Welcome to Pension Attention, the best show for first responders who want to take control of their finances.
After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]
Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are at whatever stage in your career you are in order to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team here at ONE Fire and Police of fiduciary advisors are dedicated to ensuring you take control of your finances and build the life you deserve. Before we get started and to find out more about me or my team here at ONE Fire and Police, you can go to our website at PensionAttention.com, or you can give us a call (805) 409-8150. As we get into today's episode around the three things, I feel every portfolio should have, it reminded me of a quote by the late Tommy Lasorda and his passing last month, a great Dodgers manager. [01:14.8]
There are three kinds of people in this world. He said, people who make it happen, people who watch what happens and people who wonder what happened. I always love reading stories. I don't know about you about guys like Tommy Lasorda. And if you look at his history and if you know anything about him as a manager for the Dodgers, like many of us Angelian do, right. He was actually drafted by the Brooklyn Dodgers in 49. Actually, he was drafted from the Phillies organization and the Brooklyn Dodgers picked them up. But the Dodgers sent them right down to a place called the Greenville Spinners in 49 and then to the Montreal Royals on their international league. So he pitched for Montreal for like four years. Okay. And then he made his debut for the book and Dodgers. He made his only start for the Dodgers on May 5th, 1955, but get this, he was removed after the first inning, after tying a major league record with three wild pitches in one inning. [02:03.7]
Now flash forward, okay to 1976, when Los Angeles Dodgers now made him their manager and we all know the record from there. With him as our manager, we won two world series championships (1981 and 1988), four National League Pennants and eight division titles in his 20-year career as the Dodgers manager. And it just strikes me as interesting when you look at certain people and I know you've heard these stories before. I know I've read them and heard them as well. The notion of it's not how you start; it's how you finish. The good old golf quote, right. It's not how you drive; it's how you arrive. And it's important I think to take some of those analogies and some of the sayings let a Tommy Lasorda may say, when it comes, relates to baseball or sports and relate them to us as human beings, our habits, but also as us as financial beings, understanding that what we earn, how we save in the things that we're saving for retirement, you know, cashflow and just overall savings to have to supplement our income when we stopped working. These are all really good tie-ins too. [03:04.2]
If you're sitting here listening right now, and as we get in today's topic around what are the main three things that should be in a portfolio? I think it's really good to start this conversation around understanding that the first thing we need to do is make sure you get started, not worrying about what happened yesterday, what you think you've done over the past couple of years, and you can't ever recover from it. The answer is you can, it just takes planning. As you've heard me say on this program, in this podcast many times, and for those of you clients listening, you've heard me stress this point. I don't know how many times you're probably sick of me saying it, but it's so important to stay on track. And that's what we as advisors do here at ONE Fire and Police for each of you to make sure that we stay in touch number one. And number two, we go through any updates that you've had to your planning, your career, your family, and how that relates to your overall financial picture. Because the little tweaks we make today matter for later. [03:52.8]
And as I mentioned, a few episodes ago about the ripple effect, these seemingly small innocuous changes that we make and how impactful those can actually be and how profound those can be. So, as we mentioned, today's podcast episode, I want you to start thinking about some of the changes we can start making, whether it's increasing your deferred comp plan, taking a look at some savings, paying down some debt, all things we've talked about so far in the past few months on Pension Attention, those of you listening to our clients of ours, we've talked about it, that continuously in our planning meetings, but I think it's also good to say, okay, from today's perspective, from the three things, if you look at the entire world that's out there right now, especially in the past few months of what's all that's gone on in the markets, okay. Understanding what are the three main things that should be in a portfolio like the basics. And like Tommy Lasorda said, there's three kinds of people in this world, there's three kinds of items that should be in your portfolio that I think is the rudimentary start if you will, to building a good allocated and diversified portfolio. [04:51.5]
And sometimes putting together a perfect investment portfolio, it may seem like an impossible task sometimes, especially if you're not equipped to do it and if you're just getting started. But when you get past all the jargon, the clutter and the complicated investment vehicles and you, and you sit with an advisor, who's experienced someone like us here at ONE Fire and Police that does go a long way here. The basics of successful investing plan boil down to really three simple goals. Each of which I feel matched key considerations in any one of my clients or anyone I've spoken to over15 years, any one of the considerations in their financial life. And as I mentioned, we're gonna talk about the three main things to have in a portfolio, but it also comes to the three main basics of financial planning. Financial planning is all about making money, do what you needed to do for you, not for anyone else, necessarily for you. That's where the unique custom and tailor words come in. And by the way, those are often overused in our industry. But something, we here at ONE Fire and Police for the two and a half billion dollars we manage for our clients take very seriously because each person's unique financial situation needs to planned for in a unique way. [05:59.6]
So, in order to get to the fundamentals that your investing plan must address, you have to really establish your money needs at the most basic level possible. This starts actually with us at our firm, as many of my clients listening have known, come to know is our discovery process walking through where you currently are on the job, understanding your current structure in terms of family life, your current cashflow, savings debts. We, we go through all of that to basically start the design process for what your financial plan will ultimately become. And of course, no one plan works for everyone. If you're rich beyond all dreams, and you came in with his massive inheritance from that long-lost uncle, okay. Like we all sometimes wish we had, then you don't really need your money to work at all. You just had to keep from losing it, right? But most of us can build these reasonable expectations of our money and for our money. Firstly, you want the money you invest to grow over time and we're going to go into this as our three topics, but I want to start with the planning aspects first. [06:55.5]
Firstly, you want the money to grow over time. And at some point, secondly, either now or in the future, you want your investments to create a stream of income for you to spend. And then thirdly, ideally you want your investments to protect you from as many known risks as possible for whatever risk remains you want to seek out other ways to protect yourself. And for those first responders and I know this all too well, cause I, I grew up in the family and I speak to you guys constantly. You know, you kind of know these quotes, right. Your success depends on the risks you take and your survival depends on the risks you avoid and the same should be true of your portfolio manager. You know, here at ONE Fire and Police, we take that very seriously of understanding our diversification, our rebalancing, and all of our active management strategies that we put in place for your deferred comp plan, portfolios and your IRAs and the trusts that you've given to us to, to help you manage, right. We take all those risks in consideration and design it for what your goals are, where you are on the job. You know what your tier is, all those structures come into place. And there it is in simplest terms from a planning perspective. [07:51.8]
So, what are the three main components inside of the portfolio specifically that coincide with the three basics of financial planning I just went through? Well, first I think that any basic portfolio should have equities. Now again, I want to be very clear about this. This is an across the board in a vacuum advice here. This is just more of a general, the three things that are going to hit the three items I mentioned with regards to your overall planning goals, wanting money to grow, which is our first one. Typically, you look at historical data, you want to have equities. Now, how you invest in equities is important. Whether it's individual securities, exchange traded funds or ETFs, mutual funds, that's all where you sit down with an advisor to make sure you find out what's right for you and how you want to be managing your assets. But you're also investing for the growth over the long haul. You want to find the difference between a growth stock versus a value stock. And in essence, the difference there is growth stock will typically reinvest in itself and a value stock will typically provide a dividend, provide yield or income back to the investor in a way, thanking them for investing in their company. [08:56.4]
There's, they're established already. These are the Proctor and Gamble's the Johnson And Johnson's, these larger companies that are already established and can provide a dividend back. So, you want to have a happy medium between growth stocks and equities and value stocks and equities, and making sure that those work for you. And finding great companies and businesses, it takes good research. So here at ONE Fire and Police, something that I liked mentioning to everybody is that we have an internal management team and internal investment committee that manages our assets for a portfolio. So, when I meet with a client, I talked to them about how we're going to be allocating their deferred comp plan. For example, we're doing that. In-House, I'm not subbing that out to someone else I'm saying, okay, thanks for entrusting me with your, your planning and, and being your advisor. I'm now going to go and hire an outside management company, which by the way, is typically a mutual fund company and have them run it because end of the day, we want to find the good people and we hire them. We feel like we've hired them. They're charred financial analysts headed up our own Chief Investment Officer, Steve Cowley, who many of you spoken with our town hall calls. And if you haven't let me know if you'd like to, you can send me an email right through ONEFireandPolice.com or through PensionAttention.com. [10:00.3]
You can send an email over to me. We can get you on that list. It's really good topics we're going to be going through. And when you have your own chief investment officer who oversees the entirety of our assets for our clients, when we really talk about custom tailored portfolios, we mean it. And we're there to find it individually, not trying to go and sub it out to someone else to manage it. We want to do that for you and help you because great businesses, if you find them do more than just rise in value, they produce values. We want to be a part of that and have that as a healthy mixture in a diversified portfolio. [10:30.7]
Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the drop program? go to www.pensionattention.com to find out how we can help. [10:46.7]
Now the second piece of that and to the planning point above at some point either now or in the future, you want some part of your investments or your portfolio to create a stream of income for you to spend. So, investing for income is a little bit different, if you will than investing for growth. I mean, growing your money is great, we all want that, but eventually you also need to draw income from your portfolio. Something I talked heavily about on this podcast, around your sustainable distribution rate. And by the way, if you're listening to this right now, and you're a client that we've talked to around your, your drop entrance, right. And eventually your drop exit, you've seen this from us on what we call our black book, right, our wealth forecasting analysis. We're going to go through what your distribution rate is because that's how we need to analyze and essentially build your deferred comp plan then ultimately for your drop rollover, to be able to not only grow the accounts, but also manage for some income. And balancing your growth and income needs will determine ultimately what type of investments you own in your portfolio. [11:46.4]
So typically, when you look at income investing, you're gonna look at things like value, companies like I just mentioned with dividends and fixed income or otherwise known as bonds. And fixed income and bonds, as you've heard before, probably come in different forms. There's corporate bonds, municipality, bonds, government bonds, general obligation bonds, or different types of bonds that we put in the portfolios for our clients for different reasons. But they're typically labeled as fixed income because they carry more of a, of a fixed nature. They're a little bit more stable than maybe the equity markets they're typically that safe haven. So when you see the stock market moving down, you'll typically see a little bit of uptick in the fixed income market, and that's the way you want to design and allocate and diversify your portfolio, having that happy marriage in your portfolio between equities and fixed income so that when something goes down, something else goes up and that's a great way to what we call blended portfolio to make sure that we're investing for that first goal of growth and that second goal, whether now, or in the future of income. [12:49.2]
And that leads into the third aspect of a portfolio that I think should be in any portfolio when someone's looking to invest; is investing to protect some of the risks that are out there, investing for protection, if you will. Financial risks are everywhere. And, you know, financial products try to address these risks. And a lot of people, sadly, especially in my industry, decide to sell some sort of product like an annuity or some insurance backed product as if that's like the end all be all and they have their place. Sure. But they're not the second coming of all financial products. Okay. These are things that fit into a portfolio. They're not the entire portfolio. So, when you're investing for protection, one of the main things that I think of especially more recently than ever is inflation, and this one's more specifically in the portfolio and we can use different things like tips or treasury, inflated protection, securities, things like that to help balance the inflation risk in there. There's other risks that a portfolio should take into consideration. And that's why we talk so heavily about planning because some of the risks to help protect your assets that you've saved right now is your deferred comp plan, eventually you're drop, maybe it's other assets, IRAs 401ks from previous jobs or trust assets you may have throughout the family. There's other areas that we as advisors need to look at for our clients that comes down to life and disability discussions. [14:07.7]
No one likes to talk about those discussions. Trust me, I understand it and we're going to have a whole episode on Pension Attention around life insurance, long-term care insurance. Some of the things that the relief association and the union has, some things you can get privately that we can help you with as well. Those are all items that need to come into what I call investing for protection. Yeah, there's certain things in the portfolio like I mentioned, managing risk around maybe inflation for example, but a lot of it's around the entire aspect of planning that then ultimately relates to your portfolio now. And like I mentioned, things like insurances, things like disability coverages, all the things that you may have in our first discussion, we get together as a new client. For example, as we go through that discovery process, like I mentioned, what are you currently paying for on the job? Whether it's, you know, life insurance or long-term care, those kinds of risks, what are you differ in you deferred comp plan? What do you have in the deferred comp plan as an investment structure? And that goes into the previous two, right? Investing for growth and, and for income, and then ultimately for protection inside the portfolio. But we want to make sure we take a look around the portfolio because that's really where the risks are. [15:08.8]
A lot of times making sure that we ensure the risk, if you will, around what you've saved and ultimately what will be there for you as your nest egg, as you enter into retirement, basically into drop exit. And real quickly, before we end this segment on the three things inside a portfolio, and really the three things in general that we want to set our sights on as an implanting environment. And of course, you know, once you get started investing, you start looking to it. It's easy to let things get a whole lot more complicated. And I can't stress this enough, this is where an advisor comes in to help with those. Let's be honest kitchen table conversations, right? To making sure that what's being said is accurate and factual when it comes to the investing world. You've heard me say in this program and those clients that are listening, you've heard me say this probably at nausea before, right? But when you talk about a rate of return in particular, I always feel it's always only going to be half the story. [15:58.6]
The other half of the story is what that rate of return you're talking about equates to when it comes to the distribution phase of your life, you can go and make 10% a year if you want to, but then we do your planning and in retirement, you're going to be needing to take 15% a year of your deferred comp plan and drop. You tell me is 10 really enough, oddly enough, it's not right. So, the answer really is making sure that we twofold, know what eventually you're going to be needing to pull from your deferred comp plan and drop that distribution income I was speaking about, and then how your investment portfolio relates to that. And then once you get into the investment side, that's where finding experience and someone trusted. And that's what I feel we do here at ONE Fire and Police is build that trust and confidence within our clients to know that we know how to manage a portfolio for you, based on what your goals and objectives are. And we design it that way and let the world that can be so confusing this, especially this financial world, especially even lately, right around how confusing it'd be and what's smart and what's not and, and, and what you should invest in and we shouldn't. [16:58.9]
I mean, there's a lot of news out there and I speak about this all the time. We are in an age, an era, if you will, where we are consuming information at warp speeds. I mean, it's easier than ever before to access information, yet more difficult to find the truth. And that's what we're really after is understanding all that stuff that you hear, maybe it's in the station, maybe it's at a coffee shop through a family discussion or dinner or something like that. That's where an advisor comes in and says, okay, let's, let's put her all out there and make sure that what we've spoken about in here relating to where you're out on the job, where your wife may be, where your kids are in their educational life, all that comes into play and make sure that the stuff that you're listening to and kind of reacting to is pertinent to your actual portfolio, whether it's a deferred comp plan right now, or ultimately your drop account. So, in sum, there's really three things that I've met with hundreds of clients on over 15 plus years, when it comes to setting your goals for your planning, those three things are wanting your money to grow and invest for growth over time. [17:55.9]
And number two, at some point, either now or in the future, you want your investments to create a stream of income for you to spend. And number three, ideally you want your investments to be protected from as many risks as possible that are out there, whether that's risks inside the portfolio like I mentioned, whether it's inflation as an, as an example. Or outside the portfolio, you know, death, disability, those kinds of things that we need to talk about. And those are the three things that comprise of an overall planning perspective. And then internally inside the portfolio, the three things that you can combat each of those topics with is equities for growth, fixed income or bonds for income and ultimate diversification when it comes to equities and then certain inflation protection, active management rebalancing inside the portfolio for risks inside the portfolio, like inflation as an example, and then making sure you sit with an advisor on the planning aspect to go through the other risks that are more circumstantial to the portfolio like I mentioned, things like insurances, a long-term care disability and topics like that. Thank you for listening to this week's episode of Pension Attention. Next week on Pension Attention, we're gonna be talking about pension planning. I'm calling the episode, Pension Planning 101. Don't miss it, until then stay safe. [19:03.2]
The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.
To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [19:27.1]
