Registered Rep.: Tell us, who are your clients?
Barry Goldwater: Older folks, often referrals from influencers, such as CPAs and money managers. The person I see is someone who wants to decrease risk, feels secure with annuity guarantees of never outliving income, people who want to maximize income from their portfolios. The majority of people do not understand insurance products at all and they are amazed when they see a presentation.
RR: You mention you met a 79-year-old who said he almost lost everything. Don't financial advisors develop riskless portfolios as a matter of course for people of a certain age?
BG: Yes, I do, but not everyone does. I've found that the most effective way to produce maximum income and to protect people nearing retirement is to figure out the income need and isolate 30 to 40 percent of the portfolio outside of capital market risk. By doing so, income is not threatened, reduced or interrupted during down markets. Because the remaining 60 percent is now free of income obligations for 15 to 20 years, this relieves the portfolio from pressure of having to produce income, and they may choose to take more risk for a greater long term gain.
RR: How is this done, do you just go to cash?
BG: No, for retirement purposes I am an annuity planner and use these products exclusively. For growth I use fixed-term and indexed products depending on the client. For income, I turn on the immediate annuity spigot and/or the income riders.
RR: Describe your philosophy.
BG: If a person is going to hire a money manager, he expects to get a better than 6 percent rate of return or better. Otherwise, why take the risk? When I isolate income money from a portfolio, I plan for a 15- to 20-year income stream. If we use a modest 6 percent return on investment, this gives the money manager the ability to better than double the remaining 60 percent over 15 years and almost quadruple the remaining portfolio over 20 years. Then the process is repeated.
RR: You specialize in life insurance strategies together with income planning. Why is that so important?
BG: To maximize income, a planner must address a client's wealth transfer goals. The part of the portfolio that is reduced for income purposes is taken out of the estate and away from heirs. I replenish the estate with life insurance, usually via an irrevocable trust.