Total Wealth Care™ Explained | How the Wealthy Protect & Grow Their Money

Video Transcript:

Howdy folks. Welcome to yet another edition of our podcast Smarter Money Matters with the Wealth Doctor Jeff Camarda. That’s me and our super CFPs Lou and Anna. Thank you so much for joining us. Today’s topic is total wealth care uh strategies for wealth creation and preservation that get results uh or total wealth care explained that some of the advanced techniques that the wealthy use to protect and grow their money. And uh when we talk about wealthare, total wealth care, some of the buzz word buzzwords that come up are wealth management, asset protection, avoiding financial mistakes, how to protect your wealth, uh estate planning and estate planning mistakes, wealth creation, and um and really fiduciary investment advisors. So, we know we’re going to be talking about what Kamarda Wealth’s definition of total wealth care is. Um, but this is really not intended to be a pitch for you to become our clients. And many of you watching already are our clients. Uh, of course we we we, you know, we talk about that if you want, but it’s more, you know, what you as a wealth holder, we think you should look for in terms of getting spot-on wealth management advice. um and and also for other advisors to learn from, you know, and to augment their profiles because we think it’s really really important information to help better serve your clients. So, without his background, I hate to put you on the spot, Anna, but tell me what, you know, what does total wealth cure mean to you? I think, you know, to me it means looking at our clients and their financial situation holistically, not just looking at investment management, which is common with a lot of wealth advisory firms, but looking at taxes, estate planning, risk management, all these different factors that factor into their situation that can be extremely impactful if not handled correctly. Very well said. And Lou, do you have what would you like to add to that? Yeah, I mean very similar to to what Anna just stated. I mean it’s just looking at all the different areas of of someone’s financial situation um outside of their investments. Not no including their investments, but there’s there’s a lot of different areas that people care about and that we can help them in outside of just managing their money. Yeah. Well said. I kind of call it like total wealth quarterbacking to take the big picture, you know, look at how all the pieces interact because they most all affect each other. You know, portfolio management and taxes and asset location planning. Should I have that investment in my qualified tax deferred um IRA or 401k or in a taxable account as asset location planning? How do the taxes play into that? And they’re different. estate planning, what’s you know, how can I reduce my taxes because I own a business or I’m a real estate investor. And then that enables me to make more effective and cheaper Roth conversions to take tax deferred money in a regular IRA and make it tax-free. There are so many moving pieces and it’s unfortunate, you know, in our experience that, you know, in order to get to that level of mastery, you really got to study a lot, you know, and Lou and and and Anna are both CFPs, which is a great program. You know, I did it, I think, back in the 90s. Um, but in my view, it’s kind of the foundation. And the CFP, which most advisors still don’t even have, is the foundation for the beginning of really building advanced wealth knowledge in tax and a lot of other domains. Um but when you get it right and things really support each other, you know what’s common is I’m sure you have you know typical uh investor say um has got an investment manager or investment advisor, maybe they have a broker, maybe they have another investment advisor and then they’ve got a life insurance agent that sold them some whole life insurance for reasons and they have a an attorney maybe that does their their investment rather their their estate planning and then they have a tax advisor and these These guys kind of are all float out in space, you know, and you don’t really know what their level of uh of competence is or expertise and do they talk to each other much? Do they coordinate? Do they understand what the others are doing? Uh do they trust each other or they kind view them as competitors and they become garden? And really, it looks like you got a couple of horror stories that that you could share. I hate to put you on the spot, Anna, but um is do you find that’s common, you know, in your past, you know, advisory life? Yeah, definitely. I mean, even trying to get on the phone with a client’s other expert, right, get on the phone with their CPA or their lawyer, right, to make sure, you know, we’re all on the same page, it’d be increasingly difficult sometimes. and and you know, makes you wonder, right, is that other professional looking to get more of the client’s business because they’re not willing to to have that holistic conversation. Now, here at Kamarda, when we can be on the same page with all of the clients experts, um it makes it very easy to make sure that the planning that I’m doing with the client matches their tax profile, matches their estate planning, and then when we periodically check it out, make sure it’s still sufficient. Um the, you know, clients can be feel comfortable knowing that it’s all holistically intertwined. Good point. And a good example. I’m sure. No, I was going to say a lot of those answers when they work, you know, when we all have it under one roof, is just a phone call or email away or you just kind of get up out of the office and then walk down the hallway and talk to the tax professional, you know, give the call to the here with us. Yeah. So, our total wealthare, you know, which we’ll get into a little bit, the way we is, you know, we do the planning on all areas, estate planning, tax reduction planning, asset protection planning, retirement income planning, investment management, you know, and a lot of other things we’ll talk about later on. So we have the big picture and we have what we think is a really really good eye for how things interconnect and can be optimized. Sure. But a lot of times for instance you find you know LLC’s Florida LLC’s if they’re properly constructed are very strong asset protection vehicles you know the ones you come across are they frequently not properly constructed? Most of the time if if clients do them themselves like you know you can go on on on Sunbiz and create an LLC yourself. usually those don’t they they don’t have the the right operating agreements uh around them in order to make them protective to to to protect the asset just LLC and even those that are formed by CPAs and attorneys a lot of times because you know you know asset protection which is really real important that’s protecting your assets from lawsuits and creditors you get in a car wreck you know with a football player or a wealthy you know business person that that makes a lot of money an entrepreneur and say they’re out you know the lost income is 510 $10 million low probability could happen Okay. After your whatever your insurance will pay, your liability insurance and hopefully you have an umbrella. But after that, your assets, many of them are exposed. In Florida, your home is protected, your homestead, IRA, and 401ks are protected. Some insurance products are protected, but joint accounts, accounts in just in your name, bank accounts, they’re on the table. They’re right here. If I’m coming after you, that’s really lowhanging fruit to pick up and using a a limited liability company properly constructed, which which has got to be what? Can you have one owner? No, it has to be a multimember multimember. Um, yeah. And then it’s also got to have the right, you know, the language in in the in the documents, the founding documents, the operating agreement in order to um comply with the Florida Supreme Court decision called Mstead. But if you don’t have those those two things working for you, the LLC is worthless. And we see a lot of these that are set up, you know, by attorneys and and and and CPAs and others that probably haven’t even studied asset protection. That’s an arcane art, I can tell you. all my studies, my PhD, my my my masters in tax law from Georgetown, the CFP stuff. Did you come across asset protection in a modern CFP curriculum? Not really. No. You know, it just it’s kind of off the radar, but so important. And there there are there’s a very small set of professionals that understand how to do it. But a lot of times, you ought to get an LLC, but you know, may or may not work. It might protect, you know, a bottomup attack for if you get sued or if the company gets sued because a crane fell on somebody that that that keeps it from going after your assets, a corporate veil. But if somebody sues you because you hit them with your pickup truck, um, and then they get a $10 million judgment. Everything you own that’s exposed top down attack is is on a table. And the right LLC is very powerful medicine to protect against that. Right. Sure. I don’t mean to go off on a tangent asset protection. We have know a lot of podcasts and YouTube videos and a lot of resources on komarda.com cam a rda.com if you want to take a look at that stuff. So in terms of putting it all together and this is just our program that that that me and my team has developed and refined over decades really. But the way we look at it is total welfare really comes down to first of all quarterbacking. Having a team that understands all these different domains intimately, tax and estate plan, asset protection, retirement income funding, you know, investment management, business and real estate investing to put it all together, your unique fact pattern to look at the big picture, come up with what we call a comprehensive wealth 360 plan. Something that all these are all the opportunities you have. These are the things that are important to you. How do we best fit them together in order to target the best financial results for you? then do quarterly wealth coaching and we’ll talk about that in a minute where folks like Lou and Anna and and their team are you know in frequent touch with clients saying let’s talk about asset protection this quarter it’s time to update your estate plan look at your beneficiaries and have you know a regular coaching schedule to make sure you get on track and you stay on track because everything changes every day that’s just the way life is that includes custom portfolio management um using downside side protection strategies if you’re concerned about protecting wealth from a bare market and those of you that are in or near retirement really should be you I talked to a fell yesterday a retired just retired doctor um about $8 million liquid and I’ll call call him Roger and I said Roger know you’ve done really well but you got a pretty risky portfolio everything the standard deviation which is a risk measure is well beyond the average of the S&P 500 you want to keep rolling the dice in retirement and maybe see a drop like we saw NASDAQ drop uh um in the early 2000 and lose was 80% I think NASDAQ went down 78% that would kill you right at this point why screw around with that you got plenty of money it makes sense probably take some risk off the table or do some downside protection um also looking at legacy stock positions you know a lot of folks and he’s one of them have stock have stocks they’ve had for a while that had the damn big gains in them, right? And if you go to some advisors, they have the trading account, sell everything, recognize the gains, you got a big tax bill. You probably have seen that in the in your past lives, both of you, you know, and do you need to do that? Maybe it makes sense to hang on to someone who’s position, come up with a long-term plan to minimize the capital gains tax, you know, reviewing estate plans um that look at the way your trust is constructed. Does it have protectors and are the continuing trust of the grandchildren? And these are both features that frequently trusts that we our legal team examines um that don’t have and need. You know, are you have you found a way to avoid probate and guardianship? Um asset protection like we talked about earlier. Do you have investment real estate? And and Lou, I know you have a lot of clients that they have large investment real estate positions. And what are some of the challenges and opportunities that you’ve discovered with some of those guys and ladies? Uh well, for one, making sure that they’re, you know, investment real estate is protected from from, you know, lawsuits and and creditors and so on, but also um you know, trying to offer them different strategies in terms of reducing potentially reducing their income if they qualify towards certain um what’s called a real estate professional. So using real estate basically because of the tax opportunities as a real estate investor, you’ve got the opportunity to really save a lot of money in income taxes if you’re careful with your bookkeeping. You don’t miss any tricks and there’s a lot of things that you can take advantage of if you think of them or have an advisor that by the way you know you have, you know, are you optimizing your depreciation? Are you expensing things you could expense instead of depreciating them? you know, and uh and you have the right fat pattern to make those currently deductible. Sure. But I think where you were going is that if you have, you know, if you opt if you if you do it right, real estate can be a huge way to reduce income taxes. Yeah. Absolutely. Right. Which let you do a lot of other stuff. Pay less on your W2 income maybe or or do Roth conversions or recognize capital gains. You got that stock you paid $100,000 for. Now it’s worth half a million. You got a $400,000 gain. If we can soften that with with paper losses on real estate, maybe it’s not so painful to get out of something you should get out of anyway, right? True. That kind of stuff. And also business consulting and liquidity event planning. So Ann, I’m going to, you know, let you talk about some of these items because I’m getting a little dry in the mouth here if you don’t mind. No, no, no problem. Um, you know, another thing that that we do with the holistic planning is having a financial plan and updating it, right? So, as clients move through life and they move through different life stages and changes, we’re able to update that plan. Um, and we do that through, you know, helping them with retirement income and budgeting, right? is someone’s leaving that accumulation phase when they’re working and then they’re shifting into retirement. Um, you know, helping them build out a budget so that they kind of know how much money they’re going to need. Um, we can even, you know, run analysises on Roth conversions, social security, all these different planning items that again we can continue to revisit um, you know, whenever annually with the clients. And then you know something big that you know gets swept under the rug by a lot of asset managers is liability, risk management, insurance, uh those types of things as well, which we cover at least annually with our clients. Just making sure they have the right amount of coverage with life insurance, umbrella, um those types of you have the right car insurance, you have the right, you know, is your homeowner’s pol. And we don’t sell insurance, but we’re strictly feeding fiduciaries. We know a lot about it, but we’re not looking to sell insurance that you probably don’t need just to make a commission to advise you on proper risk management, which is a really big difference. Y but you have the right say that you know your house has gone your your your homeowners policy has a maximum of $300,000 and your house now worth $600,000. When I did my CIP studies back in the 90s, you reach a limit to where it’s not going to go ahead unless you increase the coverage limits. You got a little bit of slop in there, but not double. and then the house burns down, you lost 600,000, you get a check for $300,000, you’re unhappy, stuff like that. And looking at all these moving parts for risk control, you know, is important and complicated and really beyond the scope of what what most folk did from their adviserss. Yeah, absolutely. I mean that’s that’s one of the reasons that it’s important to work with a you know fee only advisor that that’s going to give you objective advice and not try to lead you down a path that may be benefiting you know to to what their pocket at the end of the day. So yeah it’s all all all about what’s best for the client. That’s, you know, the the really the the purity of the fee only fiduciary approach. And there’s two and we’ll talk about, you know, how to find screen for advisors that know what you’re doing, you could trust in a in a later episode. Um, but you know, those the two critical things in my view are are they feeling like you know what you pay and the only source of income the advisor has is the fees that you pay them for advice. They’re not trying to recommend this annuity. or um a life insurance product or this investment or a stock on a commission that benefits them as well if you if you transact because then it taints the advice and human beings are greater rationalization. Hey, I made 15% on an annuity and it’s good for you too. What does that mean? You put a million dollar in an annuity, if my commission’s 15%, $150,000 of your money goes into my pocket next week, you’re only left by with 850. It could not be otherwise, right? the the paperwork make that the insurance company will give you will make it really really hard to discern that the account value the surrender value this value that value it kind of gets lost in the jumble but the the the cruel math is if you gave a million and he got 150 there’s only 850 left and that kind of stuff happens all the time you don’t have those conflicts and concerns with somebody that’s a fee only advisor feebased by the way means you know what it means it means they can take commissions fees are just the the primary way they make money, but they can make it other ways. Yeah. What’s it’s it’s the most visible way. Fee fee base means fees plus commissions. That’s honest. Feb sounds like something different, doesn’t it? Uh so, you know, you’re paying me a small fee and then you don’t see the the all the money that they’re making on commissions. You kind of your guard is down. Uh so, fee only advisors, you know, number one. Number two, that they’ve got the confidence to know what they’re doing. just because you’re fee only. If you haven’t got much training, you’re probably going to drop a lot of balls because you haven’t got, you know, the bandwidth to really look at the big picture and properly quarterback it. And I’d like to get back to something that you were talking about earlier, you know, smarter retirement income planning. You know, retirement planning really is more complicated than most folks think. You know, the old Benan rule, we take 4% of the principal. You know, I’ll never run out of money and so forth. But you have, you know, the phases of retirement, right? You know, active, you know, young retirees and you have more sedentary, you know, and then your health care costs increase and you have, you know, final stage care for long-term care and and that sort of thing. So, you got to look at the different, you know, expense stages you’ll go through. Um, is there going to be enough money to pay for all that? And it’s a pretty complicated calculation to figure out, you know, the discounted cash flow. Now, this is coming in is what taxes are. This you have this pension so forth. Is there going to be enough? And what happens? I know that you guys are working on that women in wealth uh show that you were putting together. What happens when the husband dies first, which is the way to bet, right? Women lead longer, sicker lives. Yeah. Lower mortality, higher morbidity. But what’s going to happen to your your income? Are you going to lose the spouse social security? Is there a pension that goes away? you know, there’s these are important factors to make sure mama is safe and happy and secure and also optimizing social security, which is kind is kind of complicated. So, there’s a lot a lot of moving parts here. Um, and then of course, you know, there’s looking at risk management as as as Anna mentioned, life, disability, long-term care insurance, god forbid you have annuities, you know, what’s the best way to optimize those? Uh, and then also tax, estate, and legal. And the way we manage that, we offer those functions in house and and and perhaps some other adviserss do. Uh we have a legal team and a tax team and clients can use ours or we’re happy to work with them as as Lou was mentioned earlier, you know, very happy to work with a client’s um uh lawyer and tax advisor and so forth. And um it’s usually not optimal. In our experience, we found that, you know, because people are people and you don’t want to offend them and g whiz that shouldn’t be on a schedule C or there’s no there’s no protector trust and so forth, you know, and and often people are very defensive of their work professionals. Um, so sometimes it’s a little bit tougher road to hope, but that’s up to the client. We can do it either way, but we we find we typically get better results if it’s all one team including tax and legal. So again, not not to blow our own hood, you know, I want to emphasize this is general wealth education for the public and for other adviserss that would like to up their game. You know, we’re not looking for you guys to become clients. We’re happy to discuss that if you want to, but that’s not really not the primary objective. But the way we do it here and the only way I think you get stuff done predictably and maintain excellence, you can’t rely on your memory. You have to have a system. Now, we like to say that we use a Mayo Clinic type system that happens one here in Jacksonville and those guys have great systems and things work, you know, they’re not forgotten. So, our, you know, continuous wealth coaching calendar is really um the subdivided into four quarterly buckets. Lou, you want to take us through quarters one and two and, you know, what, you know, what what your team is required to do for each client on a quarterly basis? Yeah, absolutely. Uh so in quarter number one of the first quarter of the year uh we focus on on tax planning and and um um annual goal updates and so you know we’ll look at you know previous year tax returns that are you know going to be due at the end of that quarter. Um you know we’ll look at clients RMDs requirement distributions you for for again folks that are up you know in in the R&D age. Um we’ll take a look at capital gains any any strategies that we could optimize in terms of you know writing off losses and stuff like that. Um we we obviously would update their financial planning picture with you know looking at the the different goals and you know what’s changed in the course of of the year um you know from the last update and then we’ll also explore things like Roth conversions and uh any you know rent rental property business uh financial planning and so on uh in that first quarter. Uh so in Q2 or Q2 we focus on annual financial and retirement planning and goals progress toward goals and updates. Um and to do this we use pretty expensive professional financial planning software. You know there’s a lot of financial planning packages out there. Some are pretty mundane. You know they’re really glorified sales pitch programs. I think others require a tremendous amount of input but are able to do some serious crunching to render you know the comprehensive rigorous plan that that gives better insight into where you’re going where you want to go you know some of the things that you you focus on you help with budgeting so forth right what else yeah uh budgeting like you said uh stress testing their retirement income plan and and you know make sure that that folks are not running out of money you know through in their retirement um you know we look at different um you know life events such as you know someone going through a divorce or any you know major topics that that may be of interest um you’ll also address um Medicare and and health insurance and then optimize social security um and consider you know things like I said like I mentioned earlier like Roth conversions and and um different tax planning strategies that may be relevant and also looking at opportunities for backdoor Roth IRA conversions uh which can be a pretty slick trick if the fact patterns But wait, there’s more. It’s only half the year. What do we do, you know, when uh when July 1st comes, calling Anna? Yeah. So, in the third quarter, we review um you know, estate planning and beneficiaries, right? Making sure that things are set up for the client how they wish, making sure it’s current with your wishes as things change. Um and and that includes personal changes as well as tax law changes. Um, again, making sure that beneficiaries, account titling, everything matches how it needs to for your estate plan to to operate properly. Review powers of attorney, living will, healthc care, surrogacy forms, making sure they’re up todate and still align with your wishes. Um, verify that our clients are going to avoid expensive probate, which can be very expensive. um address guardianship risks, right? And and how to prevent a guardianship process if someone becomes incapacitated. Um review charitable giving, right? If a client wants to provide to charity, how is the best way to do so? Maybe special needs family members, children, grandchildren, college planning, that type of of gifting. Also talking about expected inheritances and and you know, estate management. And then lastly, you know, if clients, kids or other family members, you know, are open to it, we like to involve them in the conversation as well, just so when you know, things happen, when those people need to step in, they’re aware of what the planning is, which really key, you know, and encourage all of you to involve your family and potential trustees and your kids and so forth, so they know what’s coming, their input is going to be valuable, and also so they’re not left, you know, completely in the dark with a massive mess to solve. Um, and then as the holidays approach, what happens in Q4, Anna? Yeah. So, the fourth quarter, we do our annual risk management, asset protection review, and and you know, tie up any loose ends for the year. Um, specifically, again, asset protection, risk control, um, any accounts that might be exposed if if a creditor or a lawsuit was to happen, and then walk through steps on how to protect them. Look at liability, life, property insurance. Look at the policies like we talked about before. Is it enough coverage? Again, we don’t sell insurance, but can suggest to a client to look into, you know, additional coverage in certain scenarios. Um, you know, look at year-end tax planning, whether that’s capital gains, deductions, um, making sure we take required minimum distributions, and any of these other um, you know, financial to-dos that have a deadline of December 31st. And then lastly, you know, start working on on tax filing for the next year. Yeah. and then whatever you know last minute tax moves and optimize their position uh to to minimize tax for the year which is about to close. most clients are t calendar are taxpayers and you know the bell rings December 31st right so thanks guys that was an awful lot to churn through you know and uh I thank you all for your patience and going through that but you can see hopefully that um now what total wealth care done comprehensively to our vision is a very complicated process but it and yield results far far more than uh than a typical approach. You know, Vanguard did a study a couple of years ago. Um and uh um you know, even a paying for good advice, even after the cost of the advice, the the net worth at the end was like more than twice as much. Um, and uh, anyway, thank you so much for suffering through, as the Cart Talk guys used to say, yet another edition of Smarter Money Matters with the Wealth Doctor, Jeff Camarda, and Anna and Lou. Thank you so much for watching. Uh, and we’ll promise to have yet another exciting uh, episode for you next time. Thanks so much. Byebye.