Hidden Issues That Can Undermine Success
Adam Vega: So the most important thing, in my opinion, is getting that early start. We mentioned before developing a plan as early as possible, trying to be on the front end of the unexpected. Which we just don't know what's to come and we always want to stay... we think of things in terms of dials or controls. Focusing on what you can control, in this case, how much you're saving is something you can control.
David Scranton: And that was Adam Vega of United Capital Advisors and if you watched our show without Adam recently. Then you know that some of the same issues that could lead to financial ruin for millionaire athletes can also trip up everyday investors like yourself. On that show, we focus mainly on strategic issues, but today we're going to examining some of the hidden social and psychological issues that can undermine financial success. We'll talk about how to recognize them and how to overcome them and we're going to do it with the help of someone who knows a thing or two about these issues firsthand. The man who had and then lost it all, that is none other than N.B.A. legend Kenny Anderson. It's time to tune out the hype and focus on the facts, facts that matter to you the Income Generation. Let's get started. Get ready to separate reality from myth.
David Scranton: How does it affect the market? How does it affect the economy? Thanks to efficiencies and new technology and a staff of veteran analysts and portfolio managers. Sound Income strategy tries to set a new standard and bring institutional style investing to your portfolio. Hi everyone and welcome to the Income Generation. I'm David Scranton your host you know when it comes down to it we're all wired differently, it's a point that I've made many times on this show. And I stress it because I believe that one of the keys to financial success lies in understanding how we're wired personally. And then being brutally honest with yourself about it. Experts tell us our psychological wiring is a product of both nature and nurture, the personality traits with which we're born as well as the tendencies we develop based upon our upbringing. But the question becomes, how do you understand whether your own wiring and background may be working against you when it comes to managing your hard earned dollars? Well, we will explore that important question on today's show with the help of our very special guest Kenny Anderson. And as always we'll check with other financial advisers in the field at our financial advisor's roundtable. But first, let's talk just a bit more about this concept of wiring, couple weeks ago we pointed out that one of the reasons many athletes end up losing millions. Is that they're too disengage from the process of managing their own money, they entrust it completely to others and that can lead to disaster. We also pointed out that one of the reasons this occur is that most athletes don't start off life as millionaires. In fact, far from it, most have grown up in homes where they weren't taught even the most basic lessons about saving, investing or money management. Now, of course, this doesn't just apply to athletes but it applies to most people and according to a recent FINRA study, nearly two-thirds of Americans cannot pass a basic financial literacy test. This is actually one of the reasons that I first started SAFE, the Scranton Academy for Financial Education. Which is a nonprofit organization that provides free financial education as a public service, this is something not only lacking in most homes. But in schools and businesses also but lack of training in education isn't the only potential challenge created by growing up poor. In that environment, many people can develop reckless or even negative attitudes toward wealth without even realizing it. For example, we all know that sometimes when people aren't feeling good about themselves or have some internal struggles. They'll lean on alcohol or drugs or binge eating or in some cases even binge spending as an addiction. And for some people spending could be just that, an addiction they crave the instant gratification that comes from purchasing things. It makes them feel better in the short term and takes their mind off their money problems. And like any kind of addiction, it becomes an extremely vicious circle because the worse their problems get the more they have to spend to feel better about themselves. A spending addiction or reckless attitude toward money, in general, might be a trait that you learn unconsciously or as scientists have recently discovered. It might literally be part of your D.N.A. In other words, yes, it might actually be inherited. Either way, it's obviously a part of your wiring that works against you when it comes to managing your money and there are other unconscious influences that can work against you as well. Here's an example, a friend of mine who is a financial advisor ran a very successful practice for years and years and years. But his own finances were an absolute mess, you see he knew how to save and invest successfully on behalf of clients but didn't bother to do the same for himself. In fact, it seemed like every time he made more money, he spent more money almost like he had to get rid of the money in as soon as it got into his hands. And as I got to know him a little bit better, I started to understand the root of his problem. As it turns out he grew up in a family that genuinely believed that money was the root of all evil. Growing up he was taught directly or indirectly that wealthy people are rich because they somehow take advantage of other people. And as a result, his unconscious mind was actually preventing him from building his own wealth. He was squandering his money because he was wired based upon his upbringing to believe that having it was bad. He just didn't want to be one of those evil rich people. Now consider that many professional athletes come from very humble beginnings, some grew up in outright poverty. They may have this very same negative attitude about wealth without even realizing it. Or their parents may have had reckless live for today attitudes that got passed on to them. Anything emotional can get in the way of sound practical decision making and that's what financial planning requires. Sound decision making but again, wiring is a product of both nurture and nature, our D.N.A. in other words and here again the financial troubles of athletes might teach us lessons that we can apply to ourselves. Consider how many people who pursue sports as a career are thrill seekers by nature? I mean let's face it, it can be a high risk, high reward profession. A person predisposed to risk and instant gratification can use that to their advantage in certain areas of life. But can also become a major obstacle when it comes to managing your money and that's true not just for professional athletes but for everyday investors like you, our Income Generation members. The point is that any kind of emotional baggage, whether it's conscious or unconscious, learned or inborn can get in the way of sound practical decision making. And that's what financial planning requires all of this illustrates why I believe it's so incredibly important to examine your own psychology. Your own wiring as part of the financial planning process in fact, I talk about this in my book entitled, Return on Principle. Pointing out that your psychology in your background can play a major role in determining whether you possess the internal core values necessary to successfully manage your hard earned dollars. One of those values is honesty, why? Because it takes brutal honesty to admit that you may not have the right mentality for handling money. You may have unconscious emotional issues or inborn personality traits working against you and the reality is so may your financial advisor. So it's just as important to examine that question with brutal honesty, we'll talk a lot more about some of the important values that can help you overcome these challenges in just a bit. But right now let's welcome back a man who's been brutally honest about his own experience with financial loss N.B.A. superstar Kenny Anderson. Now if you're a basketball fan you already know all about my guest today, but in case you're not here a few details that I think are important. College recruits began scouting Kenny Anderson in the sixth grade and by the age of sixteen he's considered one of the hottest basketball prospects in the country. In fact, he helped lead Georgia Tech to the final four in nineteen ninety and then entered the N.B.A. draft after his sophomore year. And that was back before it's fashionable to enter the draft at that age. He was signed by the New Jersey Nets and went on to play fourteen years in the N.B.A. earning a reputation along the way as one of the game's all-time great point guards. But despite earning sixty three million dollars over the course of his playing career, Kenny unfortunately file for bankruptcy in two thousand and five. He's the subject of an acclaimed new documentary called Mr. Chibbs.
NBA Announcer: One of the best pure point guards in the NBA, Kenny Anderson.
Dick Vitale: I say he's the best guard that I've seen as a high school performer.
Kenny Smith: None of them dominated the way Kenny did.
NBA Announcer: The second pick in the NBA draft is the New Jersey Nets select Kenny Anderson from Georgia Tech...
Bobby Cremins: A lot of people consider him the best point guard ever to come out of New York City.
Nate Archibald: His game was so much more advanced than most, he could score and he could shoot.
David Scranton: Again and we're ecstatic to have Kenny Anderson with us today on the show. Kenny, welcome to the show.
Kenny Anderson: Thanks. Thanks for having me Dave, it's a pleasure.
David Scranton: Well I know you grew up in Queens and you grew up with some very humble beginnings. So can you tell me you know how that affected you throughout your career both good and bad?
Kenny Anderson: Like I said in my documentary it takes a village to raise a child. My neighborhood you know a lot of mentors helped me through you know the hard times and goods. Even my mother rest in peace, she passed in 2005 but LeFrak City where I grew up all those people knew I had some type of potential to get out of there.
David Scranton: Sure.
Kenny Anderson: So they watched over me and took care of me.
David Scranton: So it's good because the whole neighborhood is a family in some ways. But I guess my... if we flip the coin you know how did it affect you negatively? How did maybe the pressure of all of a sudden having nothing in terms of money? But then all of a sudden you know having this money thrown at you? I mean all the stardom, how did that affect you? What role did that play?
Kenny Anderson: Well it affected you know overnight you know being in nineteen ninety-one draft, being the number two pick coming from nothing. In twenty-four hours you're a millionaire. So you know everybody in that neighborhood and that's where my heart was, you know it's something I tried to take care of too many people. You know I had a big heart, you know I didn't really think about you know a plan B at the end of fourteen years of the NBA. While I'll be able to take care of my whole family with sixty-three million, that's how much I made but I probably made more than that. With endorsements and things of that at nature. So no one... I think I would tell a lot of these athletes when you do get it it's a little word knowing how to say no. Knowing how to say no is one.
David Scranton: That's a good point you know it's the same thing right why they say people you know people who win the lottery for example, and how they lose all the money. Because they're just not used to it and they don't realize that the money, it may sound like a lot, it may sound like a big number but it's not as much as it sounds like.
Kenny Anderson: No.
David Scranton: Is that true?
Kenny Anderson: Not all true. Not at all because you've got taxes. You know the more money you make the more money you spend you know coming from nothing, you know my first goal and my first dream was to buy my mother a house. And I was able to do that you know what I mean but you've got... the money you make, the more money you spend because you don't know how to value money. Because coming from a dysfunctional home, my mother did the best what she had you know educationally wise, financially. You know but she didn't understand and like I always say sometimes your family can be your worst enemy. Me and my...I would never say no to my mother, but my mother was one of the reasons she spent a lot of my money. And I wouldn't say no to her.
David Scranton: And that's okay because that's mama, but as soon as we come back from the break. We're going to talk more about some... maybe some of the other mishaps. The other things that led to this and give our Income Generation viewers some lessons because you know it's not, whether it's sixty-three million or six hundred and thirty thousand. Everybody makes the same mistakes, so stay with us we'll be right back with more words of wisdom from Kenny Anderson. If you're near or in retirement head over to the Income Generation dot com and download your special report written specifically for the needs of the Income Generation. Again those born before nineteen sixty-six. I'm David Scranton and you've been watching the Income Generation. Welcome back to the Income Generation, I'm David Scranton your host. Now you probably have read recently that LeBron James had made a very intelligent decision, actually, this is several years ago where he decided to use Warren Buffett as his personal financial mentor. Now I believe that that's not only extremely smart, but it illustrates two more of the important values that are so necessary for managing your money in good times and bad. And they are Coachability and Leadership, you see virtually no professional athlete rises to the top in his sport without being coachable. Even the best rely on guidance and motivation from a trusted coach and they have to be open to learning and improving no matter how good they get. Unfortunately, that same openness to coaching doesn't always transfer to their lives off the field, to their personal lives or their financial lives particularly. In both those areas they may simply reject coaching, they may have this attitude that says you know I got this or as we discussed on another show they might put blind trust in a financial resource, they know little about believing they got this. Well, everyday investors make the same mistakes all the time, less extravagantly maybe but you know not being coachable when it comes to your money is all too common. Many do it yourselfer's get into trouble because they're not wired for the job but they're not willing to admit it. Others put faith in a firm or an advisor but then disengage from the process completely, only to find out that that firm or advisor isn't really wired internally for the job either. So that is what I describe as really being uncoachable, in fact, no good advisor whatever say that it is coachable. And as I pointed out before a good coach helps you play the game but he can't play it for you. Now, there's another core value for which I respect LeBron James significantly, and that is leadership. Here again, some athletes who demonstrate leadership on the field or court may fail to do it in other areas of their lives. And this includes managing money, as I've discussed many times being a leader financially often means taking the road less traveled. Zigging when everyone else is zagging. Now, we all know that there can be peer pressure when it comes to money and urged to keep up with the Joneses as the old saying goes. But imagine how much greater that peer pressure is among super wealthy young athletes, where the whole culture is about winning and being number one. Everything becomes about you, leadership, however, is having the ability to step away from all that, to say that I'm not going to follow that path just because everyone else's. Instead, I'm going to take the path less traveled, I'm going to get the right coach and take the path that makes the most sense for me. And that again is a leadership, it's another of the core values essential to protecting and managing your money in good times and bad. Now, let's take a moment and welcome back my new friend Kenny Anderson. You know Kenny, you said it's that you're blessed in a large way because your mom was... had a big influence on your life in a favorable way. And even though you came from humble beginnings. She couldn't teach you enough about money because she didn't have the opportunity to manage her money on her own. But one of the issues, I know this isn't your issue. But one of the issues I see with a lot of people and especially a lot of pro athletes is the keeping up with the Joneses element. I'm sure playing pro ball, you have a lot of people that were keeping up with the Joneses, so tell us about that. Tell us, is there stories you can relate.
Kenny Anderson: For example, a guy on the team. The highest paid guy might be making twenty-one million a year or fifty million, fourteen million and then the next guy... You know that's trying to keep up with these guys is making three million dollars. And he's trying to you know compete in you know buy these, buy this, buy that, gamble and party and it just doesn't work like that. You know what I mean and...
David Scranton: And it's too bad because you know we talked about the fact that you were benevolent, you tried to help family members, help friends, help anybody who would ask for a handout. When you didn't know the word no! Which is one of the most powerful two-letter words out there? But for some of these others, it's the same and it's the same thing true you know think about your neighbors where you live today. You know now you're in Florida and your neighbors, you have neighbors there's probably one neighbor there that makes three hundred thousand a year. The neighbor next to them makes about twenty-five and the one making one hundred and twenty-five is trying to have the same Mercedes, the same B.M.W. and send his kids to the same private school. And he doesn't even realize there's an income discrepancy.
Kenny Anderson: Yeah, my neighborhood is great. I'm in the middle-class neighborhood I must say, I'll borrow sugar, milk for my neighbors all the time. But, no we... it's much different nowadays, I think for me you know the less I have, the more simpler my life is. You know I mean before when I had millions, I was just trying to help everyone I just wanted to give and I think in my case, eight kids you know two failed marriages. A lot of my money was spent on my own doing you know what I mean and because of my lifestyle, kids... My kids are all blessings but you tell me, you break it up, eight kids.
David Scranton: It gets expensive.
Kenny Anderson: That's very expensive.
David Scranton: That's right and it's funny because you know you might be sitting there listening to us thinking well sixty-three millions a lot of money. But you have to understand when its spread out over fourteen years and half of it goes to the government. If people are constantly at you saying hey Kenny, can I have a loan? Can you help with this? Can you help me with that? It's amazing how quickly it goes.
Kenny Anderson: Yes, it's very quickly. Like you said I was in the what…? Thirty-five percent tax bracket so you might. You know, I might have seven million in one year so I'm probably going to go home with about four, about five. About four something then you got agent fees, then you got house you know then you got mortgages and you got your mother. For me, I had my family was getting an allowance you know my sister's and brother's I was giving them an allowance. So my mother made me do that so it's just money it goes, it goes quickly.
David Scranton: Well how comes... you wouldn't have been a first-round draft pick if you hadn't had defense to match your offense you know. And it's funny because in basketball you are a strong offensive player and a strong defensive player but when it came to your money. It was all offense, he was making the money but there was very little defense in terms of holding onto it which you're not alone. A lot of nonprofessional athletes fall prey to that also.
Kenny Anderson: Yeah, I think just not trustworthy. I had some great people that are still in my corner, my lawyer Herman Levy he's done a great job for me and Dick Gilbert he's been there for me. I didn't listen to them you know when they told me what I should do with my money early in my career, but I just lived and that's what a lot of athletes are really you know hard headed. You know what I mean you don't trust anyone so they are like no, it's my money I'm going to do this and what do they got to say.
David Scranton: Okay, so let's take a minute and let's talk about this because clearly... And tell me if I'm wrong but one of your best attributes as a player to get that good, that early had to be coachability. I mean you only get so far a natural talent, you are very coachable when it came to your game. So why do you think it was that you weren't as coachable when it came to things outside the sport such as managing your money?
Kenny Anderson: I think when you get a lot of money then you become powerful so some of your friends and some of the people that deal with you don't know how to treat you. So they don't want to be yes men so you could take care of them, me...I you know and then you're dealing with demons you know I had come out in my documentary about four years ago that I was molested and abused. So you're dealing with demons also you know what I mean and then I knew hid mine through fame and money. You know what I mean and I held it in for thirty-something years and finally came out but that's one of the Montrose that I dealt with, I had money, I had women. Yeah, I'm good because I was violated, I was you know...I was beating myself up in the head so that's where everybody else a lot of us, a lot of athletes are... they hiding behind their money so they're dealing with other demons that they must...
David Scranton: I appreciate you sharing that by the way you know it's... People, some people use alcohol, some use drugs some overeat and some overspend and that's how they fight the demons. We need to take another break when we come back I'm going to talk to you more about just other demons that just come from early success. Not that because that one incident was a terrible, terrible incident. But obviously, not all athletes who go through a lot of money have that happen to them but there's other demons just from the pressure of success. So we're going to take a quick commercial break our Income Generation viewers stay with us we have much more to learn from my new friend, Kenny Anderson. We'll be right back. If you're not using someone who's well trained in fixed income and you're born before nineteen sixty-six. It may just be time for you to break up with that advisor and move on. I would suggest someone who will care for you through these important years of your life. If you need help finding someone call or write us. I'd also like to remind you of the special report entitled, The Income Generation. If you're near or in retirement head over to the Income Generation dot com and download your special report written specifically for the needs of the Income Generation. Again those born before nineteen sixty-six. I'm David Scranton and you've been watching the Income Generation.
Miranda Khan: Welcome back to the Income Generation, I'm Miranda Khan. Now let's take a look at some of the big financial stories that move the markets this week. Federal Reserve Chair Janet Yellen, explains the Fed's decision to raise interest rates for the second time in three months.
Janet Yellen: Our decision to make another gradual reduction in the amount of policy accommodation reflects the progress the economy has made. And is expected to make toward maximum employment and price stability objectives assigned to us by law.
Miranda Khan: The decision left to the central banks, benchmark lending rate by a quarter of a percentage point to a target range of one to one and a quarter percent. An increasing number of wealthy Americans are reportedly stockpiling land as Apocalypse insurance. In the case of a cataclysmic event like a viral epidemic or a nuclear war. Forbes reports billionaires are grabbing up land and the nation's heartland where the climate is mild and the locations are more conducive to survival. Nike will cut two percent of its workforce as the sports brand revamps its global operations that have been to ward off competition. Nike's C.E.O. says the jobs cuts will affect about fourteen hundred workers following a recent slump in sales. Meanwhile, Bank of America is also cutting back, laying off employees in both of its operations and technology innovations. Most of the job cuts come from the banks in Charlotte, North Carolina. Its headquarters are there, a spokesperson declined to answer how many jobs would be lost. U.S. factory output found nearly half a percentage point last month during a broad decline in overall production that included the manufacturing of cars. It's the second decline in three months. For much more on these stories visit Newsmax dot com slash finance. I'm Miranda Khan, now back to David Scranton and the Income Generation.
David Scranton: Thanks, Miranda. Now let's welcome back former N.B.A. superstar Kenny Anderson. Kenny, thanks again for sticking around.
Kenny Anderson: It's a pleasure.
David Scranton: You know tell me were there other demons if you will that affected you negatively when it came to managing money just from having success at such a young age?
Kenny Anderson: I think education wise you know I went to a very good school Archbishop lower high school and Georgia Tech but they don't teach you about certain investments and bonds. And how to invest your money. Then you just want to play basketball, I just wanted to enjoy you know playing basketball and competing so I really didn't put time, checks and balances you know with my lawyers, with my accountants. I just you know bottom line, I wanted to sign the checks, pay the bills and move on. I really wasn't concerned about the future and I think that's one of the biggest problems that a lot of young athletes have.
David Scranton: Well a big problem a lot of young people have in general they don't think about the future because heck the future seems so far away. And I remember at one point age fifty sounded like an eternity. And now I'm past the age of fifty and I bet even for you age fifty doesn't seem so far away anymore.
Kenny Anderson: I'm about four year’s way.
David Scranton: That's right.
Kenny Anderson: I can't even remember when I was sixteen, eighteen years old. But it's just you know I think I would have valued you know my money more back then. I would have valued it and I would have said no because now I look at it and I live a pretty good life but I should be living a more luxuries life right now. If I would have handled my money a lot better.
David Scranton: But I just can't imagine the amount of character it built which you've been through and the amount of lessons learned and speaking of those lessons. You know very small fraction of our Income Generation viewers are professional athletes so in last minute or so we have. Tell me you know what words of wisdom can you share with them from your real life experiences and financial fopas? Help them, prevent them from falling into some of the traps and stepping on some of the landmines that you did?
Kenny Anderson: I think number one is value your money. Number one, value your money and educate yourself on vestments and on your future and don't spend your money. The more money you get you should live a frugal...you should live appropriate you know all these... certain things I look back on I don't need in my life. Right now I live with a need and not a want you know that's how I live now but I would think education is really important about money. You know about learning how to invest you know what you put your money in and not so much how you spend it. But just investing it and understanding the value of money, I don't think when I was young I didn't get that you know I was just playing basketball and trying to enjoy myself. And trying to help the world.
David Scranton: I would say these two things that everyone needs to know number one you need to know a certain amount about medical health because we only take care of ourselves. And you need to know a certain amount about financial health so it sounds like education is number one about money.
Kenny Anderson: Yes.
David Scranton: Appreciating and respecting the value of the dollar because just because it's here today doesn't mean it's going to be here tomorrow. It also sounds like plain good financial defense is important to you. You know you had so much wealth coming in a row that you focused on the financial offense, not the defense. It sounds like that's a big lesson. And last but not least from what I said, heard you say before being coachable, not just on the field but off the field. So Kenny thanks again for being part of our show. I really appreciate you being here.
Kenny Anderson: It's a pleasure. Thank you for having me.
David Scranton: My pleasure. Now that you are all up to date let's hear from some other advisors in the field and get their insights on today's topic. Yes, it's time for another financial advisors roundtable. Today we kind of, sort of have the all-star league the East versus the West. We have Anthony Saccaro the founder and president of Providence financial and insurance services in Woodland Hills California. Anthony is also a widely published author and a frequent guest of financial news outlets on Fox Business and CNBC. Anthony, welcome back to the show.
Anthony Saccaro: Thank you, David.
David Scranton: Also rejoining us, we have Pat Peason of Peason and Financial Group in Staunton Virginia. He's been in the financial service industry for thirty-one year's specializing in challenges that face retirees and people approaching retirement. Pat is a dedicated financial educator and an award-winning speaker, Pat good to have you back again also.
Pat Peason: Glad to be here Dave. But it is pronounced Stantun, you're hurting a lot of feelings of people here in the valley.
David Scranton: I know you always correct me, I always say it the wrong way I've got a question for you, Pat. You know in the valley when you come across new prospective clients that are interested in working with you, generally speaking, what percentage of them would you guess come to the table with a decent background in financial education? In other words, who are reasonably, financially literate?
Pat Peason: I would say probably about forty percent a little less than half. It's all across the board with different habits of people that come in, there are a lot of people. Most people come in that are... have an advisor or that have had an advisor for many years have a certain pattern that they follow during the 401k years. Because I work as you know Dave mostly with pre-retirees and retirees and I think as a country we've all kind of fell into the mutual fund mindset of it. And when it comes to retirees and retirement planning there are a lot of tools and a lot of strategies that I think people need to learn. That will serve them well in retirement, so let's say you know about a third that have a really in-depth knowledge.
David Scranton: Okay, now that's the knowledge part, Pat but you know we also talked about you know you read in my book, Return on Principle that I talk about the inside game. How many people are actually wired internally, emotionally have good instincts about money? What percentage would you say you can say yes to when it comes to that question?
Pat Peason: Probably a lower percentage because we're not taught that.
David Scranton: Even lower.
Pat Peason: We don't have a lot of that in school and you know one of the things that I always say on my radio program is the muscle we haven't learned that at an early age. When it comes to money is the ability to save
David Scranton: Sure.
Pat Peason: That's number one, so it's a lower percentage because in our society I think we don't place a lot of value on that internal game.
David Scranton: So Anthony how would you answer those questions you know what percentage of the people you come across on the left coast would you say are... have the external game that are somewhat financially literate? And then how many of those actually possess that internal game, have good internal instincts when it comes to money?
Anthony Saccaro: Yeah, it's funny when I heard you ask Pat that question. Pat says somewhere around forty percent, the number that was going through my mind as you asked the question out here in California was actually less than ten percent. I, most of the people I run across don't have a clue about money, they don't understand money, they're good at their professions. And they almost feel bad about not understanding money and you know I have to tell them I had a pharmacist in here the other day and I have to say would you feel bad if I didn't understand pharmacy. Then why should you feel bad if you don't understand money, it's a profession that has to be understood so maybe I'm looking at it a little more critically than Pat. But I think certainly less than twenty percent of the people have a good handle of money, probably even less than ten percent and I think it's...
David Scranton: Anthony, we're going to... we need to take a quick commercial break. As soon as we get back I'm going to ask you more about that too because that's an important perspective that you put forth. So Income Generation members stay with us, we have to take a commercial break we'll be right back with more from Pat and Anthony.
Announcer: Read David J. Scranton's groundbreaking new book Return on principle, seven core values to help protect your money in good times and bad. Discover practical solutions to the financial challenges facing today's generation of retirees and near-retirees. Learn the truth about Wall Street, the financial media and the secrets they try to hide from everyday investors. This isn't just another book about investing. Working Americans who have lived through two major stock market crashes and the worst financial crisis since the Great Depression in the past sixteen years don't need another book about investing. David Scranton's approach to financial planning is a holistic system designed for maximum protection, strategic growth, and reliable income regardless of market conditions. Stop planning for retirement with your fingers crossed. Read return on principle, seven core values to help protect your money in good times and bad, available now.
David Scranton: Welcome back to the Income Generation. I am David Scranton and today I'm here with Anthony Saccaro, founder and president of Province and financial insurance service in Woodland Hills California. And Pat Peason of Peason and Financial Group in Stantun, Virginia. Thanks for sticking around you guys, Anthony I'm sorry I... I owe you an apology I cut you off there because we needed to take a quick commercial break and you had a very good point. You know you thought that thirty, forty percent of people that come to the table with the right financial I.Q. The knowledge was way too high because you said and if I could make an analogy and paraphrase kind of like a doctor you know you say somebody comes to the table with the medical information would be false. Unless you went to medical school, but now let's pivot and let's talk about those that have the right instincts that have possessed that internal game. Or maybe with the right knowledge they can be good at managing their own money. Now, what percentage would you put on that for the people that you tend to come across every day on the left coast?
Anthony Saccaro: Now I actually think it's a much higher percentage than the people who actually have the technical game. I have to tell people all the time that I don't want them to discount themselves, I don't want them to discredit themselves because of the fact that they've got a lot of common sense. A lot of people today feel like the economy is not what it's cracked up to be, they feel like there's problems ahead but that's not what they're being told. And it's almost like there's this tug of war going on you know between what they think and their common sense and between what they're being told. And the reality is most of the time I think they're on the right end of that tug of war, I think it's a much higher percentage.
David Scranton: Well that's encouraging, that means if we could just provide more education to the general public in the world of financial advisory well then you know more people will be able to absorb it. And be able to make better decisions you know I have a famous story about a doctor client of mine years ago, made every bad financial decision in the book. And he said you know you have to realize you're going to become a doctor it's all science, it's all math and everything else and we don't take one financial course. He said I think we should have a law that says you can't get out of medical school without taking some finance or economics courses and that's a big part of it. Why do you guys think that maybe we don't focus more on that you know we focus even in college of economics and all that but not just general financial management. Do either of you have any input as to why maybe as society we don't focus more on that?
Pat Peason: I don't think we're taught at an early age the techniques and habits that are necessary when it comes around money to develop the discipline with it at an early age. And then to follow through and then everything I think becomes more of a habit later in life to focus on. If you put a plan in place at an early age and start saving money and do it judiciously throughout your career, you're going to have better instincts because you move the muscles and you're better suited for retirement. And I also agree with what you said, Anthony that when I asked people, I ask them a simple question when it comes to investing what is your gut instinct? What does your gut instinct tell you because... Your gut instinct is a good guide, not only with money but a lot of other things. And I think sometimes when we don't follow that gut instinct it could put our goals in conflict with our strategies.
David Scranton: It sounds like you're saying part of the problem is you know it's kind of like religion you know we can send somebody out to... when they're a very young child to as we used to call you know CCD or catechism and they can learn. But at the end of the day, you know spirituality in doing right really begins at home when we're very young. And it sounds like what you're saying Pat is that we really need more of that at home if at all possible.
Pat Peason: Yeah, the difference between book knowledge and...
David Scranton: So Anthony you know the question though is what can we do in the schools? Have you thought about that? What can we do in schools to make it better so at least people get some formal education? Because if they have the right instincts more often than not but they don't have the right you know the superficial stuff. All the knowledge, all the algorithms then how do we change that?
Anthony Saccaro: Well, I think there's a couple of things to focus on number one, I think we should in junior high and in high school, I think we should teach people how to open a checking account and how to use a checking account. The fact that you can't write checks when there's no money in the account they don't even have to have that. I mean they really don't even have that basic teaching, but the reality is a lot of that is personal too and I think a lot of it does start at home. And I think a lot of it starts at home wrong and incorrectly, I mean let's just go back to the allowance, the allowance is when the parents give you money to spend every week. It's free money, well that's what the government does. I don't believe that you should be giving anyone anything for free.
David Scranton: Hold on, hold on Anthony. Anthony, time out, time out are you sure you're from the west coast?
Anthony Saccaro: Yeah, I'm a little bit different out here but I know...
David Scranton: Okay, I just want to make sure.
Anthony Saccaro: That's exactly right, but the bottom line is that really that is the handout and if you teach kids to start getting handouts from the beginning to rely on something for nothing. I think it's a bad trend from the beginning.
David Scranton: Yeah, that's right. That's right and not be responsible with it and everybody goes out and they buy toys, they buy candy with the money as opposed to saving it and having delayed gratification. It's like that study many years ago where they followed kids throughout their lives and they basically gave them two pieces of candy. And they could either eat them both now or have one now and wait for the other one and they found many, many years later that those that waited for the second piece of candy had a lot more financial success over the course of their lives. When we come back we're going to ask both Patrick and Anthony about specific cases where they've had clients in the past or maybe prospective clients... Who knows maybe they decide not to work with the folks, who actually self-sabotage who wouldn't take their good advice. And it seemed like every turn they when they made the wrong financial decision and what might cause that. Stay with us, we'll be right back.
Announcer: Read David J. Scranton's groundbreaking new book Return on principle, seven core values to help protect your money in good times and bad. Discover practical solutions to the financial challenges facing today's generation of retirees and near-retirees. David Scranton's approach to financial planning is a holistic system designed for maximum protection, strategic growth, and reliable income regardless of market conditions, available now.
David Scranton: Welcome back to Income Generation. I'm David Scranton again I'm here with Anthony Saccaro from Woodland Hills, California and Pat Peason from Stantun Virginia. Guys, thanks for sticking around again. I made it a little bit easier on you this time because I would have had include you in as to what we'll be talking about after the break. So you had a minute to think about it during the commercial break, Pat tell me have you seen...? Have you had situations like that where people have come to you where it seems like every time you try to give them a good word of wisdom it seem like they almost want to do the opposite? Almost as if they were self-sabotaging. We talked about that earlier with Kenny and before that on the show, have you seen that?
Pat Peason: Just yesterday. In fact, you brought it up, Dave.
David Scranton: Entrusting.
Pat Peason: (Unclear 40:58) a new client, a couple came in. Gentleman, eighty years old his wife was sixty-eight (unclear 41:04) the impression that he was only going to live for four-five years. He was taking seventy thousand dollars out of his four hundred and fifty thousand dollar portfolio and his wife came in very concerned and it was almost a conflict inside the room between the husband and wife. I did everything I could possibly do to tell him that this is potentially very, very dangerous and he could run out of money sure than that. When the market turned, his wife really understood that. Long story short I could not convince him, but his wife came back yesterday after the first meeting a week ago and wants me to work with her money because his pension will run out and she gets none of it when he dies. And when generally putting an income plan together for her where she's basing it on interest and dividends. So she (unclear 41:56) money before she runs out of life so this is a situation...
David Sctanton: And this fellow isn't terminally. He doesn't have any real reason to think he's only going to live five years, he's just being a little bit reckless, correct?
Pat Peason: (Unclear 42:11).
David Scranton: Okay. All right.
Pat Peason: He's been doing that for a long time and he didn't put the brakes on it's going to be a big problem.
David Scranton: So, Anthony in the minute or so we have left, tell me about your experiences with people like that. I'm sure this isn't just exclusive to the east coast.
Anthony Saccaro: Yeah, you know I have a hard time saying anything in a minute. So the nutshell version though is that I have a client whose now passed away and was a client of mine for ten years. And when his wife died, he emotionally couldn't handle it, he sold the home and when he sold the home he told me if you don't help me I'm going to spend it. I'm going to... it's burning a hole in my pockets so we locked up some of that money to give up some guaranteed income until he died. And I'll tell you he asked me questions, he bought cars he couldn't afford, he bought another condo for his daughter, he gave another hundred thousand to his son. Within five years he was broke, living with his daughter and he knew it, he couldn't stop it everything I told him he ignored.
David Scranton: So in some ways, I give that guy a lot of credit because he knew himself, he was brutally honest with himself and he knew that he was the guy. He says you know I know I've got a drinking problem but I know I'm going to go for that drink, I can't stop please help me. So you ended up being his sponsor kind of, sort of in the twelve step program which is pretty good. So good for you Anthony, I'm glad to hear that gentlemen we'll be back with one more segment you guys have a minute to stay with me for a minute? Great. And for Income Generation members stay with us we'll be back with more from both Pat and Anthony be back in a moment. If you're near or in retirement, head over to the Income Generation dot com and download your special report written specifically for the needs of the Income Generation. Again those born before nineteen sixty-six. I'm David Scranton and you've been watching the Income Generation. Welcome back to the income generation. I'm David Scranton, I'm here for one final segment with both Anthony Saccaro from California and Pat Peason from Stantun Virginia. We talked before with Kenny about are people coachable generally speaking so if they don't come with the internal game, they don't come with the external financial knowledge. You generally find them to be coachable, Anthony.
Anthony Saccaro: I'm going to say that that's probably fifty-fifty. I think there are some people that have been sowing grain by their advisors or by the media or by the system. That they think things are going to go a certain direction and this is the way it should be, I got to own stocks and the reality is if you can get past that and show them why that may not be true. And why what they've always heard and being grown up with is not necessarily true, then I think they are but you got to get past that hurdle first.
David Scranton: So, Pat, Anthony's talking about the lack of coachability when people drank the Wall Street Kool-Aid, became addicted to the stock market in the eighty's and ninety's. The best stock market in U.S. history, but can you think of other examples like that where maybe people might fight being coachable?
Pat Peason: Well, I'm going to go the other side, Dave. I think people here that I work with are very coachable.
David Scranton: Good.
Pat Peason: Because most people that I see, the biggest fear they have is not fear of death but it's fear of running out of money before they run out of life. And if we show them specific strategies, how to utilize that? How to put a plan in place where they take their income from the chicken and not be (unclear 45:29) in a systematic reliable way. Common sense shows them they see the light and they begin to be coachable and say that makes sense.
David Scranton: And I think you know...
Pat Peason: I think that...
David Scranton: They take the income from the eggs not the chicken and that's a very, very good point, Pat. And Pat, Anthony thank you both for joining us today I appreciate you being here. I'd also like to take this opportunity to thank all of my guests for joining us for another episode of the Income Generation I'd, like to thank you our new and returning viewers also. You know some of us get off to a great start in life with a loving family, good home, financial security and others aren't so fortunate. Whatever are your circumstances it's important to remember that those early experiences continue to influence throughout our lives? Together with our inborn traits, they become part of our psychological makeup and our wiring and whether we realize or not they impact our decision-making process. That's why I believe it's so incredibly important to consider your own wiring and to examine it with brutal honesty as part of the financial planning process. If you don't have the right mentality to manage your own money successfully, then you should learn that ahead of time and accept that. Rather than discovering it too late in regretting it. Thanks for watching, if you're close to retirement and you really want to know how to protect and maximize your money. It's essential that you stay informed and up to date and right here is where you can do it on the Income Generation. I'm David Scranton and thanks again, we'll see you next week. If you're not using someone who is well trained in fixed income and you're born before nineteen sixty-six. It may just be time for you to break up with that advisor and move on. I would suggest someone who will care for you through these important years of your life. If you need help finding someone call or write us. I'd also like to remind you of the special report entitled, The Income Generation, this available free to you our loyal viewers online. If you haven't downloaded your report pick it up after the show. If you're near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the Income Generation. Again those born before nineteen sixty-six. I'm David Scranton and you've been watching the Income Generation.