Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only, and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative. Securities offered through Cambridge Investment Research incorporated. A broker-dealer. Member FINRA, SIPC. Investment advisor representative. Cambridge Investment Research Advisors, Incorporated. A registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Gary Determan:
First Wednesday of the month, first day of the month.
David Nelson:
Yes.
Gary Determan:
We’ve got Dave Nelson in studio with-
David Nelson:
Absolutely gorgeous out there, too, coming up the hill here. This was-
Gary Determan:
Yeah, I saw you walking up. I was standing outside, and there you are coming around the corner there. Pretty nice.
David Nelson:
Exactly.
Gary Determan:
Very nice. You still getting those walks and bike rides in early?
David Nelson:
Yeah, I have to do it. It feels great. Now you’re not doing it in the pitch black. It’s kind of nice to be able to go out.
Got a different dog. I used to have two Airedales, and we would put in roughly two miles every morning, and then I would go do other stuff, bike ride or whatever, whatever. And now I’ve got a Goldendoodle, I guess it’s called. At about 35 pounds, he’s not big like the other ones. The Airedales were always 75 to 100 pounds, depending on which one. And so, it’s different. But I just couldn’t pick those guys up anymore to get in and out of the vehicle to take them and get trimmed, and what have you. And so I said, “I got to be realistic.”
One lived 18 years, which is just incredible for a big dog. So, they ate well, and we walked, and I mean, it was a very disciplined approach. Good for me.
My wife, “You’re going to get another dog?” “No, no, no.” And then, you stop and think about it, and I said, it forces me to get up and get going in the morning, because the dogs are ready to go. So, whether I’m ready, it’s time to get them out. So, anyway, it’s good for both of us, I guess.
Gary Determan:
And it’s great to see. We’re hoping that the weather transitions, but we’ve put up with some rain. Course, I think we probably needed the rain.
David Nelson:
Boy, did we ever. So, chatting with some friends up in Minnesota this year, and you’ve certainly noticed it in the river around us, but Minnesota, they got a fairly significant snow at the end of the year. But prior to that, the entire winter, and this is two hours north of Minneapolis, so you would assume lots of snow, they had seven inches. Less than we actually did here.
And it’s showing up as I said, in the river, the volume coming through here. And so, these rains are absolutely crucial, and I’m sure the farmers are really pleased to see some of that warming up and some rain. Good combination as far as crops are concerned.
Gary Determan:
Visiting with Dave Nelson. So, kind of a transition period for the tax people down there at NelsonCorp, but they keep busy year-round. I mean, it’s not tax work, it’s tax planning now.
David Nelson:
Yeah, exactly. Very much so. And as I left down there, the bulk of the people in the office were sitting in, and they’re talking Medicare. And so, the Medicare, so the accounting people, the advisors, on my side, the wealth management side, talking Medicare and the importance of it, and just some of the changes that are coming down the pike.
Increase is pretty significant from UnitedHealthcare and others that are bumping rates and what have you, and it’s just so crucial. So, the off-season, if you say that it’s an off-season like you were implying there, basically centers around pulling out, looking at clients’ tax returns, saying, “What can we do today to help impact tomorrow?”
And it’s one of the things that I bring up oftentimes when I’m chatting with people. So, we had a whole bunch of new people this past year that came in, have become clients. And one of the first questions out of my mouth is, “How often does your financial advisor that you’re currently working with get together with your accounting people?”
And typically you get this stare, and I don’t think they ever have. It is kind of a hesitation, and don’t really want to vocalize it. But I said, “What’s really important for people to get is that every decision that we make financially today is going to be impacted either today or tomorrow on your tax return.”
The example is, if a person puts money into an IRA, let’s say. They take the deduction. So, that’s going to impact the tax return today, but it’s also going to impact the tax return tomorrow when you take the money out and you have to pay taxes on it. So, it’s weighing all that stuff out, and not knowing what markets are going to do, not knowing what tax tables are going to look like in two years or five years, or 20 years, for that matter, makes the planning so important.
But it makes it difficult as well, because you can’t give people, oftentimes, a very black and white. You can say, “Here’s what seems to be the correct answer, but we really don’t know for sure.” Obviously because of the variables that I just mentioned.
Gary Determan:
I think that was such a great move on your part, because, I mean, what you do as a financial advisor, you have so much to learn, and you’re regulated. And then, the tax people, the same thing. I mean, those tax laws change constantly. So, they are keeping up to date on that side of things.
David Nelson:
Yes. Crucial, as you said, to pull the two together to make these decisions. And yes, for years we tried to put this together. And I’ve had clients come in and say, more or less, “How long have you had it here, and was this part of the big plan?” I said, when we started back 40 years ago, give or take, yes. It made sense to pull this together. But because of the complexity that you just brought up, the laws that wouldn’t allow certain things to take place, it took us decades, not years, but decades to pull this off.
So, give or take, the last 20 years we’ve had this system in place where you’ve got, in my opinion, both sides of the fence, as far as the tax side and the money management side, and we’ve been able to get rid of that fence and make this an informed decision versus a guess. And oftentimes, when we chat with clients, and we say, “Well, the decision you made to put money into the IRA versus going into the Roth, it was a guess.” And we want informed guesses. We don’t want just guesses.
And so, it’s crucial. And the last piece of the puzzle, and people say, who’s a typical person? Well, I think by now it’s pretty obvious that we work with people pretty much 50 and up is the bulk of the people that we can really impact. Somebody’s 30 years old, we’ve got plenty of those that we work with, but the value that we can bring to the table there isn’t nearly as significant as it is for 50-, 60-, 70-, 80-year-old individuals.
And that’s the sweet spot for us. So, these rules, these changes, all of this stuff, it’s staying informed. Mike S., in the office, as we call him, Mike Mike Steigerwald, he’s the one that’s overseeing the bulk of the Medicare type stuff. So, he’s running a meeting down there. He’s been on a lot of recent gatherings, I guess I’d call them, kind of basically where you’re on a call, it’s not face-to-face, but some new rules that have been implemented in the Medicare space, and walking through with everybody.
And I’m sitting there, and I’m not kidding, my head is spinning as I’m hearing this stuff. N versus G Plan versus this versus that. And this one, you can’t convert this one. You can’t… Oh, my goodness. So, anyway, the importance of having specialist, and certainly that’s an important part of our business model.
Gary Determan:
Again, visiting with Dave Nelson. We get to go to the bottom of the hour. Before we take the break for the weather, I was just thinking about this. I mean, you said 40 years.
David Nelson:
Yes. I’m an old guy.
Gary Determan:
So, when you first started… Well, so am I. May 15th will be my 48th year at KROS.
David Nelson:
Whoa.
Gary Determan:
So, I’m an older guy.
David Nelson:
Very nice. Okay, go ahead. I’m sorry.
Gary Determan:
But when you first started, you had this certain role. But now that you’ve taken on so many other employees, so many other services, what is your role right now, Dave Nelson?
David Nelson:
So, my role, I spent a whole bunch of money, went to a coach in Toronto, Canada. His name is Dan Sullivan. And Dan Sullivan, his business is called Strategic Coach. And so, it’s three meetings, very expensive meetings, and you come up and see me, this is in Toronto, and this guy basically slaps you around for eight hours, and telling you what you’re doing right, what you’re doing wrong.
And what came out of that is that you, like every other person on the planet, are really good at a couple things. You just have to figure out what those couple things are, and you have to offload some of the stuff that you don’t like that you’re not good at. There’s other people, that’s their specialty. They’re really good at that. You have to figure that out.
So, I learned that, in addition to several other things. So, I came back and I said what I need to do is to really focus on the interaction with clients. I think I have a kind of unique skill to be able to take some of this stuff and try to simplify it. This is not simple stuff, but to try to make it where the individual across the table from me can understand it. So, that was a really important part.
And the other part of it is basically the money management side of it. And I think I have a unique skill there to be able to help make some of these decisions, as far as helping clients make more money without a whole bunch of risk.
What I was horrible about is managing people. So, I offloaded that early on. I am not good at that. What I’m terrible at, in addition to that, is setting schedules and following through with that. So, I’ve got people that basically smack me alongside the head on a regular basis. “You’re supposed to be here. You’re supposed to be there.”
Like today. This is a good example. I almost was late getting up here. So, it’s figuring that out. And that isn’t just me, that’s everybody out there. Anybody in business, what have you, anybody that has a job that has kids, just figure out the two things that you’re really, really good at, and try to find somebody else that’s good at the other things, that enjoy the other things. He asked me a question. I know we’re tight here.
Gary Determan:
No, you’re fine.
David Nelson:
He asked me a question concerning, “How much of your daily work would you say that really, really bugs you?” And I said, “Well, I don’t know for sure, but I’ll say 10-20%.” He said, “How often do you think about retirement?” So, I was probably 40 at the time, and I said, “Constantly.” And he looked at me and he says, “Why is that?” I said, “Because of this stuff here that I hate. I’m not good at it, and I hate it.”
Well, it came back to, “You’ve got to find somebody that’s good at that that really digs that.” We’ve got two people in particular in the office that are really good at that other stuff that I’m not. And I like being in front of a group. I love doing stuff like this here, where most people, this isn’t their cup of tea. They don’t want a microphone in their face. They don’t want to be speaking in front of a group of a couple hundred people, or a couple thousand people, for that matter.
So anyway, so it’s finding that and putting together that team, as you said. David just happens to be the one out in front riding on the wagon, but I’ve got a lot of good horses out in front of me here that are basically helping us get to where we want to get. And where we want to get is to bring great value to the individuals that we work with.
Gary Determan:
Great explanation. And I would imagine trying to find those people to fit those roles isn’t necessarily easy at times.
David Nelson:
It isn’t. It isn’t. And when you do, you’re lucky. And we are really lucky. We’ve got one gal, she would be terrified to be here today. But man, is she good as far as a couple other things that are really important to making the wheels go ’round and ’round in the office.
Gary Determan:
All right. Again, visiting with Dave Nelson, we’ll continue. A break with the weather brought to you by Lectronics.
Andrew Stutzky:
We are tracking a fairly decent-looking Wednesday ahead of us, partly cloudy skies, a little less in the way of wind, and temperatures reaching the mid-70s for us this afternoon. However, it turns a little more active tonight. We’ll be tracking some showers late, with increasing clouds and lows settling into the mid-50s. With your storm tracking forecast, I’m meteorologist Andrew Stutzky.
Gary Determan:
Sunshine, 62 degrees. We have west winds. Our update brought to you by Lectronics.
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Gary Determan:
Well, we get to continue now with Dave Nelson to the bottom of the hour. Very interesting when you’re talking about you saw this gentleman. You were up there in Toronto, Canada, trying to figure out what you need to do to make things better for NelsonCorp Wealth Management, and now you’re implementing it. But what did you really take from that, Dave?
David Nelson:
So, coming back, you get all these great ideas. It’s three different meetings, this was over a year, so it wasn’t three consecutive days. It was three separate meetings. And so, you’d get an assignment, pretty much. I’m telling him all my woes, the good things, the bad things, whatever, whatever.
So, we formulate, essentially, a plan. The plan is there, now I got to go back and I got to implement. But I’ve got to implement in addition to all the other responsibilities that I have, as far as being with clients, et cetera, et cetera. So, that was very difficult, and during this period of time, my little hobby of full-time job coaching a varsity basketball team as well, so it was a busy, busy time, but a really important time.
So, once we got back, now it’s a matter of, okay, what’s the first step that I had to make? And the first step that I had to make is get rid of overseeing the office, because I’m not very good at that. It’s not my skill set by any stretch of the imagination.
So, Brad Fritz was fairly new in our operation at that point in time, and I said, “It’s time.” He would communicate with people in a much more short, concise way than me, and he was much more direct than I was, and we made the determination that was a good fit for him. It actually helped him, too, because he was fairly new in this business, so he could supplement his income by managing the office while at the same time meeting with his clients. So, that was step one, and that was probably the biggest and the toughest decision.
Then it’s a matter of, okay, what else do I need to offload? And for me, I’m really good. I can walk into a meeting and I can go through with a client what they need to do. But afterwards, I used to have Cathy that worked with me for 25 years, I believe it was, she would literally meet me at the door and say, “What did you just promise those people we would do?”
Because I had great intentions, but I’d walk out of there, and I’m walking into another meeting, and I’d forget maybe about a third of what I just went through. So, we would record it on the spot. She’s taking notes as I’m recording. And so, anyway, she would then basically make sure that that stuff took place.
Since then, I mean, we’ve added multiple people to the meeting, so we have just about every meeting that I run, I have somebody sitting with me taking notes, what have you, making sure that that stuff gets taken care of.
It’s a way for them to learn, one, and number two, it’s just better for clients. I told people for years this, and I never really believed it. I really didn’t. But I said, “I travel a lot.” And I said, “If something were to happen to me, and a plane went down, something like that, I want you to have somebody else that isn’t brand new to you that you’ve met before.”
So, for a while that was Brad, then it was maybe Nate. I’ve had multiple people that fit into that spot. Little did I know that it wouldn’t be a plane crash, it would be my brain basically decided to do something that I didn’t want it to do back four years ago, probably now, three and a half, four years ago. And my wonderful doctors took care of me out in Iowa City, but that was three weeks out there, and then it was months sitting at home trying to recover from this.
And I’ve told this to clients, and I smile when I tell them this. I said, “The good news is that none of the clients really knew that I was gone.” Other than if they saw it in the paper or something, that I wasn’t coaching, Coach Nelson missed another game, et cetera, et cetera. So, that’s the good news.
The bad news of this is, nobody really missed me. So, I tell that story to clients. I say, “Things ran beautifully without me here, so I’m starting to question, am I even needed anymore?”
But anyway, it’s having that great team. And right now it’s Jake pretty much oversees the bulk of the office, and he is so good behind the scenes. Computers, he does so much. Tax stuff, he is just so brilliant in what he does.
And so, anyway, we’ve got a really fantastic team. The accounting people just don’t do only accounting. They’re helping us in other areas, helping clients make decisions. And so, the team approach has worked. And this guy, I haven’t seen him in 20 years, probably now, give or take, and he made a huge difference for our office, as well as a lot of the people that we work with in this area.
Gary Determan:
Well, we’ve got about eight more minutes left in the program. So the Fed, are they going to? Aren’t they going to? How’s the market looking? May’s supposed to be actually a pretty good month. How’s it looking?
David Nelson:
Yeah, so April’s been rough. As clients get statements, I’m sure they’re going to see, it’s been bumpy to say the least. And unfortunately, like the last 12 months, the bumps have been up, not down. This month was down and down 2, 3, 4% depending on a person’s portfolio. The markets have done a little worse than that. But at the end of the day…
So, we came into this year with the expectation, most people believed, and I’m talking about informed analysts from Wall Street, that there would all likelihood be six rate cuts in this year, 2024.
Now, a rate cut typically is going to be a quarter percent, so we moved up rapidly, quarter percent, quarter percent, quarter percent. We went from pretty much zero to 5%. Now we’re going to have give or take six cuts at roughly a quarter percent each in 2024.
The likelihood of that, and we’ve been saying, day one I said three at best. Now probably today, the best guess is, there won’t be any this year, and the market is basically going into a tantrum because of that. And so, that’s what we’ve witnessed the last month or so.
So, I think rate cuts are in the cards maybe next year. This year, maybe one rate cut. But once you start getting close to election time, now it becomes a real difficult thing to make changes without showing favoritism, supposedly, towards one party or the other. And so, it’s supposed to be a impartial, non-political type position, but people will do and say what they want to do to help stack the deck in their favor. So, I think we’re going to have some bumps for a while here, Gary.
I don’t see this disappearing and going away anytime real soon. People just need to hunker down a little bit and we’re going to get through it. We’re going to get some cuts. We’ll get them next year when the cuts come. That should be really good news for the market.
Now, I want to qualify one last thing before I move on to anything else, and that is if we get six rate cuts and we get them fairly rapidly, people shouldn’t be cheering. The first one or two, maybe. By the time you get to 4, 5, 6, that’s basically saying things aren’t so good out there, and the market is basically going to respond accordingly, the stock market, and we’ll probably see a significant sell-off in that environment. So, don’t be wishing for too many cuts because if we do get them, it could be and probably will be bad news.
Gary Determan:
As you were talking, something I was thinking about prior to that, before you made the statement, was it’s not political, but it in a sense is. And the Federal Reserve, are they elected, nominated? How do they get to that position?
David Nelson:
It depends on the position. So, the top position, yes. The president makes that decision. The others, basically, are appointed.
What’s interesting is, we used to have somebody that was on the Chicago board, as far as out in DeWitt. And that person that was on the board, he wasn’t a decision-maker. He had no vote, but he was part of that team. So, it isn’t just they’ve got all these different locations, and somebody that oversees that, these folks get together on a regular basis to decide, are we going to cut, are we going to leave it alone? Et cetera, et cetera. We’ve got to raise rates. I mean, crazy as that sounds, that’s now being tossed around. Inflation numbers two, three days ago, I’m trying to remember exactly, I think it was Monday, came in hotter than expected.
And so, inflation is maybe back, as far as the discussion. If it is, maybe the Fed will be contemplating and thinking about it to possibly have to increase interest rates. Don’t see that happening, but it’s being discussed, and people should keep it on the radar as far as that is a possibility.
So, depending on the position, most of them are appointed, and then they’re appointed to a certain period of time, and they can resign intra, but you rarely see that.
It’s a pretty powerful position, pretty prestigious position. But at the same time, man, you’re always being second-guessed. I mean, these people are being second guessed right now as far as that they need to cut, they need to cut. Well, but then you have this report come out Monday, bottom line, saying inflation is hotter than we thought. Holy cow. And the market sells off accordingly.
Gary Determan:
Where do these people come from? Are they backgrounds like yourself, or bankers, or what are they?
David Nelson:
Bankers, typically, yes. A lot of professors. So, these would be big-time professors at various business schools, what have you, that supposedly know more than the average guy. And in most situations, yes. I know politicians like to act like they have all the answers as far as what should be done, but these people are coming to the table with pretty decent backgrounds in this space, economists, what have you, that probably are brighter than anybody that you or I know. And making these decisions isn’t easy. They’re trying to look into the future as far as what’s going to happen. They’re not basing everything on what already happened, but they’re trying to look at what’s going to happen. That’s not an easy job.
Gary Determan:
What kind of tea leaves are they looking at? I mean, what kind of indicates which way they want to go?
David Nelson:
So, most of the tools that they use, we use in our office. So, there’s data points that are out there as far as looking at unemployment, what have you. What’s interesting, unemployment, a whole bunch of different data. I mean, I can you to tears with a whole bunch of different things, but that being probably number one on the list. And anytime you’ve had unemployment at 4% or below has generally been fantastic news for the markets.
Well, that’s what we’ve experienced. People talk about the economy stinks? Well, the economy’s as hot as it’s ever been, pretty much. I mean, you’re going back 50-plus years to find numbers like we’ve had in recent times. Now, part of that, and most of that, is COVID. People forget. And a little quick history lesson. And I will make this quick, folks. You’ll get the general idea here.
And that is, coming out of World War II, if you think during World War II, a lot of factories were converted to making no longer refrigerators, but now we’re making weapons to help win this war. Well, after the war is over, now we have to bring this stuff back. Well, when that was over, you had this massive desire for people to buy stuff. And so, we had runaway inflation during that period of time, very much like COVID when we shut things down. And so, it took years to get that under control, and that’s what we’re experiencing as we speak today.
So, coming back to what these people are looking at, what have you, primarily unemployment would be probably number one. And if I had to make a guess, I’m saying we’re going to get the cuts next year. We’re not going to get any this year.
Gary Determan:
It is interesting the perception that people have of the economy. As you pointed out, it’s good, but some people say, “No, it’s not.”
David Nelson:
It’s not, exactly. Now part of it is, you go to the grocery store and things are up. Now you tell people that inflation is down dramatically from where it was after COVID, nobody believes you as far as that. They say, “Just go to the store and look.” And I say, “I get it.” But basically it’s come down some, but it’s moderated. It’s not moving up. And inflation doesn’t just disappear in 10 minutes. Oftentimes, it takes quite a while.
Gary Determan:
Always fun to have you in studio.
David Nelson:
Thanks, Gary.
Gary Determan:
Very important.
David Nelson:
Enjoy this day. Yeah, absolutely. You too. Thank you.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only, and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representatives. Securities offered through Cambridge Investment Research, Incorporated. A broker-dealer, member FINRA, SIPC. Investment advisor representative. Cambridge Investment Research Advisors, Incorporated. A registered investment advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.NelsonCorp.com.