Ep 56: Four Ways The SECURE Act 2.0 Might Impact You

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After being discussed in Congress for nearly a year and a half, the SECURE Act 2.0 passed in January. Listen to today’s episode to see what you need to know and learn four ways the new changes might impact you.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc: Welcome into another edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth. We’re going to tap into the SECURE Act 2.0, a couple of items you might want to be aware of if you’re not and four ways that it could impact you. They went ahead and got this passed at the very, very end of 2022, right before the Christmas break, and some more changes coming down the pike. A lot of changes really in the SECURE Act, but we’re going to touch on some of the bigger ones today. There’s a lot of little nuance, so if you definitely have questions around it, absolutely make sure you’re talking with your financial professional or reach out to John and Nick and have those chats with them at pfgprivatewealth.com. Nick, what’s going on buddy? How are you?


Nick: Doing pretty good. I can’t believe it’s already almost February.


Marc: Yeah, at the time we’re taping this, it’s like a day away. So we’ll be dropping this first week or so of Jan… or February, excuse me. Yeah, time is moving quickly, so, for sure. John, what’s going on with you, my friend?


John: Not too much. Doing all right. Looking forward to… Nick’s probably not looking forward to this, but the upcoming Super Bowl. Two good teams.


Marc: Yeah.


John: So looking forward to checking out those quarterbacks go at each other.


Marc: Yeah. Yeah, it was an interesting playoff season, for sure. So not the result I was looking for either, Nick, but all good. So…


Nick: Yeah.


Marc: It is what it is. But let’s talk about some of these changes, guys, because they did a ton of them, but I want to touch on some of the bigger ones and any other ones you feel are important you want to touch on as well. But like I said, right there before Christmas, literally like the Friday before Christmas, they went ahead and passed this as part of that omnibus bill, all sorts of stuff in there. And they went tinkering around with some more things. And the first one on the list that might affect most people is the RMDs, the age. They changed it again. So you can give us a little backstory if you’d like from how you want to go, with whatever angle you want to go in, but explain to us what they did.


Nick: Sure. So for many years, the RMD, or required minimum distribution age for pre-tax retirement accounts was 70 and a half. And at least… I was just personally excited when they got rid of the half year, because why in the world did they have it in the first place?


Marc: Right.


Nick: But so in early 2020, they pushed it back to age 72, so people picked up about a year and a half. And now, for anyone born between 1951 and 1958, the starting age is 73, so they bumped it back one more year, and for those born in 1959 or later, the age is 75. So from a standpoint of impact for people, there are… I would say, a big chunk of people out there are taking withdrawals from their retirement accounts, and the amount that they’re taking is pretty close to their RMD amount that would be required anyways. But for those that aren’t, it gives them more time to defer funds, let them continue to compound. And from our side of things, it kind of just lets us be a little bit more strategic on creating a liquidation order and helping clients figure out which accounts we should start taking withdrawals from when. And this just builds in more flexibility, which is nice.


Marc: Yeah. So overall, do you kind of like this concept of them pushing this back a little further? I mean, either way, to me, it feels like it works for them to get more tax revenue, right? Because either the accounts get bigger and they get more RMDs you have to pay taxes on, the government will get their share, or people are doing Roth conversions, they have more time to plan for something like that, for example, and they’re getting tax revenue that way. So either way, to me, it seems like it’s a win-win for them.


Nick: Yeah. And realistically, yeah, I think just in general, people don’t like to be told what to do. So anytime, from looking at it from a client standpoint, just to know that there’s flexibility, because I can say that I’ve had more than one and probably more than 10 clients be unhappy when they realize that requirement distributions are a thing to only realize that they were taking the money out anyway. So it’s just literally the psychological impact of choosing to do it versus being forced to do it.


Marc: Okay. All right. So that was one big change that they did. John, let’s talk a little bit about the special catch-up contribution. Give us a quick breakdown on normal catch-up contributions, something that happens all the time. They change the numbers from year to year, what it is, but then also this new little wrinkle they added, and let’s get your thoughts on that.


John: So normal retirement contributions are what the normal limits are for 401k. Whether you’re going to make a contribution or not to it, you do max out. And what is the current [inaudible 00:04:43]


Marc: 22,500, I think.


John: … up as well.


Nick: Yeah.


Marc: Yeah. Yeah, I think it’s 22,500 for the current-


John: Yeah, so 22,500 is kind of normal. Catch-up provision is once you’re over the age of 50, you’re able to actually do an additional amount, which they consider, hey, catching up for basically your retirement. So for 2023 it’s going to be 7,500, which is a nice jump from last year. What makes it even better is anyone between the ages 60 and 63, starting in 2025 can be up to about $10,000. So that is really significant. And why that is, we found a lot of people, when they get into their fifties, they’re kind of in their highest income earning years. So it really comes up quite a bit where it’s like, hey, I want to save more money, but I’m really limited in what I could do. So this is really going to help people defer more for retirement, which ultimately in the long run helps them overall have a larger nest egg and more retirement income.


Marc: Yeah. And so it’s interesting what they did that. So yeah, they moved it on, they added this extra four year thing. So again, what’s your thoughts on that? It doesn’t kick in until 2025, but do you think that’s a useful tool to add even more room for people to sock away?


John: Yeah. I think anything that encourages people to save is definitely a positive for retirement.


Marc: Yeah. So what’s your thoughts on that, Nick?


Nick: Yeah. I mean, again, it’s one of those things where when you add in flexibility and the ability for people to kind of adapt, especially knowing how many 401k plans allow for Roth contributions now. So even if it’s from the perspective of, hey, maybe they don’t want to add more pre-tax money, but they want to take advantage and use some of that buffer for Roth funds, it’s just nice to have the flexibility and ability to be able to put in more funds.


Marc: Yeah. Okay. An interesting one that caught a lot of people off guard, guys, especially a lot of advisors, was the 529 to Roth transfer option. So let’s talk a little bit about that. That’s been a kind of nice little wrinkle. People have been pretty surprised by this.


Nick: Yeah, this is interesting from a perspective… So for those that aren’t super familiar with 529 plans, they are essentially education accounts, and there are funding restrictions. And one of the, in theory, downsides on 529 plans previously were the way and the timing of when you had to use the funds. And so essentially, using funds in the years that costs are incurred, there were some ability to be able to transfer funds from one person to another. But now, essentially what they’re doing is they’re kind of reducing the quote, unquote risk of overfunding a 529 plan, and they’re letting people essentially use 529 funds to make Roth contributions when they start working. So as a reminder for people, to be able to contribute to a Roth IRA, there has to be earned income. So when there’s earned income, you can contribute up to a hundred percent up to of the earned income, up to the maximum amount. And then there are income limitations and restrictions on how much you make versus how much you can put in. To be honest, realistically, this is probably going to be something that is much more tiered towards higher income earners. Definitely the kind of, maybe there’s grandparents that have a significant amount of money and they can overfund a 529 plan for a grandkid, and it can be a way to essentially start to kind of build in some future wealth transfer, which is cool, to be able to have a creative way to be able to do that. Most likely, that’s how I see it playing out overall. So it’s just nice to have that flexibility. And I was pretty surprised as well that it was something that they came up with to integrate into the plan.


Marc: Yeah. So if you wind up not using it, maybe you got the one kid that doesn’t use it or you’re going to give it to the other kid or you don’t have a second kid, it just gives you options. I mean, other people still looking at different ways to fund for college, but it’s nice to have that extra wrinkle in there. So a lot of people have been fairly pleased and surprised by that one. John, any thoughts on that from yourself since you’ve got a couple of little ones?


John: Yeah. Yeah, I think I like this. Because one of the things that I’ve always thought about is let’s kind of take off the table overfunding, but what if they don’t use it at all? What if they decide to go a different route from traditional college or what if they get a ton of these grants and things like that? So I think it’s a nice feature. Kind of puts a little peace of mind where it’s like, hey, if they don’t end up using it and you try to just pull it out, you get hit with these taxes and penalties on the growth. So I think it puts my mind at ease a little bit more knowing, hey, if I contribute to this, that it’ll still be going to them and they’ll still be able to benefit even if they don’t use it for school.


Marc: Yeah, definitely. All right. So let’s talk a little bit about the other changes kind of addressing, I guess, maybe students if you will. And there’s a lot of changes that they did, guys, to just, I think in general, company-sponsored plans, a lot of little nuances. Again, you may want to talk with your financial professional to see. They did some little things like moving, I think, Roth options right now, so matching contributions can go to a Roth, and lots of little stuff. So you may want to have those conversations. But let’s talk about the changes to the company 401k match, especially for younger folks. I think this was maybe to address the whole student loan debacle and all the conversation that’s going on about to forgive, not to forgive, whatever the case is. So explain a little bit what they’ve done with this. Whoever wants to take this one.


John: Yeah, I’ll start with it. So yeah, I definitely agree with you there, Mark, on kind of throwing this in there to help with what we have going on with the student loan issue there. But this is pretty cool in my opinion. I got a younger sister-in-law, and she’s got… law student, hefty amount of student loans. So we were talking about some different things and we talked about helped her out with picking some stuff in her employer plan. And it came up to this, and this exact conversation came where she said, hey, I’m paying such a big amount on my student loans. I don’t have any extra really to save for retirement. So this is a great way, in my opinion, to try to… That way they can get something going to the retirement account because, as you know, Nick and I do planning for people, there is sometimes a shortfall and the earlier you can start the better. So I think this is definitely a great way to get people to at least get the money into the retirement accounts, and ultimately, when they have the cash flow, they start to see what their match is doing and growing, I could see them starting to contribute themselves a little bit more as well.


Marc: Yeah. What’s your take on it, Nick?


Nick: The student loan burden is so significant for so many people, and that’s separate… The whole validity of it and does it make sense and all that kind of stuff, I think, is a separate conversation. And so the reality is that there are a ton of people living with that, and so anything that can be done to provide some sort of options and flexibility and encourage employers to assist with that, I think, is a big deal. Because ultimately so many employers, they are looking to have these sorts of certain certifications, certain underlying education requirements, all that kind of stuff.


Marc: Right.


Nick: So they’re a participant in kind of the machine, so to speak. So to me, it makes sense to integrate some kind of creative thinking into it.


Marc: Okay. Well, so that’s some of the major changes. Anything else I missed, guys, you want to bring up? I know like with the RMDs, little things like they reduced the penalty, which was a pretty hefty penalty even though a lot of times I don’t think they enforced it. Any other little items that you want to share?


John: No, I think these are the main ones that are good. And like you say, always if people have any questions, definitely reach out to us. And as we’re meeting with clients, if something pertains to them, we always bring up kind of what makes sense for them.


Marc: Yeah, okay. All right. Well, there you go. So some major items there that they updated when it came to the SECURE Act 2.0. There’s no really big gotchas, it doesn’t seem, like there was with the first one with the removal of the Stretch IRA, for example. That one seemed to be annoying for a lot of advisors and stuff like that. Any big gotchas here that you feel like that’s make it a real concern? Or for the most part overall some decent changes?


Nick: Not that I’ve seen so far.


Marc: Yeah. Okay. Yeah, you never know, right? I mean, they still got, I mean, what is this, 10 years on some of this stuff? Some of the stuff starts in ’23, some of it ’24, some of it ’25, some of it 2033. So they got a while to roll some of this stuff out, so we’ll see how it all plays out. But if you’ve got questions, again, make sure you reach out to the guys, have a conversation. Don’t forget to subscribe to us on Apple, Google, Spotify, all that good jazz. And you can find all of that information at pfgprivatewealth.com. That’s pfgprivatewealth.com. Guys, thanks for hanging out with me. As always, appreciate your time for John and Nick. I’m Mark. We’ll see you next time here on Retirement Planning Redefined.

What You Need to Know About the Stock Market During A Presidential Election Year

Presidential election years bring a lot of uncertainty and stress. And that’s not just for the candidates who are running.

In fact, during the 2016 election cycle, one study found that at least 50% of Americans were more stressed out because of the election. And this was true across all party lines.1

So, why does that matter?

Because stressing about election uncertainty can affect your mindset and trigger emotional investing decisions.2

The good news is that you can avoid the frenzy around the upcoming election—and the stress and poor financial choices that may come with it—if you know the facts about the markets during presidential election years. Knowing these facts can help you keep a level head no matter what the outcome of the next election is.

7 Facts About Markets In A Presidential Election Year

Don’t Let the Election Frenzy Derail a Good Investment Strategy

It’s no secret that presidential election years are uncertain times—and that investors and the stock market like certainty.

It’s also no secret that the stock market is influenced by several factors—and that a presidential election may not even be the most significant one.3

Of course, it can be easy to get caught up in campaigns, politics, and elections. And they do matter. Just not as much as you may think when it comes to investing.

Unfortunately, too many people let ideas about who could win office—and what they’ll do when they get there—run wild. And that can mean more stress and anxiety that overshadow sound investment choices and strategies.

In the end, stressing about the “what ifs” of the election just isn’t productive. As portfolio managers, we have seen how elections can fuel investors’ stress and lead them astray when it comes to their financial choices and their long-term goals. We also know how helpful it can be to have a sounding board when emotions run high. That’s why we’re here.

So, while the excitement of the election can be great inspiration to vote, don’t let it drive your investment choices. And, remember, whatever happens on November 3, 2020, life will go on. Instead of stressing about the “what ifs,” give us a call. We are here to support you, and we can help you create a personal financial strategy for the election year and beyond.

1 – https://www.apa.org/news/press/releases/stress/2016/presidential-election.pdf
2 – https://www.npr.org/sections/thetwo-way/2016/10/15/498033747/survey-says-americans-are-getting-stressed-by-the-elections
3 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
4 – https://www.hartfordfunds.com/practice-management/client-conversations/10-things-you-should-know-about-politics-and-investing.html
5 – https://insight.factset.com/third-year-after-presidential-election-charm-for-sp-500
6 – https://www.usatoday.com/story/money/2019/11/05/election-2020-how-does-stock-market-perform-election-year/4165271002/
7 – https://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html
8 – https://www.capitalgroup.com/individual/planning/investing-fundamentals/presidential-election.html

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents. 

Ep 2: How The Financial Industry Has Changed In The Last Decade

On This Episode

Things are changing in the financial world, and they’re changing for the better. This week, we’ll look into how advisor fee structures have changed, and we’ll talk about why more and more advisors are becoming independent fiduciaries and separating themselves from the larger wirehouses. We’ll also explain the difference between the suitability and fiduciary standards, and discuss why holistic planning is becoming so popular.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:

Marc Killian: Hello, and welcome in to another addition of Retirement Planning Redefined with the team from PFG Private Wealth. Joining me on the program is Nick McDevitt, as well as John Teixeira. Guys, welcome in. How are you?

John Teixeira: Good. How you doing?

Marc Killian: I’m doing very well. Hope that you guys are doing pretty good. Anything interesting going on since the last time we did our initial podcast? Anything exciting or new to talk about?

John Teixeira: Nick, you got anything going on?

Nick McDevitt: No, just getting ready for the summer.

Marc Killian: Well John, are you sleeping? Because, I mean the last time Nick made some comments about you trying to get some sleep with the little one.

John Teixeira: I’m … I’m not sleeping. Last night was pretty rough, so for an interesting day. But yeah, no sleep last night, but I’m up and running.

Marc Killian: Yeah, there you go. Well they’re good for that when they’re little, but they’re also got a lot of little fun things happening there too. So, it’s interesting being new parents, that’s for sure. But listen, guys I want to talk over the next couple of podcasts. We kind of kicked off our first one just to get to know you guys a little bit and get to know the corporation, the company a little bit, PFG Private Wealth a little bit. You guys are an independent RIA. You are serving the folks here in the Tampa Bay area. And I wanted to talk a little bit on this podcast just kind of about the industry, a few things. Kind of an overview if you will. And just get your thoughts on some of these things.

Marc Killian: And of course, folks, if you want to subscribe to the podcast, check us out, moving forward we’re going to be doing more of these. Go to pfgprivatewealth.com. That’s pfgprivatewealth.com, and of course as always, you can always call them if you have some questions or concerns. Before you take any action, always talk with a qualified professional like John and Nick, 813-286-7776. That’s 813-286-7776.

Marc Killian: So guys, let’s talk a little industry overview here. Just in the past decade, how’s it changed?

Nick McDevitt: Well, so typically we work with people that are 50 and up, where things are kind of starting to get a little bit more serious as they approach retirement. And one of the common things that we’ve seen is they come in, whether it’s to one of our classes, or they come in for a consultation, is that they’ve had multiple people in their life that have helped them with maybe specific financial decisions. They’ve had a person that they’ve bought life insurance from. They might have a mutual fund account somewhere else. They may have bought a few stocks from a different broker, something like that. And what they haven’t done is sat down with somebody that can help them look at it strategically and look at it from a broad base viewpoint.

Nick McDevitt: And so, that’s been the biggest change where things have become more planning focused versus maybe just focused on the stock market or returns in the market, that sort of thing. And as part of that, there’s really been a huge shift in how the industry… And there’s a lot more room left for the industry to grow that way. But the sort of transparency that the industry has from the standpoint of what our client’s actually paying for.

Marc Killian: Got you.

Nick McDevitt: From a fee standpoint, really how are the advisors compensated, that sort of thing. And there’s been a big shift where more and more advisors are breaking off from your Morgan Stanley, Merrill Lynch, wirehouse sort of structure, to an independent sort of structure. So, those have been some of the big changes for people.

Marc Killian: Okay. And I want to talk a little bit more about that in just a second. But I wanted to ask John a question to kind of chime in here. What about fiduciary versus suitability? Now, for some of our listeners John, they may have heard these terms before, they may not. So real quick, tell us what they are and then give us a little bit of a difference on these.

John Teixeira: Yeah, so this is … goes in line with what we were talking about, the industry changing. And the industry’s really going more towards a fiduciary basis versus suitability for clients. So, just to define those for people that don’t know what it is, a fiduciary has to do what’s in a client’s best interest and has to put their own interest aside. I mean, it’s funny to kind of say that, but [crosstalk 00:03:47] fiduciary has to do what’s in the client’s best interest, compare all options, disclose any conflict of interests that may happen in the result of planning. Someone that’s working on a suitability capacity basically has to recommend to a client what is suitable. So it might not be the best thing for them. So example, if you work for a particular company, and they had very good products and investments, and you said, “Well this is suitable for this individual, but there are some other ones that are better, would better serve them. But I’m recommending what’s suitable, so this will be just fine.”

Marc Killian: Got you. Okay. And so as you guys, as fiduciaries, you obviously are doing what’s in the client’s best interest. And so is that just something that … I mean again, it does sound weird to say, right? But you would think that just should be the norm. So I guess it is good that the industry’s moving more that way. And is there any kind of particular reason behind that? Or just something I think they feel that they should do?

John Teixeira: I think it’s a lot of transparency, and something that really … Dealing with people’s retirement’s very serious. You want to make sure that people are doing the best thing for their retirement, getting the best advice. And kind of going into what Nick was saying, a lot of people are leaving the Merrill Lynch’s and stuff like that and Morgan Stanley’s and going more independent. Being independent really allows you to be a fiduciary, where there’s no proprietary products that you have to sell. There’s no quotas to hit. There’s no one kind of looking over your shoulder and saying, “Hey, what are you doing for us today? Did you sell this particular product? Or did you push this investment?” Things like that, so-

Marc Killian: Got you.

John Teixeira: All that … Being in an independent space allows us to be a fiduciary and do what’s best for the client.

Nick McDevitt: And another maybe simplified example of that is … Let’s say we kind of go through and we develop a plan for somebody and based upon their plan, the client has decided that they would really like to have some sort of guaranteed income. And so they say, “Which ways can I get guaranteed income?” And we go through the options with them, and they decide, “Okay, well we’re interested in some sort of annuity” and so, maybe somebody that’s working in a suitability…from the suitability stand point, they have a broker dealer in a company that they work for that says “Okay, you’re allowed to show your client these three options for them to purchase that annuity but, we’ve restricted you to these three options” versus somebody that’s in a fiduciary capacity they could go out into the market place and look at everything in the marketplace and maybe there’s ten options and that really allows them to come up with the best option for the client. So, that’s kind of a basic example that might help add some clarity.

Marc Killian: So, you’ve got a little bit more of a smorgasbord there going on, things you can kind of look through. I always kind of make the analogy when I talk to people across the country and host different shows that in a lot of ways with some of these big boxes, if you will, it’s almost like sweaters. For example, when seasonal stuff changes they start pushing the stuff they want to get rid of, right? So, they can clear it out for the next thing to come in and so sometimes you might see that in some of these bigger box chains where they’re saying “Hey, we really want to push this particular product versus that,” even if it’s not always the best fit. We might refer to that as the cookie cutter plans, right? Where it’s just kind of a one size fits all and is that what you were talking about, Nick? When you were mentioning that independent versus the wirehouse?

Nick McDevitt: Yeah, so, a good way to…some good examples of that, and this changed even more as we went through the recession…’08, ’09, and there was a lot of consolidation. So, let’s say for example somebody walks in to a Bank of America and they want to open up an account, like an investment account at Bank of America. Bank of America purchased Merrill Lynch so Merrill Lynch is owned by Bank of America, and they will have an office inside of the bank that’s just supposed to be for Merrill Lynch and the rest of the bank is supposed to be for Bank of America. And so, at the same time, those Merrill Lynch advisors that are in that bank may have certain quotas to hit. So, for example, if somebody is going to open an account with them they may also have quotas from the standpoint of saying “Well, what are you doing with a line of credit, do you have a line of credit on your house, do you need one? What about a credit card?”

Nick McDevitt: And so, [crosstalk 00:08:03] it gives to all these other lines of business that in our mind from an independent stand point create conflicts of interest for the client and puts them in a position that may not be best for them. So, as an independent, when there’s not proprietary products and you’re able to act as a fiduciary and you know that you don’t have any quotas to hit at the end of the year. The matter if you are ethically a, an extremely ethical person and you really do try to put the client forward, there are just conflicts that are out of your control, no matter as an advisor if you’re trying to do the best that you can, eventually you’re going to be put in a position that may make it difficult for you to do that. And so, that’s really where that difference [crosstalk 00:08:45] comes to play.

Marc Killian: That makes a lot of sense and I think that kind of helps things. That’s why we’re kind of talking and named the show here Retirement Planning Redefined, that’s what you’re listening to. The podcast with John and Nick, financial advisors at PFG Private Wealth and of course check us out online at pfgprivatewealth.com and I guess I’ll ask one kind of final question here to kind of wrap up our podcast here around the industry overview. Hopefully, you’ve found a useful nugget or two of information in there, and that’s around fee structures. So, if things have changed a lot over the last decade, and we talked about some of these things, how has that changed, what are you talking about when it comes to fee structures?

Nick McDevitt: Yeah so, again going a part of the change, I’d say when I first started back in 2006 and the investment world was really geared toward commissions. For example, you would sell “Hey, Marc, you want to buy some Bank of America stock?” I’d trade it and then make commission off of that.

Marc Killian: Right. Okay.

Nick McDevitt: Where now it’s going more towards just a flat fee. So, if I’m managing a client’s portfolio, let’s just say it’s half a million dollars, I may charge X amount and it’s that for the year. So, it’s just much cleaner versus the commission focus. We found a lot of clients that have come to us we’re leaving their advisors because they were only hearing from their advisor when there was a stock trade. And it’s like “Hey, this is the new buy, let’s go ahead and buy this.” They generate a commission, wouldn’t hear from the person until they was ready for another commission that was coming their way.

Marc Killian: Right.

John Teixeira: Where the fee based it’s really just ongoing advice on the assets so it’s just much cleaner and in reality when you’re charging a fee to manage someone’s portfolio, you really want a long term relationship with the client. It’s not a one and done. So, you, let’s say, you work a little bit harder to make sure that the client is going to stay with you. And that’s just kind of on the stock basis but, the same thing goes for mutual funds where, especially, when I first started in ’06 it was all these A shares where basically someone would buy into a mutual fund family, let’s just say American funds and there was almost a five percent sales charge in to it and the person would stay within that fund family. Negative to that was, American funds is good at certain thing but they’re not the best at everything. So, some of these people were kind of stuck within that fund family where a fee basis you can kind of use all the best funds available to manage someones portfolio.

Marc Killian: Okay. I got it. It makes sense. And, a lot of times we do hear those kinds of questions from folks, they feel like…and that sometimes maybe the difference between just having a broker and an advisor is you only kind of hear from that person when they’re trying to move you in and out of a different product whereas an advisor, a financial advisor, one that you’re building a long term relationship with, you can kind of turn to that person and say “Hey, here’s what I’m thinking about for the future, here’s what I want to plan for, here’s this, that, and the other” and you kind of pull all those facets together, is that kind of how I’m reading that?

John Teixeira: Yeah, and I would say as well that a couple of the buzz terms on that are that, so, when things were, when trades were commission based or almost load based, what would happen is that the conversations would be “Hey, it’s time to make a change to your portfolio” and because those changes would often incur expenses, clients started to kind of get a little bit reticent to, like….is this actually good for me? And so, that communication made it harder for the advisor to do their job, and then for the client to trust that they were doing their job. So, with the fee based management where the advisors team typically operates on what’s called a discretionary basis, so in other words, if things are happening and changes need to be made, that agreement has been made up front. And, because there aren’t additional competition towards the advisor incurred on those changed, the client, typically from the feedback that we’ve had, they feel more comfortable that those changes are being made proactively because they’re not a cost being generated to them. So, it increases the communication which ultimately ends up with their being a better relationship between the advisor and the client.

Nick McDevitt: To jump in on that, we find a lot of clients actually like the fact that there’s invested interest in their account going up. So, they say, we hear things like, “Oh, so, when my account goes up you make more and if my account goes down you make less” So, we find that’s [inaudible 00:12:53] hear that quite a bit.

Marc Killian: And we’re going to touch on that a little bit more on our next podcast episode, we’re going to talk about how the things have changed over the last decade from the advisor role. We kind of talked about the industry overview here a little bit today on this podcast with Nick and John and so we’re going to touch on that the next time. So, make sure you tune in, make sure you subscribe to us and go to pfgprivatewealth.com again while you’re there you’ll be able to… we’ll have this coming here pretty soon, you’ll be able to click on podcast and subscribe to us on iTunes, Google Play, Stitcher, various different outlets, whatever one is the one of your choice. And as always, reach out to the team if you have questions or concerns about anything before you take any action give them a jingle at 813-286-7776, again 813-286-7776 to talk with John Teixeira and Nick McDevitt at PFG Private Wealth, an independent RIA, serving you in the Tampa Bay area. And guys, thanks for your time, I look forward to talking to you in a couple of weeks when we talk about advisor roles and how they’ve changed over the last decade. Thanks for your time guys.

John Teixeira: Thanks, Marc.

Nick McDevitt: Thanks.

Marc Killian: We’ll talk to you next time here on Retirement Planning Redefined.