Income Investor Podcast Ep. 15 – Transcript

Stan: Welcome everybody. This is Stan The Annuity Man, with my cohort, Jimmy Dot Direct, and we welcome you to another informative podcast under the flagship of, the best newsletter on the planet, just launched, but it’s gonna be a monster. Trust me on that.  We’re very happy today to have two very close friends of mine that happen to be two of the best fee-only planners in the country, Cruise Ship Van Wie, Van Wie Financial. This is Steve and Adam Van Wie. They’re going to join us today for the podcast and we’re not really talking about annuities. We’re will talk about financial planning, kind of the overall aspect of what they do and get their insights on where they think things are headed and what sets them apart.

  But, before we do that, I want to throw it to Jimmy Dot Direct, my friend and co-founder of, and Jimmy, kind of give them an overview of and then all the sites that encompass the behemoth that has been built. Jimmy?
Jimmy: is a newsletter that we created to help people really go the gamut of what can create income for investors and whether you’re retired or not is irrelevant, but it’s dividend driven, whether those are bonds, whether it could be dividend-type ETFs or mutual funds. It could be REITS, or it could be MLPs. Anything that drives income, we talk about, write about and cover throughout the newsletter so that people can find an honest and above reproach way to look for investments without somebody banging the drum to make commissions off of a product, so it’s very transparent. You can just go to We do have all of our other websites off of Annuities.Direct, so if you go to, you’ll see all the information on QLACs, SPIAs, MYGAs, DIAs and now the newest that we just launched which is the, which is for guaranteed income streams and retirement.
  So, all of that’s available for everybody. It’s free of charge. You can sign up for the newsletter. Just go to and you could sign up on the right-hand side of the website. So, back to you, Stan.
Stan: Absolutely. We’re happy that Steve and Adam are here and we have actually, before this, signed them to a deal. They just signed the paperwork to be contributors to Income going forward, so be looking for their stuff. And any time that there’s a new article that’s published, you’re going to get an email if you sign up. Nobody’s going to bug you, try to sell you something or anything like that. So, before we get started, let me give you a little bit of background about who Van Wie Financial is.
  Again, Van Wie Financial, V-A-N W-I-E We’re going to have all of this, all of their links and information on the site so you can access that. They have a great radio show that airs every Saturday here in the Jacksonville area, but what I like about them is just kind of the cadence of how they approach things. Father and son, family owned, they do something very unique in the financial planning business. They actually listen to you and they really take a personal approach. I’ve sent them clients because I am Stan the Annuity Man, I do only one thing.
  So when people need that type of financial planning, I refer them and everybody has come back with just great reviews on how things were handled and I haven’t thrown them easy people either. They’ve gotten some pretty unique people. So with that, let’s kind of go for it. A couple of things just before we get started. They’re from Wisconsin, so you might hear a little bit of an accent, as they might be cheeseheads. The one thing I do like about Adam is he’s a Greenway. He went to Tulane and I was looking at, Steve, where you went. I don’t even know the mascot of Wisconsin, Milwaukee. What is that?
Steve: The Bratworst.
Stan: Oh, the Flaming Bratworst. Okay … I think Florida played them earlier this year. Yeah, I think it was tied at halftime. Guys, welcome and let’s just jump into the first question. Can you guys kind of explain to the listener out there fee based and fee only and the difference between that because a lot of people think when they just hear fee, then if it’s fee based, fee only, it’s the same thing. Tell the listener what the difference is and the reason that’s important.
Steve: Stan, fee based means that commissions could be paid in this relationship. Now I’m going to quote a recent SEC fine placed on a major brokerage house, and it says, “The workings of the wrap fee program, a version of ‘fee based advising,’ is to disguise commissions from the customer.” And you notice it said customer. Because we have clients and the non-fee only people have customers. The difference is there can never be a commission paid on a true fee based business and therefore, we eliminate all of the potentials for conflict of interest. And it really is not more complicated than that.
Stan: From just a fee standpoint, Adam, someone walks in, they’ve got x amount of money, they say, “We want Team Van Wie to handle this,” how does that – you don’t have to go through the whole fee structure – but how does that work and kind of explain to the people how the fee only process works from you managing their money, etc.
Adam: Absolutely. The fee only structure really only puts our best interests in line with our client’s best interests. The more money of theirs that we manage, the more money we make, and conversely, if we lose their money, we are actually hurting ourselves as well. So, we really have the same end goal in mind and that is to grow our client’s wealth. And we’re very, very transparent about our fees. We publish them right on our website. It’s a sliding scale that starts at 1% and goes up to 2% and it’s right there online for everybody to see so you’ll never pay anything else besides what you see on our website. And the way that we do it is we bill four times a year.We take a quarter of the fee and build that on the account balance, on the last day of the quarter. And it’s as simple as that.
Stan: Okay, okay. That’s pretty self-explanatory and I think that’s the way the industry is definitely moving for sure. So I’ll ask first question. Jimmy, you can have the next one. Annuities were designed back in the Roman times for income. Obviously, it’s a transfer of risk income product. In most cases, that’s what people are using them for. In your world, if someone says, “Adam, Steve, I want an income plan, but if you show me an annuity, I’m going to vomit. I’m going to throw up and kick you in the shin.” Tell me, your income strategies and how you guys go about, in a general sense, I know everything is customized, income without using annuities.
Steve: Stan, income means nothing unless you have a base income for life and that’s where you come in. I think there’s a feeling in the industry like people like you and people like us are at odds with each other and we’re clearly not. We need people like you to satisfy the most fundamental of all human needs, which is income for life. The problem with most annuity people is that they try to get all of your money in there. What you try to do is solve the problem. That’s what your books say and believe me, I’ve read them all cover to cover.
Stan: You’re the guy! Fantastic. You’re the one guy that did.
Adam: No, I also read it, so there’s two of us.
Steve: Seriously, when you get the initial question answered, what is your income for life need, that is solved by the annuity, the social security, some people have pensions, railroad retirement – the real lucky ones-
Stan: Yeah, exactly.
Steve: At that point. Now, all of a sudden, if you think about it, here’s what we’ve done. We’ve solved the income for life problem. That allows us to put more into the riskier side of life, management style, which means stocks and bonds, so now we get a whole world of investments available to us, meaning dividends, stocks, bond ladders, utilities, and one of my favorites in an environment like this is TIPS, the US Treasurer Inflation Protected Bonds, which cover you two ways, both from an income standpoint and from a net worth standpoint because they pay both ways. But none of that is really made possible until you’ve sold the original formula, which is what is my income need for life that can never terminate. That’s why we work together.
Stan: Got it. Jimmy?
Jimmy: And to that point, I guess one of the things that Stan and I deal with on a regular basis is it’s kind of a two prong question. One is that addressing rate time, people trying to time interest rates, which is amusing unto itself, but the second is also yield chasing. How do you guys address that with your clients?
Steve: Ignore it.
Stan: Does that work?
Steve: I read it in your book.
Stan: Yeah, but you’re nicer than I am. You’re a nicer person, I think you guys are nice. [crosstalk 00:10:01]
Steve: Hey, I was taught by the best.
Stan: Well, I mean, when people … When they bring up between the treasury number and they always say cavalierly, “Well, you know, rates are low Steve,” and they’ve been saying that to all of us for since the ten year treasury’s been at four. What are you telling people now? What are you telling them?
Steve: I’m telling them, don’t expect them to go up anytime soon.  Adam and I will say on the radio show, pretty much every Saturday morning, that we would like the Fed to raise rates, raise them immediately, raise them often until they get back to normal. To do so would require that they contradict their own goals but all they’d have to do is look everybody square in the eye and say, “Look, we’ve tried it. It didn’t work, so we’re breaking the rules and we’re going to put interest rates back up. Going to stop punishing savers. We’re going to let you make some money on that. We’re going to allow the annuity industry to take off. Things are going to be different. And if that doesn’t work, we’ll talk again in four, five years.” But it doesn’t work. Japan’s been doing it for twenty years. It doesn’t work.
Adam: In some ways, both of us would just like to see them go up, say, I don’t know, one hundred, seventy-five basis point-
Steve: Right away.
Adam: And just do it. Get it over with.
Steve: With two more increases like that later on.
Adam: I know it would hurt, but at the same time, I think we could get through it and we could stop punishing old people and savers, and allow people to buy a CD that returns something.
Steve: We’re creating a scenario, we have created I should say, a scenario where older people, risk adverse people, have had to take on more risk in the market just to get a yield that is above zero and they’re losing money to inflation on taxes, obviously. So if we could get that part of it solved, we could get everyone back to a much better personal risk profile, but we can’t.
Stan: Hey, Jimmy, what’s your take on all this? I mean, are you in line with what Steve and Adam are talking about on the rate side?
Jimmy: Well, I mean, you know, you and I have had this conversation many times and the fact that … I just read an article a week or two ago about the fact that the Fed, I’ve actually been calling them the Little Boy Who Cried Wolf for the last three years. It’s time to raise rates. We need to, one hundred basis points is just ripping the scab off, it’s just the beginning. We need to get rates back in the two and a half to three percent range on the ten year treasury. And to stop doing exactly what we are talking about, which is punishing savers, we’re punishing senior citizens, we’re punishing social security benefactors by the fact that we’re keeping rates at zero. The only benefactors are foreign countries and the fact that the federal government can continue to float debt at zero percent interest rates. That’s the only reason, in my opinion, it’s still there. But I do agree 100% that we’re forcing the investor to take on greater and greater risk and that’s why people are buying rates and MLPs and things that they really don’t understand because they see the yield at four and five percent.
Stan: Exactly. And I think this is also a good reason that a fee only planning firm, like Van Wie, like Steve and Adam, in a low interest rate world, you better have a pro doing that stuff. You better have someone that understands it and is following it and it’s like Jimmy said, “You don’t just go, ‘Oh, well, this rate’s paying seven.'” Yeah, whatever. Look at the liquidity, etc. What are some recent horror stories you have seen with people walking in? I know there’s annuity horror stories when someone is sold the wrong annuity. Let’s just get the annuity horror stories out of the way because those are ongoing. But things that you see people are making mistakes out there that are not only annuities.
Steve: Most recent one that comes to my mind immediately is people who bought untraded rates, unlisted rates, and realize not long after that that this was not necessarily a good thing. Certainly not a transparent thing. And have tried to unwind their investment and found out just how ill-liquid and ill-marketable these things really are, so a lot of them are tied up with a whole bunch of money, with dubious returns, some of which have been cut, no way to truly identify market value and they never would have been in them had they been in a risk environment and a reward environment, interest rate environment, where they could have chosen better, or perhaps dealt with someone who wasn’t quite so interested in generating a big commission for himself or herself, which hopefully will go away in 2017 with the new fiduciary rules.
Jimmy: Yeah, we’ll see. That’ll be real interesting.
Stan: Adam, when people come into the office and they go, “Adam, I want to hire you. I love you guys. Clean office and you guys keep it smelling good. But, what are my, what should I expect from a return standpoint?” Jimmy and I laugh all the time because people are insane and they think that seven and eight percent net of fees is just something normal and I always tell people, if you can do that ongoing, they’re going to build a statue of you right beside the bull. What do you tell people when they say, “What should I expect?” And this is obviously going, there’s different risk parameters I’m sure, but what do you tell people from an expectation standpoint?
Adam: Well, for one thing, we never make any promises like that and if we did, it would be a major ethical violation for us to tell someone that we could return them seven or eight percent every year net of fees. So, we stop that discussion in its tracks and start to lead them down the path of, “Here is what we can try to control.” We can try and control the yield of your portfolio and that is what it should do on average over time, and then we’re going to look at the risk and say, in order to get to target that yield, we have to focus on controlling your risk. So, sure, you can reasonably expect to get an eight percent return if you have the riskiest portfolio out there and you let it go for thirty years, there’s a really good chance you’re going to see a good return and some years are going to be even fantastic returns. But that is not appropriate for the majority of investors.
  So, what we do is run them through some of our software that actually assesses their risk tolerance and then we build the conversation from there and say, “Okay, with the amount of risk that you are looking at, we can reasonably set a target return on your portfolio of,” instead of eight percent sounds good. Let’s just go there and who cares about the risk. That is not an appropriate way to approach portfolio design, clearly.
Jimmy: What are you doing when you put together a portfolio mix? I mean, what are you using as far as the actual tools that you’re putting the money into?
Adam: As far as the actual software we use? We have some … We have a software called Quanti that looks at historical returns and uses Morning Star data actually to model different portfolios and so that is the actual software that we use. It’s relatively new. It’s all based on the cloud and it updates the next day with yesterday’s data so you really can get a great feel for what your portfolio has done historically, which we all know is not a perfect predictor of the future, but it’s the best thing we have.
Steve: Stan, you remember the commercial we both watched and compared notes a few years ago, where the fellow says, “Our clients wants a reasonable rate of return.”
Stan: Oh, yeah. Jimmy and I love that.
Steve: You and I had a little chuckle about that for a few weeks.
Stan: It’s called fill in the blank. It’s a typical annuity thing.
  For the listeners out there, just a reminder, we’re talking to Steven and Adam Van Wie of Van Wie Financial, fee only superstar guys. And let me just tell you, if you hear a little engineering coming out of these guys, they’re both engineers. They both have backgrounds as engineers. And math degrees. You hear that. That’s kind of how they approach it. So, if that’s kind of what you’re looking for, these are your guys. Both of them are CFPs, both of them know what they’re doing, but they are methodical planners. They’re not just throwing stuff against the wall.
  One of the things that I always wanted to ask you kind of off-script was robo-advising and kind of that drive toward robo-advising, what’s your opinion about – I know that’s growing by leaps and bounds and it’s very new – but have you guys … What’s your answer to someone that says, “Hey, what do you think about robo-advising?” I mean, give me the good and the bad because it’s not all bad and it’s not all good. Where do you guys land on the current environment of robo-advisors?
Adam: We are actually fans of it, which may surprise some people, because in some ways it’s a competitor and in some ways, it isn’t. But, regardless of how you look at it, it’s the wave of the future and it’s happening right now. They’ve attracted billions in assets and it’s not stopping. So, we think, we look at it as a great feeder for people who will eventually be our clients because when you have a little bit of money, it makes a lot of sense to go to a robo-advisor and you’re not necessarily getting … You don’t necessarily have the needs of our more financially complicated cases that we deal with. You might just need your assets managed and they’re perfectly capable of doing that.
  And at some point though, your life is going to become more complicated. You might have kids, you might get married, you might have a business, you might own a bunch of real estate across the country and have major estate planning needs. And your typical robo-advisor isn’t going to address all of those. Those are the people that may have grown up in the robo-advisor environment, who we think will eventually come to someone who is in our business. And so, in a lot of ways, we look at it as kind of a partnership and Schwabb even, who we custody through, even has their own robo platform and we have a service where we can service smaller clients at a cheaper rate if they use the Schwabb robo platform.
Stan: Nice.
Adam: Yeah, you kind of get the hybrid, you get the robo platform for your investments but you can also utilize our more professional investment advice.
Stan: So you would design the robo platform, right?
Adam: Correct.
Steve: Stan, in the more abstract sense, it’s like my grey hair, it’s age related.
Stan: Yeah, we were meaning to talk to you about that. Me and Adam, about this headshot thing.
Steve: Imagine bringing people into a practice like this who are either starting in their twenties, or started with a robo in their twenties and now maybe they’re in their thirties, or thirty-five, forty, and they come to us and they’ve already gotten ahead of the curve on financial planning and investing. This is the best possible news for an RIA ever. So we do. We love them, we embrace them.
Stan: Interesting, interesting. Jimmy, what’s your take on the robos? I know we’ve talked about it before, but things are kind of happening quickly in that area.
Jimmy: I think it’s something that people have tried to create for a long time and it’s finally here. It’s just, you’re going to have to do your homework, like any investing that you do, you want to do your homework prior to jumping into models that may not fit your risk profile. As both Adam and Steve were talking about is that you got to understand who you are as an investor and the more you educate yourself. I think they give you a great platform to work on. I know Schwabb has a great platform for theirs. They were one of the first people to actually embrace it in the advisory world. But I like the fact that people who have smaller amounts of money can actually start in an environment where they can learn versus just always blindly following somebody who may lead them down a path they don’t want to go.
Stan: I agree. Hey guys, what’s your opinion on where the financial advisory type business is going? There’s a lot of things happening that people don’t know, the Department of Labor has stepped in, smacked the annuity industry in the forehead as a well-deserved smack they should’ve used a two-by-four, and things are going to change drastically starting in the middle of 2017, but definitely the first part of ’18, where you would think this is common, but the best interests of the clients come first, you would think that’s a no-brainer but in the annuity industry, it sometimes is not for a lot of these agents out there. Where do you see it all landing? Are we turning into England where they’ll be nobody advising and we’re going to go down to two thousand advisors? Give us your – we won’t hold you to it, unless you’re wrong – but give us your opinion on like a five to ten year look down at the future of what’s going to be happening when people go to find an advisor?
Steve: Let’s sum it up in one word. Hallelujah! It’s the best thing that ever happened to a registered investment advisor. It is by inference, if you think about it, since we have to put our clients’ interests ahead of our own, it’s the best thing that ever happened to clients. Now you’re going to hear, you have heard, are hearing, and will hear, a constant litany of we’re going to deny good advice to younger people because of this. I would change that sentence a little bit. We’re going to only allow good advice to hit younger people. Isn’t that an improvement. Seriously? The whole concept – and I’ve said this a couple times on the radio and to you – it kind of amuses me, I guess that I’m crediting the administration, which I’m not a tremendously large fan of, with doing the right thing at the right time for the right people in imposing this rule. And people like Barack Obama and Elizabeth Warren are really on the side of the younger people and the industry is fighting back tooth and nail, as Stan knows better than anybody I’m sure-
Stan: Mm-hmm (affirmative)
Steve: And they’re using the excuse of it’s going to hurt our customers. I categorically disagree and that lays right back on the robo platform and with people like us. So, all you providers out there who are not fee only. If you look five or ten ahead, start looking at fee only so you can participate. That said, the hardest thing in the world is to get into this business. The barriers to entry are almost insurmountable for young people. And that’s a shame. And I don’t have the answer for-
Stan: I remember when you guys were starting the firm, literally opening the doors, and just the administrative nightmare. I mean, you would think you were starting a trash business of taking out your hazardous waste, for God’s sake. They make you guys jump through hoops and thank goodness you persevered, but Jimmy, I know you had a question. I just had to step in and give my two cents worth there.
Jimmy: That’s not like you Stan.
Stan: I know.
Jimmy: As everybody’s tiptoeing and head on talking about the new fiduciary rules, from your views, explain to our listeners what the fiduciary responsibility, as you guys see it, what is the fiduciary responsibility that one, you have as an RIA to your client, and two, that you believe the industry should have towards clients?
Adam: Well, for us, it’s pretty straightforward, we have basically taken an oath to always put our clients’ best interests ahead of our own, so in our business model, we make money off of how much money we manage. But, so let’s say that a client comes in and there is a situation where they really should pay off their mortgage to go into retirement, but doing so, would meant that they would have to take money out of their account with us. Well, we have taken the oath that we will make that recommendation to them and see that they follow through and take the money out from under our management and payoff the house even though it costs us personally. But that’s how we do business and that’s how we will always do business and that’s what basically what this fiduciary rule says. That you always have to put your clients’ best interests ahead of your own. You can’t think about what generates you the most money. You have to think about what puts your client in the best position to succeed financially and achieve their financial goals.
Steve: How can you go wrong?
Stan: That’s beautiful. I’m crying. There’s a tear running down my face right now.
Steve: Don’t feel sorry for us. I’ve been in this business fifteen years after decades of doing other side of the desk work, as I say, I was a client, not a producer-type. But think about it, what makes your clients better off? Good advice. When your clients are better off, who is ultimately better off? We are. Don’t feel sorry for us.
Stan: And in the annuity world, I think Jimmy and I take all credit for what we’ve designed with, which is we show all carriers, we show all choices, etc., which is what the DOL is going to make the annuity people do. You can’t just choose the annuity of choice to go on the trip to Bora Bora and drink for free. You’re going to have to show everything and that’s what the platform is. By the way, Steve, I feel sorry for only one person that you have a relationship with and that is your lovely wife, Sara, of forty-four years. That person has all the empathy I have. I mean, I’m telling you, she deserves combat pay for God’s sakes.
Steve: Stan, I really would put that right back to your wife instead.
Stan: No, I think Jimmy would agree with that too. Jimmy married up as well.
Steve: You travel so much. I go back and forth from the house to the office. You travel all the time. I’m just glad-
Stan: I know, I know.
  Well, listen guys, one more question.
  It’s going to be hard. You know, that’s the reason we’re doing because at some point in time, the mythical figure, Stan The Annuity Man, is going to have to hang up the cleats, but we’ll figure it all out.
  One last question. It’s a weird one of course. I’m not going to let you guys get away without me throwing a really weird one, but it just hit me. I’ve been seeing a lot of chatter from supposed masters of the universe about reverse mortgages, okay? When I see that initially, I reflex and do a little baby vomit, spit it out, and I go, “What are they talking about?” Tell me, and Jimmy, what’s your take on this whole reverse mortgage as part of the overall planning thing that I’m hearing out there?
Adam: Well, first of all, I wasn’t sold on the reverse mortgages until I saw the commercial with Tom Seleck and he said that he researched them on his own and so they are safe.
Stan: Okay, well that’s all I need to know. Between him and the guy from Knots Landing selling gold, I’m set, okay. I’m all good.
Adam: Stan, let me go into that a little bit. I consider the reverse mortgage exactly the same as the annuity. It’s not the product that is the problem, it’s the salesperson that is the problem. A well-placed, well-executed reverse mortgage is a Godsend and a life saver and a real cornerstone in financial planning. The problem they had was they tried to just sell these, I guess, lay them on the public with Fred Thompson and the Fonz and so on as you were saying, the product does not need celebrity sales, it needs understanding for the right people at the right time and I have come up with these, recently. They are an absolute Godsend. It’s a way to get your non working capital working without exposing yourself to too much risk for a very small subset of clients. That’s the key.
Stan: Gotcha, gotcha. Well, and you know, what scares me is not – and I know Wayne Foul, I mean, I just know him – he’s now out there giving these talks about reverse mortgages, we also are good friends with Tommy Hegna and he’s out there doing the same thing and they say the same thing as you, got to be careful, got to fully understand it. But what happens though, the gun slingers hear those guys and then they stand up at the bat reverse mortgage chicken dinner seminar and say, “These guys say it’s good. I just heard Steve Van Wie on a podcast say that he likes reverse mortgages.” That’s what scares me because back in the day in the annuity world, guys were doing reverse mortgages and buying annuities and obviously, that’s a felony now, but they stopped that. It just scares me when niche products like that start getting a little bit more publicity. Jimmy, what’s your thought – I’ve never asked you that Jimmy – what’s your thought on reverse mortgages? You’re older than dirt, you’ve been around the block, what do you think?
Adam: Older than dirt? I don’t know about that.
Stan: That’s right.
Jimmy: I did come down from Mount Sinai with Moses, but that was a while back, but … I think it’s like anything, you know. Every product has its place and every product can fit any one person’s individual needs. The problem is, like you just said, is that too often the salespeople want to lump it in for everybody to have one for either a commission or for whatever else. And I’ve been a fee only advisor since 1983, so I’m one of the old ducks on this pond. Then, I’ve always told people, advice is only as good as what you pay for it. And it’s only as good as the experience that it comes from it relative to what your needs are. And this really comes down to a needs based business. What do you need as an individual? How do you meet those needs? And find somebody who’s going to be honest. Do you pay off your mortgage? Do you get a reverse mortgage? Do you buy treasuries or do you buy high-yield bonds? It really comes down to your risk profile and every individual need that you have, but you need an honest coach on your side and that’s kind of what we’re talking about today.
Stan: I agree. Hey, time has run out. The little man on my shoulder is whispering in my ear. I think that’s the little man. But I want to thank Steve and Adam Van Wie for joining us. This will not be their last appearance. I’ll guarantee you that. And we do look forward to them contributing some articles to Once again, Steve and Adam Van Wie, Van Wie Financial. They have a radio show you can catch every Saturday globally on the internet and we’ll put that link up as well, but guys, we really appreciate you being with us and we will be tapping you on the shoulder to get your insight on what’s going on out there going forward. Thank you so much.
Steve: Anytime Stan. Thank you.
Adam: Thank you.
Stan: Take care. Bye bye.
Steve: Bye.

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