“I want my clients to lay their heads down on their pillows and not worry about what their financial future will bring in the morning,” says Jeff Mitchell, CEO and Founder of Monolith Financial Group in Granite Bay, California. After more than 22 years working in the financial industry, Mitchell says it’s his ability to help his clients sleep at night, worry-free from the turmoil in the market, that keeps him getting up in the morning.
Ensuring that his clients don’t have to worry about money for the rest of their lives is no easy feat, especially during a span of time economists call “the lost decade” and after the market crashes of 2001 and 2008. These challenges cannot be overcome with a one-size-fits-all plan, although that is exactly what many financial planners offer. Mitchell says “If you’re alive and have money, you fit their ‘plan’! That’s how a lot of advisors work. Everyone who comes into their offices walks out with the same plan.” Monolith Financial Group, however, has the flexibility to create custom plans as unique as each of its clients.
Mitchell recommends that retirees look for “an adviser who is open to everything out there, who can get access to all of the amazing products.” Mitchell is securities-licensed, which means he doesn’t have to limit the scope of his offerings and can choose from hundreds of products and investments to find the best fit for his clients. His company provides insurance services, securities, mutual funds, stocks, bonds and first deeds, in addition to income and estate planning. “Most advisers have a set of products they constantly use, and their decisions are not about the client, they’re about the planner’s goals. I want everything that I do with my clients to be about their goals and dreams, so I listen 10 times more than I talk,” says Mitchell. However, the most important part of his process isn’t the products, but developing a trust-based relationship with his clients. To do this, Mitchell believes in complete transparency.
A few years ago, a 79-year-old woman walked into Mitchell’s office for a second opinion on her portfolio – a second opinion many retirees never get. As they reviewed her products together, Mitchell asked how much her broker’s plan charged her in fees. She didn’t know. One week later she walked back into Mitchell’s office to report what her broker of 20 years replied when she’d asked him that same question. At first, her broker tried to deflect her question as he always had by replying “don’t worry about it – it’s just built in.” When she pressed him further, he told her: “If you’re asking that, you don’t trust me. So you’d better go elsewhere.” It turned out that she was paying 3 ½ percent in fees, which amounted to $70,000 per year. She was wondering why she had lost so much money in her $2 million account, and these fees had been one of the most significant drains, second only to the products that exposed her savings to market downturns. If she made money, she paid even more in fees. She was in a situation she couldn’t win and her broker wasn’t even willing to explain it to her. Mitchell says that situation is all too common. “When someone comes in and asks me about my fees,” he says, “I write it down on a piece of paper so they can take it with them. We have to be more transparent in our business.”
Not only is Mitchell happy to tell his clients when he makes commissions and what fees are attached to any given product, he calls the companies that provide the products – with his clients on the line – so clients can hear the product details explained directly from the source. “It’s all about complete disclosure,” says Mitchell. “I’ve never once had a client come into my office who knew everything about the Variable Insurance products that they’ve bought – and that’s sad. The clients should have a better understanding of the products used in our industry,” he continues. Usually, when a retiree agrees to buy a product, the broker will hand over a 100-page prospectus and tell the client that the answers to their questions are “in there somewhere,” says Mitchell. By calling the companies, Mitchell’s clients get the truth straight from the source, rather than filtered through a broker. Then Mitchell takes a piece of paper and writes down what happens if the account in question goes up, and what will happen if it goes down.
Mitchell is particularly concerned about income riders and variable annuities. “The income rider situation is going to blow up in the industry’s face,” he says. “These accounts that are ‘guaranteed to grow’ by 6 to 7 percent every year don’t quite work the way they’re presented,” he warns. And, while he says not all income riders are bad when used properly and explained fully, he cautions that they often seem to work best for insurance companies and brokers – not clients. “I don’t like variable annuities because of their high fees – I’ve seen them over 4 percent. If you’re paying out 4 percent every year, you’ll have to make 9 percent average just to make 5 percent profit. Then there are all these hidden things about them that aren’t disclosed to clients. All the clients hear is ‘it’s growing by 6 to 7 percent,’ but that’s not the whole story. Not by a long shot,” says Mitchell. He says that in more than 22 years working in the financial industry, he’s never once had a client who has had a variable annuity explained to him or her properly.
Although he thinks products should come with explicit warning labels, Mitchell says there are many excellent options out there. “There are products that give 6 percent guaranteed growth as profit every year if you use it as a pension – it pays out over a lifetime for you and your spouse. And there’s long term care insurance, which is affordable when you’re younger. And there are products out there like life insurance and annuities which provide for long term care. There are a lot of avenues out there,” he says.
Providing for long term care is on the minds of most retirees, but especially for single women who make up a significant portion of Mitchell’s clientele. Women in particular need to ensure their individual well-being since they statistically outlive men. “‘Who’s going to take care of me?’ That is their big question. They just spent five to 10 years caring for their husbands and they’re drained. And their finances may be drained. They have to plan for the rest of their lives and they don’t want to be burdens on their kids. That’s one of the most important parts of my job: giving them peace of mind,” says Mitchell. The trend which concerns him most for this segment of the retiring population is the unscrupulous advisers who recommend unnecessary and expensive riders. He says, “They need to ask what are my costs and fees inside this? Can you lose money in this account? Do you have to die to get your money back out of the account? The attitude of too many advisors is ‘if you don’t know, it’s not going to bother you.’ Don’t ever accept ‘don’t worry about it,’ from your financial adviser.”
When it comes to selecting products for his clients, Mitchell first determines whether they have enough income already from Social Security, pensions, investments and real estate. “If you have a comfortable, sustainable income that lasts a lifetime for both the husband and wife, that’s the key. Income first, then you can have fun with other money,” he says. The trick, however, is that the income streams have to be “sustainable,” and Mitchell isn’t placing any bets on the longevity or reliability of Social Security – or even on private pensions. He says, “That’s why I have to have that open and honest relationship with my clients. I want to know where their income is, where their money is coming from. Guaranteed income is my number one concern. It’s changed drastically in the last five years or so – people never thought they would lose their pensions or have pension reductions. Now people with state and federal pensions are wondering what the future will hold.”
Taking a close, critical look at what other planners and retirees might consider to be “givens” is Mitchell’s specialty, but to get a complete picture, he also looks at possible future inheritances and whether his clients have children with special needs. Mitchell says, “When you think of planning for the remainder of someone’s life, it’s challenging, and there’s a lot of information that goes into it. Most advisors sit there half listening most of the time, already concocting a fee for the person across the table, because they were told to move a certain product that day.”
Most of his clients aren’t interested in buying a yacht or traveling all over Europe in high style. Keeping up with the cost of living, inflation and medical expenses are the priorities taking up his clients’ thoughts. While the goal itself is simple, Mitchell’s approach to it is detailed and specific: “I had a lady who said to me ‘I just want to keep up with the cost of living.’ I said, ‘that’s great, but that’s different for everybody. You might drive more than someone else and the price of gas would be a lot more important for you. She said ‘well, then I’d just like to keep up with the price of tomatoes.’ I said, ‘That’s easy, start planting those tomatoes in your backyard today.’” Mitchell recommends finding products that will adjust, or help subsidize, fixed pension incomes – products that ideally will pay out between 5 and 8 percent on your investible assets.
While ensuring a lifetime of comfortable income is highest on his clients’ lists of priorities, one traditional priority may be going by the wayside: saving now to maximize children’s inheritances later. Today’s retirees want to enjoy the money they have earned, reports Mitchell, whereas their parents saved to pass on money that would give their children and grandchildren a leg up in the world. “Most kids are doing OK today, and retirees want to enjoy their lives. It’s a paradigm change. I say the perfect plan is to spend every dime – and save one to get into heaven. And hopefully heaven doesn’t go up in price,” says Mitchell.
However, for every parent and grandparent spending every dime, there are still those who’d like to pass on substantial legacies to their loved ones. The best way to do that, according to Mitchell, is to use a life insurance policy: “You can leave hundreds of thousands of dollars for hundreds of dollars.” One of his clients is leaving money in another way: a multigenerational IRA. “The father converted $300,000 of an IRA into a Roth with his three sons as beneficiaries. Each son will inherit $100,000 in a Roth IRA, giving them tax-free growth inside that account. They’ll have their accounts for the next 30 years, which could amount to over $1,500,000 in tax-free money,” explains Mitchell. Once the three sons have inherited their accounts, they are then able to pass on some, or all, of this money to their children. This creates an even longer lasting legacy. However, he adds, many money management companies won’t allow this type of planning with an IRA.
There are many roads to retirement and even more types of vehicles to get retirees safely on their ways, but retirement planners should review all the maps and all the varieties of products as comprehensively as Jeff Mitchell. Over more than two decades of navigating these roads, he is always prepared with alternate routes if roadblocks should occur. But the secret to his success and to his clients finding themselves in solid retirement during and beyond the “lost decade” is open and honest communication. “You dig really deep down to the core of somebody when you’re trying to plan like this for them. At least, you should be,” says Mitchell. One of the compliments he gets from his clients is “you really seem to care.” He says, “Yes, I definitely do.”
