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March 23, 2024 - Money Matters Podcast

Financial advisors under the microscope, plus questions about Social Security, a portfolio allocation, wash sales, and bond funds.

On this week’s Money Matters, Scott and Pat explain where you can go to find out whether a financial advisor is legit. A caller with three adopted grandchildren asks whether his wife’s Social Security benefit can replace death benefits the grandchildren are currently receiving. A retiree from Texas wants to know whether his portfolio has too much cash in it. Finally, Scott and Pat explain the advantages of wash sales, and help a caller decide whether to invest in bond funds.

Join Money Matters:  Get your most pressing financial questions answered by Allworth's co-founders Scott Hanson and Pat McClain live on-air! Call 833-99-WORTH. Or ask a question by clicking here.  You can also be on the air by emailing Scott and Pat at

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Announcer: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's Money Matters, call now at 833-99-WORTH. That's 833-99-WORTH.

Scott: Welcome to Allworth's Money Matters. Scott Hanson.

Pat: Pat McClain.

Scott: Glad you are part of our program. We are both financial advisors. Have been advisors for three-plus decades. Have worked with thousands of...well, hundreds on a personal basis and thousands over some advice that we give over the radio.

Pat: And as a disclaimer there, don't take this... The advice you receive on this program is...

Scott: Intended to be educational. We don't really get to know enough about people.

Pat: A lot of it's practical, but take it all in the context that it is given, which is it's hard to...

Scott: There's no official engagement we have as a client-advisor relationship over this program.

Pat: And we'll give you our views, but unless we know your situation intimately, definitive recommendations are hard to come by. No one's saying that. For the show, Scott and I were talking about the investment advisory business.

Scott: So here's what we're talking about. We've been doing this show for a long time. We have people call us and we'll ask look at that sometimes after the show, we'll be like, "That person would really benefit from a financial advisor." You can tell. Right? Like most frankly, I think most people.

Pat: Correct. Or they just get things kind of so backwards and like how things are, right, like completely missing the mark. Save the money, invest in it, but missing the tax mark.

Scott: But your point, and what we were talking just before the point, we were having this conversation and you said, "Yeah, but it's really hard for people to find good ones." And I think there's some truth to that.

Pat: It's very difficult.

Scott: Yeah. I mean, there's a lot of great advisors out there. There are. But for every 100 people who call themselves the financial advisor, what percent you think would actually be? Because you could be a broker, traditional broker, non-fiduciary.

Pat: You could be an annuity sales guy.

Scott: You could be an annuity salesman.

Pat: Twenty percent?

Scott: I had an Uber driver tell me the other day, he's a financial advisor as well and start talking about something.

Pat: All right.

Scott: Not like a young kid starting out that's trying to find some additional income. Someone who's a career-age person.

Pat: Well, you'd save a lot of time. Let's say I'm going to the airport and can bring someone.

Scott: Anyway, I need my portfolio.

Pat: Maybe what do you think, 20% 20, 20%, 20, 30. I just think about in the greater Sacramento area...

Scott: The ones you've encountered over the years. And the ones out of conferences. Yeah, if you go to some, like you go to the Financial Planning Association, annual conference, what percentage of those people would you?

Pat: Oh, a higher percentage there.

Scott: Yes, correct. Because those are people actually getting education.

Pat: Correct. But if you go to an independent broker-dealer conference, maybe not so much.

Scott: Yeah, or securities industry.

Pat: Or a bank broker conference, none at all.

Scott:There are some, yeah. It's hard. There's good ones out there and there's and again, we're not going to spend 10 minutes saying, "Here's how you find a good financial advisor."

Pat: Let's just start by every time you hire one, you go to

Scott: My guess is those that the ones that we're that we were in discussion are not the ones that...they're the ones that would do the due diligence. Basic due diligence. Okay. Because we have people who've lost money, had money stolen from them, had alls that...not our clients, just people who've called the program and went up. They simply just Googled broker check, put that person's name in, this city, they'll find out what the background is. Have that person been, have they been fined by the regulators? Have they been disbarred from the industry?

Pat: How many times have they been sued? And it's normal if you've been in the business for years and years and years.

Scott: You might have a complaint or two.

Pat: You might have a complaint or two. And typically they're not justified or they're settled.

Scott: And you're not stating that because you have a complaint or two. I can't frankly believe in 30 years I don't have any complaints.

Pat: Yeah, I do that, correct, knock on wood because you can file a complaint without any justification whatsoever.

Scott: If you're in business, you all know there's some crazy customers.

Pat: There are crazy customers. But I know great advisors that have a complaint or two.

Scott: Yeah. Anyway, it's looking for the big stuff.

Pat: Yeah. or the guy that... So part of our business model is firms join Allworth, so we've had how many? Three different firms, 30.

Scott: Yeah, so we've grown, we've managed roughly 20 billion in assets and we have 150 financial advisors, 125 financial advisors

Pat: Somewhere like that.

Scott: But a lot of our advisors have joined us because their firms have merged in with us.

Pat: Thirty-four different firms.

Scott: That's right. From very small ones to some larger ones.

Pat: Yeah. And the first thing you look at? The first thing we look at when we're in a conversation.

Scott: It's the very first thing, bro. Very first conversation with anyone.

Pat: If some conversation happens, I ran into a guy last weekend, first thing I did before I called him back...

Scott: Before you called him back.

Pat. Yeah.

Scott: You're like, "Well, I'm not going to waste my time." Before you even called this person back.

Pat: That's right. All right.

Scott: We're gonna take calls. Questions at Well, that's where you can send your question to line up a time to speak with us. We record every couple weeks in the studio for a couple shows at a time and record calls. And sometimes we have these call banks or whatever we call them. Anyway, questions at, we'll get you scheduled. Or you can call 833-99-WORTH. We're talking with Butch. Butch, you're with Allworth's Money Matters.

Butch: How are you guys doing today?

Scott: We're awesome. How you doing, Butch?

Butch: Good. I got an interesting question that I don't know if you guys can answer, but right now I have not been able to find anybody to answer this. I, back in last May, I adopted my three grandchildren. And this April, my wife is going to be 68 and she's going to file for Social Security.

Pat: Is your wife working now?

Butch: No, she is not.

Pat: Okay.

Scott: And she's going to apply when?

Butch: First of April.

Pat: Okay.

Butch: We haven't applied yet. We real rush.

Scott: I disagree. But anyway, go ahead.

Butch: My question is that right now the kids have death benefits, Social Security death benefits from their father, our son. And so she's going to file...

Scott: Did your son pass away?

Butch: Yes, he did.

Scott: Oh gosh, wow. And now you've adopted the kids.

Butch: Yes. So we've had them for five years. It took us that long to get the adoption completed.

Pat: Okay. God bless you.

Butch: Thank you. So we're going to file Social Security. So are we going to lose the children's death benefits and replace that with Social Security benefits that my wife will get or part of?

Pat: Oh, wow. Wow. This I get to tell you. So I have done this.

Scott: Before you were starting, I was, if there was no death and you had adopted them in your retirement age, once you get Social Security, they can receive Social Security.

Pat: That's right, and I have had grandparents adopt grandchildren, clients where you're like, look, what's the death benefit amount that they're receiving?

Butch: About between the three, divided by three, is I think $1,245 a month.

Scott: And what will your wife's benefit be?

Butch: Her Social Security is going to be like $3,050 a month.

Pat: They receive $1245 each.

Butch: No, no, that's divided by three.

Pat: So $400. And how old are the kids?

Butch: They're just having birthdays. Eleven, nine, and seven.

Pat: Okay. How old are you, Butch?

Butch: I'm going to be 67 in April.

Scott: Isn't that funny? You never know where life's gonna take you, do you?

Pat: And your wife is no longer employed, correct?

Butch: Pardon me?

Pat: Does your wife work?

Butch: No, she does not. She's not employed. I am.

Scott: My guess is the benefits...

Pat: You can't get both.

Scott: You can't get both, but it'll be the higher of the two. My guess, this is just a guess after being in this industry for 35 years, 34 years, my guess is that their benefit would be higher with your wife filing Social Security.

Pat: I would make, I would put big money on that.

Scott: No, what do you mean split it?

Butch: Have I talked to Social Security? No, I haven't been able to get an appointment, so I need to...

Pat: So here's what I think you should do. I'm going to bet that that Social Security benefit is going to be substantially higher on your wife's Social Security than the death benefit would. When did you adopt these children?

Butch: May 12th of last year to be exact.

Pat: I would make a claim.

Scott: I think you can only do six months back now, is it? Or can you go further back?

Pat: I don't know. I would make a claim. So here's the first thing you do, talk to Social Security. I would bet big dollars that the benefit's going to be more on the Social Security than the death benefit. And then I would ask them, can I backfile a claim till the date of adoption and pay that? Well, you, she didn't ever apply for Social Security.

Butch: No, not yet. No, no.

Scott: And the challenge, but this is not, this is a bit, it's not that common. But it's not that people do it.

Pat: I'd be very very, I would be shocked.

Scott: If the if the amount wasn't higher. Yeah, just based upon what you've seen with clients who have the retirement Social Security and their minor children, the benefit their minor children receive is typically much more than 400 bucks a month.

Pat: That's right. That's right. Yeah. I wish you would have called us last May.

Butch: Okay.

Pat: Anyway, but it will come out in the wash. It'll come out in the wash.

Butch: Yeah, well, I guess like I'll try to make an appointment to try to get in and talk to them and see and then file and then file for her Social Security in April or May. I mean, so maybe the sooner the better, like you said.

Pat: Yeah, probably. Yes, yes, yes, yes, yes, as quickly as possible.

Scott: So we can't, we're not definitive on this, so.

Pat: I'm not definitive but...

Butch: Like I said, it's a good one and...

Pat: If you ask me to put a $10,000 bet on it, the fact that that benefit...

Scott: And you're not a betting man. "I hate gambling." I've never seen you bet, ever.

Pat: I hate gambling. I don't see this as a gamble. I would be shocked and appalled if that benefit wasn't higher under your wife's.

Butch: We're all getting ready here to, I got a couple more years to go and then I'll retire and then we'll have, we'll just raise the kids with, my Social Security will kick in and it's higher. So I'm assuming that that will take over my wife's.

Pat: That's right. That's right. That's right. That's right. That's right. God bless you.

Scott: Yeah.

Butch: Thanks. Thank you very much.

Pat: They're lucky to have you.

Scott: Yeah. Yeah. It's funny. I mean, my wife and I adopted two children after we raised two biological children. So I'm 57 with a 13-year-old, but I'm not in Butch's situation where he's 60 some odd with a 7-year-old.

Pat: But many times, I mean, more than a handful, I have asked grandparents who are raising children where their child didn't die.

Scott: Right. Oh yeah.

Pat: They didn't die. They normally have mental issues or drug or substance abuses where I will ask them to consider adopting the children and have had it done.

Scott: Yeah, I have as well. Not only that, and then sometimes there's maybe a second marriage and there's one person's Social Security age.

Pat: That's right.

Scott: And oftentimes makes sense to take Social Security earlier than they would otherwise.

Pat: Because the life expectancy kind of goes out the window at that point.

Scott: Well, now you're looking at the total family income, not just looking at what one Social Security recipient may or may not receive.

Pat: That's right.

Scott: And it gets a little more...

Pat: Little more in-depth, but the planning could help.

Scott: Yeah, and that, you know, Social Security is just a... It's complex. I'm surprised that his grandkids only see 400 bucks a month.

Pat: It sounds very, very low.

Scott: Yeah, I was thinking it's... I mean I've seen other much higher for death benefit. Maybe it had to do with the what was paid into Social Security wages. Yeah. All right, let's continue on. We are in Texas talking with Matt. Matt, you're with Allworth's Money Matters.

Matt: Hi, guys.

Pat: Hi, Matt.

Matt: Love your show. Never miss it.

Scott: Thank you. We appreciate that. How can we be of help today?

Matt: Well, I think perhaps I feel like I may be too much in cash, but I get a little nervous when I think about going into the market these days.

Pat: Okay. Walk us through it please, Matt.

Matt: Okay.

Scott: By the way, Matt, two things. One, I always feel nervous going into the market. Secondly, I don't know if this is statistically accurate or not, but based on our experience, whenever you buy a stock or get in a stock fund, the next day it goes down.

Pat: Yeah, Scott, that is statistically accurate.

And if you sell it, it's gonna go up.

Pat: That's statistically accurate.

Matt: Well, one guy told me one time, you don't lose until you sell. How's that?

Scott: Yeah, I know I've heard that but I... It's just a paper loss. Not really.

Pat: It ignores opportunity cost, which is actually a big number in investing.

Scott: And the paper loss, well, the paper you take to the store is, you know, the dollar bills are paper as well.

Pat: Yes. So tell us how big the portfolio is.

Matt: Okay, let me give you some numbers real quick. Well first off, let me mention that my wife, I'm retired and my wife is 62 and I'm 64 and I'm her full-time caregiver. She's got some serious health challenges and so that's probably why I'm heavy in cash right now. It makes me feel a little bit more secure.

Pat: Okay, that matters.

Matt: Okay, but the numbers are I got 135 in cash in the bank. And then CDs, I got 2.1. And then fixed IRA income is 1.6, not income, fixed IRA is 1.6.

Scott: And when you say fixed, what do you mean by fixed IRA?

Matt: It's a money market, not a money market, it's called an income fund.

Pat: It's a bond fund or is it a guaranteed investment contract?

Matt: Well, I don't know that.

Pat: It's all in one fund?

Matt: Yeah, it's one fund. It's a Saudi Aramco income fund is what it's called. It's something Vanguard put together for that company to offer their employees.

Pat: Got it. And what is it paying? What's it yield?

Matt: Well, right now it's pretty good. I think it's around five. But it has been quite low, of course, you know, a few years back it was in the ones. So that's that. And then I got $75K in a brokerage. And then I've got...

Pat: And how's that invested?

Matt: That's invested in Chevron. And then I've got the S&P and this is in the IRA also. I've got S&P, I've got a million in the S&P. So that's it, that's all, nothing more coming. Well, we are getting Social Security too.

Scott: And what are you living off?

Matt: I'm living off of Social Security, my wife and I are both taking Social Security and I'm getting a $40,000, well, let's say $10,000 a quarter from that fixed income fund.

Pat: From the IRA?

Matt: Yes sir.

Pat: And what is your Social Security benefit?

Scott: And you're not taking any, the CDs, are you, the interest on the CDs, are you taking that to live off at all?

Matt: No, just letting it ride.

Scott: And what's your Social Security benefit?

Matt: Well, combined it's 2.5 a month. I got hit with the WHIP. They were this big behind by 25%.

Pat: All right, and so you're are you receiving a government pension then?

Matt: No, when I retired from my job, I took, I had a pension. It wasn't a government pension. I took it and put it in the lump sum.

Scott: We're curious why you have a windfall elimination on your Social Security.

Pat: Yes.

Scott: That's usually when you have a government pension.

Matt: Right, I worked overseas for a company.

Scott: Yeah, overseas so you weren't paying into Social Security.

Matt: Correct.

Scott: Okay.

Pat: Thank you.

Matt: And we don't have a lot of expenses right now. I mean, my expenses probably run 35 to 4,000 a month.

Scott: And how are you paying your taxes, your quarterly tax bill?

Matt: That's a good question because this year it jumped up quite a bit with the...

Scott: Yeah, interest rates are high. Right, suddenly it's significant. It's going to be more so to the end of this year. So how are you paying? Are you taking money out of your cash or CDs, or is it coming out of...

Matt: No, it's coming out of cash.

Pat: All right. And so what did this portfolio look like? You know, obviously the numbers were different, but the percentages of the investment, what did they look like 10 years ago? Did you have more in the market, less in the market?

Matt: probably less.

Pat: And you want us to do what for you?

Matt: I want you to convince me to go more into the market with what I've got in my fixed CDs or tell me that, you know, just everything's okay, just do what you're doing.

Scott: Well here, I mean, here's the reality. You could take these dollars and bury them in your backyard and just pull them out when you need them and not earning any interest and you have enough money to last you to your dying day at your current standard of living. Yes. So you have the luxury of either being as conservative as you feel like being, or frankly, you have the luxury of also saying, "I'm going to be much more aggressive because I've got more money than I need based on my standard of living. I could take half my portfolio and invest it, not necessarily for my life expectancy, but invest it for the next generation. And I'm not going to worry about what it's going to be worth this month, this quarter, this year. I'm going to be worried about what it's worth 10 years out.

Pat: And quite frankly, we use it here at Allworth as a technique for clients like you that intellectually know that, but emotionally have a hard time dealing with it. And so it isn't unusual for us to set up two different accounts and say, "This is the account that's invested for you and for your needs, but can we all agree that you're never going to run out of money? Yes, we can."

Matt: Okay, well, I might have forgotten something, right? You know, I told you my wife had some health challenges.

Pat: That was my next question.

Matt: Yeah, she's got a pump attached to her heart. And we live in an area where the people who can manage that care are in the Dallas-Fort Worth area and work 350 miles to the west of there. So I think in our future, we're gonna have to pull up and make a move and get closer. Yeah, make it like this year.

Scott: You can afford to do that too.

Pat: Matt, I wouldn't make a change in this whatsoever. I mean, look, intellectually I can make the argument both ways, right?

Scott: And there's probably some people listening, Pat, that you said that and they're like, "What?"

Pat: Yes, that's right. And that's what they should say. But it's your money. It's your tool. It's not their tool. And look, if... You tell the story, Scott, about the client that died and the wife comes in the widow and she's like, "These markets are freaking me out."

Scott: Her husband had terminal cancer.

Pat: Okay, tell the story.

Scott: She was an aggressive investor, still a few years away from retirement. Her husband has terminal cancer. Don't know if it's going to be three months or two years or whatnot. Her life has completely changed. Suddenly she's looking at a future, maybe single the rest of her life, like all these things. And I said, why are we, the markets are making her nervous. I said, "Let's just go to cash." She's like, "What are you talking about?" "Well, like, you've got so much that you're dealing with right now. Why take the risk of this? What's the point?" And he ended up passing away after about a year and she's back in the market.

Pat: But, Scott, the point being is, look, we say don't time the markets because of the markets.

Scott: That's correct. But no, I like to say, good advice is there to help guide when life happens. This is not, my guess, Matt, what you had expected your life to be like in your early 60s.

Matt: No.

Scott: Right?

Matt: Right.

Scott: But the reality is you've saved a lot of money. You're looking at you've got medical expenses for care stuff higher. You don't know where it's gonna go in the future.

Pat: You don't know if it's long-term care.

Scott: You don't know. In-home care, which is extremely expensive. The great thing is, you've done such a good job saving, and my guess is you've been very frugal in the way you guys have lived your lives over the years. You're in a position where you can pay for whatever care is gonna be necessary for your wife. Which is probably much more appealing to you than saying, "Oh, I want to be in the top of the, I want the big suite on that cruise. I want to do three cruises a year and I want to fly first class to Paris and stay at the Ritz-Carlton," right? That's not of any value to you, I guess.

Pat: Right. And so if I make the argument, Matt, which I sounded like you want me to do, that you should allocate 50% of your portfolio in the market, because in 10 years you will have more money. Look, had you told me...

Scott: Odds are. Extremely high chance.

Pat: Not 100% and not without pain getting there. But the answer to the question was, what did the portfolio look like 10 years ago? And you said less equities. It tells me you're a conservative investor. You're probably a pretty conservative guy. I'm guessing you're not driving around in a Porsche.

Scott: My car, I bet your car is at least eight years old.

Matt: Well, I got a new one, but it's a Camry.

Scott: Okay, there we go. And how old was the one you had before this Camry?

Matt: 2000.

Scott: Okay. I hope some young people listen to this, right? As the old Texan saying is, big hat, no cowboy. The guys driving the Porsches and Mercedes probably don't have five million bucks.

Pat: Well, I drive a Mercedes, Scott, but my car is 10 years old. So actually, the rip in the door is starting to bother me a little bit, though. I think you, let me ask you another question. You're a full-time caregiver. Have you applied to the state or county for money to act as the full-time caregiver for her?

Matt: No, I haven't.

Pat: Okay, so, most of the time but not always it is Irrespective of what family income is if in fact you are providing a full-time caregiver in former fashion.

Scott: We don't know what Texas is. I don't know your county.

Pat: That's right, but 30% of the time I've recommended to clients it hits that they're there. And you could call your Department of Social Services in your county and ask them what the eligibility is for your particular county of your action as full-time caregiver. The only thing I would probably recommend is the bank money. You might want to just use it to like a Synchrony or an online bank. But your CDs are probably getting pretty close to what you'd be getting there. But I wouldn't, I wouldn't change a thing. I would not change it. Wouldn't change a thing.

Matt: Well, that makes me feel a lot better, guys. I needed a little... Now there's so much uncertainty these days, you need to hear it from somebody else once in a while.

Scott: Well, and you've got a lot of uncertainty in your daily life.

Pat: Yeah, I mean this is the lady you loved and the most important thing is that you're there for her so, you know.

Matt: Well, thank you so much, guys.

Scott: All right, appreciate it. I mean, it's interesting. So on our program, we started with Butch, who is retirement age and raising three young kids. Young. Right. Young kids. Not exactly the life that he had planned for himself.

Pat: Not the ones you see on the commercials.

Scott: And then you look at...

Pat: Matt? Not the ones you see on the commercial where it's all lollipops and rainbows and fairies and unicorns prancing through the field where you're sitting down on a beach. You know, with...

Scott: None of those are like this. One might say Butch and Matt's lives maybe have more purpose in them and more joy, even great meaning in the midst of that, which is really interesting about life. Money is a tool. You said it because people like we're in the money business.

Pat: We will get complaints about our recommendation to Matt. I promise you, someone's gonna go online and light us up like we don't know what we're talking about.

Scott: We don't know what we're talking about. They haven't worked with hundreds of people for 30 years.

Pat: There's a difference between theoretical and being practical.

Scott: Sometimes people look at our... They go, financial advisor, our job is to help people get rich. That's not rich in all of life's ways and helping people accomplish what's important to them. Not what's important to their neighbor.

Pat: So imagine we told Matt, who called us, who's got, I don't know, I didn't even add up all the numbers.

Scott: About five million bucks.

Pat: About $5 million.

Scott: And lives, by the way, on $4,000 a month. Yeah. Social Security and the interest from one of his million bucks of his $5 million.

Pat: And what if we said to him, "You know, this portfolio absolutely needs to be 50% equities, 50% stock, 50% bonds, cash, regardless of context of life?"

Scott: It's fine when the markets are going up.

Pat: And the market falls off 35% next week. You're like, "Really, could it fall off 35%?"

Scott: It has before. Look at the beginning of the COVID.

Pat: How quick that decline.

Scott: Thirty-five percent?

Pat: Bam. Like, it was there, right? How much added value would that portfolio be in his life at that point in time? Here's a guy that was more conservatively invested 10 years ago as a percentage in the markets than he is today with all the other things going on in his life. Do you think he's going to stay the trade?

Scott: No, he wouldn't.

Pat: You gotta stay the trade. So during COVID, which is a market, by the way, it's a coarse term of phrase that says if you're gonna make the investment, you need to know the timeline of the investment and how you're going to react to the investment. Because if we make investments for clients that they can't live with, then we should have never made the investment in the first place. And by the way, the client plays a role in it. Not all us. Not all us. The client plays a role in it.

Scott: Oh, for sure they do. Back when the COVID, the early days of COVID, when the market was down 35%, it was a crazy, if you think back, it was a crazy time for all of us, right? Because for a while, it was what percentage of the population is gonna wipe out, right? And it's gonna wipe out me is it gonna wipe out my loved ones? So there's all that. And then suddenly, you're like locked in, you know, working, we were working remotely. Fortunately, our company was, the way we were designed, we were able to do that immediately. But our organization, at the time, we made the decision, we said, for this next number of weeks, whatever it was, sorry, but we're not taking on any new clients, 100% of our focus is going to be on our existing clients. And I remember the charge to all of our advisors, don't let anyone throw in the towel on their financial plan. In other words, don't let people react to the emotion.

Pat: Don't let the emotion overtake the long-term goal.

Scott: And so we had podcasts, we had videos. I mean, almost every day we had some other communication tool and all of our advisors on the phone with their clients, emails, I mean, we did everything in our power and I still think we had, I think if my number's correct, we had about 70 families that sold stock during that period of time out of, tens, I don't know, thousands, right? About 70 and those families, their finances would never recover the same. Because it wouldn't be the same.

Pat: That's correct.

Scott: The snapback was just as quick. It was crazy.

Pat: It was, it was. I had a number of my clients, "We don't time the market, but..."

Scott: Well, we increased our stock allocation just based upon our disciplined rebalancing.

Pat: That's right. Because that was a discipline because all of a sudden the portfolios were underweighted. And then I had a couple clients that had suitable net worth that I said, "You know, I got to believe that this too shall pass and if it doesn't, what's it matter?" So we increased the equity exposure above beyond the rebalance.

Scott: A few weeks ago, we had our annual advisor get together. We're all get there's 100 and whatever was. There's about 200 people in Dallas. Some other people in our leadership team, what not, were all advisors. And my favorite story, Pat, and we had some great speakers on. My favorite story was during the lockdown or during the COVID area. There was a client at one worked with one of our advisors in Cincinnati. Called nervously, wanted to get out of the market, he convinced him to stay invested. Called nervously when it went further down, he convinced him. Called nervously again, then finally said, "I can't listen to you anymore, Alex. Just, I need to get out of the market." He called that person back every day until he convinced him to get back in.

And it was so meaningful to me, Pat, because I've seen, I have witnessed firsthand what happens to people's financial lives when they sell during scary times and the impact it has on their future. Because when you miss those few big days where the big run-ups, you're gonna miss the most of the gains that's possible.

Pat: By the way, you lived through some of the worst days in the rundown. But then you have disqualified yourself from participating in the run-up.

Scott: Yeah, I saw a stat, just reminded, the stock market on a daily basis goes up, what percent of the time does the stock market go up? Fifty-three percent. Forth-seven percent of all day's stocks are negative. It's about one out of two. If you go on a quarterly basis, roughly 71% of the time it's positive. That means each quarter you should expect your stocks to be down 29% of the time, every quarter.

Pat: Yeah, a third of the time you should expect that you're...

Scott: On an annual basis, stocks are up only 78% of the time. Twenty-two percent of the years, you should expect, one out of five years, little more than that, you should expect negative in your market.

Pat: Yeah.

Scott: You go out 5 years, 10 years, and essentially there's no loss.

Pat: And I'm gonna share something else with people. If real estate was priced the same way stocks were, you would see a similar number. But because your particular piece of real estate doesn't trade on an exchange, just because you can't see it doesn't mean it doesn't happen. Because I have people tell me all the time, real estate is the only place to be.

Scott: Not commercial property.

Pat: And I don't think it's an, and I don't believe it's an either or.

Scott: I should say some commercial properties. They're all different, but office buildings have been interesting.

Pat: That's right and it's not an either or.

Scott: Yeah, totally agree. Let's now head to some more calls here. Let's talk with Opal. Opal, you're with Allworth's Money Matters.

Opal: Hello there.

Scott: Hi, Opal.

Opal: Thank you for taking my call.

Scott: Yeah.

Opal: I love your show. I just called before and I'm glad I wrote everything down because I just hit the when I popped in, the delete button hit my brain so I need to look at my notes.

Pat: No worries, fire away.

Opal: Okay, I've got a question and I've got something I'd like you to look over at my shoulder for, if that would be, the first thing, okay, so this first question is basically has to do with some of your callers. The intent of investing is buying stock or mutual funds is to make money. You've got callers that have been at the top of their tax bracket and then life happens and then they have to pay for that life. I believe the suggestion was to do a wash sale from their brokerage account and that would solve the issue. But my question, here comes my question.

Pat: Okay.

Opal: See, hang on and see. Isn't selling at a loss, kind of a waste of money?

Pat: No. No, not at all.

Opal: Why? Okay, why not? Isn't that what we originally wanted to do?

Pat: Well, no, originally, obviously, you wanted it to appreciate in value. I mean, that's why you bought it.

Scott: Let's take the S&P 500, for example, 500 largest companies, right? In any one year, there might be a couple hundred stocks that are down in value. And the overall basket does well, but you're going to have some that do phenomenally well and some that do horribly.

Pat: So let's, so what, here's what a wash sale does if you're doing it correctly. Let's say I bought Burger King. I don't even know if it's Burger King. I don't know. So whatever. Yeah, let's say I bought Yum Brands, Yum Brands, which owns Taco Bell and Kentucky Fried Chicken. And I'm like, I'm in love with this stock. And it fell by 25%.

Scott: After you bought it.

Pat: After I bought it. So I bought it for 100 and it's now down to 75. And I'm like, "Dang it." And then I'm like, you know, I could take a loss for that and use those losses against either ordinary income or other gains in my portfolio, but I'm like, I really like Yum Brands. And then I look around and I'm like, what looks like Yum Brands that is not Yum Brands? So if I go to a Taco Bell, what's normally next door to the Taco Bell or within a half mile?

Scott: McDonald's.

Pat: McDonald's, right? By design, by the way. I go, okay, I'm going to sell my Taco Bell for a loss, take the loss on it. I'm going to buy a McDonald's as a stand in, as a placeholder.

Scott: For 31 days.

Pat: Thirty-one days. I think these companies are...

Scott: Then you sell the McDonald's and you buy back the Yum Brands.

Pat: If I want.

Scott: That's the strategy.

Pat: That's the strategy. Or, let's say the McDonald's went up in value, right, and I decide I don't want to recognize the gain on that. I might just decide that McDonald's looks close enough to Taco Bell or Yum Brands that I'm just going to keep it. That's the idea behind it. And it is all, look, it is always a good idea, not just sometimes, always a good idea to harvest losses if you can find a significant enough stand-in for that wash period of time.

Opal: Suppose you have a mutual fund.

Pat: Okay. You can do the same there.

Scott: You can do the same thing.

Pat: It can be similar, but not identical.

Opal: But if you wait long enough, the market will recover, so relax.

Pat: I know, but look, so what happens if I bought the S&P 500 and it was down 20% and I wanted to recognize the gain for tax purposes, what happens if I bought the S&P 490? Are we gonna look pretty close? What you're saying to me is that I should ignore an opportunity that exists.

Scott: Investing is hard enough. We have technology that does this, and it adds about a percentage point a year in overall return. Because in any portfolio, you're gonna have things that go up and go down.

Pat: And it costs almost nothing and it's all driven by algorithms now.

Opal: Got it. Okay, so it's not... Okay. So could those folks could possibly have used a Roth account?

Pat: Yeah, don't confuse the two.

Scott: They probably have both. Don't confuse the two.

Opal: I know the difference.

Pat: Yeah, yeah. Oh, you mean for the wash? You mean for the wash? Could they buy it in the Roth? You can't do that.

Scott: Even if it's across household too, they look husband and wife. Yeah. You can't do that.

Pat: I guess you could...

Scott: But it's not legal.

Pat: Correct. You might not get caught, but...

Scott: Anyway, appreciate the call, Opal. Thanks so much. And let's talk now with Jane in California. Jane, you're with Allworth's Money Matters.

Jane: Wow, hello. I can't believe you're like celebrities to me and I get to get...

Pat: Wait, hold on a second. The paparazzi's trying to get in the room.

Jane: You guys are the closest thing to celebrities I know.

Pat: You need to get out. You need to get out more often.

Scott: Your brush with greatness is right now.

Pat: You need to get out more often. What can we do to help other than the fact that you get to bask in our glory?

Jane: I've been listening to you guys for a year. I heard you advertise on another podcast or radio or something. So the first thing I did, I had to vet you. And so I did that by going to 2020 in January and then I went through the podcasts through the pandemic. I wanted to see what you said.

Pat: Oh, you went all the way back and listened to us. Holy smoke.

Scott: Now I'm interested, continue on.

Pat: No, no, you really need to get out. So what can we do? So now that we've been vetted and we're apparently up to your standards, what can we do to help?

Scott: Well, I'm going to just really, I'm quite proud of the way we acted during the pandemic in the lockdown.

Jane: Yeah, when the market hit like 19,000, you know, that's the low, I really wanted to hear what you had to say. And what made me decide to listen to you is you mentioned that for some of you who never, who aren't able to convert to a Roth, you might be able to now, and I did that.

Scott: Oh, good.

Jane: It was very painful, very painful, because I knew I was going to have to come up with 38,000 cash. I would, yeah, that was a tough time, but I just like kept putting money in as it went down and it was scary and painful, but the fear of not doing it was greater.

Scott: That's right.

Jane: And I always do the least worst.

Pat: I understand. Well, thank you for being a new but loyal listener. How can we help?

Jane: Okay, so I'm 64. I've had my retirement accounts always invested in all stocks, like 95%. And now, you know, a year ago I bought some individual bonds. And I didn't buy bond funds because I didn't really understand them. I kind of know, you know, it's a basket of bonds, but I picked a bunch of stocks with the help of someone I pay. And but now my question is, is now a like particularly good time to buy a bond fund?

Scott: Well, I don't know if now's a...

Pat: What's the objective of buying the bond fund?

Jane: Well, I was in like 95% back and I'm 64 years old.

Scott: Yeah, so having some fixed income in your portfolio.

Pat: Well, maybe or maybe not.

Scott: Well, yes, she's going to want some fixed income in her portfolio, not 100% stocks.

Jane: Yeah, I did buy some new treasuries looked good so I bought a little bit of that.

Pat: How big is this investible amount of dollars?

Jane: Well, right now I did buy some bonds. The investible dollars, I mean, I can put as much as I want. I have

Pat: Is it 10 million? Is it 20 million? Is it 50 million? Is it a million?

Jane: Well, my retirement account's 1.9 million.

Pat: Okay.

Jane: And I have like 350k in bonds right now, U.S. Treasuries. And then I was, you know, picked a few bonds. But so I'm 72% stocks and 28% bonds right now.

Pat: Okay.

Jane: And I'm comfortable with that.

Pat: I'm comfortable with that.

Jane: But I'm actually almost a little uncomfortable because I'm so used to being in 95% stocks. But...

Scott: I'm a fan of holding treasuries individually, so government bonds. I personally am not a fan of owning individual corporate bonds. And maybe it's maybe it's my own personal bias, because we used to build bond ladders for clients. And during the financial crisis, Ford Motor Company.

Pat: What year was that?

Scott: 2008 or '09, Ford Motor Company went bankrupt. Right. Remember that? I had a client who had a Ford Bond in his portfolio. It was AAA rated when we bought it.

Jane: Yeah.

Scott: Right? And I remember the conversation, the fear he had at the time. And I remember afterwards thinking, what's the point? What's the point? Because you, it's really difficult to get, you have to own so many bonds to get enough diversification that you're better off just having a bond fund.

Pat: Yeah, and so the idea is, well, people will say, "Yes, but it costs you more to own the individual bond." Not much. Not much, because look, an institution isn't gonna trade the same way you're gonna trade on a bond in terms of the bid and the ask. So they're gonna get a bond less expensively than you are, number one. Number two, there's less friction. Does it cost a little bit more? Yeah, but so does diversification.

Scott: But you're probably gonna get... I mean, it's very difficult to outperform the broad stock markets. The bond market's a different... It's not efficient like the stock market is, particularly some of these more obscure bonds. Like we're big fans of having.

Pat: I would not own, unless they were treasuries, if you're going to own any corporates or even municipalities for that reason, you want a fund if that was the question you're asking.

Jane: It is. Like, I know there's short bond funds or intermediate bond funds, and I don't know what the time range is on those.

Pat: Well, it will tell you, the fund itself will explain what the average maturity on the bond duration.

Jane: Okay, okay. I'll have to start trolling around more.

Pat: Out of curiosity, why did you decide individual stocks versus mutual funds or a combination of the two?

Jane: Of the bonds you mean?

Pat: I thought you said that you only...

Scott: I think she misspoke. The bonds, someone helped to pick the bonds.

Pat: Oh, got it. I thought you said that you owned individual stocks.

Jane: Maybe I did. I own individual bonds.

Pat: Okay. Yeah, there's no... Tresuries are fine.

Scott: But it's a lot of work too. You gotta wait for the maturities and it matures and you gotta go find another bond.

Jane: Right, yeah, and I'm paying someone to advise me when to do that and...

Pat: Why?

Jane: Because for me to pick individual bonds, I don't have the knowledge.

Scott: So if you're paying someone to pick individual bonds, why don't you just buy a bond fund?

Pat: And then you're paying someone to pick individual bonds. And it's much less expensive than paying that one person.

Jane: What you say makes sense and I may end up doing that the next year because I have to pay this guy once a year 800 bucks and so if I...

Scott: You might be getting your money's worth.

Pat: And is he conducting the trades for you?

Jane: No.

Pat: And is he giving you any feedback on the bonds, like the credit ratings or anything like that on an ongoing basis?

Jane: Yeah, quarterly.

Scott: He's making money. They're making money in the spread.

Pat: Yeah, is the account with him or is it somewhere else?

Jane: He's just an advisor. He's not a... I do my own trades within my brokerage account.

Pat: And he's charging you $800 a year for this?

Scott: Is he not part of your brokerage? Is he not involved in your brokerage account?

Jane: No, oh god, no, no, I do all my own.

Pat: Jane, Jane, you're making this much more difficult than it is.

Scott: You are and you're getting what you pay for, $800 for the risk he's taking on, something goes south and he's responsible like.

Jane: No, he's not. I'm with him.

Pat: Okay. Okay. You're making it much more difficult than it needs to be. You really are.

Jane: I understand that. That's why I'm now wondering more about bond funds.

Pat: Yes, you want bond funds. You absolutely want bond funds.

Scott: And you're gonna miss this guy. You're either gonna have to take the time and learn and educate yourself, or find an advisor that you really trust to build the right kind of bond portfolio for you. That's it. Yeah, anyway, I'm glad you are a big fan of the show, and we appreciate you calling. This program is a lot dedicated to education. I think the end of last podcast I talked a bit about our work.

Pat: Or works, actually you talked about our, if I recall, our website and educational material on our website.

Scott: Yeah. And it's fine. We've been doing this a long time and sometimes I've had a couple times where people been critical like, "How come you guys only work with people that have a lot of money?"

Pat: Is that what they sounded like?

Scott: That's what I hear. And look, the reality is we have our account minimums about as low as we can, where it's probably really not profitable for the organization, but we're trying to help.

Pat: We are a for-profit business.

Scott: If someone gets to retirement age and doesn't have any money saved, there's not a lot we can do. So part of the thing about doing this program for 20, almost 29 years, is to educate people. And people clearly can hear enough examples of how people achieve financial independence and all that. So my whole point on education is we also have, we've got live workshops coming up on Social Security. So depending on where you're in the country, they're not every city, obviously, but in a number of cities, it's called the Complete Social Security Planning Workshop. And during this workshop, we're gonna cover how to determine your retirement income needs, how to maximize your retirement income benefits, how to evaluate the best time to start claiming when you start Social Security, how to plan for your Social Security taxes, really why that's important with the rest of your taxes, and also prepare for some potential program changes that may impact your benefits when 2030, 2022, whenever that happens.

Pat: So these are live in person March 27th, March 28th and the 30th in different cities across the U.S. Go to Now, in saying all that, if you go to our website, you will actually see other workshops available that are online.

Scott: Yep, that's right. So thanks for joining us. This has been Allworth's Money Matters.

Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.