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Financial Balance - The Living Balance Sheet
- 1. An Uncommon Approach to Financial Decision Making
- 2. Find Real Balance... ...to protect against the unexpected while helping to grow your wealth. An Uncommon View... …to challenge traditional thinking and offer a refreshingly new approach to financial decision making.
- 3. Today, >90% of the wealth in the country is owned by <10% of the people This smaller group thinks about money and wealth building in an uncommon manner. Learning their secrets may be the key to unlocking your full financial potential.
- 4. “My money only needs to keep pace with inflation.” “I will be in a lower income tax bracket at retirement.” “My 401(k) plan creates a tax savings, which can be spent or invested.” “Compounding interest creates a financial miracle.” “I won’t need life insurance when I retire.” “A 15 year mortgage costs less than a 30 year mortgage.” “Disinvesting is the same as investing.” “Rate of return on my assets is more important than regular savings habits.” “To increase protection, my cash flow will suffer.” Common Financial Myths
- 5. Goal = Time x Money x ROR • Linear Math • Minimum Protection • No Financial Cushion • Reviews & Update • Goal Incorrect • Inefficient • Requires Guesswork • Promotes Risk Problems Financial Target College? Retirement? Death? Impact of Needs/Goal Planning
- 6. Goal = Time x Money x ROR Financial Target Optimal Results Actual Results Impact of Needs/Goal Planning
- 7. Threats to Your Money: Real Cost of Living: Inflation, PLUS taxes, new inventions, things wearing out, support for children, improved lifestyle, unexpected life events Failed Products and Strategies: Taxable compound interest, credit card debt, subprime, low savings, high risk asset allocation, term and invest difference, over reliance on qualified plans Financial Disorganization: Multiple financial institutions, constant change, bias, hype, inefficiencies, money locked up, confusion, costs, penalties
- 8. We start with your BALANCE SHEET... ...And then add your PROTECTION and CASH FLOW decisions, to create a WIDE ANGLE VIEW of your finances The Real Goal: To move toward, and then maintain an improved level of FINANCIAL BALANCE An Uncommon Perspective
- 10. Results • Wide Angle View • Lower Risk • Assumes Unexpected Life Events • Optimal Financial Balance • Economic Based Financial Rules • Efficiency/Cost Avoidance
- 12. Our Unique Approach 1 Complete confidentiality. 3 A “no Additional out Of pocket” Approach. 2 No increased risk on your Wealth.
- 13. Thank You The Living Balance Sheet® displays the financial holdings identified by the client based upon information and valuations provided directly by the client or by electronic feeds from the client’s financial institutions. Valuations provided by electronic feeds reflect the most current information provided by the financial institution as of the date and time noted, but can reflect valuations from an earlier date and time. Guardian, its subsidiaries, agents or employees do not give tax or legal advice. The Living Balance Sheet® and the Living Balance Sheet® Logo are registered service marks of The Guardian Life Insurance Company of America (Guardian), New York, NY. The graphics and text used herein are the exclusive property of Guardian and protected under U.S. and International copyright laws. © Copyright 2005-2013, The Guardian Life Insurance Company of America
Editor's Notes
- Hello <name>.<Referrer> spoke very highly of you and said because this was so good, so important, so different, that <referrer> felt it was very important for us to meet. Because he thinks so much of you, <prospect>, <referrer> made a point to put the two of us together. And I’m glad he did, because I have been looking forward to meeting you and getting to know you. Have you worked with other financial advisors before? How have they helped you? Did you have a chance to watch The Living Balance Sheet video? Great, what did you think? My practice is exploding, I’ve never had so much business. And my clients who use The Living Balance Sheet, despite the fact that there are so many others that find themselves in such disarray financially... My clients are better insulated and protected from those financial mishaps and problems. Let me explain why that is the case.
- I have made a professional commitment to help people that I meet. On their behalf...I take a stand for them to challenge traditional ways of thinking about money and to help them avoid purchasing and implementing products that may be dangerous to them financially . So, <prospect> on this screen, the 2 key themes that de-fine my real value to you, are in bold letters, ’Balance’ and ’Uncommon’. I see so many people who are not in balance financially. They have holes in their financial affairs, or they have all of their eggs in one basket. Or they have things they‘re trying to accomplish that are dragged down by seemingly unrelated financial decisions. So we focus on balance. And that is achieved by breaking free of traditional financial thinking. I definitely consider your financial choices in an uncommon manner. In fact <prospect>, if after our time today, what I say, and what I show you, doesn‘t sound completely totally different than anything you have ever seen or ever heard, then let‘s go ahead and agree up front to part ways and wish each other well. Would that be OK?
- Most of the money in the world is owned by only a few. The vast majority of Americans, perhaps as much as 90% or more, don‘t make money decisions the way that people do who have most of the wealth. How the wealthy and most successful financial people think and behave around their money is worth knowing about. It‘s uncommon. It could be the first big step in helping you to achieve the financial success that you have always been looking for. If you look back, historically, there aren‘t that many examples of where someone has followed the common financial thinking and can boast of any real high degree of success. What I want to do with my clients, is have them start thinking differently...right away - not like the pack, but how the most successful and wealthy people think and act with their money.
- And one of the ways in which you can begin to do that is through considering this list ―Common Financial Myths. Take a look at these examples ...is there anything on the list that jumps out at you? Any surprises, that we might have a brief conversation about? <<choose 1 or 2 examples to illustrate the point >> I would suggest that as we begin to work together, most of these issues will surface. And you and I will be able to test whether your current financial strategy is structured in your best interest. Some sources of financial information are extremely biased towards a certain product; they don‘t have a ―holistic view. Sometimes information is out of date. What might have been true 20 or 30 years ago might not apply today. You need to have a lens that knows the difference. That is what my work offers. Appendix - Common Financial Myths Keep Pace with Inflation People have been led to believe that their assets and income need to keep pace with inflation if they want to maintain their lifestyle. While it's true that inflation is one of the factors that raises their cost of living over time, the reality is that inflation is just one of many factors that affects future cost of living. So it's a myth that simply keeping up with inflation will lead to financial success. Tax Bracket People are told that they'll be in a lower tax bracket when they retire. That only hap-pens if their taxable income falls at retirement. Since the goal of most people is to retire at an income close to what they had before retirement, those who are successful may not fall to a lower tax bracket. That's especially true for those who have done most of their savings in programs that defer tax until retirement. Furthermore, even if our bracket is lowered, it's quite possible that the tax rates for our brackets will be higher than today - perhaps much higher. Tax Savings There's a common belief out there that putting money into an IRA or 401(k) creates tax savings that can be spent or invested currently. However, when we show clients how these programs really work they quickly realize that much of their tax savings is not savings at all, but rather just putting off payment of the tax to some future date. Compounding Interest Compound interest is often considered one of the miracles of the financial world because the longer the money is compounded the steeper the growth curve gets. Unfortunately, for many people that's only part of the story since their taxable compounding strategies often create unnecessary expenses to occur in other parts of their financial world, and those expenses also compound over time. The net result is considerably less than what people have been led to believe, and seeing the whole iceberg is much more important than just seeing the part that sits above water. Life Insurance Most people buy life insurance to protect their families when they are young. They want to make sure that if they die prematurely, there will be money available for last expenses and emergencies, college education and weddings, as well as to pay off mortgages and debt and replace the income that would have been earned had the per-son not died. Odds are that many, if not all of these reasons will reduce or even disappear as they get older so they believe they won't need it anymore when they retire. Un-fortunately, nobody bothered to tell them that there are some major negative impacts on their retirement income choices if they drop the policy when they retire that could not only reduce their retirement income but actually increase their taxes. 30 Year Mortgage It is true that a shorter term mortgage will usually save the consumer a substantial amount of interest over time compared to a longer term mortgage. Again, there's more to the story than meets the eye. Paying a mortgage off earlier means more cash flow has to go to the payment each month. To do the comparison correctly, we have to study not just the interest savings, but the difference in cash flow, the difference in tax deductions and the value of those items over time. Looking at the whole picture in-stead of just part of it helps our clients make better decisions with better results. Disinvesting When people put money in the market, they usually understand that the value of their assets will fluctuate over time, and they're usually OK with that because they believe that the average return will work in their favor. Unfortunately, the average return of an investment is often very different from the return people actually get because their individual rate of return is affected by the timing and amounts of their deposits. This is also true when people retire and disinvest from the market, but there is a tremendous difference in the impact of market fluctuations on disinvesting, and most consumers have never been made aware of the devastation it can cause to their wealth. Rate of Return So much emphasis is placed on rates of return these days. It's the center of conversation with most financial professionals as well as in many magazines, newspapers and radio and television talk shows. While rate of return is important, it typically pales in importance to rate of savings. For most people, an increase in the amount of money they save each year will be worth far more to them in the future than a higher rate of return on their savings and investments. Cash Flow Will Suffer One of the primary reasons that people fail to protect their balance sheet is the belief that they'll have to sacrifice lifestyle for protection. For most of our clients that's simply not true. Often we are able to find ways to give them substantially more protection and better forms of protection without the necessity of reducing their lifestyle or future net worth.
- Relying on common financial thinking or myths...is quite often followed by people planning their financial affairs by developing stated needs or goals . These financial targets become the focus...and there are several problems with this approach. <Prospect>You are x years old. Exactly, how much will you "need" at retirement? You see, it is an unanswerable question...isn't it? If anyone approaches you trying to plan your life, based upon a goal that is incorrect, using a time x money x rate of return formula, then that person is moving you onto a dangerous path. How long will your retirement last? What kind of tax law environment will your retirement face? What will inflation be? What will the stock market do? What types of new inventions will you want? And what will wear out during retirement? These are all unpredictable and unanswerable and therefore should never be part of...or be a basis for...any form of financial solution. College is the same way. Where will your children go to college in 16 years? Will they go in state or out of state? 4 years, 5 years, grad school? Any scholarship money? Will they go abroad and travel in Europe? Will they join fraternities or sororities? What will the cost of college tuitions be? Will they go to summer school locally? With all of those unanswerable questions to consider, millions of Americans have played the dangerous game of using a goal based college funding approach to discover that they have taken too much risk, been without the necessary level of protection and been far off the mark when college time actually arrives. And sadly, the same is very true in the event of the death of the primary bread winner. The Living Balance Sheet understands that identifying the exact amount a family will need in the event of the bread winner‘s death cannot be determined accurately and seems contrary to the basic purpose of insurance. LBS believes that all forms of insurance should be designed to fully replace the value of what might be lost, the entire car, the same home, the real ring...and full replacement of a person's life value. I will never take you down a path of guesswork that generates minimal protection advice. Is this making sense to you?
- The difference between actual results and optimal results can be millions of dollars over someone‘s life-time...your lifetime. And the reason for that is that traditional planning does not fully understand the threats that surrounds you and your money.
- <Prospect> When you think of all the things that could keep you from achieving your financial success, they could be defined and grouped into 3 areas. 1. Financial Disorganization The first threat is to move through time in a state of financial disorganization. How many different financial institutions do you interact with? Let’s make a brief list. When I meet people like you, they tell me they work with 10 - 15 or more different financial institutions, and that those institutions actually change over time. Each of those institutions provides consumers with a heavy dose of bias and hype. And you move through time confused, disorganized and inefficient, and with higher costs drawing you far away from your optimal results. 2. True Cost of Living Another key ingredient to this perfect storm is the total miscalculation of the True Cost of Living. It‘s not just inflation. It‘s also taxes on the rise. It‘s new inventions that come your way. It‘s all the new things you have to buy to replace things that wear out - with after inflation dollars. It‘s the wealth you take off your balance sheet to support your children. As you do that, it robs you of current protection and future financial results. We all want to have a better life. Many people today find themselves spending their future to keep up with the Jones‘s. And then, bam, out of the blue, without warning, something that your financial plan did not anticipate occurs. A premature death, a disability, a lawsuit because of car accident, loss of a job for a year, parent care, 6 years of college instead of 4, a divorce, a stock market that stays flat for 10 years, increases in taxes on your 401(k) plan just at distribution time...and on and on and on. <prospect>What I want you to get a feel for, is that your existing approach to money and even the advisors that you have interacted with, are just scratching the surface. We have to go deeper. You have to get organized. You have to understand what you are up against. By virtue of The Living Balance Sheet and the philosophy to understand that the real cost of living goes way, way past just inflation. ...you can begin to prepare properly. 3. Failed Products and Strategies And finally, products and strategies that are commonly recommended and bought by the 90 percenters, are ones that will not serve you well. Just think about “sub-prime” for just a minute and what that has done to this country, and in fact the world‘s economy. Compound interest -trying to make progress with 8% investment return while you are paying 18% non-deductible interest on your credit card. Placing too much risk on your wealth. Buying life insurance that is designed to disappear when it is just about to do you the most good. And putting all your eggs into one basket. An over reliance on any one product or financial strategy will never achieve the financial success that you are entitled to.
- In my work, I start with a balance sheet. It‘s nothing new. It‘s not something we created. It‘s existed for hundreds of years. It‘s a generally accepted accounting tool that measures Assets - Liabilities equals your net worth. However, what you may not realize is that every financial decision that you have made since you began earning an income, lives in your net worth. Every investment decision that you have made, every trip to the mall, how you‘ve financed your car, how much you save in your 401(k), the level of protection that you have or don‘t have, all of that added up…plus more, lives in your net worth. Having this context is important, because I help people build their net worth. This is an extremely important challenge. Because some day, it will be your net worth <prospect> that has to support you and your family when you decide to quit working. So your balance sheet and your net worth need to be protected. And you need to be able to make decisions about where to put money along the way that will bolster the net worth results. While a balance sheet itself is not new, what is new, what is revolutionary, what‘s causing so much great news in my local market and what‘s keeping my firm so busy and excited, is the addition of protection and cash flow considerations on the same view, so that everything a person is doing financially, can be looked at on that single page. People get confused about what they have, where it is and what it amounts to, because they have their financial affairs scattered across a wide expanse...located at several different institutions and dealing with different advisors. They don‘t know how it all fits together. So the assembly of protection, assets, liabilities and cash flow on a single page, gives our clients a one time, first time, wide angle view of their entire financial landscape. There are 4 financial domains; asset, liabilities, protection and cash flow. We don't use these domains to try and predict the future or hit a stated need or goal. The first step is to simply: have everything you own...or do financially...organized on a single page. From here I can see what steps could be taken to help improve your financial balance. This template is my tool. It defines what it is that I do, not why I do it, but what I do. I help people move toward and then maintain an improved level of overall financial balance. That‘s my goal. That‘s what I will do for you if we decide to work together <prospect>. To help move you closer to and then maintain, an improved overall level of financial balance. That‘s what people love about the work that I do. It‘s not just that there are 4 domains; assets, liabilities, surrounded by protection and cash flow, it‘s that they are interdependent. What happens in one domain effects the other 3 naturally and with most certainty. Once I have your basic financial information populating each of the 4 domains, I can take the decisions and strategies that have already been made, and I can see how those decisions stack up and how they may be able to take care of you going forward. And the way I evaluate that is by understanding what the objectives are within each domain. The Living Balance Sheet carries with it 15 different financial rules inside those 4 domains. These rules begin with Protection.
- I don‘t build your college savings plan or retirement strategy...which may be 20-30 years from now...and leave you exposed to something that could happen this afternoon. <Prospect> Doesn‘t that seem like the right way to approach things? Protection: When it comes to how much protection, you want the amount of insurance to be equal to the value of the item insured: The entire house, the same car, real jewelry, and your entire life value. There is never a point in time when it is better to be self-insured than fully insured. And so you will want to make sure that the products and strategies around your protection will allow you to have that coverage in place forever. If, with minimal impact on your current lifestyle, I can help you improve the Protection surrounding your balance sheet...would that be a valuable service? Assets: In the Asset domain, you seek a rate of return, but I want to tell you that I will never, ever ask you to take more risk on your money than your currently taking. In fact, from a rate of return stand point, it‘s highly likely I may be able to reduce your risk, to show you how you can get where you need to go without taking unnecessary risk. The way that can be accomplished, in a large part, is simply to minimize paying taxes along the way or at the end. There are products and strategies that lower the impact of taxes which boost your overall rate of return, without you having to take unnecessary risk. And while many people move through time with all of their money locked up, unable to respond to an emergency, an unexpected event, or even a financial opportunity, I want you to measure your liquidity to make sure if those surprises or opportunities happen, that you can respond accordingly. Liabilities: In the Liability area, I will work with you to ensure that nothing is dragging back against you...to slow your wealth building results. Eliminating debt, car loans, credit cards...will be my focus here. They are devastating against the wealth building outcomes that people seek. And yet, far too often they remain. What can you do to avoid taxes, not just merely defer them. And let‘s make sure your mortgage on your house is aligned with your overall financial situation. Cash Flow: And finally, I teach all of my clients a step-by-step, in order, deployment hierarchy of their Cash Flow...to make sure protection is maximized with minimum cost, to make you a better saver for the future to overcome that real cost of living, to lower the drag of debt and taxes, to live a life that is budgeted and disciplined. These 15 rules have been utilized by me, my clients, and the clients that are part of my organization, with great success. If we focus on what is optimal in these 4 areas, and what‘s possible, then you won‘t need to base your planning chasing after a financial target that we both know is wrong. Where this all takes place <prospect> is on your own private, secure, personal website.
- Each of my clients gets their own private, secure web-site, a financial home base, that they can check into anywhere in the world as long as they have an internet connection. And as each of your financial accounts change daily, so will this page...as it updates automatically. When your stock or 401(k) plan goes up, and your debt goes down, a new net worth will be posted for you...every day. You can set alerts to keep you inside the guardrails. So if wills, or insurance contracts need to be reviewed or updated, you will be alerted to do so. If your cash balances at the bank gets too low or your credit card debt gets too high, or even an anniversary or birthday reminder, your Living Balance Sheet home page can warn you or alert you to stay up to date and current from a financial perspective. You’ ll also receive a financial balance scorecard, that measures what you’re currently doing against the optimal balanced position that we spoke of previously. There is an optimal way that you can be protected, build wealth, manage debt and taxes, and deploy your cash flow.
- There is a vault, that will allow you to store, on an unlimited basis, financial documents and personal mementos important to you and your family. Whether it be a tax return, or a recording of your father‘s voice. You will have a secure, private, personal location for all of these pieces of information that make up your life. There will also be an ―uncommon knowledge tab. A place you can go, that says ―here‘s what the world says about a topic. Let‘s see what The Living Balance Sheet says for me as an alternative, uncommon way of thinking. There is also the ability to budget. And you can hear from other happy customers who have benefited every day from the client website experience offered by The Living Balance Sheet. The level of technology and the service it offers my clients...simply does not exist any-where else. I’m going to send you a link, <prospect>. You will get an email from me, and after you get home, you will be able to log-in and take a look at what The Living Balance Sheet actually amounts to. You will see an impressive, beautiful thing that we‘ve created. And it‘s really the reason I‘m so excited about what I do every day.
- Much of our discussion today may seem different than you were expecting, and I will continue to work with you using our unique approach. That is ...#1 Complete Confidentiality - you can count on me to keep your financial affairs, products, decisions, website, completely, 100% confidential. #2 - I will never ask you to increase the risk on your wealth. I will never ask you to move your money into a more risky situation than it currently is today. In fact, more often than not, I will be able to reduce the risk on your wealth. You work too hard for it. It‘s too important to you and your family to see it simply just disappear #3 The first phase of our working together will be based on a no additional out of pocket cost approach. I will take a look at what you are doing and make suggestions on possibly redeploying or rearranging your current cash flow, but I won‘t ask you to dig deeper in your pockets and spend more than you are currently spending. How does that sound? So I will take your existing resources, assets and cash flows, and see if they can be put back together and deployed in a more efficient manner to give you a better result. I don‘t want you to worry about cost, because it is simply not about that. We will not touch your net in-come – the amount you live on, eating out, vacation, dry-cleaning, and utilities....things like that. That‘s completely off-limits for me. I have to work with your other monies in order to produce better protection and better wealth building results. How would that feel? This is my unique approach: confidentiality, never asking you to take more risk with your money, and working with you, especially in this first phase, and not asking you to spend more. How does that sound? Has anyone ever approached you with those components as being a basis for a relationship? And I want you to know one final thing - you are never under any obligation, ever, to buy anything from me or to refer me to other people. I don‘t want to put that as an expectation up front, standing between myself and you. I want to put all the pressure on me. I want you to know that I‘m approaching this as if I‘ve got to be so good, that you willingly buy a product or maybe refer someone you care about to me. But it will only be because I have impressed you...and taken care of you like no one else you have ever met. Service is everything. You can count on that from me.
- Let’s get together next week. What looks good on your calendar? I want you to come to my office and walk around and see that I’m part of a large, dynamic, forward-thinking organization. We’ll reserve a private conference room. We’ll have The Living Balance Sheet up on a 50” monitor. We’ll begin to see which tools I have at my disposal to be able to show you options that will be important to you; tools that will help you to see how you can increase your protection with a no additional out of pocket approach, and how you can really move down the road in a more efficient manner from a wealth building standpoint. It’s going to be a great meeting. I hope that your spouse can be with us, because that person, obviously, is also part of the decision, and is greatly affected by whatever decisions are or are not made. Let’s go ahead and schedule a time right now. I will send you an email confirming that time, and give you your log-in instructions for the website. I will also have a document checklist for the other things I want you to begin to start to collect, like your wills, trusts, insurance policies and tax returns. I’ll be wanting to look and review all those things, but don’t worry about it. Just get started on it. We’ll look at your scorecard and we’ll see what the world looks like through that light with me as your “financial radiologist”. How does this sound? Has this been different? How do you feel right now? I’m looking forward to working with you. My whole practice is based upon favorable word of mouth. I go to great lengths to make sure that I treat everyone of my clients as if they were my own brother. It’s a high stakes game. It’s something that I know if done correctly can be the difference between financial success versus financial disappointment. The Living Balance Sheet is a powerful, unique tool. We have an uncommon approach to money decisions. And I’m excited to get to know you better, to see how our service can be of help to you and your family. I’ll see you next <day & time> in my office. Thank you very, very much.