Your Retirement Plan is Your Blueprint | The Retirement Income Show

Blueprint For Success:

Mark Elliot: Fine Wednesday for The Retirement Income Show and Troy Sharpe, the CEO and founder of Oak Harvest Financial Group. You can always go to the website to learn more, Call if you have questions or concerns. The way Troy is breaking down the retirement success plan is something that they create for every client at Oak Harvest.

The investment plan, the income plan, the tax plan, the health plan, the estate plan. What about social security? How do I do it? When do I do it? What if I retire before I get to Medicare age? What do I do then? You can always go to the YouTube channel. He’s talked about all of these topics. I guarantee you, just search Troy Sharpe and Oak Harvest.

I’m Mark Elliott. Glad you’re with us today. Troy, you’re talking about risk management which is really the first step of this retirement success plan. It’s the investment plan. Don’t a lot of people think that their plan really is all about the investments? I’ve got IRAs, 401(k)s, I’ve got some real estate, I might have some life insurance. That’s my plan but those are really just tools.

Architectural blueprints.

Troy Sharpe: Yes, they’re tools. Think of a plan as the instructions. If you go to IKEA and you’re into just making yourself angry, you go to IKEA and you buy something and you bring it back and you have to put it together. The screwdriver, the hammer, the wrench, those are the tools. We’re talking metaphorically here, stocks, your bonds, your real estate those are the tools. If you don’t have the instructions and we’ve all had this happen to us where we buy something, it needs to be put together and you go through the box you’re searching and there’s no instructions.

I guess now everything is digital so you can probably go online and find them but we’ve all had that happen to us before. That’s what we see time and time again when people come to see us. We have two types of people that come to see us and I’m going to talk a little bit about our experience of analyzing thousands of portfolios over the years. Either they’re a self-director either by choice or just simply by force. What I mean there is if you never have had a financial advisor and you’ve just put money into your 401(k) forever most likely by force, you’ve had to choose those funds for yourself over all those years.

I shouldn’t say force I guess but you get where I’m going there. Then by choice. People, who say, “You know what? I can read, I can understand what I hear in the news. I’ve got a decent understanding of financial concepts and mutual funds and fees so I can do this myself.” Those two types of self-directors or someone who comes to see us because they are just looking for something new, they’re dissatisfied with their current broker, their current advisor.

Maybe it’s just a consultant that they’re working with but they have some type of professional that’s helped them to build a portfolio. When we see people who have done it themselves, particularly the self-director by choice, we see three common things, and all of these are very, very similar to the extent that they don’t focus on risk management. I don’t like to speak in absolutes, but the majority of the time we have an investor come in to talk to us because they say, “You know what Troy, I like what you’re saying about the planning stuff but the legal is too confusing, the tax code is too confusing, everything on the planning side is really confusing. I understand how to research mutual funds, but I don’t understand the planning side of things.”

Part of our process, we’re going to analyze the investment side of things, we’re going to focus on risk management, we’re going to go through that retirement success process, but we really see three types of self-directors. The first one is the one who researches mutual funds and they have a portfolio of funds, they’re at Morningstar, they’re at Fidelity, they’re researching fees, the expense ratio, they’re researching past performance over three-year periods and five-year periods, they want to invest in those five-star Morningstar funds, and that’s one type of investor self-director that we find.

The other is the one that has a bunch of different stocks and usually they invest in companies that they’re familiar with but they also typically follow newsletters. There are dozens and dozens and dozens of newsletters out there. I’ve never been a big fan of newsletters. I remember in college and when I was young– as soon as I turned 18, I opened up a stock account and I thought newsletters were the way to go. I learned the hard way that the way they pitched, the way they do their marketing, every single idea they throw at you seems like a brilliant idea. That’s another type of self-director that we come across, someone who has a portfolio of a bunch of different stocks, either from companies they’re somewhat familiar with or they follow newsletters.

Then the third one we typically see is the high-dividend investor. Someone who says, “I’m going to go out and I want to invest in a lot of MLPs” or what we call BDC’s, Business Development Companies, REITs, single stocks, oil and gas stocks in particular that have very high dividends, 7%, 8%, 10%. The thought process is, “If I can generate 7% without touching my principal, I should be okay.”

All three of those methods and that encompasses I would say about 95% of the type of self-directors that we encounter. If that’s you, this is an important discussion. I’m not saying any of this is right or wrong, what I am saying is that I believe, in retirement, that those methods of choosing investments in portfolio construction avoid the most important element, which is risk management.

If we’re looking at mutual fund performance and past performance, first, there’s a reason why past performance isn’t indicative of future results. There’s a reason that disclaimer is out there. Most mutual fund managers simply do not– oh, I think the number is around 90% do not meet or exceed their past performance when it comes to investing in the public markets.

A lot of people who are dependent on those past returns and those Morningstar ratings– ultimately, what you’re doing is you’re looking backwards, you’re not looking forward. Economic conditions are completely different over the next five years typically than they were over the past five. So if you have found a growth fund or a mutual fund that focuses on technology, for example, that should have done really, really well in a decreasing interest rate environment but moving forward into an increasing interest rate environment maybe that growth fund, maybe that technology fund isn’t likely to perform at the same level.

So we’re making decisions based on past performance and Morningstar ratings, but we’re avoiding the risk management component, so we’re just looking at returns, I guess is a short way to say that. We want the funds that give us the best potential for returns and marketing-wise, these companies have made it very simple for people to go out and do research and try to identify at least mentally what we think gives us the best potential for returns.
Now, the other one, the high dividend type investor.

There’s a reason why companies typically pay 7% or 8% or 10% dividends. If I’m a $20 stock and I pay a $1 dividend, that’s a 5% yield. If my business is so bad that my stock crashes 50% from $20 to $10, now I still pay that $1 dividend, but it’s a 10% yield. So if I run a stock screen or if I’m following a series of companies and I see, “Oh goodness, this is a 10% yielder, I need to scoop that up,” well, what you’re really doing is buying a company who is in most likely tremendous trouble.

So, what happens if that company doesn’t have the cash flow to meet that dividend payment? Which is often what happens in these situations a year, two, three years later. Now your investment– if the company cuts that dividend, your investment is likely to drop 20, 30, 40, 50% and you don’t have the dividend. Again, you’re focusing on yield and you’re focusing on income but you’re ignoring the risk management side of the equation.

Then we have the third one there where we’re looking at different newsletters and companies that we’re familiar with so we build a portfolio of all these different stocks that have great growth prospects and there’s an amazing story behind them or I feel pretty comfortable with them. We’re ignoring the risk management component. Which sectors are you invested in? What is your position sizing? How are you mitigating risk? How are you mitigating industry risk, company risk? How are we mitigating any of that stuff?

It gets back to the guardrail discussion. How much are you willing to see your portfolio decline and still stay the course along with your financial plan? What we want to do in retirement is have a portfolio that is constructed first and foremost from a risk management perspective. From there, we understand your income needs, the impact inflation will have on your income, but also the growth expectation so we can then deal with the tax side of things. When we focus on that risk management side, it’s the core, I should say, of investment management. That’s true for no matter how old you are, but it is especially true in retirement.

1-800-822-6434, Retirement Success Process. The Retirement Success Plan, it starts with risk management. That’s the core focus of our Retirement Success Process here at Oak Harvest Financial Group. If you are one of those investors and you’d like some help with risk management, if you’ve seen the portfolio go beyond your lower guardrail or if you’ve seen your dividends be cut or you never understood the risk management component, and I’m talking about standard deviation, I’m talking about non-correlating assets. I’m talking about building a portfolio that is constructed to statistically not go beyond your lower guardrail, whether that’s $100,000 or $200,000 or $500,000 in loss.

Once we get to retirement, it’s critical that we have a portfolio focused on risk management so we can then plan for the income you need to enjoy your retirement, continue the lifestyle that you deserve, and keep up with inflation. That helps with the other aspects. So Chris Paris, our Chief Investment Officer, he always talks about, he puts out a podcast two a week. One of them that comes out on Friday, he’s talking about what we’re seeing behind the scenes with economic data and institutional research and how it impacts you and your portfolio.

He has a saying that we invest for your need, not your greed. That’s another way of saying, what do we need to achieve your goals, give you the standard of living that you want in retirement without taking excessive risk? That is the core focus of the portfolio construction process here at Oak Harvest Financial Group. If you would like to have a conversation, if you’d like to sit down, the phone number is 1-800-822-6434. Visit the YouTube channel, visit the website

Mark: So, glad you’re with us today for The Retirement Income Show and Troy Sharpe, the CEO, and founder of Oak Harvest Financial Group. We’re talking about the Retirement Success Plan that Troy and the team creates for every client of the team at Oak Harvest. Maybe touch a little bit on your investment team led by Chris Paris, whom you just talked about, your Chief Investment Officer. He’s got an incredible resume and he used to do it for companies, and now he’s doing it for you and your clients, your families at Oak Harvest. You’ve created a great investment team led by Chris.

Big Money:

Troy: Yes, so Chris will be the first one to tell you. Chris has managed institutional money for most of his career. He’s been here at Oak Harvest for– going on five years now.

Chris has had success with institutional money management. He managed the number one ranked nationally, ranked by Lipper, mutual fund in the country. He managed the number two, both of these were for performance, the number two mutual fund over both three and five-year periods, again, nationally ranked by Lipper. We have the information on his bio on our website. So check that out, and Chris will be the first one to tell you that past performance is not indicative of future success.

One thing I love about Chris is he has managed money on an institutional level through multiple different market environments and across multiple asset classes. Small-cap growth in the late 90s and early 2000s during the tech bubble. Then large-cap value and large-cap growth, and then a strategic opportunities fund. Over the past, let’s call it 22, 23 years, he’s managed not just one particular asset class, but multiple asset classes in multiple different economic environments. Increasing interest rates, decreasing interest rates, decreasing inflation, increasing inflation, not to mention geopolitical events and black swan events.

Chris will be the first to tell you past performance is not indicative of future success. We have to focus on risk management. We have to focus on a financial plan or a goals-based investment strategy. That’s why we don’t outsource it to a third party like many people do. Even if your advisor works for a really big firm, typically they are the ones that are actually managing your money based on whatever research that their large company provides, or they just have models that they put you in and there’s no real customization, they’re just putting you into a box.

Elderly couple talking together and drinking coffee or milk

We just simply feel that having Chris’s expertise leading the investment team in-house gives the customer more direct access and a direct line of communication, and it allows us to customize the portfolios based on your risk level, based on your needs, not your greed. It really provides, in my opinion, just a better way to communicate to the client because Chris is doing the podcast. He’s on the radio show here. He’s very visible when it comes to communication to our clients on everything that we do from the outlooks, to the podcasts, to the YouTube videos. Very happy that Chris is part of the team and also that direct line of communication to our clients.

Check it out on the YouTube channel. Chris has tons of videos out there where he’s talking about the stock market, economic conditions that we’re seeing, how they impact your portfolio. Great section called news or noise that talks about current events. If this impacts your portfolio or it’s something that you should ignore, more noise. If you don’t have that Retirement Success Plan in place, if you want to have a conversation about going through this Retirement Success Process, 1-800-822-6434, give us a call at Oak Harvest Financial Group. Let’s walk you through these steps, see if we’re a good fit, and start to build out the foundation of a Retirement Success Plan for you and your family.


Mark: With Chris’s resume, and you can certainly read about it, but he graduated summa cum laude from Georgia Tech, MBA from Harvard Business School, and then the success in the mutual fund world that Troy was just talking about. I feel way better that he’s handling my portfolio than I am handling my portfolio. 800-822-6434. Troy breaking down the Retirement Success Plan that they build for every client at Oak Harvest. We’re going to get into the income plan and the tax planning part in our final segment. Stay with us. This is The Retirement Income Show with Troy Sharpe of Oak Harvest Financial Group.

Announcer: Investment advisory services offered through Oak Harvest Financial Group, LLC. Oak Harvest Financial Group is an independent financial services firm that helps people create retirement strategies using a variety of insurance and investment products. Investing involves risk, including the loss of principal, any references to protection benefits, or lifetime income generally referred to fixed insurance products, never securities or investment products.

Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Oak Harvest Financial Group, LLC is not permitted to offer and no statement made during this show shall constitute tax or legal advice. You should speak to a qualified professional before making any decisions about your personal situation. We are not affiliated with the US government or any governmental agency. This radio show is a paid placement.