the S&P is not suitable for most of our clients, but it is suitable for some. And for those that it is not suitable for, of course, there are other asset classes that have worked as a hedge against inflation historically that we can talk about. With my many hours of research that one certainty that I found was that when it comes to inflation, anything beats cash.

This is why picking a financial advisor is one of the most important decisions you’ll ever make. You don’t treat it like you would when shopping for a car. These complex techniques are a unique wheelhouse for Jean Dorrell and her team of fiduciaries. Call our office at 352-307-8652, visit our website (www.senfinancial.com/schedule) to book an appointment, or register for an upcoming seminar. One office. In The Villages. For 30 years. We know retirees and their needs, do you know us?

*Investment Advisory Services offered through Bucket List Wealth Management LLC, a Registered Investment Advisor.

In this video, CEP and owner of Senior Financial Security Jean Dorrell talks about why life insurance may be a smart investment for your portfolio, in addition to discussing being a full-service financial advisor and some other interesting investment advice.

Being a full-service investment firm means that we can do anything. Stocks, bonds, mutual funds, ETFs, IRAs, annuities, insurance, etc. An important part of what we do as fiduciaries is to get into the nitty gritty of what your risk tolerance is or is not. As an example, I’d like to share a little bit about Dan’s and my risk tolerances and how different we are. I’m very conservative, which is probably even an understatement, because I worked so hard for everything I have, and I don’t want to lose it. I want to preserve wealth first and foremost. The gains are not as important to me as the risk. Yes, of course I need growth, but not at the risk of losing principal. Dan, on the other hand, is very risk tolerant. He’s the type of person that likes to drive 90mph in the 75mph lane. You almost couldn’t get two more different people in a relationship than us.

That’s where something like downside protection comes into play. If you’re like me and you want some downside protection, we do offer that, however it’s not for everyone. Statistically, probably half of our clients have some sort of a downside protection plan. And then we have some clients that come in who want to ramp it up all the way, to be on that rollercoaster. Some clients have all downside protection and no risk, and then some of them are all risk. Each plan is customized based on your risk tolerance in order to work best for you.

This leads us to our specially designed life insurance, and how we’re different.

When it comes to life insurance and you’re working and you have a mortgage, a spouse and kids, you tend to think of it as a vehicle to take care of everything and provide your family with a way to survive if you die suddenly. That’s the old type of life insurance. When we’re talking about retirees and life insurance, we’re talking about something completely different. I don’t have any children, but I have specially designed life insurance because I’m working and I make too much money to put into a Roth. The Roth IRAs are good to use as contributory programs when you’re working, but the government doesn’t want us to have all these tax-free vehicles, so they limit what you can contribute based on how much money you make. In my case I don’t really qualify for Roth IRAs unless I was to convert to a retiree with no earned income. To do so, you can take your traditional account and you can convert part of it to tax free and just pay taxes on what you turn it to.

I did some of that, especially in 2010 when they gave us three years to pay the taxes, I converted a lot to my Roth, but it still wasn’t enough. And I could foresee the future of taxes going up. Especially now you can see that happening with all these things we have to pay for, so my question was how could I get more tax-free money faster? That’s where the specially designed life insurance came in. Ultimately, you’re not really buying that for a death benefit. You can if you want to, if you specifically want to leave a tax-free death benefit you can buy it for that. However, we really do more of the tax-free Roth on steroids type of life insurance. Meaning that, again, the government doesn’t want us to have tax-free vehicles unless they add limitations or hoops for us to jump through.

With the specially designed life insurance, one of the big hoops is, it has to have a death benefit. Remember that when you get older, if you’re paying for a death benefit, it’s expensive. What we do in order to get around that is use IRS code 7702. It’s nothing new, but it is very complicated,