Insights

Welcome to this episode on our 4Buckets Channel, and today we’re going to be talking about the “Impact Zone” and how the outcome looks for a retiree who has adopted the 4Buckets strategy. What does it look like on the back end after they’ve undergone this process and have chosen to move forward with this

4Buckets strategy?

I have a little history that I can speak on but I have a special guest with me today who has much more history (praise God) – three decades working with folks and helping retirees step into this journey and walk out this final/last chapter in an abundant way. And so I have Greg Lohr here with me; the last names match because Dad is my father, business partner, and friend, and what we want to do is glean from his wisdom and the experiences that he’s been able to enjoy in his years of practicing. So to kick us off Dad, I’ll have you share a little bit about Lohr & Company’s history and sort of get us to the point of how you began to use a 4Buckets framework when working with clients, even though, you know, it wasn’t 4Buckets at that time, talk to us about how we got to that point.

How Lohr & Company (and 4Buckets) Came to Be

Greg Lohr:

Sure. A little bit of background to frame how Lohr & Company came into existence: my undergraduate college degree is in electrical engineering and interestingly, my last semester in engineering school I took a personal finance class that really stimulated an interest. [Finance] was the type of math that I wanted to be involved with. It was self-centered initially driven by this sort of “wall-street” desire – wealthy clients, networking, lots of money, but the Lord gradually reshaped that into a desire to help others but I had to set this desire aside for a while because I was graduating to become an engineer at a large paper mill.

While I was an engineer for six years, I worked with a lot of people who had many more years of life under their belts and had a very good lifestyle in the area where we lived and worked. The desire to be a financial advisor never left and so I went back to graduate business school doing an evening MBA program and completed a finance MBA in August of ‘93 and the Lord led me into what is now known as Lohr & Company in November of ‘93.
The interesting circumstance that happened within two years’ time, was that the large paper mill – it was a unionized paper mill – went through a tremendous early retirement buyout package to a lot of the salaried and hourly workers there. And by virtue of the opportunity that was offered to them, there were a lot of people in their mid-50s that were wanting to speak with me about their options.. So I hung up my hard hat, put on a suit and tie, and started calling myself a financial advisor.

Being entrusted to take care of a person’s finances at that point was very humbling. There was a certain level of, I would say, fear and trepidation to be relied upon and held to that level of responsibility and caregiving. The two resounding themes that I consistently heard were “Greg, help me not to outlive my money” and, “Help me to live in my own home for as long as possible.” From there, that established the emotional priority that I took to listening and making suggestions for people who were stepping into retirement, with pensions that had a level income component that created a healthy baseline alongside Social Security, plus a 401k. So it was a very sweet spot and a unique opportunity, and a tremendous learning launch point for what is now Lohr & Company.

Focusing on Retirees

Ethan Lohr:

Yeah, certainly it is a different environment than what we see today, for retirees with those pensions gradually disappearing as time goes on.

So that was the basis for building a clientele of retirees in that small paper mill town, and then Lohr & Company made several changes locationally to continue to build a retiree clientele across Virginia which eventually led to my arrival and I joined Dad in 2015. At this point, Dad is 20-25 years in and has been walking through this retirement phase with his clients and now Ethan shows up. I am new to the business, trying to understand how it all works and be a help, a support, an element of growth for our firm as we looked towards the future.

Initially, we were stuck. There was this period of wrestling that we had to go through where we first I thought that Lohr & Company had to basically be two practices under one roof where Ethan was going to undergo his own journey similar to Greg: advisor in his 30s, bringing on clients growing with them and building off of that. That’s very much the direction we were heading. But the Lord redirected us and with Dad in the later stages of his career, and me on the front end of mine, the Lord brought us together in a sweet unifying way to say: “No, this is the clientele that has supported Lohr & Company, these are the folks that we have walked with for our entire history and we want to serve them well across the board so that Greg and Ethan, regardless of who is the adviser in the picture, are able to to help these clients in a skillful uninterrupted way.” That’s what began the journey of unifying Dad and I as business partners under a model that we now call the 4Buckets. This is the framework that we use to help today’s new retirees and serve existing clients that have been with us for a really long time.

Creating the 4Buckets Framework

So that’s the backstory of how we got to where we are today. Let’s talk more about the 4Buckets. So, this 4Buckets process obviously has a visual framework that quickly pops into your head when you first hear this concept, but underneath, there’s a sequential process that we follow when working with a potential retiree client. That first meeting, (and I have talked about this) is a very important meeting and it has very little to do with numbers actually. Go ahead and talk about what that first meeting is and what you see take shape coming out of that meeting, Dad.

The Planning Process

Greg Lohr:
Many prospects bring in financial information with them in the first meeting and my consistent response is, “We’re not going to actually cover anything truly financial in our first meeting together; it is all relational, first and foremost,” because we want this relationship to last for the rest of this person’s life. And so I share with them my background, my family, the firm, full transparency from a personal standpoint, and then I ask about them where they are, you know, what are their experiences, what emotions are they feeling at this point of their lives, whether they’re pre-retirement or in retirement?

There’s a variety of emotions at this point in life. And so, in this factfinder meeting, most people have never self-expressed what their personal and financial goals are. They’ve worked, they’ve saved, they’ve done life but they’ve really never written down or self-expressed what their personal goals and financial goals and dreams are, so it’s a “dreaming meeting” of sorts once they’re comfortable with us professionally.

We’re not trying to impress anybody with what we know. It’s putting on a teacher’s hat, a listening ear, and listening and unpacking emotion. We’re asking about their family makeup and history, if they have parents that they are concerned about a lot in life with, what their children’s lives are or what their grandchildren’s lives are – really making the emotional connection before the technical financial elements come into play.

Ethan Lohr:

Yeah, so it’s obviously laying that relational groundwork together with minimal financial discussion; give us an idea as you work through goals, dreams and concerns, where are you hoping to move the prospect in that first meeting, particularly as it relates to the sort of life that they want to live in retirement?

Greg Lohr:

Good question. It’s really a conversation of reassurance. Many people will come to the end of this first meeting and they’ll say, “Well, this was totally different than I expected this meeting to be.” I want our first meeting with prospective clients to be very disarming. To not feel like Lohr & Company has an agenda, but to really enjoy listening to this person’s life and how they got to where they are. This helps us understand how we can best listen, how we can best understand the words that a prospect uses to capture the emotion of their answers. Well also understand what they have listened to from the media or friends or present advisors to formulate their decisions up to the present day. And so, instead of a conversation of restriction and discipline, it’s more one of reassurance and excitement – “Wow! Let’s dream together! Let’s build something really fun for you guys together.”

Ethan Lohr:

Yeah, and as that meeting concludes oftentimes, like you said, the retiree walks away deeply encouraged and surprised.

As you begin to get into technical planning, using that first meeting as a springboard, this dreaming often becomes, “Okay, what is actually possible from a financial standpoint in retirement?” Because retirees are inundated with preservation and scarcity messaging from the media and even the aging process has an impact on that as well.

But where we try to flip the script for folks is to first encourage them by affirming that they’ve done really well and so with that understanding in mind, what can we actually achieve here from a lifestyle standpoint and beyond that from a legacy standpoint.

So retirees are now encouraged and they’re now thinking, “Okay, well, I can do more here than what I would have thought” or “Yeah, the sort of retirement that we figured we would have actually can look a lot different from a lifestyle and even a legacy standpoint for kids or grandkids or from a charitable standpoint.” So, once you start to help them establish a new lifestyle that they want to reach, what’s the process for helping them achieve that using the different retirement income tools that are out there today?

The Retirement Income Strategy

Greg Lohr:

I think we want the common goal to be continued peace of mind, income stability, and income guarantees. The present day income of the prospect is usually the first talking point because they know the lifestyle that they are presently in, and they have a lot of emotions of either anxiety, fear, trepidation, joy, or curiosity about a retirement lifestyle.

But lifestyle is still based on income and so we talk about the here and now and how you enjoy the here and the now. Then, based on the various income sources, whether it is rental Income, Social Security, defined benefit pension plans, defined contribution 401(k) plans, or Roth and traditional IRAs, we come back to tailor a plan based on the present income instead of what a past lifestyle may have looked like. Let’s deal with what we know now about your lifestyle and build a plan around that.

And then from there as we go through the 4Buckets process together, it is a tweaking of all the different buckets. How much to have in reserves, how much in guaranteed income supplements, how much in market-based portfolios. We’ll discuss risk propensity, because risk really is more emotionally driven and emotionally analyzed for a retiree than quantitatively analyzed at that point in a person’s life.

Ethan Lohr:

Yeah, I like the way you use those phrases about custom fitting a retirement strategy that is unique to that client. There’s a whole range of tools out there and I think what’s unique about the 4Buckets is that it gives validity to all of them. Meaning, from investments to insurance, when we’re helping a retiree use their assets to meet that desired income or that desired lifestyle (which is in essence one and the same), we’ll look at the breadth of options, talk through pros and cons and help build that custom plan that you talked about.

What we tend to see as retirees come out of this is that they have envisioned a new lifestyle. We have shown them the tools that allow them to reach that lifestyle comfortably. And so, in this latter half of our time, we’re going to talk about what a retiree looks like going forward. How do they respond in light of this new income strategy that they have through the 4Buckets? How do we see them using this new approach for their benefit?
What often takes place is a retiree has now established an income that has more elements of guarantees like their Social Security and their pension. I’ll refer more towards a retiree that has more guaranteed income in their picture because I think it gets back to what you’re saying, Dad, about the emotions behind investing. We can live through it, we can look at investments through a quantitative lens but with the way that we are as humans and the biases that we have, we’re just naturally going to look at it more emotionally.

For those clients that have used more guaranteed income to reach their retirement lifestyle, what we start to see happen is that they have an income in retirement that is largely level or gradually increasing just based on the way Social Security works. That, for the money that has been used for the lifestyle, they have this sort of level path. But for a retiree, age just naturally starts to create this divergence between the income that they’re receiving and the spending that they’re able to do. So you’ve got this income line here and this decreasing spending pattern that’s taking place.
We’ve talked a lot about how great that is from an inflation standpoint. Retirees often want to ask, “Well, what’s my plan to fight inflation?” And this is a great way to tackle it – having an income out of the gate that is high and is consistent and can stay at that level throughout retirement knowing that your spending will come down. So that’s the inflation side of the argument for higher income and higher levels of guaranteed income. But we’re going to talk about it from an impact standpoint where the client has this ever-widening gap between what they can spend and the income that they have coming into their accounts each month from this strategy.

We call it the “impact zone.” Dad you’ve seen more than I have over the years with your retired clients, what are ways that you have seen retirees using that impact zone for their enjoyment and even enjoying it beyond them from a legacy standpoint?

The Impact Zone

Greg Lohr:

The sweet recurring conversation when we enter that impact zone with a retiree and they hear me say, “We’re going to keep sending you more money.” That is a phrase from a professional advisor that few clients hear because most clients are used to a professional relationship that goes the other way where the advisor is saying “Send me more assets to manage for you Mr. or Mrs. Client.” So it’s a sweet, and the response is typically, “Greg, I don’t need any more money.” And I say, “I know that but I want to send you more money because I want you to get the most out of this 4Buckets system that we have built together.”

It comes back to the beauty of the advisor-client team working together. We’ve helped shift paradigms for them about how retirement can look and they’re choosing to stay disciplined within the plan we’ve built – it’s just a successful outcome for everybody. Their joy, their peace, and the irony of just getting more and more money that they didn’t think that they could enjoy whether it’s doing some more travels by themselves or with a spouse, expand life experiences with children and grandchildren. Whether it’s primary, secondary education or college funding, seeing investments made into the education of their grandchildren or charitable giving to what resonates in their hearts. Being able to do all of this knowing that they’re not going to lose ground on their lifestyle.

And so the best barometer on our side of the relationship is phones that are quiet, emails that are empty, and clients that are at peace with us proactively making statements that restate the plan we have in place. And so what began as a professional relationship quickly becomes a personal friendship.

Ethan Lohr:

Paying Taxes Now to Experience Impact Now