“Always think long-term.” With Jason Hartman & Randy A. Fox

I would recommend being highly diversified not just across the stock market, but across all asset classes. Also, everyone’s circumstances are different, that’s why I don’t like using “rules of thumb.” You can’t tell all 40-year-olds to do the same thing; you can’t tell all 70-year-olds to do the same thing. With people living so […]

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I would recommend being highly diversified not just across the stock market, but across all asset classes. Also, everyone’s circumstances are different, that’s why I don’t like using “rules of thumb.” You can’t tell all 40-year-olds to do the same thing; you can’t tell all 70-year-olds to do the same thing. With people living so much longer than they used to, even 70-year-olds have to start thinking about the next 25–30 years; not just the next 10.

As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Randy A. Fox, CFP®, AEP®

Randy, a third-generation entrepreneur, is the founder of Two Hawks Consulting, LLC based in Skokie, Illinois. Fox is a nationally known wealth strategist, philanthropic estate planner, educator and speaker. He has dedicated his career to helping individuals, professional advisors, charitable institutions and planned giving organizations “do well while doing good.”

Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

As a third-generation entrepreneur, I worked in several different family businesses growing up for my father (a restauranteur) and my grandfather (a pharmacy visionary). I learned valuable life lessons about business operations, the value of hard work and pursuing one’s dreams no matter how many roadblocks life throws at you. It’s also where I saw first-hand how family dynamics can complicate matters in closely-held businesses and ultimately erode their success. I also learned how important it was to have good planning in place. When my father died suddenly, we discovered there was no buy-sell agreement or succession plan in place, even though there was a very well-known attorney regularly involved in our family matters. I knew there had to be a better way to build and protect family wealth while preserving family harmony.

I entered the world of financial planning in the mid-1980s. The notion of being a comprehensive planner, rather than a financial product salesperson, was in its infancy. I had no clients and no experience. I had two infant children at home and survived by doing seminars to drum up business (not my favorite thing!). After major tax law changes took place at the end of the decade, I took my first training program in charitable planning and learned about Charitable Remainder Trusts (CRTs). I was fascinated by the idea that you could give money away, get an income tax deduction for doing so, avoid the taxes, and still have an income stream for life. Amazing! Despite all the wealth in this country, I was equally amazed that so few highly affluent people (and their advisors) new about techniques like simple CRT’s.

I spent a lot of time training attorneys about this new concept in trusts and forged many important relationships that exist to this day. I soon realized that I had a knack for this type of advanced estate planning and could solve the complex estate planning puzzles that many other highly trained advisors couldn’t solve. This evolved into my current business model of being an advisor for other advisors, providing them with more power, wisdom and higher-level thinking than they could ultimately achieve on their own. I never get tired of learning new things, and we prefer to work with professionals who share our unquenchable thirst for knowledge.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

Early in my career, I was invited to do a presentation for a group of other professional advisors. A wholesaler for one of the companies my firm did business with saw the value of what I had to offer. He liked me and helped me organize the meeting in a local hotel conference room. There were about two-dozen heavy hitters in the room. Unfortunately, the hotel had a really low-quality LCD overhead projector. The lamp was not powerful enough and no one could see the slides.

It could have been pretty embarrassing situation, but as the old saying goes, “the show must go on!” Fortunately, I had an early portable computer with me. Long story short, about two-dozen advisors got up from their seats and crowded around my tiny laptop computer so they could view the presentation. In such a tight setting, no one can drift off or fall asleep. It must have worked. I got several new client cases as a result of the presentation.

It’s all about learning to adapt to the circumstances. That said, I always show up an hour early to check on things whenever I have a speaking engagement — and I make the AV guy (or gal) my new best friend.

Are you working on any exciting new projects now? How do you think that will help people?

We’re doing some very creative, cutting-edge charitable planning work. I believe I’m one of only two or three people in the entire country who know how to utilize a new application of Pooled Income Funds (PIFs) that can provide huge benefits to multiple generations of a family and the charities they support. A PIF is very similar to a charitable remainder trust, but it’s run by a charity, rather than by a family. For more on PIFs see my recent commentary.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I’d have to say I was influenced by my father and my grandfather. Both were scrappy entrepreneurs who taught me the value of hard work. They also followed the stock market religiously to make extra money. My grandfather was a Russian immigrant who came to the U.S. with almost no money, but found a way to put himself through pharmacy college. He worked in several pharmacies, before heading out on his own after he invented a cough drop recipe.

Again, both my dad and grandfather usually talked about the stock market at family gatherings and I think investing has always been in my blood. Some of my relatives would roll their eyes, but the market always fascinated me. Growing up in the 1960s, most of my peers wanted to protest the Viet Nam war — I wanted to go to business school. I was always intrigued by what made dad and grandfather decide to invest in certain companies — why they thought what they thought. I was intrigued by how they went about evaluating risks and opportunities and what they thought was going to happen in the future.

I didn’t realize it then, but they were classic value investors — picking stocks they thought were trading for less than their intrinsic book value. Basically, they were looking for bright ideas from undervalued companies that they thought would take hold. I remember my Dad bought Polaroid back in the 1950s before anyone knew what it was. I was fascinated by his thought process — still am.

Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?

One thing we can do as advisors is to be a steadying influence. One of the best ways to be a steadying influence is to listen very carefully to what people are afraid of and support them. People are rightfully afraid. It’s a fearsome time. When people are vulnerable and under great duress, it’s very important to help them avoid making rash decisions that won’t be in their long-term benefit. One of the first things you learn as a financial planner is the importance of having 3–6 months’ worth of living expenses stashed away in an emergency cash “rainy day” fund. Clients always nod their heads when you preach this to them, but it’s amazing how few actually follow it. During crisis times like these, you can see how important it is to have a rainy-day fund at the ready.

It turns out the “boring” common sense advice financial planners have been doling out to clients over the years has been pretty good. We tell clients all the time how important it is to have estate plans in place, and their powers of attorney established for their healthcare and personal property. Now people are starting to understand why.

Estate planning attorneys are busier than ever. For people who sell life insurance with long-term care riders, business is through the roof. This is NOT an isolated incident. The entire world is affected. You can’t brush off estate planning and life insurance any longer and say: “Those bad things only happen to other people; they’re not going to happen to me.” Everyone is vulnerable to the pandemic and potentially other crises on the horizon. You need to be prepared and have your affairs in order.

The usual excuses: “I’m not old enough” or “I’m not wealthy enough” or “it’s not a high priority at this time in my life” are no longer relevant. If you’re in the hospital on a respirator, wouldn’t you want to know that you have someone out there in your corner who can tell caregivers what you really want — and who has the authority to do so?

Sometimes it takes a crisis to get people to have those difficult conversations and make those difficult decisions. That’s why you need a highly trained advisor to guide you — because most people can’t ask themselves those tough questions.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?

The whole point of dollar cost averaging is to take advantage of volatility. Buy more of your stocks or funds when prices are low and buy less when prices are high. That’s what dollar cost averaging was meant for. They key to making dollar cost averaging work is investing on a consistent and regular basis. But, when times are scary, it’s counter-intuitive for most people to keep putting more money INTO their investments rather than take it out. That’s what advisors are for. It’s not that people aren’t smart. Advisors are there to help people stay the course and fight their irrational instincts during scary times so they can do what’s right in the long run. Study after study shows that dollar cost averaging always works out better than moving in and out of the market. That’s because it’s almost impossible to time exactly the right time to get in and the right time to get out.

Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?

I’m not a big fan of playing sectors in any type of market climate. People always need to be broadly diversified. Even professionals don’t really know which sectors are likely to thrive near-term and which are likely to falter — much less which companies within those sectors will be the winners. The average investors shouldn’t be “playing the market.” The dynamics of the global economy are so complex; nobody knows what really causes something to happen. My advice is simply this: Stay diversified, rebalance occasionally, keep your hands-off and don’t try to over-think things.

Are there alternative investments that you think more people should look more deeply at?

When I mentioned diversification above, I wasn’t just talking about the stock market. It’s important to be diversified into all different types of asset classes. You should also own real estate, oil and gas, fixed income and life insurance, too. Of course, it depends on you age, your goals, your tolerance for risk and your tolerance for complexity. No two people are the same.

If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long-term investment what would you advise them to do with it?

As mentioned above, I would recommend being highly diversified not just across the stock market, but across all asset classes. Also, everyone’s circumstances are different, that’s why I don’t like using “rules of thumb.” You can’t tell all 40-year-olds to do the same thing; you can’t tell all 70-year-olds to do the same thing. With people living so much longer than they used to, even 70-year-olds have to start thinking about the next 25–30 years; not just the next 10.

Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing, what would you say? Can you please give a story or an example for each?

  1. Always think long-term.
  2. Be broadly diversified in your investments.
  3. Always have six months of living expenses on hand for emergencies.
  4. Have an estate plan and adequate insurance in place, even if you’re in your 20s or 30s.
  5. Be charitable. Always give some of your money away, regardless of your age.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“It’s better to be an hour early than five minutes late.” I’m always on time. As mentioned earlier, I arrive extra early whenever I’m scheduled to give a talk. I’m often the first person at the venue making sure everything works and it’s set up right. I cannot tell you how many times I’ve walked into a presentation with a faulty microphone or bad connections or something else that’s not set up right. My advice for young people: Always arrive early if you’re doing a presentation and make friends with the A/V guy (or gal). The amount of time and embarrassment that will save you is priceless.

You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

I would encourage every advisor in the country learn about charitable giving. It’s amazing how little advisors know about efficient planned giving. There’s more to philanthropy than simply writing checks or giving only when there’s a disaster or a fundraiser in your circles. People can also give assets and give of their time. But there needs to be a strategy and an awareness of the impact your giving is making.

All people, regardless of age or income, should be willing to help out those less fortunate. Again, there’s no rule of thumb about how much. Just give what you think you can afford.

Feel free to contact me if you or someone close to you has questions about strategic planned giving.

Thank you for the interview. We wish you only continued success!

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