Volatility, Risk and Your Financial Plan

by Mike Lester

Apr 1, 2022

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Speaker 1 (00:02):

Welcome to the Retirement Wealth podcast. Our goal is to help those retired or soon to be retired investors make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors, Inc. An SEC registered investment advisor. Thanks for joining us today and let’s get started.

Kristen (00:30):

All of this awful stuff with Ukraine. I’m ready for some good news.

Mike Lester (00:35):

Well, there’s nothing great about Ukraine but I’m a silver linings’ kind of guy.

Kristen (00:40):

I know you are.

Mike Lester (00:40):

Guess what we haven’t heard about in a while? COVID.

Kristen (00:43):

Valid point.

Mike Lester (00:44):


Kristen (00:44):

But give me some good news. You’ve got to have something. You got the kids, you got the family. I’m just single over here with the cat. I’ve been watching too much news. What’s some good news you can share with us?

Mike Lester (00:54):

Well, that is very true. So I get to block out, first fire the cat.

Kristen (00:58):


Mike Lester (00:59):

… lady and even though you only have one cat, I’m a little worried about later though. How many are you going to actually have?

Kristen (01:03):

Oh, stop it. It’s always only going to be one.

Mike Lester (01:05):

Yeah. Famous last words. James Bond had a movie, Never Say Never Again, because Sean Connery was never going to do one again.

Kristen (01:13):


Mike Lester (01:13):

Then he wound up doing it. So never say never there Kristen but all right, so about a week ago, but it still sticks in my brain so we’re very blessed, great things going on. So Peyton does swim.

Kristen (01:25):

Man, is she good that.

Mike Lester (01:27):

Yeah. Junior Olympics and stuff. So Saturday we were at swim meets all day but the boys were pretty well behaved and Luke swims too but not as much as Peyton but Finn, he just, it’s, this is an all day event. If you’ve got kids in swim, you get there super early and you probably don’t leave till 5:00. It’s all day and you’re sitting on bleachers and everything else. So Peyton’s made junior Olympics again, which is great.

Kristen (01:52):

Oh, that’s awesome.

Mike Lester (01:53):

Super exciting. Then Sunday rolls around and Katie did swim duty so that the boys wouldn’t have to go sit there all day again because we got to balance this out a little bit.

Kristen (02:02):


Mike Lester (02:02):

It was just me and the boys and we were hanging out and told them we had to go run some errands so we went to The Home Depot, took him out to lunch but anyway I love the backseat conversations.

Kristen (02:15):

Oh yeah.

Mike Lester (02:16):

I haven’t told you this yet. So this was great. We’re driving and Finn who’s, just remind our listeners he’s 5, Luke’s 10. Finn says to Luke, “Hey Luke, God doesn’t talk to me.” And our kids are in Christian school so Finn takes it very literally that God is going to come down and have a conversation with him.

Kristen (02:38):

Sit down at the kitchen table. Yeah.

Mike Lester (02:40):

Sit down at the kitchen table and it was just the sweetest conversation.

Kristen (02:45):


Mike Lester (02:45):

So I was listening to Luke explain to Finn, and Luke’s only 10 mind, that he doesn’t necessarily talk to you. It’s not a verbal conversation. It’s like might speak to you in your dreams or might speak to you and your feelings or stuff like that. That was a very sweet moment for me.

Kristen (03:03):

I’ll be honest with you, I needed that. For real.

Mike Lester (03:05):


Kristen (03:05):

That is the future and that is sweet and innocent and great perspective. We’re going to need more stories every single week right now.

Mike Lester (03:15):

Okay, I’ll see what I can [crosstalk 00:03:16] next week. We’ll see what happens.

Kristen (03:18):

And you’re raising some sweet babies, my friend, you and Katie both.

Mike Lester (03:21):


Kristen (03:21):

Congratulations on that. Well, I hate to deter away from that but we do need to talk about what’s happening because whether you’re glued to the latest news on Ukraine or you’ve decided to turn the TV off, many of us are wondering how the Russian invasion might impact our personal economy, as much as our hearts go out to the citizens of Ukraine, and President Biden was asked about that by a Fox news reporter at a recent White House news conference.

Speaker 4 (03:48):

Markets are down and gas prices are up. I know you always stress the difference between Wall Street and Main Street but everybody seems to be in for some economic pain. How economically painful is it going to get for people in this country?

President Biden (04:06):

First of all, there’s no doubt that when a major nuclear power attacks and invades another country, that the world is going to respond and markets can respond all over the world. So there’s no doubt about that. Number one. Number two, the notion that this is going to last for a long time is highly unlikely as long as we continue to stay resolved in imposing the sanctions we’re going to impose on Russia, period.

Kristen (04:36):

Sounds like he’s not all that concerned about the long term impact but what do you think Mike, as a fiduciary financial advisor doing this well over two decades, for those of us on Main Street, should we prepare for at least some short term financial pain?

Mike Lester (04:51):

Yeah. Financial pain could be short term or long term. I hate to say it but they keep talking about this 58% or more that disapprove. I’m in that camp. My confidence level is not super high one way or the other and I’m not going to take financial advice from them.

Kristen (05:07):

Well, duh.

Mike Lester (05:07):

It just doesn’t make sense but I think if you’re listening to that and you don’t have any money set aside for retirement, so the impact of all this is irrelevant to you unless you lose your job, then you’re like, hey, gee whiz, I don’t really care was going on in Ukraine. Kristen, that’s not who we work with. We work with individuals that have made sacrifices along the way, kept their expenses low, saved for retirement, have a nest egg and frankly, when they look at what’s going on around the world, again, I don’t want to get into our administrations, solutions for problems but the confidence level is so low. We’re talking to people every single week going, yeah, that doesn’t, that’s not reassuring to me. I’m not reassured by that statement. I don’t necessarily think things are going to be good moving down the road.

Mike Lester (05:54):

Kristen, I’m already thinking beyond Ukraine. I think the crisis and everything that’s going on is terrible. I think that certainly in the short term it could be really volatile for markets depending on what happens from day to day. In the long run, six months from now, hopefully Ukraine is something that happened in the past and then we have to go back and deal with our own economy. We have go back and deal with the cost of goods and services. We have to go back and deal with my biggest concern outside of Ukraine but after that, my biggest concern, which is just disposable income. The economy is not driven by the retirees, it’s not but we work with the retirees. We work with people with nest eggs, it’s driven by people that go to work and earn a living and then they have to take a look at their expenses. So the cost of shelter, cost of clothing, cost of food, cost of fuel.

Mike Lester (06:49):

Then after that they’ve got disposable income. With the cost of everything, that disposable income, in my opinion, is not high enough to drive this economy to levels that keep going up, which would make the stock market keep going up and so if I’m sitting on my nest egg and I’m either retired or close to it, I’m going, hey, something’s got to give and at some point I think it’s a stock market. I don’t think 2022 is going to be a great year in the market. I could it be wrong. We’re taking steps to protect our clients, explain to them what we think may happen and preparing for that in their portfolios. If I’m wrong, our clients are going to miss out on a portion of gains. If we’re right, we’re going to protect our clients from big losses in markets.

Mike Lester (07:32):

At the end of the day, Kristen, there are a lot of people out there that aren’t working with somebody that’s giving them advice. They’re not working with someone that’s a fiduciary that has a vested interest in them doing well. They don’t have that relationship in their life, which is why we do this program. We explain a little bit about what we do, how we do it. We talk about topics that are topical to people like Ukraine or markets or the economy. My big thing, Kristen is I want people to understand what their current investments are likely to do if markets do well and then also understand what your current investments are likely to do if markets do poorly and then come up with a plan for both sides of that and understand it.

Kristen (08:11):

Because volatile markets like we’re experiencing right now, certainly have a way of reminding us that we might be taking a little too much risk with certain investments. It’s something that Warren Buffet’s been warning us about for years.

Warren Buffet (08:25):

You don’t find out whose been swimming naked until the tide goes out and…

Kristen (08:32):

Him saying that makes me a little nervous because there’s that whole envision people without clothes to not be nervous thing. I’m just like Warren Buffet’s… Okay, I don’t want to think about it. But anyway, what would you say to someone who’s feeling a little overexposed, if you will, in this market?

Mike Lester (08:46):

First of all, it’s easy to feel that way. Particularly if you don’t have direction. People wouldn’t be listening to our show or calling us up and coming to sit down with us if they had a lot more confidence about their ability to manage portfolios. I think a lot of people just feel like they’re along for the ride. They’ve chosen a profession and whatever profession it was, chances of it being managing money or finance or economics wasn’t always what they were good at. It just, it happened to be the path of least resistance for me but there’s a lot things that I’m not good at. I could name more things that I’m-

Kristen (09:26):

You want to get Katie on the phone and patch her in?

Mike Lester (09:27):

Oh yeah. She could tell you about all the things I’m really, really terrible at but she will admit I’m just, I’m good with the money part.

Kristen (09:35):

Obviously. Yeah.

Mike Lester (09:36):

Which is fine. It comes in handy but we’re meeting people week after week and it’s just when the media is talking about it and again, they’re trying to get us as scared as they possibly can to sell more advertising. When we’re looking at volatility in our portfolios, when we’re thinking to ourselves, hey, gee whiz, things have been pretty good for a long time and sometimes really good over the past 10, 12 years. Most people have that in the back of their mind, hey listen, things aren’t going to be good forever and the other shoe’s going to drop. I don’t want to be stuck there holding the hot potato or I think of that chair game where people are going around in circles and-

Kristen (10:19):

Like a cake walk.

Mike Lester (10:19):

… music plays and then no, no and then there’s a chair gone and then if you’re the person without the chair… Forget the name of that game as a kid, but… Musical chairs, right?

Kristen (10:26):

Oh yeah.

Mike Lester (10:27):

You just don’t want to be the one standing there when everything goes bad. You’re the one losing because Wall Street we talk about this is a zero sum game. So for you to make 10%, somebody else has to lose 10%. For you to make 5%, somebody has to lose 5%. So Kristen, it’s our job as investment advisors, with people that are retired or very close to it, to help them not be on the receiving end of losses. Now we’re not going to get it right all the time. We can’t time markets but what we can do is be proactive when it comes to management of your portfolio.

Mike Lester (11:03):

We can do what’s called active management and say, hey listen, probability of things going well is bad so we’re going to move your portfolio or your investments to something more conservative or probability of markets doing well or high so we’re going to move your investments to something that’s more aggressive or will do well if markets go up. Currently, we don’t think things are likely to do well. We’ve got a lot of data that supports that. It doesn’t mean we’re right, Kristen, but it does mean we’re working as fiduciaries for our clients to help them protect and grow their money. If you want that type of relationship, maybe you don’t currently have it because you have 401k and you don’t have an advisor or maybe you’re working with an advisor and you just want a second opinion and we can do our comprehensive financial plan for you.

Kristen (11:46):

With Wall Street so rocky lately, Mike, I’ve been reading about the importance of investment management with our portfolios but you also hear on the show, put a heavy emphasis on financial planning for your clients, which one do you think is more important?

Mike Lester (12:00):

Well, it’s confusing. Kristen people talk about investment management and then they talk about investment planning and it sounds synonymous if you think about it. There is a difference. Investment management would be the management of your assets and we talk about active management all the time. Just means would we move you to positions that are more conservative because we think things are going to be bad or would we move you to positions that are more aggressive because we think things are going to do well. Active management just means working with somebody that has the ability to reallocate your portfolio in a way that they feel is going to be best for you.

Mike Lester (12:39):

That’s what fiduciaries do. Most people don’t have that relationship with their money. They have more of a hang in there approach. So we’re having those meetings week after week with individuals that just want to understand the difference between active management and the hang in their approach. The next part of that is having an actual financial plan. So financial planning includes not just active management of a portfolio but income planning, tax planning, estate planning, a written plan and those written plans, Kristen are updated at least on an annual basis. So with Talon Wealth and our radio program here, we are sitting now with individuals, not only providing active management with clients but also providing financial plans, complimentary.

Kristen (13:20):

Connect to Mike, the entire team by visiting guardingyournestegg.com. Mike, a friend of mine, I’ll just call him Rick, because I don’t want to embarrass him, he brought up an interesting conversation the other day. He’s been working with one of the nationally known financial firms for almost 20 years and he’s pretty happy with them because they’ve done a really good job growing his retirement dollars well into seven figures. However, he is getting the feeling that they don’t have great answers to his questions about following through with actually retiring and drawing from the money that they helped him grow. What would be your advice to him if he’s listening today or for me to pass along to him?

Mike Lester (13:58):

20 years is a long time but if we go back to the early… Think about it, sounds like yesterday but 20 years ago was 2002.

Kristen (14:08):


Mike Lester (14:08):

And 2002, we were just after the tech bubble that had crashed. We had a pretty good run until late 2007 when things started to unravel. We had a horrible 2008. We had a bottom in early 2009, in March, early March and then we’ve basically had a bull market or another way to look at it as a good market, a growing market ever since, until now where we’ve plateaued for the past six or seven months, meaning we’re just in a trading range here waiting to see where markets go. There’s a lot of volatility and concern. We do talk to individuals in Rick’s situation a lot where they’ve been working with a financial advisor for a long time.

Mike Lester (14:50):

But one of my first concerns when I talked to individuals in that situation is I ask them, well, what did your current financial advisor do for you in 2008? It was, well, they told me to hang in there. Turned out they were right. I’m glad I hung in there. It came back and I’d say, well, yeah, that’s true. One of the things that most firms, not all firms but most firms will train their advisors to do is coach investors to hang in there because these firms need you to stay invested in markets in order for them to make their money. But also they know eventually markets will get better and eventually that advice will be good advice, just might not be in that current moment. But the problem for most people is when they’re retired or very close to it, hanging in there doesn’t sound very good because they’re not working now and making contributions.

Mike Lester (15:36):

Again, it’s not 20 years ago when your friend Rick may have been 40 years old and now your friend, Rick is 60 years old and he’s probably looking at the world a little bit differently. Well, hey, listen, I’ve got my nest egg and if I asked Rick right now, Rick, would you be willing to go through or another 2008 at this point in time? His answer would probably be no. So we’re working with those people week after week. We’re getting those phone calls weekend after weekend and week after week. It’s important to understand how you’re invested, what’s likely to happen moving forward and if you’re retired or close to it, what can you actually do about this volatility and what can you do to protect your money? And we believe it’s active management but we want to sit down with you and explain to you exactly what active management looks like.

Speaker 1 (16:21):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at retirement.tips/plan and we can do that for you complimentary. Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at retirement.tips for more free retirement planning and investment resources. Thanks for tuning in to today’s show and we’ll see you next time on the Retirement Wealth podcast. Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate and when redeemed may be worth more or less than originally invested.


Mike Lester

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Volatility, Risk and Your Financial Plan