When we sell our business, we want to keep more of the money we make. But how do we do that without wasting it away on tax? In this episode, Michelle Seiler Tucker sits with a special guest live on Exit Rich to teach us her secret. Fradel Barber, the CEO of The World Changers, shares some business tips and insights for business owners to keep more money from what they make. Although gross revenue is important, we should also consider the expenses, tax obligations, or opportunity costs because they can help eliminate or minimize some expenses. Better set your exit strategy straight today with Fradel Barber and exit rich later!
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Fradel Barber Live On Exit Rich With Michelle Seiler Tucker
We have another episode. I’m excited about this guest as well. This guest is a business partner and all of the above. Let me introduce Fradel pretty quickly. I know you guys are going to love her because she is a visionary entrepreneur in the financial services industry. I always tell my clients, “It’s not how much I sell your business for. It’s how much you walk away with or how much you keep.” She leads the development of entrepreneurs in the financial service industry. As Founder and CEO of The World Changers, she leads a team of 350 licensed professionals.
Fradel is passionate about financial education for all types of people regardless of their social status or income. She has been featured in Forbes as a top financial security professional. She has also been featured on ABC as a financial expert. Her last speaking engagement was to an audience of over 20,000 people at the MGM Grand in Las Vegas where she spoke about the need for widespread financial literacy.
She was featured in Women of Wall Street Journal. As a female in the space, she encourages and empowers women to enter and succeed in the financial arena. Fradel serves on the advisory board for All For One, a nonprofit organization dedicated to changing the lives of children. That’s a subject near and dear to my heart. Welcome to the show, Fradel. It’s wonderful to have you here.
Thanks. It’s great to be here. I’m excited about our conversation.
As I tell all my business owners, it’s what you keep that’s the most important. Let’s dive in. Tell our audience a little bit of stuff about yourself. What were you like as a little girl? How did you get into this industry?
That’s some story. I’ll start from the beginning. I grew up in Brooklyn, New York. I’m the oldest of twelve children. Anyone with children out there, and I have four of my own, if your kids ever misbehave, think of my parents growing up in that environment. Money was always something that wasn’t easy to come by. It was not only because of how many children there were, but in general when you have middle-class income or something that happens. Growing up in that environment, I always knew I wanted more. I wanted to understand the money game, but I never knew how I would get that information.
As I grew up, I had an interest in the design world, like graphic design or fashion design. I was a creative thinker. I thought that my path would be there, but as I started going into that realm and decided to move to California at the time to study fashion design, I looked around at the people that were further ahead in their careers in that field and it didn’t fit where I wanted to be financially.
I started looking around, and that’s where I came into the financial industry. It was game over. Once I understood what it was about and how impactful it could be not only in my life financially as creating a business in that area but also then empowering other people to be able to do that as well, it was something that I fell in love with and have never lived back.
In addition to growing up as the oldest of twelve, I grew up in a Hasidic environment. It was very sheltered. I did have to break out of that mold. That was not an easy thing to do. It helped me once I got into the business world because I was able to break out of the mold that is typical. You know this because our industries have that similarity where females at the top in our industries are hard to come by. That’s something that I attribute to the way I grew up and what I had to go through to be able to get to that point. It’s exciting to meet someone like yourself as well who is a leading female in their industry. I’m passionate about also helping women to be able to get to that place as well.
I’m in an industry that’s 98% male-dominated, so I get it. I love how you spoke about passion. Your passion in fashion is your passion. Fashion is my passion too. I said, “I’ll never make a living in it.” I tried too. I said, “I’ll go out and find something else as my passion,” which is helping business owners save their business and exit rich, and then I’ll have money to go feed my passion.
You can always have your passion be a hobby. It doesn’t necessarily have to be what makes you money. It depends on the lifestyle you want to live. It has to match up.
You’re based in Miami, right?
I am. Although, I am originally from New York. I moved to California then moved back to New York, and a few years ago moved out here to Miami.
Do you work with clients all over the United States?
What are the top three business tips for business owners to keep more of the money they make? There are two things. You want to keep more of the money you make when you’re in business and you have to be careful because when you do want to have personal expenses for the business and everything else, it can be hard to get lending. It’s hard to put it to a buyer to maximize value on the sale of your business. You want to maximize strategies so you can keep as much and have these tax strategies as well when you’re running your business. It’s important when you go to sell your company. What are the top three?
There are a lot of things. It depends on who you ask, if you ask a CPA or you ask someone like yourself that’s looking at the exit. It is about keeping it simple. Especially for people who are more in the startup stage of their business or within the first 3 to 5 years, number one is to know about your money. That might sound basic and obvious, but it’s not.
I deal with business owners all the time, and many times, they’re focused on the gross revenue of what their company produces. While that metric is very important when we talk about money you’re going to keep, you can’t forget about what the expenses are, what the tax obligations are, and even something like opportunity costs.
If you’re focused only on gross revenue, you’re not seeing those things. If you dive deeper and pay attention to, let’s take expenses, for example, it is understanding what is going on underneath. You understand what the expenses are. That gives you an opportunity to minimize or eliminate some expenses that could potentially then give you more cash to keep. That’s one thing.Understand what goes underneath. That allows you to minimize or eliminate some expenses that could potentially give you more cash to keep. Click To Tweet
The second thing is taxes. It is understanding what you need to put away for your tax obligations but also finding ways to minimize or even eliminate certain types of taxes through tax credits or different strategies that are available for business owners. Remember, the tax code was written for business owners. You have to learn the code and what applies to you. That’s another area to pay attention to and not shove under the rug, go once a year to your CPA, and have it be something you need to deal with. Pay attention so you can keep more of that money.
The last is opportunity costs. Understand that money not received costs you money, potentially due to inflation, which is a hot topic due to where inflation is. The money you don’t have, what is it worth in a year? The other part of opportunity cost is investment. What could your money that you don’t have, have been earning you?
Next is missing out on the opportunity in general. Maybe it’s to acquire another department of your business or expand. Those are areas that I see a lot of times that business owners not only delegate but don’t pay attention to. It’s not the expectation that the business owner is always going to do all of those things, which they shouldn’t. They’re running the company. Make sure that the people you employ or contract to do those areas are giving you clear reporting so that you could be able to assess where are the areas you can keep more money. That’s what I mean by knowing your money. That is number one.
That’s important. I deal with selling companies. I can’t even begin to tell you how many business owners have no idea what the company’s EBITDA is, which is Earning Before Interest, Taxes, Depreciation, and Amortization. They’re completely clueless. They don’t know what the net is. They’ve been running expenses personally not referring to their business for so long that they forget. It’s important.
One thing that we discovered during the pandemic with our clients is everybody’s trying to cut costs. Even if business owners are not going to always pay attention to your numbers, you need to have those KPIs or those Key Performance Indicators. I like to have them on a daily, weekly, and monthly basis. You need to review your numbers once a month and look at what you can cut. We did that with our clients. We went through their financials and said, “Do you need a water fountain here? All of your people are virtual right now. Do you need to pay this much for water every month? Do you need to have this cable TV right now? Do you need to have this and that?”
Sometimes, the first thing that business owners want to cut is marketing. You don’t want to cut marketing. You want to do an audit of your marketing and see what’s working and what’s not working. You can get rid of what’s not working. You also don’t want to cut how much of that money that you’re putting away to savings and investing. That’s important. I hope to see more business owners paying attention to the bottom line because, at the end of the day, it’s not the revenue. You can make $100 million and go home broke.
That’s so true. That brings me to my second one, which is putting away money. There are a few ways you can do that. One that’s very important is saving or emergency funds so that you’re going into the least bad debt possible. Bad debt is the one that compounds and that you can’t catch up with. It is things like credit cards with high-interest rates and things of that nature.
Also, it’s for retirement. Retirement looks very different when you’re a business owner versus an employee. Even if you’re working somewhere that you think you’re going to be for the next 30 years and you’re going to retire there, it’s pretty simple. It is whatever retirement plan is offered, whether it is 401(k) or pension you participate in and so on. When it comes to a business owner, a lot of business owners think they’re never going to retire. That’s number one. They’re like, “I love my business. I’m never going to retire.” That’s great.
That’s not great. That’s a big mistake. Everybody’s going to retire someday. We’re living and we’re dying. We are going to retire sometime. What I see often is that I get calls from the spouses. It’s typically the woman that will call me and say, “My husband died at the age of 42 from a heart attack. Can you sell the business?” He didn’t plan for his exit, so he doesn’t have a business. He has a job. He goes to work every day. When he died, the business died. It is important to plan that exit from the beginning because you never know when your time comes. You got to set your loved ones up for success so you can sell that biggest asset, and that’s typically the business.
That goes along with what I was going to say, which is I don’t even like the word retire. It is having the freedom of choice. At what point in your life will you have the freedom to say, “I do want to work or I don’t.” In the business aspect, it’s selling. It’s exiting in some capacity. I like what you said because it’s exiting whether you’re alive or not. Your exit strategy can’t be if you’re still running the company. What if you can’t? What if there’s something that takes place unexpectedly? That’s true.
Another thing I always say to remind people about saving for their retirement is that when it comes to retirement, no one is going to loan you money for you to retire. They’ll loan you to start a business, to go to college, or to buy a house, but no one’s lending you money to retire. In fact, that’s when they’ll cut back all lending. You won’t be able to get a mortgage or everything like that.
I like that saying. Nobody is going to lend you money to retire.
Who’s left that’s going to deal with that? It’s you. You can’t wait until the last second because starting early allows you to put away less money through compound interest and weathering market fluctuations. If you wait until the end, hopefully, when you work with someone like Michelle, you will have a big exit, but you can’t always rely on that. We know the statistics of business. 30% of all businesses don’t make it past the third year. I believe that’s the one.
That is the one. It used to be that 95% of all startups will go out of business in the first 1 to 5 years. The business landscape has changed dramatically. 30% of startups fail. When it’s business owners that have been in business for over ten years or longer, 70% of those businesses are going out of business. You got a 70% of the Baby Boomers and some of Generation X.
These businesses are going out of business on a daily basis because of a lack of innovation and lack of marketing. Many of them don’t have a retirement fund. Many of them don’t have it because they put all their money back into their business when they should have said, “Let me put 10%, 15%, or whatever it is into my retirement fund.” That’s something that every business owner should stop and do.
Sometimes, it could be daunting to say, “Not only do I have to figure out everything in my business, but also my investments in retirement.” That’s where I say, “Don’t go at it alone. Use a financial advisor. Find someone that understands businesses.” It is a little bit of a different realm when you’re a business owner versus an employee, even in terms of planning for your future.
That brings me to my third point. Have a killer team. What do I mean by that? It’s not just your employees but your financial team. I believe it consists of at least three. I’ll say four because you’re having the exit strategist. The other three would be a good attorney because you will need them as a business owner in some capacity, a good CPA who understands businesses, and then the financial advisor. That’s the one people forget.
You’re going to always have the CPA to file your taxes. Most businesses deal with some legalities that they have put together early on in the business. The financial advisor should come in also early on in the business because they’re the quarterback to your goals. They tie everything together. Who’s communicating from the attorney to the CPA to your money and then bringing it all back to what goals you have not only for your business but also on a personal level? Having that killer team is so critical for the success of your finances, whether your business succeeds or fails. The earlier you can have it, the better it is. That’s something that I help people do every day. It’s a game-changer.The financial advisor should come early in the business because they're the quarterback to your goals. Click To Tweet
I’ll add a caveat to that, too. I’ll also say it is adding the right M&A advisor because there are a lot of them. Mostly M&A advisors or business workers sell the business. They don’t get the business ready for sale. Steven Covey says, “Start with the end in mind.” I always say, “You should plan your business with the end in mind. You should plan the 360 GPS exit,” which we talk about in my book, Exit Rich.
Determine your destination. Determine what that sales price is. You can change your mind along the way. These clients are like, “I don’t know.” I say, “Pick a number. Say you want to sell at $20 million. You’ve got a number. If you want to decrease that or increase that, so what? It’s your exit plan.” You always need to know what your business’s worth is.
Most business owners never get an evaluation until they want to sell. They’re then quite disappointed that the evaluation number is nowhere near what they would like to sell their business for or what they feel they need to retire on. That’s important, too, to bring an M&A advisor in early. They can also talk to you not just about planning your GPS exit, but where your numbers need to be to get to a $20 million purchase price and how to operate your business on all 6 Ps. The more you plan, the better you always be. I always say people don’t plan to fail. They fail to plan.
I’m curious. When do you typically advise a business to get an evaluation other than when they intend to sell?
Shortly on. We’re working with clients that are 4 years out, 5 years out, or 6 years out. That’s in our road to exit rich plan when we are working with them. Here’s what happens. They come to us and say, “I’m going to sell my business for $20 million,” and maybe their business is worth $5 million. They’re like, “I didn’t want to do it in a year.” You’re about five years out.
The earlier they start planning and connecting to what their destination is, what their business work is, where their numbers need to be, what the 6 Ps are, and what the synergies they need to build in their company are, then I have a much better success rate of getting the actual wish price that they want to sell their company for what they feel like it’s worth.
Typically, when business owners tell me a number, they’re not basing their number on the value of their business. They’re basing their number on what they think they need to retire on. They’re like, “I want to retire. This is how much I need.” A lot of times, that’s not true. They don’t need $20 million. That’s when we try to bring a financial advisor in. We’ll go through the financials on how much you need a month to live on, how much you need a year, who are your dependents, etc. We start drilling down to see how much they need.
What we’re working with clients to do is get all those 6 P’s in place. Businesses will come to us, and the business owner is doing all the jobs. The business owner is the business. The business is completely reliant on the business. This happens even in large companies. We have a company we’re selling where they have 350 employees and that business is dependent upon that owner. A buyer cannot come in and buy 100% of that company because they will never survive. We work with our business owners to try to get work on the business, not in the business and have the right people in the right seats.
It’s the same thing with their processes if their process is not buttoned up or they’re in a dying industry. The industry is never going to come back. There’s going to be AI or Artificial Intelligence that’s going to get rid of a lot of industries. You need to be on top of your business as it comes to the people, the product industry sector you’re in, the processes, the proprietary assets, which is what I value, and your patrons. You have customer concentration. You have concentration and you’re turning profits. We coach our business owners all the time. Make sure you get a financial advisor, and make sure you put so much away in savings in case another pandemic happens or a hurricane.Ensure you get a financial advisor and put so much away in savings in case another pandemic happens. Click To Tweet
That’s very valuable.
When I say start at the beginning, what other things should business owners watch out for and practice doing early?
I’ll touch on this. This is where it comes in when you’re in a partnership. This is another area that is overlooked. There are so many areas of partnerships that you have to look out for. One of them is what happens if something happens to one of the partners. Some business owners may have heard of a buy-sell agreement. If you don’t know what that is, it’s a legal document that indicates what happens if one buyer wants to either buy the other one out or something happens to one of the partners.
The thing that, a lot of times, I see business owners forget even when they do have that document is to fund it. Why does someone need that when they are in a partnership? I’ll paint the scenario. Imagine you have two business partners. They’re two male business owners. They’re doing business great together. Let’s say both of them are married. If one business owner dies or one partner dies, guess who the new partner to that other business owner or partner is? It is the wife. That wife may have been a stay-at-home mom. She has no business acumen and, quite frankly, doesn’t know anything about the business, but is suddenly the new partner. That’s the scenario of what if you don’t have one.
There are many others. It doesn’t have to be death. It could be a disability. It could be many different things. Identifying a buy-sell agreement indicates what happens to buy out that other partner. How will that happen? You need assets to buy it out. Most businesses don’t have cash sitting around to buy out the other partner. One of the ways to correctly set this up is through funding it with a life insurance policy where premiums are paid on a policy. That death benefit, which if it’s properly set up will be tax-free, will go to buy out that other partner.
Going back to that scenario we discussed, that spouse or that wife gets the death benefit. Let’s say it was $2 million. She gets that as a buyout. That remaining partner owns 100% of the business where they can then bring on another partner or continue to run the organization on their own as opposed to having major business disruption. I’ve seen it ruin businesses, too, because when money comes into play and things are not clear, there could be a lot of fighting and disruptions. That’s another big one that businesses should look out for.
That’s a huge one. You hit the nail on the head. My spouse passed away unfortunately and unexpectedly. He has businesses. He has a partner. Knowing what good businessmen my husband and his partner were, the buy-sell agreements were not. They were not updated. You got to update your buy-sell agreement. You need to make sure you sign the buy-sell agreement. You need to keep all of that in place. You want to keep your articles of incorporation. You want to keep your buy-sell agreement updated.
You want to make sure you keep all of your documents, and you want to make sure you keep them in a place that is easy to get to. We had to go searching for ours. I hired an attorney several years ago that’s not even practicing anymore. You want to keep those updated because it is so true. It does cause headaches. It does cause frustration and tension between you and that partner when things are not clear, when things are not updated, etc. You want to make sure you have access to that at all times. I can’t stress that for businesses more than you can. It is so imperative because it will ruin a business.
I’ve got some very good friends of mine. My best friend died, and her brother and sister-in-law are now in charge of the estate. It was not a clear buy-sell agreement. That insurance that they had went to pay off the debt of the business. They didn’t have insurance to go to the surviving mother, brother, family members, etc. There are two different types of insurance that we want to be crystal clear on. One is to pay off the debt. The other one is to go to the spouse.
That would be my next point, which is proper protection. You mentioned a good point where there are different purposes for different policies. Many times, people think, “I have insurance.” No one likes paying premiums. What is the strategy around your insurance policy? Is there even one in case you die? Every policy should have a strategy for what it’s for.
When you’re thinking about protection, you’re thinking about not only business protection, so, “How do I protect the business in case something happens?” but also, “How do I protect my other assets and my family?” That is if there is a family that you want to leave something to or that will need an income replacement. For example, there is a spouse and children that live in a house and that house has a mortgage. If there’s suddenly no income, does that mortgage get paid off? That’s one type of strategy.
I could get a second mortgage that maybe the partner took out on the business.
That is correct. A lot of times, people use their home equity for the business. There are different areas that you want to look at. Lastly, if someone does have a big estate, it is utilizing that protection for the estate. You build this huge business. Michelle helps you exit rich. You have a great estate, but how are you protecting yourself with estate planning? Is a big chunk of that going to go to Uncle Sam when you pass on away or are you going to be able to pass on most of that?
A lot of that is through utilizing different types of trust, like irrevocable life insurance trust. It is where that is taken out of your estate and you have this tax-free death benefit along with some other policies that are not irrevocable trust. It will go to then pay off the estate and probate taxes, and then you are left with whatever other assets you have. It’s a lot to take in. We mentioned probably 6 strategies in 1 minute. This is where it goes back to having someone that you’re sitting down with and you don’t need to figure all this out. You need to figure out what you want. What is your end game?
You talked earlier about thinking with the end in mind. Let’s talk about the end. Let’s talk about what you want. If you can’t see that far, at least for now, what is it that you want? By working backward with an advisor and having them structure a plan based on what your goals are, what do you need to do to bridge the gap and get you as close as possible with leaving in flexibility and the ability if you change your mind, your business changes, or your family dynamics change?
All those things are important to be able to have in a discussion to know that this is what the plan is. You’re checking in. This is not a one-time set it and forget it like you go to the doctor or do your taxes every year. You got to sit down with your advisors every year, whether it’s your M&A advisor, financial advisor, or anyone on your killer team. You got to do that to be able to get set up for the best financial success that you can have as you create the best business that you have towards your vision.
I agree. I couldn’t have said it better. Somebody commented. Kitty said, “Great info.” If anybody has any questions about what we’re discussing or comments, please feel free to put your question and comments. I’ll read out all questions. It is important stuff. The biggest problem is business owners usually wait until it’s too late. They have nothing to sell. They haven’t started their retirement account or they haven’t been consistent.
The other thing is consistency. It is contributing to that account and making sure that you’re following the GPS exit model on building your business to exit rich. It is making sure what you’re going to do with that money. At the end of the day, let’s say I get you $50 million for your company. What’s going to happen at $50 million? What do you walk away with? There are different strategies for that, too, if you want to talk about some of those strategies.
That’s a good point. After you have realized your dream and exited, how is that going to help you live the life that you want? A lot of times, the business owners that I’ve worked with almost have a sticker shop. They’re like, “I have all this money.” Money, if not properly managed, can be eaten up by expenses, taxes, and all the family members that think they’re entitled to it. That’s where having a strategy for post-sale, which is very important.
I’m not going to get too detailed into product or strategy because that is very different. Some of the things to look at is income for the rest of your life. How are you going to be supported? Some people go and start a new business or use their expertise in consulting or whatever it might be. Can you use your business proceeds to create a guaranteed income for the rest of your life?
That gives you the freedom and flexibility to go do anything regardless of what that will earn for you. The other thing is setting up a proper trust. I touched on that a little bit before. It is making sure that those things are set up. Legacy planning takes place there and then tax planning. There is potentially a big tax bill when you’re done with that sale.
It’s not a big tax bill. It’s a gigantic, huge tax bill. We do that pre-planning and post-planning for about six months. Usually, when we take an engagement, we’re starting that planning already because it’s a process. If you’re into the LOI and you’re about to prepare closing docs, and you’re headed to the closing table, then these strategies might not work for you because it’s too late. There is a trust where you can put the business in the trust, take money out, no taxes paid, and invest it into other businesses or other real estate properties. You take it out. They do a risk assessment for the job to flow the business.
I know Fradel knows about some of these strategies. It’s her job to continue to grow your portfolio and increase that money. If you got a business to sell for $50 million, it’s her job to continue to grow that $50 million. You can take out 6%, 8%, or whatever bill that you need to live on. You’re taxed on that piece. You’re not taxed on the pieces that you take out to invest in other commercial real estate, businesses, things of that nature, or residential real estate as long as it is not your own personal home.
You’re familiar with those strategies. What else should business owners be looking out for when it comes to financial wherewithal and building their business but, most importantly, building that portfolio? I know that you’ve got to watch out for it if you’ve given some equity and some incentives when you sell the business. If you stay on, you’re like, “I pay you this.” You have to have all your ducks in a row. Remember who you made your promises to because that’s going to come out of the proceeds as well. Here’s a question from Kenny. How can I set up the Rockefeller method?
I’m not quite sure specifically about the Rockefeller. I know I’ve read a book on it if you want to expand on that question. One of the things I will say is that there’s a lot of stuff out there. You can even go on TikTok at any moment and people are talking. One of the things you got to understand is who is saying it. Look at someone like Michelle. She has written three books on the topic. She’s helped so many businesses. I don’t even know the exact number, but probably hundreds of millions of dollars of money that went to the business owner. Who is giving you that information is important. What’s even more important is are you the right candidate for that?
All the time, I have people coming to me and saying, “I want to set up a trust,” and they have no clue why. They’re like, “I heard it on TikTok.” I say, “What does it have to do with you? How will it help you?” They’ll say, “I want to do infinite banking.” That’s a buzzword. Infinite banking is where you take a certain type of life insurance policy that has cash value and utilize it as a bank for your needs. Many people use it for real estate. They have no idea what comes with buying life insurance. They think, “I’ll have money tax-free, interest-free.”
Number one, knowledge is power, but knowledge is power if you apply it in the right way. It’s not just knowing things and listening to everything. If you find a topic that interests you, try to find someone who has experience in that field that has dealt with people and helped people do it. If there are new licenses needed, and I know in our industry there are, make sure that they’re properly licensed. Also, make sure that they know your goals and that they have your goals in mind.
I’ll share a funny story. I once had a client. We set up a type of plan that involved life insurance and also a savings component to that. She calls me one day and says, “I was on the Suze Orman show.” I said, “That’s great.” For those of you who don’t owe Suze Orman, she’s extremely against permanent life insurance of any sort. The policy that the client got was a permanent policy. I said, “How did that go?” She said, “My friend is a producer on the show and she told me to call in because she knew I bought life insurance. They were having a session about that.”
When she got to talking to Suze Orman, Suze said, “What policy do you have?” She named the policy and she started going off like, “This is the worst thing you can do. Don’t ever buy it.” I said, “Okay.” My client’s like, “I’m a little conflicted. I know you suggested that I get this, but Suze Orman told me that is the worst thing I can ever do.” I said, “I want to ask you one question. What does Suze Orman know about you? What did she ask you about you? Does she know about your family situation, your goals, or your financials?” She was like, “She doesn’t know anything. We didn’t discuss that. She just knew what policy I have.” I said, “How can she tell you what’s right or wrong?”
That’s the point. Everyone is in a different financial situation. It’s not a one-size-fits-all. People have different scenarios, whether you’re a business owner, an individual, or you have a family. You’re at different stages of your life. It’s different for different people. That’s why it’s important wherever you’re getting that from that it fits for you.
That means that the person that’s giving the advice understands where you’re coming from, where you’re going, what your goals are, and your financial situation. That’s when you can then assess what the right strategies are, what the right products are, and where you can have options. You can then decide what makes sense for you. That’s the starting point. It is understanding where you’re at and where you’re going so that it could be appropriate in any capacity.
Number 1) It’s not one-size-fits-all. Number 2) Even when you go and research something that you’ve heard, you got to also make sure you do your due diligence on that person. A lot of people get paid to speak on stage and write books. They throw a theory out there, but they don’t have any real-life experiences in carrying that through. I’ve met a lot of people who speak on stage and said they can do this and this and they never perform. You got to do your due diligence. Talk to their existing clients. Kenny says, “Having whole life insurance on all family members and paying the proceeds into a family trust that continuously grows.”
How you set that up is you need an advisor or at least someone who has a license in life insurance and an attorney to set up the trust. The question you want to ask yourself is, do you need all that depending on how much you plan to invest? If someone’s doing a minimal amount, you don’t necessarily need that whole structure. If you’re doing it at a large level, it could be very beneficial tax-wise to pass down to the next generation. Consult an advisor, someone like myself, or another financial advisor that’s familiar with those types of policies and structures. You’ll also need an attorney that is familiar with trust to be able to set that up as well.
That’s something that you and your firm probably would not take on because it’s not your specialty, right?
We do those types of plans, but we would have to bring in an attorney, which whom we have relationships. Some people have their own attorneys to be able to set that up. Certainly, that’s something that we would be able to take care of.
That’s good. Do you have any other questions? Please chime in. What other advice do you have? We dropped some good strategies and golden nuggets. I do encourage people to go back and read this episode because it is like drinking from a fire hose.
We went over a lot of things. I want to end with if anyone does want to touch base with me or even comment on what they learned, you can go to ExitRichSurvey.com and fill out the survey. I’d love to hear your thoughts.
I love that. We have an Exit Rich survey that you created?
I love that. Is that what you guys do or did you make it special for this show?
I made it for this show. I know our readers are going to have a lot of things to say, so I want to hear them. It is ExitRichSurvey.com to get in touch with me or to comment on the things that you learned.
Go back and read. Do you have any other words of wisdom? I know you have so many. You’ve been in this industry. It’s important to tell the audience there are so many different financial advisors out there. It’s like attorneys or CPAs. You got to do your due diligence. I know your passion is working with entrepreneurs. What separates you from everybody else? That’s important for people to know.
My first career road was design. From a creative perspective, I put that into the financial side as well. I’m not thinking about everything from a cookie-cutter perspective. I’m thinking of ideas that are outside the box, taking the products and services that exist in the marketplace, and seeing how they can fit into those unique strategies.
The other part of it is that creating strategic relationships with people like yourself. I’m the quarterback. I want to be that person, and I am that person for the clients, but there are some things that I don’t do. I don’t do mergers and acquisitions, but when I have a client that comes to me that says, “I need to sell my business,” I know the right people. I have relationships with the right people where I can say, “I’m going to get you in front of the right person. We’ll make it happen in the best way possible.” That’s a big differentiator.
Lastly, most of our industry tends to want to work with the top 5% or 10%. That is the high net worth individual or the one that has millions of dollars to invest. While I have plenty of clients like those, one of the things that our firm specializes in is working with anyone. If you want to better your financial situation, you want to save money, or you want to be able to get ahead financially, we offer financial education. We offer the ability to sit down with an advisor and be able to get that strategy early on. It’s not necessarily having to have that high net worth to be able to get that one-on-one attention.You should get ahead financially through financial education to better your financial situation and save money. Click To Tweet
A high net worth did not start high unless they inherit it.
That’s right. Everybody started somewhere, and that’s where I come from. I didn’t have money to even pay for my licenses when I first started, so I completely understand that. I appreciate the ones that are on the way. It’s great to work with people that want to make it and are willing to do the things needed, not only for their business, but also for their savings, their retirement, and their future. They want some hand-holding to be able to get that done. That’s where we specialize. We also help people become financial advisors and licensed professionals in this industry. That’s one of my favorite things that I do. I help train people and help them get licenses and things of that nature. That’s the exciting part of my business.
It is not an easy license to get. That’s amazing. Do you work with individuals or are you working with businesses?
It is both. I personally work with a lot of business owners, but my team handles all sorts of clients.
You have 350 financial advisors on your team. That separates you, too, because a lot of financial advisors don’t have that. Are you a fiduciary?
I am. Not all of our financial professionals are fiduciaries. Some of them are only insurance licensed. Depending on the client, we match it up with the right fit.
Why don’t you explain to our audience why it’s important to have a fiduciary versus a non-fiduciary?
A fiduciary is someone who, per regulations, has to do what’s in your best interest.
It’s the client’s best interest, not what you get paid the most on.
There’s a separation in terms of licenses that are needed, but also the responsibility that you have with handling a client’s funds and advice.
Everybody should get started. There are a lot of readers that are startups. There are a lot of our readers that have a small business that works from home. We have mid-sized and larger companies as well. We have some individuals that want to get into business. Everybody should start with a financial advisor for sure because it’s compound interest. Let’s say you start with $100 a month or whatever that number is. It compounds, right?
Exactly. That is where the earlier you start, the better off you are because your money has more time to double.
That’s why I’ve already started with my daughter. That’s another thing. You want to open up an account for your children that will help pay for college the things they need for college.
It is even thinking beyond college. I have four kids. They all have what I call a life account. I want to build whether it’s for college or starting a business. Who knows what college is going to be in twenty years? I don’t know. It could be irrelevant at the rate we’re going. Maybe they do. They want to become a professor. To have that compound interest starting day one is such a big difference.
We started when my daughter was two, so she’s got a bit of money in there already. All the birthday money goes in there, too. The biggest key is consistency. A lot of people will get started and then they forget about it. They’re not consistent. It’s good to have it set up to your EFTs of Electronic Fund Transfer or ACH. It comes right out of your bank. It’s very important.
I have business partners that do that. They have an automatic ACH that’s 10% for savings and 10% per investment. They could also have 10% for nonprofits, which brings me to the next point. Let’s talk a little bit about your nonprofit while we still have time. Nonprofits are a write-off. You can donate to nonprofits and it is a business write-off. I know many business owners always look at the write-offs.
It is aligning yourself with something that has a lot of passion for either your company or individually.
It can be your nonprofit or you can align yourself with a nonprofit.
That’s correct. It doesn’t have to be yours. We’ve done a fundraiser event. One of the events I hold is called Women in Wealth. We do educational. It’s geared towards women and financial education. It also has a networking component. It is a lot of fun. One of the things we’ve done is also work with a nonprofit that gives money towards different women’s needs.
In one year, we did it where it was a woman in emerging countries that didn’t have businesses that were trying to make their own business. All the proceeds of the ticket sales, we gave that to that organization. We matched whatever the ticket sales were, so our donation was our tax write-off. Each of the attendees also got a write-off for themselves with whatever money they put in there as well. It could also be from a corporate social responsibility standpoint. There are a lot of ways to be able to help the world and change the world. At the same time also financially, it does impact your business as well.
That’s wonderful. What is your nonprofit? Do you have your own nonprofit?
No. I’m a board member. It’s not my own. It creates orphanages and schools in third-world countries.
That’s a wonderful charity. Is there anything else that you would like to share?
We could wrap it up. This was a great conversation. Hopefully, all the readers got a lot of value. Thank you so much for tuning in. I’d love to connect with you all.
Thank you for coming to the show. You dropped a lot of golden nuggets. The chapters of Exit Rich are called golden nuggets. You dropped a lot of golden nuggets and a lot of good strategies. Everybody should get started. People always say, “I’m going to start,” but not, “I’m going to start when,” the ‘but’ gets bigger.
Time is not waiting for anybody.
You need to get started. Reach out to Fradel and connect with her. Do your due diligence. Find the right team. That’s the right attorney, the right CPA, the right M&A advisor, and the right financial advisor. Thank you again for being on the show. Thank you, Kenny, for your comments and questions. Thanks to all of our audience for tuning in.
We’ll see you soon when we have another episode of the show. I know you guys love this show, so share it with your network, influencers, colleagues, fellow entrepreneurs, or people at work. Get the show out there so more people can learn about financial literacy. We can make the economy stronger in the United States. Thank you.
Thanks for having me. Take care, everyone.
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