How to Explain Risk and Safe Money to Clients | 7 Figure Annuity Sales Podcast | Ep. 118

Hello, everyone. I'm Chad Owen, the annuity sales coach, and welcome to today's podcast. Boy, if I'm gonna start off like this, it's gonna be a hard time stuttering already today. Okay, today, what are we talking about today, Caleb?

We're gonna talk about risk and safe money. So it's one of those topics, you know, we throw around the term safe money and all of that. But really what I want to kind of discuss, Chad, is how do you go about not only explaining the concept of safe money to clients, but then also the importance.

Okay, look like, what's risk money to you, Caleb?

Well, risk money is fun money.

No, risk of money is I'm crazy money. Risk money is like you take a chance on things. Safe money means you don't even need to think about it. I mean, when it comes down to it, there's often people say, well, for example, variable annuity with an income rider is safe money. No, it's not. The principal still at risk. The income rider obviously is safe.

Sure.

But the way I look at things is risk money means you don't know what's going to happen. You have an income protection on. Once again, we'll talk about the variable annuity of an income protection on that, but the principal still at risk. Right. So therefore you go, okay, how much can I pull out of here? Okay, you got your income taken care of. Do you still care when the market goes down? Absolutely, because the money still at risk. So to me, risk money is anything that you can lose when the market goes down, that's anything. Sure. Now, do I think CDs are risk money? No. Is there a risk in a cd? Yes, because you're limited in what you can grow at. So the reality comes into what is the true definition of risk versus safety? And I'm just looking at safety to mean, to me means you don't even have to think about it. It is what it is. It's going to do what it does. That's why when I'm presenting an annuity, I always, always, always go off of worst case scenario. So if the market did nothing for the next 35 years, you know you got your principal back. You know that there's a famous billionaire out there that says, he goes, I'm not so much concerned about in a return on my money, it's the return of my money. And I know there's been people throughout the decades, throughout the centuries that have said things like that, but the reality is, why do the super wealthy make that comment? It's because they like the idea of I don't want to lose anything. Warren Buffett has said this. Rule number one, never lose money. Rule number two, never forget rule number one. Now, has he lost money? Absolutely. I Remember, I remember 2007-2009, his Class A shares and class B shares lost a ton of money. But was he hurting? No. I mean the billionaires, they don't hurt. They can get things we can't because they have money we don't. They can tie it up for longer than we can. And so they can ride out things. I mean, if you're worth a hundred billion dollars and you lost 30% poor, you only got $70 billion left, you know, struggles true. You know, it's. When I think about it, even these athletes and celebrities, you know, they're so quick to say, oh, it's okay, you can tax us, oh, you can do this. But the reality is when you have that much money, what's it to you? But when you have some as a hundred thousand dollars and you're at risk and you lose 30%, that's a big problem, right? So risk money is just anything that you can lose money on. Safe money, you don't even have to think about it. There's this show back in the day, I haven't seen one of his infomercials in a long time, but it was Ronco. Ronco had everything. I mean he used to do the set it and forgive it to get it, forgive it 7 forgive it, forgive it, set it and forget it type cooking. So you literally set it and forget it. Well, I think the safe money retirement plans are set it and forget it type deal. You know, if you have a 5%, 6% guarantee for a 10 year timeframe and you're going to retire in seven years, you, you know, beyond any shadow doubt, that income rider is going to grow at that amount no matter what. Right. Now, if you have a good index strategy, could it do more? Possibly, but don't ever count on that. So if I have an income rider on my product, I know beyond any shadow of a doubt the worst it's going to do is whatever that income guarantee is, right? So that's true safe money. People get it confused because they say, why? I'm in a straight indexed annuity. So they'll do a straight indexed annuity for an income product. And then they're saying, well that's, that's safe money. Well, yeah, technically it's safe money, but did it give them a complete peace of mind? No, because we don't know in seven years what that income, account value is going to be. So that's why you got to give your, your money a purpose. This is your job. Your job is to provide income for me. So make sure you do a product that actually justifies what its purpose is. If you have money out there that, hey, you know, I just don't want to lose anything, but I'm not concerned about income, well then you use an indexed annuity. So safe money and risk money are terms that just whatever the purpose of the money is, you don't have to think about anymore. That's true. Safe money, sure.

So just for clarification sake, when you think about risk money versus safe money, risk money being something that can, your principal can be lost to something on the outside, not the client receiving it. Because even, even we talk about safe money products, fixed indexed annuities, things like that, your account value says, I mean it's still going to go down. I mean, you think about, I mean, on the guaranteed values that these illustrators show, it's going to show you always, worst case scenario, index does nothing, which we know doesn't happen, but it's there because it has to be. It's going to show that account value going down. But the reason it's doing that is because they're taking, taking their income, right?

So, yeah, taking their income or their.

Speed or there's a income. Right fee. Yeah.

Or you had to surrender it. So I'll even say something along the lines, worst case scenario, you got your five, you have a 6% surrender charge. But think about it. If you're in the stock market in five years from now, what's the stock market going to be then? We don't know. So what if it's 20% down, what's your surrender fee? Right. 20%. Plus you had to pay your broker fees. So I often say, and you'll hear someone say this too, and it's talking once. Get safe money, risk money, but they'll talk about fees. I go, you're paying, you have mutual funds, right? Now you have a broker, you're probably about 1 1/2% fees. Even if you have low mutual funds, what does that one and a half percent get you? Nothing. Right. There's no guarantees. What is this 9/10 of a percent or 1% rider fee get you? Guaranteed. You know beyond any shadow of a doubt at X number of years that this is how much money you could pull out. Right. You also know that no matter how long you live or your spouse lives, if you do joint lifetime payout, you'll know they never have to worry about it. So that's true. Safe money, Right? Safe money is when you just don't even need to think about it.

Well, it's the greatest benefit to the policyholder, the client. It's not the outside source or outside entity that's gaining inevitably from this relationship that may not be beneficial to the client.

Correct.

That's good. That's good. So that's risk and safe. One of the things, you know, we talk about all the time is taking a portion of the money, right. You talk about somebody with 10 million, right. And it's not a deal where they need to put all. Well, true, they may not need to put all of it in into a safe money product, but you put a portion of it into the safe money, generate the peace of mind. But that's really where I want to go down next, Chad, is aside from the peace of mind that the client gives, gets from these safe money products, what are, what are the other benefits? I mean, you got the guarantees. Walk us through those.

I mean, part of the thing we look at is there's this perception out there. Some people think I hate risk money. That's not true. I hate risk money that's misused. In other words, it's Ms. Purposed and they don't give it the right purpose. So in other words, if you have someone and we're just using a million dollars as a number, Even if it's 500,000, you have a million dollars, use 500,000, you know, you got the guaranteed income where you don't even need to think about it. And then you take the other 400,000 and put it into stocks and leave a hundred thousand in cash. I don't got a problem with that. Right. You know, it's like, hey, that's their opinion. Now that I'm not the guy to talk to about that. I don't do variable accounts. But for someone to sit there and say, well, Chad hates risk money. No, that's not true. I hate it when people take risk money and try and imply its safety and security. So I'll hear people talk about these hybrid products, these fancy name products, these whatever. I mean, I could go on and on about the different types of products that they've said over the past 15 years are safe money, and then all of a sudden they end up losing money or these, what do you call, alternative investments. Where our state, our state of Texas, we have some of these alternative investments that they're saying, no, you can't even touch these. You touch these, we will come after you. And it's a lot of it had with life settlements and things like that, where people were misrepresenting, saying you can't lose any money. So they presented safety and security, but the reality is it wasn't right. And it's important to stay in your lane. I mean, if I am an annuity person, I am doing annuities, I'm doing life insurance, I'm just doing insurance products. I'm not trying to come up with some fancy little way to protect people's money on something that has no guarantees, but you imply it does have guarantees. And so the ins and outs of this safe money is tell your safe money, like I said before, this is what the job is. This is what your job is. So don't use risk products. And so when we're talking about designating, I have a million dollars, 500,000 more than meets the income I need, I can retire comfortably, maybe even do some laddering. Yeah, I've talked about that before, where you take maybe 500,000, they want to draw that in two years and you take another 100,000, they draw that in seven years, take another 50,000, they draw that in 12 years, and then you have some built in income laddering there. We can do that in our products. And once again, you know, beyond any shadow of a doubt, this is how much we're going to have. And we don't need to worry about it because the money's taken care of. So when we're talking about safe money, always everything is purpose driven. Everything has a. This is your job. I use it like the military. We have a lot of military in San Antonio and Austin. So I say, well, if you're a leader, Sergeant, let's say you tell your troops to do something, they each have a designated job. Your little soldiers, your little Benjamins, that's your job. You are the safe money person. You, you're the suicidal bomber. You know, you, you, you're the specialist. You know, the suicidal bomber is the one. I'm gonna buy this cryptocurrency. You know, we don't know.

We don't know what's gonna happen.

Nobody does. That's why somebody says, are you an expert in variable accounts? I know variable accounts very well, but I'm not an expert because there's no way you can. I can't call myself an expert. Well, I can. I am an expert. I know, I know exactly what the market's gonna do the next 10 years. It's gonna go up, it's gonna go down, it's gonna go up, it's gonna go down. I know that that's just what's gonna happen. We can even look at the last 10 years where the markets done pretty well, but we still had 2018. That was a challenge. With the beginning of 2020, that's a challenge. I even say even right now, it's a challenge. I mean, the market just bounces all over the place.

So, yep, we know it's gonna go up. We know it's gonna go down. That the issue that we don't know is the timing, right? We don't, that's the, the essence of it. So those save money products, I mean, it's, it's peace of mind. But really, at the end of the day, I mean, is there anything more valuable than being able to retire without.

Stress and whenever you want? I mean, think about this. If you go to retire and the market's going up and then the market goes down, you're going to retire in a year and then as a big hit, then you can't retire.

Right.

I know people that wanted to retire in 2007, 2008, 2009, that didn't. If they even did get to retire. 2014, 2015, 2016. I still have some clients that wanted to retire and they just have not recuperated. Whatever they were in at the time just never bounced back. And they're still working to this day. And they weren't clients, they were prospective clients that said, I'm going to let it ride, I'm going to see how it does. I think I can time the market. Really? If you could time the market, why are we only dealing with 200,000, not 10 billion?

True.

You know how to get off the top of the market and back in the bottom market, you could predict the future. You could be making tons of money because you would know how to time it perfectly. So nobody can time the market. Nobody can.

Yeah, that's so good. And it's, it's one of those things too. I've talked with agents all over and it drives us crazy because there seems to be this gambler mentality a lot of times that idea of, well, I'm just going to wait, I'm going to let it ride. I'm going to get out of the.

Slot machine arm and I'm going to win the megabucks, you know, I'm gonna buy that lottery ticket and I'm gonna be the one that's gonna scratch it off and I'm gonna win. Really? I mean, I lived in Las Vegas for four years. The entire city of Las Vegas was built from losers. It's that simple.

It's true.

Entire cities, the entire economy is built from losers.

Crazy.

Because it is. It's a city of losers. It just really is because everybody comes in. Now, of course, you do get some people, hey, I'm just gonna have fun. I'm gonna. Here's my allotted amount, I'm gonna spend. But when you have spent that allotted amount, you've lost. Now, it was entertainment, so. Okay, that's fine. And yeah, you have shows and you have good food, you have things like that. But the reality is the entire casino is based. They base all their profitability on your losses.

Yeah.

So when you look at that scenario, you to go, what am I doing in the variable count? Okay, So I could go into a casino. I could play every slot machine in every table in there, call myself diversified. But the reality is, everything in there is designed to take my money. If you're with a broker, it's the same thing. Everything is designed to take your money. That's why they get fees whether you're winning or losing.

Right.

That's the reality. And I know that rubs people the wrong way, but come on, I've helped so many people that are former brokers. I've helped so many people. I train agents right now that are brokers, and they. I have no problem if you do your job and you protect the money. Okay, fine, take some gamble on some other things. But at least, you know, even if the market tank, at least, you know, they have the safe money, right?

Well, and that's the reality of it, too. The people that go to Vegas responsibly are taking few hundred bucks, few thousand bucks. They're taking in a portion. They're not selling their house to go and gamble with it. Right. Which in a lot of times, if you're trying to base your retirement off of what the market's going to do and try and get these, what, what often promised to be big, giant returns. I look at, look at the potential for the upside. It's like, in essence, it can be like selling the house and trying to go. Because think of the upside.

Oh, yeah. I just watch people all the time going with their Social Security checks and end up with nothing. Mean, that's deep trouble. So. Well, I hope you guys understand. I mean, this is a thing of safe money and risk money. If you're in a variable world, like, you do both and just make sure you're protecting people's money. You designate. This is your purpose, your job, so you can comfortably risk people's money knowing that you've already provided safety and security. So I hope this helps you. You guys have a great day and happy selling.