September 9, 2023 - Money Matters Podcast

A Roth conversion question, where to invest CD proceeds, and cleaning up an unorganized financial mess.

On this week’s Money Matters, Scott and Pat start the show by discussing drama in the crypto world. A Montana woman who retired last year asks for advice on a Roth conversion strategy. You’ll hear why Scott and Pat tell a caller with six CDs to rebuild his portfolio once those investments come due. Then, Allworth advisor Blake Davelaar joins the show to explain how he was able to clean up a couple’s portfolio that consisted of ten accounts held at five different financial institutions. Finally, Scott and Pat help a woman looking for a new financial advisor.

Join Money Matters:  Get your most pressing financial questions answered by Allworth's CEOs 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-W-O-R-T-H.

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

Pat: I'm Pat McClain.

Scott: Welcome to our program. Glad you are with us. Both myself and my co-host we're both financial advisors and have been so for a few decades. I like to do this program to help people.

Pat: We try to help. We believe we're helping.

Scott: I certainly hope we're helping because it's been a big chunk of my life for the last 28 years of this program.

Pat: Otherwise, this has been a very, very disappointing pursuit.

Scott: Hopefully, people don't get to the end of their career and think those sort of things about their lives, right?

Pat: Holy smoke. Did I waste all that?

Scott: What a bummer to go through life like that. It's not a good way to look at things anyway. Anyway, we're a financial program. We'll talk about financial issues and not so much about whether we can look back with fondness on our careers or not. Anyway, we got a great show. We're gonna talk about some things that are just going on in the world of finance and we'll take some calls. Pat, we have not had a... What's not been in the news much lately are two items, one, meme stocks.

Pat: Yes.

Scott: Right? With Robinhood and Reddit.

Pat: Yes. And my young adult children have not mentioned them for quite some time. Two of my kids were doing the meme stock thing.

Scott: They don't talk about it at all. So, I'm guessing they're not making a bunch of money at it anymore.

Pat: That's my only barometer.

Scott: And the other thing is crypto.

Pat: A little bit of crypto in the news. SBF.

Scott: Sam Bankman-Fried? What's his name?

Pat: The guys in the know call him SBF, Scott.

Scott: Okay. Even now? I mean, that's when he thought he was cool.

Pat: Yeah, Sam Bankman...

Scott: He's not quite so cool when you're a fraudster and you're in prison.

Pat: Yeah. And you actually have been considered a witness tampering and you have lost your ability to actually be on...

Scott: Wasn't he on house arrest in his parents' house?

Pat: He was out on bail. And now they said, "Nah, not working for you, but you have not followed the rules. In you go into the clink." And they said based on his vegetarian diet, his attorney...

Scott: What? He's not a vegetarian.

Pat: But the attorney said he's a vegetarian and based upon...

Scott: He doesn't look like a vegetarian.

Pat: I don't know what vegetarians look like, but...

Scott: But for a young man, he was quite heavy.

Pat: Okay. But he said...his attorney said that he is living in subhuman conditions, subsisting on nothing but bread and water. And the judge said, "I don't actually think that's real." I got a kick out of... The judge says, "Nah, I'm not gonna go with that. So, your petition..."

Scott: Well, his judge has been following this guy for the time he's been on...

Pat: Well, the judge got tired of him...

Scott: Of course.

Pat: ...and threw him back. So, that has been in the news.

Scott: I think when I brought up crypto, it wasn't to hear about SB...whatever his name is, what his stay in jail is like. I wanna talk about...

Pat: I do find that stuff absolutely fas... One of my favorite television shows is called "American Greed" where they talk about all these Ponzi schemes and things where people get taken advantage of.

Scott: Do they still have that on?

Pat: I don't know if it's still running. I was on a bicycle ride with someone and he was telling me he listens to the podcast.

Scott: "American Greed" podcast?

Pat: Yes.

Scott: Oh, that would be more interesting, I think, than watching television.

Pat: Yes. So, anyway...but you do see a little bit of crypto in the news, mostly criminal indictment around money laundering. One just came up this last two weeks ago where the firm was accused of money laundering.

Scott: Wasn't that...

Pat: That was the whole idea behind partly how it started, was on the Silk Road.

Scott: Yeah. How am I gonna get this... Here's the way we can do... We can trade and... Bitcoin is about $27,000 a coin. Wasn't it up to about $60,000 or something like that?

Pat: I don't know. I still don't quite understand it. I just still don't quite understand it. And maybe I'm slow.

Scott: Well, the argument earlier was that it's the blockchain and people would confuse the... Like, okay, I understand the... I don't quite understand the blockchain technology, but I comprehend blockchain technology and I can see how that can be valuable as far as storing contracts and that sort of thing. But just because Bitcoin is built on that technology would never...

Pat: They're not one and the same.

Scott: I don't know.

Pat: But you don't see that. And the meme stocks seem to have kind of faded away although they're...

Scott: So, this week, there was someone in my office the office, I was chatting with them in the hallway. And they have an adult son who's in school and he's gonna be graduating. They said he wants to be a financial planner. I said, "Reach out to me when he's back in town. I'd love to have a cup of coffee with him." I say this often and maybe once a year, probably you too, maybe once a year a college kid reaches out and I have coffee or something with him or breakfast or... I'm always happy to spend time with young people who are pursuing their future, but it's very rare.

Pat: That was Scott Hanson talking, not Pat McClain.

Scott: All right, side note, I'm gonna come back to this.

Pat: Okay.

Scott: Years ago, I was at a university promoting some event that evening or whatever it was and... These were all seniors. They were all graduating. It was in the springtime, they were all graduating. I was in, like, four or five different classrooms. I said, "If you wanna get a job," I said, "You're not gonna get it on the job board." I said, "It's gonna be through someone you know." I said, "So, what I would recommend is that you find somebody in the field you wanna go into, reach out and say, "Can I please buy a cup of coffee? I'm a student in college. I'm about to graduate. I'd like to learn more about the industry. And then when you have coffee with that person, ask them for a name or two of people." And I said, "Once a week buy someone a cup of coffee. You will have a great job by the time you graduate." And I said that and I thought, "Oh, crap." I said, "I'm gonna have all these students reach out to me." I had one student reach out and schedule a coffee and two days later he canceled it.

Pat: Wow.

Scott: Out of several hundred.

Pat: Wow.

Scott: Okay. Now back to my point.

Pat: Okay.

Scott: That's why I'm so disappointed with this younger generation. I'm kidding. I'm joking. I'm joking. I'm joking.

Pat: There are plenty of very young people...

Scott: This couple in the office, they said something about their son wants to be a financial advisor. They said, "Yeah, because we gave him some money when he was younger. He would buy and sell stocks and he would be buying this and buying this." And as they're saying that I'm thinking, that's not financial planning. That's not financial advice, it's...

Pat: It's trading.

Scott: It's trading. It's very different.

Pat: Yes.

Scott: And I think people maybe perception of our industry...

Pat: Is that it's trading.

Scott: Don't come to me looking for the hot stock tip.

Pat: Yeah.

Scott: Matter of fact, if you're talking to a financial advisor and they're leading with some great investment, it's the wrong advisor.

Pat: The doctor doesn't start with the prescription.

Scott: Sometimes they do. They wanna get you out really quick. "Yeah, have some amoxicillin. Call me in five days if there's a problem." No?

Pat: "Take this new drug, placebo."

Scott: No kidding. Anyway, let's take some calls here. Let's start off in Montana with Leslie. Leslie with Allworth's "Money Matters."

Leslie: Oh, hey, there. Great to talk with you.

Scott: Thank you.

Leslie: I actually spoke to you all a few months ago about lending some money to my son-in-law and daughter for some education funding. So, you guys were a great help, a huge help and really helped guide me and put it in perspective so I could give you an update on that if you'd like.

Pat: Sure. I don't remember the call.

Scott: I don't remember either. No offense, Leslie. I'm sure if we met face-to-face, I'd never forget you.

Leslie: I don't take offense at all. I feel like you might have talked to more than just me a few months ago.

Pat: And what was...

Leslie: So, they lived in Scotland and he was gonna be going to Harvard for grad school and we were having trouble kind of figuring out how to finance it because they were hoping to sell their flat and then they weren't able to. But long story short, you helped guide me with a great perspective on how to do that and they were able to... Circumstances changed so they have been able to sell their flat so they just had to borrow some money from us short-term that they're gonna be able to pay us back for.

Pat: I do remember the call.

Scott: Not very often we have people in Scotland going to Harvard...

Pat: But because it was...

Scott: ...quite out there.

Pat: Yeah. Because it's...

Leslie: It was unusual.

Pat: It's a big problem in my family with, you know, kids living overseas and then going to Ivy League school.

Scott: [crosstalk 00:09:36]

Pat: Yeah, Brown, Princeton.

Leslie: The best part of the call was mostly just talking about how nice it was to be in Missoula, Montana.

Pat: Oh, that's right. I recall that. Anyway. So, what can we do for you this time?

Leslie: Anway, but that's not what I'm calling you today, but your people were so gracious to let me call again to ask a couple of other questions that I still had. And so, one is just guidance on when to take social security for both my husband and myself, and some Roth conversion goals that may tie into the other...

Scott: How old are you, Leslie?

Leslie: Sixty-two. And my husband is 66. He'll be full retirement age in October, 66 and a half for him. We both retired last year.

Pat: And what is your income now?

Leslie: So, we kind of don't have any income now. So, we've just been kind of a little bit limping along on...

Scott: Forage for mushrooms in the morning? I mean, what do you mean?

Leslie: Foraging for mushrooms. Yeah, exactly. Roadkill help.

Pat: How much money do you have in your IRAs?

Leslie: So, yeah. We have a couple of million dollars in the retirement...

Pat: Two million?

Leslie: Yeah, about $2 million in... Well, it breaks up. We have some Roth and just some 401(k) stuff and back to my account.

Pat: Well, you've gotta break it down for us, like, specific.

Leslie: I will.

Pat: Please. Thank you.

Scott: Yeah. We have some money saved here, yeah, we got some money here and there. Yeah, yeah.

Leslie: Yeah. We've got some money here and there. Yeah.

Pat: Okay. So, break it down for us.

Leslie: So, I broke it up a little bit just with the Roth because that was part of my question.

Scott: That's right. You're trying to figure out, should I convert to a Roth or start Social Security? Right? I would think.

Leslie: Both. Yeah. Yeah, exactly.

Scott: And you retired last year.

Leslie: Correct. Yeah.

Scott: And now we're in roughly 8, 9 months into 2023. Is retirement permanent?

Leslie: Yes. Retirement is permanent.

Scott: Okay. Neither one of you have a desire to go work for a wage anywhere or self-employment income or...

Pat: They're too busy foraging for mushrooms.

Scott: Yes.

Leslie: Foraging for mushrooms takes up all our time. Yeah.

Pat: So, break down where the monies are located and how much.

Leslie: Okay. So, if we break out the Roth, we have about $2 million just in straightforward 401(k)s and traditional IRAs. We have about $350,000 between the two of us in Roth. Then we have an investment account with a brokerage that's about $550,000 and inherited IRA that's about $110,000 and then cash about...right now about $100,000.

Pat: And your home's paid for?

Leslie: Paid for, yeah.

Scott: And what do you figure it takes a year for you to live?

Leslie: We're kind of guesstimating probably $120,000 to $150,000. So, about...

Pat: After tax?

Leslie: Yeah, after tax. Probably $120,000.

Pat: And so you're living on that now or you're taking that from your brokerage account or IRAs or cash?

Leslie: We are taking... Yeah, we had some cash that was just kind of appropriated till we kind of got a plan in place, to be honest.

Pat: Three million. So, we've got a corpus to work with about $3 million. And so $120,000 net of taxes, even $150,000 should be relatively easy, even without the Social Security.

Scott: With the Social Security.

Leslie: Yeah. So, it's just a matter of what makes sense.

Pat: It would be 5%.

Scott: With the Social Security.

Pat: Yeah, with the Social Security. Well, actually, I think I'd do some Roth conversion this year.

Scott: Well, for sure.

Pat: And then I'd probably start...consider Social Security for one of you next or maybe even the year after.

Leslie: Yeah. And I guess that was kind of a question of what the pros and cons of waiting or not waiting. And I know you've got some really great points.

Scott: What's his Social Security gonna be, your husband's?

Leslie: So, if he just hits it right at the full retirement age, which should be basically the beginning of October, it would be about $2,500 a month.

Pat: October of next year?

Scott: No, this year.

Leslie: This year.

Scott: That's why he's...

Leslie: Yeah. Like in a month.

Pat: [inaudible 00:14:16]

Leslie: Yeah. Yeah. That's [crosstalk 00:14:19]

Pat: And how much will yours be if you started it today?

Leslie: If I started it today, today, it would be about $2,500 a month.

Pat: How's your health?

Leslie: Oh, sorry. No, it'd be about $2,400 a month. Both of our health seemingly is great, knock on wood.

Scott: I mean, so, this year gives you a great window, obviously, to do Roth conversion because you have got no real income. You get a little bit of dividends from your brokerage account or whatever but, essentially, very small income. So, you can convert quite a bit. I mean, if I were in your situation, I'd probably convert at least, you know, $80,000, if not...which would get you to the top of the 12% bracket.

Leslie: And that's exactly what we did last year.

Scott: In Montana, are they 3% tax...? What is the state income tax in Montana?

Leslie: Oh, that sounds about right.

Scott: It's relative 3% or 4%, I think, or something on the relative list.

Leslie: Yeah.

Pat: Yeah. You've got some room. Or even...

Leslie: Yeah. So we did $80,000 last year or it ended up like...actually ended up doing about under $90,00 last year.

Pat: That sounds about right.

Scott: It's perfect. Yeah. And you ran the numbers. Yeah.

Leslie: Yeah, ran the numbers.

Scott: Yeah. I was just doing a... You probably can't convert quite as much this year because the interest you're receiving on your cash is much greater than it was last year. So, that will have...

Leslie: Right. Darn.

Scott: ...some impact. So, the question is, Pat, it is... So, there's two things. Do you, one, just continue the Roth conversions in that tax bracket or do you go up? Which I don't think I would.

Pat: I defer.

Scott: I think I would do just what you're doing for the next few years and defer Social Security.

Pat: That's what I would do.

Scott: That's what I would do.

Leslie: Okay. And...

Scott: And you're making a bet on a few things.

Pat: What's the distribution from the inherited IRA every year?

Leslie: Six thousand dollars.

Scott: You'd be making a bet on... I'm just thinking even... I mean, you're making a bet that Social Security is always gonna be there for you if you're deferring it at that same level.

Leslie: Yeah. And that's I know something you both have talked about, so that had got me thinking more, "Should we just get it started or where do we fall into the categories of people that should get it started or not?" before I can kind of fall in between...

Scott: I might actually convert a little bit more. I might convert a little bit more. I might convert some up into the 22% tax bracket if I were in your situation.

Leslie: Okay. Do you have a general ballpark game plan for... Is there a percentage of Roth of the whole portfolio that makes sense to have a...

Scott: I mean, in a perfect world, every retirement dollar you have is in a Roth because it's tax-free.

Pat: But that is a...

Leslie: Right.

Pat: If you had a third there, you'd be happy as heck. It's really about the tax arbitrage. That's what you're trying to take advantage of, right?

Scott: Yes.

Leslie: Yes, exactly.

Pat: Against the required minimum distributions.

Leslie: Mm-hmm. Exactly.

Pat: And you have the money in the cash, the brokerage account, to actually pay the tax on it. I would do it... I don't know, Scott, if I would go to the 22%, but I most certainly would go to the top of the 12.

Leslie: [crosstalk 00:17:42] as well.

Scott: We're just making numbers up.

Pat: Yeah.

Leslie: Yes.

Scott: Truly, if I'm in your situation, I'm gonna run the numbers and I'm gonna say, "Based on some assumptions, what's this gonna look like for me when I'm 70, 75, 80?" And then you can make a truly educated guess.

Pat: Whether you should far [inaudible 00:18:04.338] you have any you should go into the next highest tax bracket.

Scott: Because you might choose just to turn on your husband's Social Security right away.

Leslie: Yeah. I mean, I would love to just get your perspective on that because...

Pat: Well, you know, you...

Scott: I mean, you've heard us talk before.

Pat: Call our office. I'm gonna put it straight out there. Call our office. Talk to an adviser. They'll charge you for a financial plan and they will answer your question spot on.

Scott: And you'll get some...

Leslie: Yes, understood.

Pat: They're gonna charge you... Them being us. We'll charge you for a financial plan.

Scott: Answer these questions.

Pat: And we will answer the questions to the penny.

Scott: Hey, Leslie, appreciated the call. Let's talk with Chuck in California. Chuck, you're with Allworth's "Money Matters."

Chuck: Hello, Scott and Pat.

Scott: Hi, Chuck.

Chuck: Thanks for taking my call.

Scott: Sure.

Pat: Yeah.

Chuck: Yeah. Just a brief background. I'll be 65 in October, lord willing, of course. And I retired about a year and a half ago. And then in January, I closed out a defined benefit plan. And the positions were sold, it was liquidated and the cash was transferred to my traditional IRA.

Pat: Were you self-employed?

Chuck: I was, yes.

Pat: Okay.

Chuck: Yeah. In the construction industry. So, between that transaction and the sale of a rental home last year, I find myself with 50% of my portfolio in cash.

Scott: All right.

Chuck: So, total portfolio...

Pat: And then you've watched the market take off this year and skyrocket.

Scott: And it's just been...

Chuck: Well, in January, you know, everyone... Well, not everyone, but the majority of the talking heads were saying, you know, recession, third-quarter interest rates will wind up dropping. Obviously, that hasn't...

Pat: So, let me ask you a question. So, your DB plan, how much money was in the defined benefit pension plan?

Chuck: It was one point... It was just over a million.

Pat: Okay. And that money was allocated, I assume, 60-40, 65-35, something along those lines?

Chuck: Yeah. It was actually 30-70, but...

Pat: It was 30-70. And how long had it been 30-70?

Chuck: Yeah, for about a year.

Pat: And what caused it to be 30-70?

Chuck: Well, that was emotions.

Pat: Okay. All right. I'm trying to level set. And what were the proceeds from the sale of the house?

Chuck: That was about, close to 5... It was $500,000.

Pat: Okay. And so the million dollars that was in the DB plan got moved into an IRA and the sale of the house got moved into a brokerage account. Correct?

Chuck: That's correct.

Pat: Okay. All right. And so, what's your question for us? And what is the other assets? So, that's $1.5 million. I have another question. How much money in addition to that is there out there?

Chuck: Well, in my IRAs, I have about...almost $2 million.

Pat: Including the $1 million that just came in?

Chuck: Yeah, yeah. So, about $2 million in IRAs and then around $800,000 in a brokerage account.

Pat: Okay.

Chuck: And overall, I'm sitting with about 50% in cash, and so I've spread that out in 6 CDs, which, you know, I'm planning for a 25-year horizon. So, given that cash is a drag over time, you know, 5% feels attractive right now. But I'm looking at when these CDs come due, over the next eight months, my question to you is, dollar cost averaging... as they come due or as they mature, you know, investing those, does eight months horizon seem reasonable or should I spread that out?

Scott: Well, dollar cost averaging is not a method we use to increase returns. If it did, then every time you're invested, you'd say, "Let's get it out of the market again and let's go dollar cost average back in." Right? So, it's designed to minimize the swings and to give you a little comfort if that's what's needed, you know. Because markets go up more than they go down, most of the time, you're better off just jumping in. But you got these CDs, so my only question is, how are you gonna put your plan together now so that the next time things look stormy, you don't reduce your stock exposure?

Pat: He's gonna leave it, Scott. He's got to leave it 50% equities and never go above that.

Chuck: No. Actually, I'm looking to go 60-40 overall.

Pat: You can if you want. You can if you want.

Chuck: I'm sticking with 60-40, but... Go ahead.

Scott: Do you have an advisor?

Chuck: Yes, I do.

Pat: What did the advisor tell you?

Chuck: Well, he thought that, you know, as these come due, you know, put them into the market and look at my reach the 60-40 overall allocation.

Pat: Well, I agree with your advisor, but the mere fact that you changed your defined benefit plan to 30-70 is the thing that actually questions whether you're gonna stay the course or not.

Scott: Yes.

Pat: It's not the portfolio, it's you.

Chuck: Yeah, yeah.

Pat: Right?

Chuck: I get that. And I'm looking to stick it out for the long haul.

Pat: How many times have you done this in the past?

Chuck: I haven't really. I have made a couple of changes a number of years ago and... Yeah. So, it's not...

Pat: Okay.

Chuck: The 30-70 was a reaction and I saw that and...I saw that that was a mistake.

Pat: And part of it was driven by the fact that you were just getting ready to retire and you thought you...

Scott: Yes, for sure.

Pat: ...needed the money and there's an emotional state that you were going through.

Chuck: Yeah. Sure.

Pat: Right?

Scott: It's not uncommon.

Pat: And especially if you're self-employed, it becomes difficult, like, part of your identity is tied up in your business. Right? Does any of this sound familiar?

Chuck: Yeah. No, that's correct. I was just looking to...

Scott: I like the concept of you taking the CDs mature, use that cash to build the proper portfolio.

Pat: I like that.

Scott: And if you've got an advisor that you trust and you work well with, then I would follow that advisor's advice and figure out a way so that when the next storm comes, you can say...

Pat: Because what ends up happening, typically, people take a temporary decline and turn it into a permanent loss. But, look, if it's 50-50 or 60-40, you'll be fine either way. But the most important thing is to build a portfolio that you're gonna actually...

Scott: Live with.

Pat: with. And actually, as soon as it gets overweighted, you're gonna let the advisor actually bring it back down into tolerance. So, I like the idea of Scott, once the CDs come due, rebuild the portfolio the way it should be, and let it live.

Scott: Take a quick break. Stick around for more Allworth's "Money Matters."

Announcer: Can't get enough of Allworth's "Money Matters?" Visit to listen to the "Money Matters" podcast.

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

Pat: Pat McClain.

Scott: Hey, before we go back...

Pat: Scott?

Scott: What?

Pat: Sorry to interrupt, but...

Scott: I'm pretty used to it.

Pat: You should be, it's 30 years. We have a Social Security workshop coming up.

Scott: Correct.

Pat: And I said, you know, we should read this promo right after this phone call from Leslie that happened...

Scott: You did state that.

Pat: ...because she had all these questions about Social Security, and where did we finally end? Well, you've gotta do the numbers. You've gotta do the calculation. And I said, "The marketing people want us to promote the Social Security workshop." This would be a perfect segue into the Social Security workshop because many of the listeners are thinking the same thing. "When do I start it? Should I do a Roth conversion?" And at the end of that call, we finally just said, "Well, this is what we'd probably do, but you have to run the numbers."

Scott: Yeah. And then you pitched our firm, which was...

Pat: I did.

Scott: [crosstalk 00:27:08.582]

Pat: I don't do that often. But look...

Scott: That was good. Yeah, I get it.

Pat: We do make a living giving financial advice. That's how we get paid.

Scott: That is correct.

Pat: And I'm not embarrassed to...

Scott: No, of course not. I think what we do adds tremendous value in people's lives.

Pat: And that people...we should have...if they so desire, avail themselves to hiring us on a one-time basis and an ongoing basis to... But if you're not that person that wants to hire us, come to the free Social Security workshop.

Scott: Regardless. Because, look, the more educated you are, the better decisions you're gonna make. Right? If you're dealing with a major medical issue, you're gonna wanna find the best doctor, but you're probably gonna wanna do some research as well.

Pat: That's...

Scott: Right? So you know the questions asked.

Pat: So, come to our website, take it for free. Come to the Social Security...

Scott: It's a webinar. "Five Steps to Unlocking Social Security." And what you're gonna learn, the Social Security questions many never ask, but need answered. You're gonna learn ways to use your benefit to create a retirement income. You're gonna learn some smart taxation strategies. And you're gonna learn some possible legislative changes that could impact your retirement age and spousal benefits. So, the Webinars, Tuesday, September 19th and Thursday, September 21st at noon. Again, Tuesday, September 19th, Thursday, September 21st at noon. So, if you wanna do it middle of the day, noon, or Saturday, late morning on Saturday, September 23rd, at 10:00 a.m. Wanna learn more or sign up? Go to

Pat: And that's Pacific Time.

Scott: Pacific Time. So, there you go.

Pat: Yep. Attend or don't. But it's free.

Scott: Or don't. What do I care? All right. So, before we go back to the phones here, we're talking with Blake Davelaar. And Blake is one of our advisors in the...he's in our Tucson office. And he's gonna talk about a situation he dealt with a client. So, Blake, thanks for being part of the program today.

Blake: Pat, Scott, good to be here. Thanks for having me.

Scott: Yeah. And by the way, gimme... I love stories like Blake because he's one advisor that started... I believe you started as a college intern, right? So, studied finance. Give us a quick background of your journey into this field.

Blake: Yeah, sure. This is the only real job I've ever had besides reffing basketball in high school. And by the way, this is a much better job for me than being a basketball ref. So, I started at 20 years old as an intern with Brian here in our Tucson office and was fortunate enough to get a full-time out offer after being an intern for 2 years, and I've never looked back. So, it started out in the back office, running a lot of those Social Security analysis and crunching all the numbers, as you guys were talking about a little earlier in the show. And now, I'm doing it in front of clients, with clients, and helping them navigate the complexities of financial planning and taxes and all of these decisions that we deal with day in and day out. And you can say I hit the lottery in terms of finding a good career.

Scott: How many years now you've been with the organization?

Blake: Eight years.

Scott: Okay.

Pat: Perfect.

Scott: I mean, I love younger advisors like this for a number of reasons. One, our clients love it because...particularly if they've been with an advisor for years, the advisor starts getting up in age and then they start thinking, "Wait a minute, what happens when my advisor retires?" Like, anyway, we're glad you're part of the team. So, tell us about the situation that you encountered.

Blake: Yeah, yeah. I came today with a story of what happened just a couple of months ago here. And this is very common, I would say, with new clients that show up at our door either from a referral or they found us online or however they got into our office, they're typically there for a reason. And this client had 10 accounts, different IRAs, different taxable accounts, a couple of Roths, a couple of annuities, but the accounts were spread across 5 or 6 different financial institutions, you know, insurance companies, a couple at a bank, a couple at a large discount brokerage shop, you know, all over the place. A couple with asset managers. It was just a complicated mess, and they had no idea how any of the accounts were really being invested. And it was pretty clear, off the front end, that there was no cohesive strategy whatsoever.

And they had some big life changes that were happening, which I'm happy to get into, that caused them to really wanna take a step back and look at their priorities moving forward here in retirement, spending more time with a couple of family members dealing with some health problems. So, they wanted to be able to travel more to visit their grandkids and help their family through this difficult time. And they were wondering where to go get the money. And it was a big complicated mess, but it was a really good example, I think, of kind of the level of work that we can do diving into these different accounts, how they're invested, the tax implications.

And lo and behold, here we are in almost September now and they're in three accounts at one firm with a cohesive strategy. And, you know, it's just a joy for me to see the relief on their face after our last meeting, them walking out of here knowing that they have the freedom to go do this and they know exactly where the money is gonna come from, what the impact is gonna be, you know, we covered the taxes, all of that. And it was just a great example of some of the peace of mind and confidence we can deliver. Because they have the assets, they just weren't sure how it all fit together.

Pat: So, Blake, did you have any kind of... Did they just go through and collect investments over life? Is that how it worked? Like, they ran into someone and someone said, you know...

Scott: They had a 401(k) rollover and they talked to someone here [inaudible 00:33:17.281] invested, "This is a great product."

Pat: And then here and here, and is that how it worked?

Blake: Yeah. Salesman here, salesman there. You guys have been in the industry a long time, you know, so, old 401(k) over there, an inheritance over here, a couple of annuities that they purchased 15 years ago that pretty much went nowhere for the better part of a decade. So, yeah, they had assets spread across God's green earth and different financial institutions and just had never really...didn't really have a relationship with any one firm, right? They didn't really have a true advisor, in my opinion. They had a bunch of investment advisors, maybe, but nobody who really could answer these questions that they had around income and travel and where they're gonna go get the money to go rent a townhome for three months to go visit family and stuff. And so they really needed somebody to dive into it and answer those questions.

Scott: And so, Blake, they didn't...oftentimes people come a couple of years before retirement, right? It's the same kind of thing [inaudible 00:34:12.914]. So, was this a retirement plan that they came to you for or was it... You can kind of change some of the facts to keep some anonymity, but...or was this a health issue with a family member?

Blake: No. So, they've actually been retired for a few years and they've been living off of Social Security and some required minimum distributions from a couple of those old 401(k) accounts. And they were...

Pat: So, they were in their 70s. They were in their 70s.

Blake: Yes. Early 70s. Yep. Yep. And their big thing was, how do they go get a townhome in Denver? Because their daughter-in-law recently was diagnosed with some pretty serious health problems, and so they wanted to go help their son and their daughter-in-law with some of the childcare and other responsibilities...

Scott: Sound like wonderful people.

Blake: ...and just be close to family. So, how could they go get a townhome, the way, the real estate in Denver, as we all know, and the mortgage rates, etc., have gone through the roof. So, that was their big concern was, you know, how are we gonna be able to afford this? And we ended up landing on, like, a kind of VRBO-type situation to where, you know, maybe with this additional income that we can get from your investments when we have it all together in one place, you know, maybe you go do a VRBO for three months and then come back and kind of go back and forth that way. And, you know, you don't need to go out and buy a $700,000 townhome. Let's kind of take it one year at a time, one month at a time. And it seemed to really resonate with them to go with a strategy like that.

Pat: I actually...I have made this very same recommendation to clients who were like, "Oh, I need to buy a house there." I'm like, "You probably don't wanna buy a house there. You probably wanna rent in the time periods that you're there." So, what made them seek you out? Were they referred in? Did they find us on the Internet? How did they end up coming to Allworth?

Blake: They found us on the Internet, which...give them a lot of credit in their 70s poking around trying to find a local advisor. That was important for them to work with somebody that they could meet face to face and sit down and go through all of this together. So, they found us online and... Yeah, met with them a few times to kind of, you know, the lot 10 statements and going through the whole analysis process, looking at cost basis, had some annuity analysis done. But yeah, we were able to really consolidate it now. And, you know... I think the big thing too is that they had some annuities over here that were doing, you know, 2% guaranteed return and then they had individual stocks over here with an asset manager. So, there was, like, different risk profiles all over the place. And there was no cohesive strategy whatsoever. So, in order to generate income, it's like, well, you know, as you guys know, if you have accounts all over the place doing different things, it's really hard for somebody in their 70s to know, like...

Pat: Anyone.

Blake: ...what's the best place to go? Yeah, exactly.

Pat: And did they know what their net worth was before they visited you?

Blake: You know, on paper, yeah, they had the values and stuff, but that was about the extent of what they knew. I don't think they really understood how it was being invested.

Pat: It actually reminds me of... You know, I've been doing this a long time. About 27, 28 years, a lady showed up in my office with a box full of paper stock statements saying, you know, "I've gotten these over these years..."

Scott: Those dividend reinvestment plans?

Pat: Well, I looked at her tax return and I said, "I think you own about $150,000 in stock. Where's it at? Just based on the dividends." And she said, "How do you know that?" And I said, "Well, just backwards. This is the dividend and these are the companies they came from and I just did the math backwards. Where are they?" She came in with a box of stock certificates. And she said, "I had no idea it was worth that much."

Scott: That's hilarious.

Pat: Right?

Blake: Yeah. You're the best advisor on the planet there, Scott or Pat if you're pulling money out of left field.

Pat: Oh, God. I don't think it had anything to do with me but thank you. Thank you. I'll take that.

Scott: Hey, Blake, thanks for taking a little time and sharing the story. And thanks for being part of Allworth.

Blake: Yeah, you bet, guys. Thanks for having me on.

Scott: Yeah. You know, it's interesting, Pat. So, at the start of this program, I talked about the couple in our office who had the college kid who wants to be a financial advisor and started talking about buying and selling stocks, right? And so, like, the reason...what I like about Blake's story here is... And one of the things we talk with our advisors... We have a hundred or so advisors at Allworth. It's the ongoing guidance. It's the financial planning, investment management, but it's the ongoing guidance for when life happens, whether it's external, the markets, or internal.

Pat: Changing your life circumstance.

Scott: Something in your life. So, this is a prime example, something that you don't plan for. Suddenly it's your child's spouse with a major health issue that you're like, "Why don't we come alongside and help as they're going through this season?"

Pat: What's interesting about this is that was the life event that actually caused them to seek out a financial advisor. The financial advisor wasn't already there. They had collected all the assets. So, I think about all the years that they missed out on where they could have been doing Roth conversions or...

Scott: Or could have been in just such better shape and had much more confidence in their finances.

Pat: Yeah.

Scott: And I think, Pat, people, they avoid our profession because there's so many lousy...

Pat: Do you blame them?

Scott: Unless they know someone to go to talk to, I can understand why they stay away from my profession. Yep. So, we have a bad reputation and it's well earned.

Pat: Yes.

Scott: As lumping Wall Street or investments or whatever.

Pat: And the average consumer might not be able to tell the difference between us and Wall Street. Who knows?

Scott: Yeah. Anyway. Again, glad to have Blake on. Let's take some calls now. We're in Texas talking with Pam. Pam, you're with Allworth's "Money Matters."

Pam: Hi, guys. I'm in Dallas, Texas right now.

Scott: All right. Good. [crosstalk 00:40:32.742] here in Dallas.

Pat: I was there last week. It was warm.

Pam: It's 104 right now.

Scott: Nice and cool.

Pam: Okay. Y'all are on the line.

Scott: We are. What can we do to help?

Pam: I'm your sister or your mother.

Scott: All right.

Pam: I have some...about to retire. My husband's retiring a year before I do, 9/11 this year. Our second thing is we have two homes paid for, so we're gonna sell one and move to our lake house. And I'm gonna get probably $0.5 million off that house.

Scott: Okay.

Pam: What is the best plan...? Because I want to also move... I'm not real happy with where our money that's been growing over the years is. It's like with Edward Jones' office.

Scott: Okay.

Pam: So, of course, they've, you know, been in the tank for a while. And so we're looking to move that money.

Pat: Wait, wait, wait. Slow. Slow. Slow.

Scott: It's been in the tank.

Pam: Okay.

Pat: It's been in the tank for a while. Like, what's a while? Like, the last six months?

Pam: It started in '22.

Scott: Yeah. But have you had some recovery this year?

Pam: Well, it has recovered some, but it has... I think we took about a 30% hit on that and it looks like it's up about 20 since then, so...

Pat: Okay. All right. Well, then your statement sounds correct. It doesn't sound like a very diversified portfolio. Okay.

Scott: So, you have an advisor that you've been working with that you don't... You think it's time to find a new one?

Pam: Yeah. Yeah. And so, just what's the steps? What do we need to do? Do we need to interview people? I don't need to make big gains, I just don't like losing money.

Scott: And are you...

Pat: Well, are you comfortable with the idea that you have enough money to retire comfortably?

Pam: I mean, I can't... I guess so, yeah. So, I'm a realist of...

Scott: So, Pam, you're my sister. Here's what I'm gonna tell you. First of all, if you head into retirement with a strategy saying, "I never wanna see a decline in my portfolio," unless you have tons of money, you're gonna run into a problem with inflation down the road. So, I'd say you're gonna have to get comfortable with having some piece of your portfolio fluctuating value, which means that at some point in times it's going to go down in value. You're gonna have to get comfortable with that.

Second, find an advisor that you can trust to the point where when you wanna do something to your portfolio that's not gonna be helpful, they will say, "Pam, you don't do that. That's not gonna be good for you. Follow my advice on this instead." You need that kind of level of trust. And I would find an advisor, one, by maybe asking some... I would interview three.

Pat: Scott, you would actually pay for your sister to have a financial plan done at Allworth. That's what you would do.

Scott: Well, of course, I would. Yeah. But I'm trying to act not so...

Pat: No, no, objectively. But she called and Pam wants to know, I'm your sister, I'm your mother, what should I do? And the answer is, get a financial plan done.

Scott: And the plan will say, "Look, here's what your retirement's gonna look like, here's where your income's gonna come from, here's when you consider to take Social Security, here's what your taxes are going to be, here's some steps to minimize those taxes, here's how your portfolio should be allocated."

Pat: Here's how much money that you should be taking out a month. Is that enough for you to live on? Yes? No? Too much? Those are what it's gonna ask. It's gonna ask you a bunch of questions and then answer it. So, essentially, it's a road map. It is a road map, a retirement plan. And by the way, the retirement plan, the minute it's done, it's obsolete. But it doesn't mean that...

Scott: Because the market's changed.

Pat: Yeah. And you changed, but it doesn't mean that it didn't have any value. It gives, this is. So, if you added up all your assets, everything you owned, including the $0.5 million from the sale proceeds and the sale of the home, how much money would you have in your suitcase, if you added it all up?

Pam: Well, if I took all my money that's invested with Edward Jones and then the house I'm gonna sell...

Scott: That's right.

Pam: We're bumping at a million. And then our lake house is about another $0.5 million.

Scott: Is the lake house paid for?

Pat: They're both paid for. Correct?

Pam: Yeah.

Pat: So, you'd have $1 million. You'd have $1 million. And how much money do you think you need to live on in retirement?

Pam: Well, I think our Social Security will bring in about...before they take out for Medicare, the growth is about $7,500 a month.

Pat: Okay. And how much money do you think you need to live on?

Pam: I really don't need much more than that with everything paid for.

Pat: Perfect. Yeah. Go get a financial plan done.

Scott: Well, we are out of time. It's been so great being here with you. We'll see you again next week. This has been Scott Hanson and Pat McClain at AllWorth.

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.