Benefits of Stocks and Bonds

July 16, 2017 – Wealth Strategy with Bryan Rigg, Your Wealth Professor
Listen In Every Week: Saturday on WRR from 7:00-8:00 am / Sundays on 570 KLIF

What we’re talking about today is leading off we’ll talk about stocks and bonds. Now, you hear the words stocks and bonds together, but we’re going to talk about how they’re actually different.

We’re going to talk about what it’s like to save at 55. Is it really too late to start planning if you happen to be in your mid 50’s? The answer is no, but…

Also, we’re going to cover a topic about what it’s like to use the larger financial firms. The gentlemen I’m here with every weekend actually are independent consultants, but we’re going to talk about what it’s like to work with the larger wire services and financial firms.

Finally, we’re going to close out the show with what exactly is a pension plan and where are they? Who does them anymore? There’s a few out there. These gentlemen here, David and Gary, will be covering that, as well.

LISTEN TO THE SHOW

RIGG Wealth Management offers securities to Broker Dealer Financial Services, Member SIPC and advisory services through Investment Advisors Corp and SCC registered investment advisor. RIGG Wealth Management is not a subsidy area of Broker Dealer Financial Services. Neither RIGG Wealth Management nor Broker Dealer Financial Services offer legal advice. Client should consult their attorney of choice on all legal matters.

Opinions expressed on this program do not necessarily reflect those of Broker Dealer Financial Services. The topics discussed and opinions given are not intended to address the specific needs of any listener. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk. Examples mentioned are for illustrative purposes only, individual results may vary. Past performance is no guarantee of future results. Investing involves risk including loss of principle. Rebalancing can entail transaction costs and tax consequences that should be considered when determining a rebalancing strategy.

SHOW TRANSCRIPT

SEGMENT 1

Rob Dalton:  Welcome. I am Rob Dalton. Joining me today are two special guests, only because Brian Rigg is on vacation, so we’ve got a couple of people who like to work with Brian day in and day out.

Gentlemen, say good morning and who are you?

David Rigg:  I’m David Rigg.

Gary Bilyeu:  I’m Gary Bilyeu.

Rob:  Great. Gentlemen, thanks for being here. We’ve had you the past couple weeks and we’re on a roll and we’re having a great time. So, let’s do it one more time, shall we?

Thanks for being with us. It is the weekend. We’re glad you’re with us. Thank you for making us part of your day today. You may not be paying attention every weekend, but we are here every weekend at this time and we beg you to come back and give a listen over the next few weeks especially the length of the summer.

People are going to be out of town on vacations, but when you’re back in town or you want to listen to us, please feel free to do so. We’re here every weekend talking about financial strategies and wealth management.

Those terms are sometimes scary and intimidating, but what we like to do here every week is just break down the financial world into terms and bite sized bits and vocabulary that you can understand. My job is to keep it simple so that we can all learn together and make this process easier.

What we’re talking about today is leading off we’ll talk about stocks and bonds. Now, you hear the words stocks and bonds together, but we’re going to talk about how they’re actually different.

We’re going to talk about what it’s like to save at 55. Is it really too late to start planning if you happen to be in your mid 50’s? The answer is no, but…

Also, we’re going to cover a topic about what it’s like to use the larger financial firms. The gentlemen I’m here with every weekend actually are independent consultants, but we’re going to talk about what it’s like to work with the larger wire services and financial firms.

Finally, we’re going to close out the show with what exactly is a pension plan and where are they? Who does them anymore? There’s a few out there. These gentlemen here, David and Gary, will be covering that, as well.

Once again, gentlemen, welcome to the weekend, happy to have you with me. Any words of advice to get the weekend started?

Gary:  More coffee.

[laughs]

Rob:  That has a lot to do with the time of day. Alright good. Let’s kick right off.

David, we mentioned the terms stocks and bonds. We hear them combined all the time as one feature, but they really are different, aren’t they?

David:  Yes, they are, yes, they are.

Stocks you have to look at as ownership in a company. You are purchasing an equity position in the company. Bonds, if you look at that as you have purchased some debt that the company owes. If you look at it that way, stocks are an equity position, bonds are a debt position and that’s the easiest way to separate.

Rob:  OK. So, they’re completely different tools.

David:  Yes.

Rob:  But, all within the mixture of the market. Isn’t that right, Gary?

Gary:  Yeah, that’s exactly right. You know, when you get into stocks, and we’ll start delving in a little bit. We did the 30,000 foot view and now we’ll start zeroing in a little bit.

Rob:  Started digging in a little bit.

Gary:  Yeah, so with stocks, you really get into two main types and that’s common stock or preferred stock. There’s some subtle differences but some very important differences between the two.

With common stock it usually entitles that shareholder, the one that just purchased that stock, to have voting rights at meetings and to receive dividends. And conversely, preferred stock, it generally does not, does not have voting rights, but it has a higher claim on the assets or earnings.

And so, for example, if a company was to fail, the preferred stockholder would be paid first. They’re always paid first when it comes to dividends, so if it pays a monthly, quarterly, end of year dividend, the preferred stockholder gets paid first. Alright?

Rob:  Alright.

Gary:  And, they do have a higher pecking order, if you will.

Rob:  Sure, let’s call it that. And common stock…

Gary:  And, common stock, they’re at the bottom.

David:  They’re last. They’re at the bottom of the chain.

Rob:  They get whatever is left which is often nothing.

David:  And actually, bond holders are paid before the preferred stockholders. They are actually higher in the hierarchy.

Rob:  Oh well, that’s a nice segue, thank you.

David:  You bet.

Rob:  But, there’s a lot of variety in each one of those.

David:  Yes.

Rob:  And Gary, you went into some detail about the stocks offering the preferred and common, but David, I know there are different types of bonds, as well.

David:  Sure, you’ve got normal bonds, you could have municipal bonds which are city, state, municipalities. You could have convertible bonds.

Rob:  Never heard of that. Is that in the automotive industry?

David:  Exactly, exactly.

[laughs]

Rob:  Well, it is summertime. That’s where my head went.

David:  A convertible bond is a bond that’s going to pay you interest during the life of the bond. Once that bond matures, you can then convert that into common stock. So, if you like the company, you like the investment, you like the direction the company is going, you don’t necessarily want to terminate your investment in the company, you can then have convertible bonds which will then convert back to common stock.

Rob:  Wow, because you may fall in love with them over time.

David:  Yes. And companies may not have enough outstanding shares to have a stock offering or where you can purchase more shares of stock, but they may have a project. They may have debt they need to refinance or they may have some project they want to finance and so they issue the bonds to raise capital for them to do whatever project it is they’re after.

Rob:  Have done.

David:  Yeah.

Rob:  Whether it’s expansion or merger or…

David:  Or a refinance debt. There are a variety of reasons.

Rob:  Yeah, They’ve all got their reasons. I’ve never heard of the convertible bond market, so that’s interesting that you can…so, you don’t get your money back so much as you get to just reinvest it.

David:  Yeah, you can. You don’t have to convert.

Rob:  But, you can reinvest in that company then?

David:  Yes.

Rob:  That’s interesting, that’s a great option. Between the stocks and the bonds, I know we talk about diversity all the time. In today’s economy it’s absolutely essential that you diversify, but within each of those stocks and bonds there’s a broad degree of diversity in each one of those even though they’re separate.

David:  Oh, millions.

Rob:  Yeah, millions.

David:  It really depends on the client. What are they trying to achieve? Every financial tool out there or instrument serves a purpose and it depends on what you’re trying to achieve. Are you trying to have an additional stream of income? Are you trying to protect your assets? What are you trying to do?

That is how we determine the allocation or the mix of what we have inside your portfolio. There’s a lot of general advice out there that you can take your current age and subtract it from 100 and that is your ratio, if you will, of stocks to bonds. And as you get older, it starts to migrate over to where you’re heavier on the bonds.

Rob:  Because of the security.

David:  Right, and less risk. It’s all about your appetite for risk, but what are you trying to do? Those are general rules and they may be fine, but sometimes people don’t want just the general rules that apply to the masses. They have a specific situation.

Every client out there has some unique need they’re trying to solve. I think that’s what we do a good job at at Rigg Wealth Management is sitting down and understanding what those needs are and pairing the right vehicle and instruments inside that portfolio with what they’re trying to achieve.

Rob:  And, a lot of that comes from the initial consultation with you guys where you ask the right questions and you find out what people’s…where they are now and we talk about it all the time, where they want to go.

Gary:  And, what is their risk appetite? Get that in there. That’s a big one.

Rob:  And, that can change over time as we’ve learned. You start out thinking, “Oh, I can take a lot of risk,” and then, they start losing sleep at night and three weeks later they’re calling you.

Gary:  Or, a couple things happen and all of a sudden things didn’t turn out like you think and then your risk appetite greatly changes.

Rob:  Yeah, you’re not so hungry any more.

David:  That’s a great point. It’s usually developing a plan with the clients and then staying on top of it, consulting with them on a routine basis, and seeing if there’s any changes. Did you have your first child? Did you get a divorce? Things, life changing events that…

Rob:  Changing jobs, all those things. And, they really have an effect on your risk appetite.

Gary:  It does, it does.

Rob:  Well, getting back to the topic at hand, stocks and bonds, between the two again, they’re always mentioned together, but what’s the difference of how fluid are each of those, David?

David:  Do you mean liquid?

Rob:  Liquid, right. I said fluid but yes, you’re right, I meant liquid.

David:  Typically, to sell stocks and bonds or sell funds that you’ve invested with that are stocks or anything like that, it’s pretty easy.

Rob:  OK, the stocks are?

David:  Yeah. Your standard settlement date would be three days to sell it, so if you end up selling something, it should be three days before it settles and you get your money.

Rob:  All right.

David:  Working days, business days. But, that’s an important point, liquidity, is that important to you as an investor?

Rob:  Another element, sure.

David:  Absolutely. And those are the questions that we ask that every financial advisor should be asking their clients, because there are literally tens of thousands of investments out there, and instead of us going through every one of those, it’s easier to find out what…it’s a process of elimination, if you will, by asking you these half dozen, dozen questions we can eliminate entire sectors or entire types of investment and then hone in on what’s important to you.

Rob:  We mentioned that the stocks are pretty liquid. What about bonds?

Gary:  Well, the way we invest those are liquid, as well.

Rob:  They are?

Gary:  They are, they can be.

Rob:  In my head I pictured a loan that you’re not going to get back for 10 years, but that’s not always the case with bonds because it’s a bond market.

Gary:  It is a market and it trades every day. In fact, our screen is changing every 15 seconds.

Rob:  I wanted to make sure that the listeners understood that, just because you mentioned long term bonds, it doesn’t mean you’re locked in for that length of term.

Gary:  No, it is a length that it’s going to pay and if you want to stay in there until it matures, the maturity date, then that’s fine, and if you don’t, that’s fine, too.

Rob:  Good. If people want to take advantage of your initial consultation, who do they call, Gary?

Gary:  They can call us at 972.383.1210.

Rob:  And, there’s a website you guys have where you take email questions as well. David, what’s that?

David:  That would be www.riggwealthmanagement.com.

Rob:  Great, thanks. Good topics, guys. I appreciate you sharing your knowledge with the listeners. We’re going to take a break but when we come back from the messages, we’re going to discuss…we’re going to pick an age group of mid 50’s. Is it too late to start saving? What can we do now without taking too much risk?

We’ll be right back…

SEGMENT 2

Rob Dalton:  Welcome back from the break. I am Rob Dalton. The show is “Wealth Strategy with Bryan Rigg.” Bryan’s on vacation. It is summertime. Once again, for the past couple of weeks and today, repeated, we love having them with us, David and Gary.

Gentlemen, thank you for being here.

Gary Bilyeu:  Thank you.

David Rigg:  Thank you.

Rob:  I know you work with Bryan at Rigg Wealth Management. You guys take calls and answer questions and client consultations as well, right?

Gary:  Yes, we do.

Rob:  Thanks for being a part of the show again. We just finished up a segment about stocks and bonds. If you missed it, I’m sorry. If you were here, we appreciate you sticking through the break. We are going to tap on what it’s like now if you’re 55. In the next segment, we are going to talk about using the larger financial firms. These guys are independent consultants in the financial world.

But for now, the topic at hand is let’s say you’re in your mid‑50s. You’re 55. You just realized, “Wow, I lost track of time.” Is it too late? What should I be doing, if I’m in my mid 50s? First of all, Gary, let me ask you. Is it too late?

Gary:  No. Next.

Rob:  Next question. [laughs]

Gary:  No, it’s never too late. My philosophy is this. If you choose not to take charge of your retirement and start building a plan and start contributing, then you made the conscious decision that you’re going to rely on the government to take care of you in those golden years of your life.

Rob:  Yes, right.

Gary:  But how golden will they be, if you’re on a fixed income from the federal government?

Rob:  You fall back on the default system. It’s not always the safest system.

Gary:  You do. That system was never intended to be the sole source of income for retirees. It just never was. With issues, you can read about them in the newspapers and see them on the news. There are always issues with it becoming insolvent. It’s going to be broke. There are all these patchwork pieces of legislation. They’ll fund it for a few more years and kick the can down the road.

But, at some point, there’s going to be a reckoning and we’re going to have to deal with that. I’m in my mid‑40s. I’ll tell you, I’m not counting on Social Security. I’m just not. I take matters in my own hands and start planning accordingly. If it’s there, great. If it’s not, I don’t want to wake up, when my working days are over and say, “I wish I would have…”

Rob:  [laughs] Woulda, coulda, shoulda, right?

Gary:  Right.

Rob:  David, let me ask you. Every age has its advantages and disadvantages. What are the advantages to being 55?

David:  You should be in your peak earning years in your 50s.

Rob:  As a career, yes.

David:  As a career, you should be at the top of your game. You should be well established. Your income is probably going to be as much as you’re ever going to make. The opportunity to save should be there.

Rob:  Right. You may have less overhead, without the kids, so to speak.

David:  The kids should be gone, yes.

Rob:  Running around paying school fees and college fees and baseball and hockey select leagues and all that. All that stuff’s gone. So you’ve got more money and maybe less overhead. That’s what you’re saying.

David:  That’s the plan, anyway. I’m 54 and I have one more year of college for one kid and two years for the other. I would be in that ballpark exactly.

Gary:  Yeah, in theory.

Rob:  In theory, right. In general.

Gary:  In theory, the kids are cut off. But, as I’m finding, I thought when they got out of diapers and formula I’d get a pay raise. No. Then there are camps.

David:  No. It gets worse. It just keeps getting worse.

Gary:  There’s music lessons and there’s all kinds of stuff.

Rob:  You’ve got kids moving back home too, moving in with parents. It’s not always the case. But generally speaking, your income’s up and your overhead’s down to some degree.

Gary:  I’m going to buy them a tent. They’re not moving back in.

[laughter]

David:  A tent and a garden hose.

Rob:  [laughs] We’ll let them know before they make plans, that’s for sure. There are some advantages to being in the 50s. That’s a great point. The disadvantages and you bring it up almost every week and this is your opportunity again, the two things are time and money. What’s your phrase?

David:  Our business is made up of two components. One is time. One is money. At 55, if you don’t have a whole lot of money, you don’t have a lot of time either. If you don’t have one, you’ve got to have a lot of the other. It’s never too late to get started. If you’re not starting till your 55, you’re obviously just not going to get where you could have gotten, if you had started much earlier.

It can be difficult. Let’s be honest. A lot of people are looking at their retirement and not happy with what they are seeing in their 50s, because of some life changes. A divorce. If you turn that 401k into a two hundred and a half, it hurts. Then you’re starting over with that particular situation. You’ve lost a job.

We just had a client call. They went through a merger. The companies went through a merger.

Rob:  His company did, OK.

David:  Yes. His phone call was, “I lost my job. Can I retire?”

Rob:  What age bracket is he in?

David:  He’s late 50s. He’s late 50s. That’s a heart‑wrenching thing to go though, because all the plans that you had laid out and you were tracking, are now done.

Rob:  Using that one example you had of the gentleman who called in his late 50s, what’s your immediate answer? It’s not your call. He asked you a question, but it’s really not for you to answer. Is that right?

David:  No. We’ll have to look at the portfolio and see what that portfolio is generating, let him know what that’s going to do for him. Then it’s going to be his decision whether he can do that, if he can make that work for him or not.

Rob:  I wanted to point that out, because even though he asked you the question, it’s ultimately his decision. But what he’s looking for is your consult and a status check basically.

David:  Sure. That’s always going to be an individual question. What are your expenses? What’s your burn rate for the month? Are your kids out of school? Is your home paid off?

Rob:  Some real hard questions with some self‑evaluation.

David:  Yeah, there are some real hard questions with that.

Rob:  I get that.

Gary:  That’s not an easy yes or no. That’s a few follow‑ups.

Rob:  Yes.

David:  Yes.

Rob:  Right. I wanted to point that out. That’s the kind of service you guys provide at Rigg Wealth Management, that responsive and caring and consultative effort to get them the information, because knowledge is power.

Gary:  It is.

Rob:  I wanted to bring that up. You don’t just give answers and expect them to follow through.

David:  No. We are going to give them honest answers, too. He may not like the answers, in that particular situation. My heart goes out to him. But this is what we have. This is what we can work with. We can’t make that produce much more, within his acceptable level of risk.

Rob:  Risk again, yeah.

David:  That’ll be a conversation that’ll happen over several meetings.

Rob:  Good. That’s what you guys do best. Married or single in mid to late 50s, is that a factor or just is it all about the income?

Gary:  Our wives like shoes. Being married, there are advantages. There may be some disadvantages to that. I’m a strong proponent. I’m sure my wife’s listening. I’m a strong proponent of the institution of marriage. [laughs]

No, think about it. If you’re in your mid‑50s and you’re single, yeah, you probably have less expenses. Your burn rate might be higher, because you’re not putting it towards things like retirement and other things like that, but you may have some fairly expensive hobbies. It can be. But, once again, every situation is different.

Rob:  Every situation.

Gary:  It is. That’s when you’ve got to sit down and ask people questions and find out what do you want to do. We get a lot of people that come into us. They sit down. They really want to find out where they are now. I seem like I say this over and over again. But they want to find out where they are now. That’s fine. That’s very important.

But we’ve also got to see where they want to go. Here’s your starting point, point A. Where is point B for you? Then how much time do we have to get there, your risk tolerance and so on and so forth. Then we map out a plan for them.

Rob:  I brought up the marriage question. That was a good answer. Thank you, Gary. It also might be another double‑income factor. She might be working as well.

David:  That would be one of the advantages.

Rob:  Right. That might help with the burn rate, month to month, but also it gives you even more opportunity to save for both of you.

Gary:  We see a lot of clients, married couples, one of them may use their income to pay all the bills. They may have a 401k at their respective employers. But one may be to take care of all the expenses and the other one is going towards supplementing their retirement. That’s a good plan. If it works for them, it’s a great plan.

Rob:  It’s a great plan. Again, those are the questions you have to ask. Being a grandparent, most of the time, when you’re in your 50s, if you had a family, you’re a grandparent by now, does that change things? Is it a factor?

David:  It can. It’s up to the individual grandparent. Do they want to help with the kids’ college? A lot of times we’ll have grandparents come in and want to do a 529 Plan.

Rob:  Which is?

David:  Which is an education plan.

Rob:  Thank you. Good. OK.

David:  They’ll come in. “Hey, I’ve got a new grand‑baby. Here’s $5,000. I want to do my 529 Plan.” There can be situations like that. You brought up the case, you may be in your 50s, but it may be a second marriage. You’ve got young kids and basically you’re thrown right back into the situation of somebody in their 30s. It may not even be the traditional 50‑year‑old track that you’re on.

Rob:  That’s true. Very true.

Gary:  Also David, let me throw something in. If you can invest cookies and brownies and ice cream, then grandparents can be a great asset.

Rob:  [laughs] You can buy them or make them.

Gary:  Right.

Rob:  I want to take a moment before we close out this segment. Looking ahead, being in your 50s and starting looking for retirement, it’s more than just the first seven or eight years.

David:  Hopefully.

Rob:  It is.

David:  Hopefully it is. Hopefully you’re in the situation where the things that you have put off or postponed the things that you would love to do or like to do or dreamed of doing, hopefully you’re now in a situation where you can. You have the time. You don’t have the responsibility of going to the office every day to where you can actually go do some of these things.

Rob:  Gary, if someone’s in their mid‑50s and they want to call you, where do they call?

Gary:  You can call our office directly. That number is 972‑383‑1210.

Rob:  The website please, David.

David:  Www.riggwealthmanagement.com.

Rob:  Emails are encouraged at the website. They are quite responsive.

Coming up next after the break, working with the big wire houses. What’s that all about? We’ll be right back.

SEGMENT 3

Rob Dalton:  Hello and welcome back from the break. My name is Rob Dalton. This is “Wealth Strategy with Bryan Rigg”. Bryan is not here today, but he is on vacation. As guests, again returning, again, they are just so entertaining to speak with.

Instead of having the singular voice of Bryan, we have David Rigg and Gary Bilyeu. Gentleman, once again, thanks for coming back after the break.

David Rigg:  Thanks for having us.

Rob:  This particular segment, we are going to discuss what it’s like working with the larger financial firms, the franchises and the wire services. After this segment, we are going to talk about existing pension plans. Are they still out there? We’ll get to that to close the show.

For now, I wanted to take a moment to thank you for sticking around after the break. If you’re just joining us, thanks for being with us this weekend. We are here each weekend, at this time, to talk about financial management.

We’re going to talk about things that may be uncomfortable for you to listen to, but we really want you to take the time to listen and learn and become more comfortable with the vocabulary and the strategies, because some of this is DIY stuff.

Some of this stuff we can do ourselves. Sometimes ‑‑ I’ve used this analogy before ‑‑ when you need something fixed or you don’t understand something, you go to the experts. An example, I’ve got a transmission issue. I take mine to a car shop. Or if I’ve got a health issue, I go to the doctor. I don’t know how to fix those.

I know I can take Tylenol and take a temperature and check my blood pressure, but beyond that, when it comes time to deal with stuff we are unfamiliar with, maybe, such as wealth management, that’s when people go to people like yourselves. These guys are here every weekend to talk about what they do and why and hopefully earn your trust.

This particular moment, we’re going to talk about the industry as a whole. That is some of the wire houses. Rigg Wealth Management is full of independent consultants. They’re not beholden to the larger companies and the financial companies, much like Edward Jones and Chase may be, a Goldman Sachs or Charles Schwab.

David, help me understand. Are these actual franchises? What exactly are they?

David:  They can be. They’re just large companies. They have to advertise for the company. They have to make money for the company. They have to offer…Most of them have their own products. If you are working for that company, they’re going to expect you to sell their products. They’re not going to expect you to go out and sell somebody else’s.

Which is one of our advantages. We can go and find the most appropriate or suitable product that we can that fits our client’s’ needs. We don’t care where it comes from. We really don’t. We are not beholden to a wire house to sell a particular product.

Bryan has a great example, when he was at Credit Suisse. They were pushing him to put a lot of his clients into a hedge fund. He didn’t like the hedge fund. He didn’t put any of his clients in it. Within I want to say it was a year or a few months, it had lost 50 percent of its value. But he had pressure from those above him, from his supervisors, to put people in there.

Rob:  To put people in there, because that was a directive from above.

David:  Yes.

Rob:  I’m going to detract for just a moment. As an analogy, most of us out there listening, have cars. In a way, you go to a Ford dealership or a Nissan dealership and you’re going to get Fords or Nissans. If you go to CarMax, you’re going to get all the cars in the parking lot. You’re going to get a broad variety.

In a way, you offer that type of variety, meaning, if you want to go to any car model you want you can look at, you can look at it and then pick the one you want. Gary, let me ask you. Do they have to share their fees up the ladder and up the chain, so to speak? Is that common, because they are beholden to the corporate?

Gary Bilyeu:  Yeah. That’s exactly right. There are advantages and disadvantages to the big wire houses, but there are also advantages to the smaller, independent firms as well. Dave mentioned you probably see the Edward Jones and those types of wire houses advertised on TV. That’s very expensive. We don’t do national advertising. We don’t do that.

We do a radio show and we have an office off of the tollway in Spring Valley. Some might say that’s not convenient. It’s not on every corner, like the Edward Jones. In this day and age, we can meet for an appointment and then, with the Internet and cell phones, we’re in contact.

Rob:  Emails, yeah.

Gary:  Yeah. We’re in contact with our clients quite a bit. One of the advantages that we have is, where Dave mentioned it, some of the wire houses have a certain, maybe a finite number of products. They want all their clients, no matter what shape you are, if you are a circle or a square or a triangle, you’re all going into that circle.

They’ll find a way to make everything fit. We don’t. We have the luxury of looking at your situation first and then building a plan and putting together a portfolio that fits you. It’s customized.

Rob:  It does. That comes with the banter and the discussion about where they are now and where they want to go.

Gary:  Yeah. Rob, I wasn’t avoiding that question of fees. I can’t speak for all the wire houses, how they charge. There’s some flexibility there. But I can talk about how we do it.

Rob:  Yeah, what is it that you do?

Gary:  I’m going to throw some more terminology out there.

Rob:  I’m braced.

Gary:  Assets under management, AUM, is how we’re referred to. That’s how we’re compensated. That’s why we can do a no‑cost consultation. We’re not compensated until we actually start managing money for you. Until we have those assets under our management, we are not compensated. We charge a flat one percent. That’s our typical fee.

One of the big differences, and it’s subtle, but it’s important, is that we are paid in arrears. You move money this month. We get it up and running for you. It’s not until the following that we are compensated.

That’s an important question that all the listeners should ask their financial advisor. How are you, as the advisor, compensated? Are you compensated up front? What’s your fee?

Rob:  And when.

Gary:  And when. They may get paid up front.

Rob:  Right. We’ve talked about it. Yeah.

Gary:  They may get paid three months, a full quarter up front.

Rob:  Up front.

Gary:  Yes.

Rob:  Regardless of their performance.

Gary:  That fee comes out first. The difference is what’s invested. When the clients come with us, we get their entire amount of money up and running for them. Then our fees will come out the following month.

David:  It actually comes out of their principal, what they have to invest. Sometimes it’s charged before it ever gets deployed and started to work for them.

Gary:  If you had $100 and you went to one of the wire houses, say they charge a one percent or higher fee, and they are paid up front, that full hundred dollars is not going to work for you. It’s going to take their fees out. The difference will be invested.

Rob:  Whatever’s left is what they invest. Right.

Gary:  With us, you bring $100 in this example. $100 goes to work for you. Then your portfolio will generate income in the form of dividends. Our fees will come out of that.

Rob:  I’m going to stand on a podium and throw out a four‑syllable word. In other words, to extrapolate that…See, there it is right there. [laughs]

David:  Ooh, big word. That’s a college word.

Rob:  I know. I wrote it down. I couldn’t spell it right. But I wrote it down. If we were to extrapolate that, really, in a way, the more money that you make for your clients, both teams win.

Gary:  That’s the incentive for us.

David:  Yes. We are chained to the same oar they are.

Rob:  Thank you. I like yours better.

[laughter]

Rob:  You are a man of metaphors. Yeah, you’re chained on the same oar. When they see success, you see success.

David:  Yes.

Gary:  Conversely, a lot of people like to talk about when their accounts go down.

Rob:  I was just thinking that. Going down, right.

Gary:  If the value goes down, then we are compensated less. There is incentive.

Rob:  Yeah, there is.

Gary:  If you want to see your portfolio grow, so do we.

Rob:  You’ve got a dog in the fight, so to speak.

Gary:  Absolutely.

Rob:  Yeah, I get it. I think that’s important. I don’t know if it’s a difference‑maker to those who are listening. You get rewarded for your counsel, as does the client. It’s not always your fault and your credit, but it’s all the same boat.

Gary:  Yeah. You’re going to see that advisors are compensated two ways. They are either a fee‑based, which is what we are, or they’re commission. In that commission, they’re compensated on those trades. When that money is invested, they are compensated immediately, the rest is invested.

With us, it’s fee‑based. We have a fiduciary responsibility, meaning we put your needs ahead of ours and ahead of any of the companies. We have a little bit more paperwork, as a fee‑based advisor, but we want to make sure everything is right there in black and white and you understand exactly.

It goes back to the efficiency of investing. Fees and taxes are very important. Fees are very important to us. We have no problem putting it in writing and showing you.

Rob:  Yes, and showing you, OK. I’ve seen that paperwork too. I want to talk about, tapping into some of the things you were talking about, I want to deal with a trust and the integrity issues. I want to take just a moment, since we’ve got some time here.

I think one of the things that makes you different is that all three of you, Bryan, who is not here, David and Gary, you’ve all worked and been with the Marine Corps. Give me a little bit of background about yourselves and why that might be something different in how you handle your clients.

Gary:  I’m still in.

Rob:  You’re still in. Right.

Gary:  I’m in the Reserves. I’m an Infantry Officer. I’ll have 24 years in September. It is the integrity. It’s that Marine Corps ethos. I think what I like best about working with these guys, knowing their background, is reputation.

A Marine Officer, it’s all about their reputation. I know that if Dave or Bryan tell me they’re going to do something, that’s golden. I can take that to the bank. We understand. We have this common background. It helps us in the civilian world.

Rob:  Dave, what about your background?

David:  I was a pilot in the Marine Corps. I flew Harriers, then was an instructor in A4s and T45s, before I got out. Kind of like what Gary says, I enjoy working with Bryan and Gary because of the trust factor. I don’t have to worry about an integrity issue or anything else. The Marine Corps is very big on that.

I was 20‑something years old. I was a First Lieutenant in a Harrier Squadron. I was in charge of the engine shop and worked in the maintenance. I took that job over. I had to sign for 20 Harrier motors, $3 million dollars each. That’s $60 million. Three spares, all the equipment. The guys that were running the shop, I had to supervise that. When the guy came and took over from me, he signed his name

Rob:  He signed the same paper, yeah.

David:  $70 million worth of stuff . Here you are. 24 years old, 25 years old and away you went. A huge amount of trust there. It had better all be there. You’re signing for it. I’m signing for it. I’m sure Gary had examples like that when he was in, or still in the Marine Corps. For us to work together means an awful lot.

For people that know what the Marine Corps does and what the training is like, whether it’s the enlisted training or the officer training, it’s very difficult. You have to want to do it. You have to have a desire to do it. You have to be willing to get it out and get it done. I know these guys have done that, because I did it.

Rob:  I know you’re David Rigg, older brother of Bryan. Give me a little bit of Bryan’s background in the Marines.

David:  Bryan went into the Marine Corps. He was injured very early on. He went through OCS. He became commissioned to Second Lieutenant. Then he got injured. He slipped on the ice and hurt his back. He was actually medicaled out.

Gary:  He didn’t just hurt it. He broke it.

David:  Yeah, it was a bad deal. He’s medicaled out. He’s actually a retired Second Lieutenant.

Rob:  But he’s got the background.

David:  You’ve never heard of that before in your entire life.

Rob:  OK, great integrity. A lot of trust here. Where can they get a hold of you for quick questions? What’s the phone number David?

David:  It’s 972‑383‑1210.

Rob:  And Gary, the website?

Gary:  Www.riggwealthmanagement.com.

Rob:  Easy website. You can drop an email there. Drop them a question or two. They are going to get back with you. Leave a voicemail, if no one’s answering right now. They will return your calls as well. Coming up next, we’re going to talk about pension plans. Are they still out there? Who has them anyway? We’ll be right back.

SEGMENT 4

Rob Dalton:  Welcome back. I am Rob Dalton. With me are two guests of honor that work with Bryan Rigg, our wealth professor. Gentlemen, state your names, and who exactly are you?

David Rigg:  I’m David Rigg.

Gary Bilyeu:  I’m Gary Bilyeu.

Rob: You work with Rigg Wealth Management in and around Bryan.

David: That is correct.

Rob: I want to first welcome back our WRR listeners. Thank for sticking with us this Saturday morning. It’s so nice to be a part of your morning routine, drinking coffee, making eggs, time with the family, or at least quiet time on the patio. Thank you for making us part of your Saturday morning today.

We hope you’re enjoying your weekend. It’s early, but we really want you to enjoy the rest of the weekend as well. This particular segment, we’re going to talk about precious metals, and that being primarily gold and silver. There are many.

We see the advertisements on TV, and especially if you’re up late at night, buying the coins and the certificates. We really want to get into are precious metals something that needs to be in someone’s portfolio, savings, and retirement plans? Gary, where would you like to start with, help me define precious metals, exactly?

Gary: I think you hit the big two, gold and silver. If you remember in high school, the periodic table, there are plenty of different metals and things that you can invest in, but gold and silver are the two that you see on TV at night.

You know what? Can it be a part? Yes. Is it for everyone? I would say no. You really need to understand what you’re trying to achieve with that. Most of our clients, they want lots of gold and silver. They want tangible assets. They don’t like the “funny money,” as they call it. They want something to put their hands on.

That’s fine, but if the zombie apocalypse strikes tomorrow, I think there’ll be other things more valuable than gold and silver.

[laughter]

David: You can’t eat it.

Gary: No.

Rob: Gold and silver are traded, are valuable, really because maybe it’s part of the financial structure or system in some way?

Gary: I think some of it is psychological. Gold and silver has always been the accepted currency. No matter what a paper currency has done, gold and silver is always tangible, and it’s pretty much held its value.

Rob: Globally?

Gary: Globally. Silver is used in so many components these days, many that we don’t really realize. I’m sure all our listeners has a cellphone. There is a certain amount of silver that’s used in those components.

There are some real advantages. Just having gold coins, silver coins, and stockpiling those may or may not be in your best interest. That’s what we sit down and talk about.

David: What I find interesting is, a lot of times, you watch those TV ads, and they’re trying to sell the precious metals as a hedge against volatility.

Rob: I’ve seen that.

David: Let’s take the price of silver, for example, over the last decade. 10 years ago or so, it was worth roughly what it is now, $15, $16 an ounce. In the middle of that decade, it went to $34 or $36, I think. I don’t have the exact numbers, but it was way over $30. Now, it’s back down around $16.

If you were chasing performance or something along that line, it was probably great if you got in at 16 and got out at 34. If you got in at 34, and now you’re still sitting on your silver, it’s not so good. It’s just like any other investment. There’s risk with anything.

Gary: I’d like to add something. Do you want to be the holders of the bullion, the gold and silver coins? A lot of our listeners may not know this, but you can actually invest in the companies that mine for it.

You can invest in companies that provide equity or money to the companies that need money to build a mine, or to increase the capacity of the mine. Some of these companies are not going to return on their money, but they may be compensated in a percentage of what is mined.

Do you want to be downstream, if you will, to where you get the gold coin or the silver coin, or do you want to invest in the company that’s helping to produce the gold and silver? That’s what we ask our clients. Most of them don’t even know…

Rob: Do you want to own the gold, or the process of gold?

Gary: Right. It depends on what you want to do. A lot of times, clients just don’t know the options that are available. They see those ads on TV, and think they can only buy gold and silver coins from this company or that company.

David: There’s many ways to get involved with that sector. You don’t necessarily have to have a gun safe with an AR‑15 and a bag of coins in it. I know people that do.

Rob: [laughs] That’s the fun part of it.

David: I know people that do.

Rob: It is Texas.

David: There’s many other businesses involved with that that you can invest in.

Rob: Speaking of tangible, and the bag of gold coins, when you get the stocks, you don’t always get anything tangible. You just know you have the stocks. When you buy gold, do you actually physically get the gold and the silver?

Gary: You can.

Rob: You can?

Gary: You can. I’ve seen some of those companies that will ship it directly to your house. I always wonder about that.

Rob: Then you have to store it.

Gary: That’s what he was saying, the safe you put all your gold and silver in.

Rob: Safety deposit boxes, safe around the house, the risk of getting broken in…

Gary: That just goes to show that different clients have different needs and their comfort level. I have many friends that will not invest in the market. They buy as much gold and silver. Now, I won’t tell you their names, because there would be a run on their properties.

[laughter]

Gary: They believe in having those tangible assets. That’s fine. That’s what they’re comfortable with. I don’t try to change their minds.

Rob: We talked earlier in the show about risk appetite. They’re in control of their own risk appetite. Along those same lines, these precious metals, are they rather liquid? Can you turn them into cash if you need to?

Gary: You can try. A lot of people say that real estate is not considered liquid, because you have to find a buyer. It’s the same thing with gold and silver.

Rob: Same thing with precious metals.

Gary: Can you? Yes, but it’s usually driven by market price. That goes back to Dave’s point. If you purchased silver in the ’30s, and you want to get rid of it, and now it’s down to the teens, yeah, you could get rid of it, but at what cost?

Rob: What’s it going to cost? What are you going to lose on it?

Gary: That’s what you need to take in consideration.

Rob: Like stocks, it’s not a loss or a gain until you actually…

Gary: Until you sell. It’s all a paper loss, paper gain until you sell.

Rob: I get it.

David: What is shipping on gold, just off the top of my head? It’s like shipping lead.

[laughter]

David: I can’t imagine.

Rob: It’s half the cost, shipping of bullion.

David: Exactly. You’ll never make money on it.

Rob: You’ll never make it if you end up shipping it FedEx. Can you buy precious metals online, or do you do it through a dealer? Is it something we can invest using Rigg Wealth Management?

Gary: All of the above. Now, there’s some precious metals that can go into your IRAs. Now, we don’t ever advocate putting all your eggs in one basket. Can we help with that? Yes. Are we going to try to give you other options? Yes.

Rob: The good thing is, it’s stable. The bag thing is, it’s entirely stable.

Gary: Someone will always buy your gold and silver, but at what price?

Rob: If they want to talk about precious metals, Gary, what’s the phone number they can reach you at?

Gary: They can call our office at 972‑383‑1210.

Rob: Where can we send our WRR listeners, Mr. David, for a website?

David: www.riggwealthmanagement.com.

Rob: Love that. Bryan will probably be back next week. We have checked his schedule. We hope to hear from him. He is our wealth professor, but for now, gentlemen, thanks for being with us today and the past couple of weekends as well. It’s been a pleasure working with you. Thank you.

Gary: We enjoyed it.

David: Thank you.

Rob: Listeners, we appreciate you being around. We’re going to take a quick break, but we do want you to stick around and come back. We’ll miss you while you’re gone. Bye for now.

SEGMENT 5

Rob Dalton:  I am Rob Dalton. This is Wealth Strategy with Bryan Rigg. I’ve got two guests in the studio today. Gentlemen, please introduce yourselves.

David Rigg:  I’m David Rigg.

Gary Bilyeu:  I’m Gary Bilyeu.

Rob: Who do you guys work with, exactly?

David: I work with Bryan Rigg.

Rob: Bryan Rigg, and the name of the company?

Gary: Rigg Wealth Management.

Rob: They are located right here in the Dallas area, North Dallas, right at Spring Valley and the Tollway. These guys are here. They work with Bryan, our wealth professor, on a daily basis. Bryan is just not here today, so we asked them to visit, to occupy some time, and get to know you, so you could get to know them a little bit.

We’re going to close out the show today with something about pensions. The term is slowly fading in today’s economy, and in fact, it might be disappearing from our vocabulary altogether, as it’s almost ghosting now. There are existing pension plans out there. Gary, who still has pensions? Any idea?

Gary: Yeah, you’re going to see a lot of municipalities at the state, the federal, and DOD, Department of Defense. Some of the biggest pensions out there here in Texas, and the one that I deal with the most, is the Texas teacher retirement system, still a pension.

Rob: Define a pension for me, David, if you would, just so everybody who isn’t familiar with that term knows what it is.

David: It’s a defined benefit plan. Just like you said, it’s starting to go away. It’s expensive. Most of the companies don’t like the responsibility of that. One of the most famous failures of that was Studebaker. They had a pension plan, and when they went out of business, it was woefully underfunded.

That was one of the biggest examples of a failed pension plan. You really don’t see a lot of that anymore. Even the ones that are still existing, Gary mentioned the military. When I was in, if you did 20 years, you got 50 percent. If you did 30 years, you got 75 percent.

Gary’s more familiar with it than I am. Now, it’s 20 years, you get 40 percent, but they also have a thrift savings plan. They’re starting to move over to the defined contribution side. Most pensions, I think, are moving that way.

Gary: One important point, you said defined benefit. That is, i.e., pension plan. The responsibility of investing falls on that pension manager. The individual that’s a part of the pension has no responsibility. They work. It’s about years of service.

Rob: The employee doesn’t have any responsibility?

Gary: The employee does not have the responsibility.

Rob: The employer assumes the management?

Gary: Whoever’s managing that pension plan for them. It’s more about you come to work, you work 20, 25, 30 years, and you get benefits based on, usually it’s a combination of your age, plus years of service, whatever that equals. The longer you work, the greater your benefits.

Whereas typically, and what most corporate America is going to, is a 401(k) plan, which is a defined contribution.

Rob: Defined contribution.

Gary: What’s very important about that is now the responsibility of investing falls on the individual. As we’ve talked about, and we’ve said it over, and over, and over again, people just aren’t born with a high financial IQ. They’re just not.

They work in a particular field. They become a doctor or an attorney, or like my dad was fireman. Defined benefit plan. Worked 35 years as a firefighter…

Rob: Get a check.

Gary: Get a check. There was no responsibility on him to make those investments. He knew exactly what he was going to get, what the benefit was going to be when he retired.

Rob: It was in the hands of the experts, so to speak.

Gary: Now, that responsibility is basically…If you’re in a 401(k) plan through your employer, all of our listeners out there, that responsibility of investing is on you the listener right now.

Rob: Whether they do anything or not, it’s still your responsibility.

Gary: That’s why we advocate, go see a financial adviser. Go see somebody who that is their daily job. That is their full‑time job. They can focus on investing and give you guidance. The only thing we ask is, go see three financial advisers ‑‑ we’d like to be one of them ‑‑ and see what they’re offering, and what they’re telling you.

Compare it to what we’re telling you. You’ve got to be comfortable with your financial adviser.

Rob: I want to mention, too ‑‑ and we’re getting slightly off‑topic, but I’m going to circle back around after you answer this question ‑‑ you mentioned the 401(k)s. You’re willing to help people understand their 401(k)s. Even though the money’s not with you and your firm, you still provide consult.

Gary: We can. Like you said, we’ve got to be very careful. If we’re the planned administrator…

Rob: If they bring you something, you can offer some advice.

Gary: A lot of times, they say, “I’ve been contributing to my 401(k) at work. Here are the options. What are those options? Oh, OK.” We just simply say, “Here’s what this is. Here’s what they’re investing in. Here’s what that mutual fund this, and this mutual fund,” and help them understand it.

Based on what they’re telling us, if they’re a conservative investor getting late in their working years, and you find that they’re in very aggressive mutual funds, they need to understand what they’re in. They may want to change that allocation, and do something that’s more compatible with where they are in life.

Rob: That’s good. People need to realize, too, that when they change jobs, that their 401(k) stays with the company until they move it, isn’t that right, David?

David: Yes. They can do a rollover…

Rob: Even though you’re responsible for it, you have to bring it with you.

David: You do. You have to move that over into a like plan. You can roll a 401(k) into an IRA type of a thing. We help people do that all the time as well.

Gary: Rob, I’m surprised at how many people will change employers. They’re focused on starting this new job, and before you know it, a year has passed, two year’s passed, and that money’s just sitting there. It sitting there. What I say is, I don’t even leave $5 on the table, because my kids will take it.

That process, it’s not a difficult process, but if it’s done wrong, or you don’t move it to the like account, like Dave just said, then there could be some tax consequences and penalties. That’s your hard‑earned money. It’s our job to help you understand what your options are, and then to help you move that money.

Rob: I brought this questionnaire up, because I thought about the spring, when the fire department here in Dallas was having those issues with their pension plans. I just wanted people who aren’t familiar with it just to a, a better understanding of why ‑‑ we’re not looking for opinions here ‑‑ the term is mismanaged, and assets were frozen.

I just wanted people to have a little bit of background on understanding what that…Because it put a light on the plans.

David: There were a lot of terms thrown around for that. The big takeaway from that is just because you have a pension, somebody has to manage that. Somebody has to produce that, and have the responsibility for doing that.

That particular example is a great example of they may not always work out like you think, just like Studebaker did many, many years ago.

Rob: We mentioned ‑‑ and I’m pension this up ‑‑ that pension plans can’t always be trusted. Are they guaranteed with the FDIC?

Gary: No. Guaranteed is really a four‑letter word in our industry. You’ve got to be very careful. There’s only certain products out there that can make the claim of being guaranteed. What you’ll find is some of them are insurance products that advisers will incorporate in your portfolio.

Usually, it’s limited to the federal government. If you’re going to invest in some type of product or security the federal government offers, they print the money. They can make that claim of guarantee. We can’t. There’s risk in everything we do.

This holds true for any financial adviser. If we knew for certain what the future was going to hold, we would have all the answers. You never know. Markets are up and down for a reason. We just try to be very conservative and very focused on a plan over time. We don’t chase returns or the highs and the lows. We’re very consistent in our methodology.

Rob: One last question before we close out the show. Is there a minimum age for pulling money out of a pension plan? There’s really not any parameters, is there?

David: Most of the plans have their own formula. Gary does the teachers’ retirement system. That’s age and years of service is 80?

Gary: 80.

David: 80, I believe.

Gary: There’s a lot of other rules. That could be an entire show. Usually, like we mentioned with the federal government and the thrift savings plans, when you’re 59 and a half, you have an opportunity to take out some of that money without paying additional penalties, as long as it’s done properly.

Rob: David, what’s the website if someone wants to find out more about Rigg Wealth Management?

David: www.riggwealthmanagement.com.

Rob: The phone number, please, Mr. Gary?

Gary: That number is 972‑383‑1210.

Rob: Call and ask for Gary, ask for David. If you’re lucky, you’ll even find Bryan back from vacation and in the office. [laughs]

David: That is the plan at some point.

Rob: Ladies and gentlemen, thanks for being with us today. We appreciate you sharing this past hour with us. We hope you learned something. We’ll see you next week.