Transcript Edited For Clarity

Scenario: “I make a dollar and uncle sam takes five of my dimes. How am I ever going to build wealth if I keep having to pay every time I make any money?”

Enpo: Hi, Chris. This is Enpo calling on behalf of My Financial Coach – Live! I’m looking forward to having a conversation with you today and I hope that you’re ready to answer some interesting questions for us.

Chris: I’d love to Enpo.

Enpo: all right. Well, hey, for our listeners here at My Financial Coach – Live!, could you maybe give us a little bit of background about yourself in your practice?

Chris: Sure. I came to become a financial advisor from a little different route. I started in corporate America. At one of the largest insurance companies, and helped them develop a mutual fund family that they sold to the public and then I was recruited away to run a broker dealer in a mutual fund family for another insurance company and once I was tired of corporate America. I decided to take my skills and abilities as a CPA, and help people individually it was just much more meaningful than than you know being in charge of a number of of wraps doing it doing it that route I wanted to have more hands on impact I guess in my life. So, as a CPA, my practice focuses more on the tax side of investing then on necessarily just having the right investment mix. Though that that’s important, I think the tax piece brings added value. And that’s really what what you know where where my value to my clients lives.

Enpo: All right well, Hey, thank you so much for giving us a little bit of background about yourself and what you do what what I’d like to do is… is sort of set the stage for what you might have as a normal interaction with one of your clients. So, imagine, if you will, one of the people that that you’ve been working with for a while says “Hey Chris, I make a dollar and Uncle Sam takes five of my dimes. How am I ever going to build wealth if I keep having to pay every time I make any money.” So essentially, your client is asking: “How do I not payso much in taxes?”. And, there’s definitely a lot of different ways you can take this question, but just on the surface what are some of your initial thoughts whenever a client comes to you with this question?

Chris: Well, sure you can go a lot of different ways. There’s about eighty eight thousand different pages to the tax code. So, the beauty of that is that there are a lot of holes. So, I like to describe the tax code is as a series of green lights and red lights. A red light is “Stop, you owe a tax.” Most of the CPA’s, most of the accounting industry that prepares taxes focuses on the red light. “I cannot let my client run a red light or they’ll be penalized.” whereas there are green lights in the tax code which is an exception to paying taxes. Often those are in, for example, a charitable section of the tax code. So, what I focus on is the green light in the tax code that allows people to either turn their tax dollars into charity, or turn their tax dollars and put that back into their family instead of going into the Internal Revenue Service. Because, whether it’s money that we make or money that we leave behind in a legacy, there are only three options. Those are: Family, Charity and the Internal Revenue Service. Most people don’t want to choose the Internal Revenue Service, so it’s really easy once you point out he options that people have.

Enpo: All right. Excellent Chris, and speaking about some of those options, could you give us an idea of what options are generally available in the marketplace today?

Chris: Sure. When you think about investments, there are really three ways to break them down. There are taxable which are things that you buy, and you sell it you make capital gains tax on you might have interest and dividends. There are tax deferred, like a 401K or a 403B an IRA where you put money in it before paying taxes on it and then every dollar that you take out you have to pay taxes on and then. The final category is is tax free. And there are only a couple of tax free, where you put in money after tax and then when you take it out there’s no tax on the gain. It’s important to have a proper blend of all three categories to maximize how much money you get to keep versus how much money the Internal Revenue Service takes. So, when someone comes to me when they’re in their early years, we look at what can we do to either… maybe pay a little bit more tax now but pay no tax in the future or how can we shelter the maximum amount of money from taxation today and then look at an exit strategy later on. If we’re dealing with an executive or or a business owner who who has a practice in their in their later years. Then it’s often a triage situation where we’re trying to do in a rescue of a large pile of money that is going to be taxed heavily. What are our options to get out of that so most people fall into one of those two categories, Enpo, on where they’re at and for example: would be if we’ve got a small business owner that doesn’t have too many employees. You know conventional wisdom, your CPA is probably gonna say “Hey let’s set up a 401K profit sharing plan.” Well, that maxes out the amount of money that you can put into your into your tax deferred savings in your 401K about sixty thousand dollars. Well, if it’s a situation where that business owner is married, and they are at the right age, we can set up a different type of plan. Possibly cash balance pension plan where they can put up to five hundred thousand dollars in there, pre tax which becomes a much more significant savings. But, that’s really just one of many many different options there are about a hundred over a hundred or so different strategies, tools, tactics and techniques that we use and it’s usually a skillful blending of one, two,three, four, five of those for each individual client.To come up with the right outcome.

Enpo: Yeah, so I think that kind of touches on a few different things and you kind of had mentioned it earlier. Where maybe they’re a client that already has a CPA that they’re currently working with, or perhaps they are working with an individual where they’re very happy with their existing strategies. So, what would you say that an advisor’s role should be for their clients, and this will be our last question here.

Chris: Sure, well, an advisor’s role should be to find the maximum benefit for their clients, and oftentimes it’s a situation where the current adviser does not have the tools or is not aware of the strategies that allows their clients to meet that. So, I often work in conjunction with the other advisors to come up with some of those tools. It’s impossible to know everything in the tax code… to know everything in our industry. That’s why many times, it takes a team. By no means do I want to be anyone’s CPA, and I think most people in our industry think that way. But, if we can educate the CPA to the point where they’re aware of the strategies and they see that: “Hey, we’re not threatening you, or your relationship with your client. We just want to build upon that and make things better for everyone then it ends up working really well.

Enpo: Absolutely well Hey Chris thank you so much for taking our call today and I think we’ve been really helped along by but what you shared with us and we look forward to connecting with you soon.

Chris: It’s been my pleasure, Enpo.

Enpo: All right, take care.

Chris: Bye now.