The Rockefeller Method That Can Change Your Financial Future with Garrett Gunderson

I'm super interested in your take as it relates to your, your take on the Rockefeller habits and how that family, uh, used instruments to control their money. And, you know, versus some of the other families, but also applied to small business owners. Because when you hear the name Rockefeller, and let's just say you own a $2 million painting business and you own a house and maybe you're, yeah, maybe if you sell that business between your retirement and everything, you've got a, you might, you might see a path to a $3 to $5 million estate. At what point do you need trust instrument? Like at what point would you employ the Rockefeller thinking? And if you do, are you going to be better off? Are you going to end up with more of an estate? Because of the disciplines there, or, you know, is, is it a— do you have to have a certain net worth to really benefit from what the Rockefellers did?

The way I wrote— I wrote What Would the Rockefellers Do? And what I did is I distilled what is this thing that anyone can learn from the Rockefeller method.

Okay.

Because yes, there's, there's basically super advanced, you know, dynasty trusts and different things that the Rockefellers do that isn't going to apply to people that aren't billionaires, but there are certain fundamental pieces that anyone could apply and learn from. And so look, anyone— I would, I would really argue everyone should have a trust. It's just which trust makes sense. There's two main types. There's the revocable living trust, which is very transparent. You can put stuff in, you can take it out. It really doesn't do anything while you're alive. It only kicks in after you die. But then there's the irrevocable trusts, which actually mean you own nothing, but you still control everything because it removes it from the estate, protects your assets not only from tax potentially, but also from financial predators and liability.

Sure.

So the wealthier you are, the more likely you want an irrevocable trust. I like domestic asset protection trusts for people in the United States because you can still access your cash through your distribution trustee, but it's going to be more onerous and more expensive than just a revocable trust. So if you're, you know, doing $2 million and your net worth is, a few million bucks, a revocable trust is going to be suffice. We can still deploy the Rockefeller method in both trusts. And the Rockefeller method comes down to two key factors: trust and insurance. Trust allows us to have a set of instructions of what we want to have happen to the money, avoid probate so the money remains private and doesn't go through the court system, and help preserve, perpetuate, and protect that money for generations to come. Many trusts are inadequate because they don't think about that. They just go, hey, one of my kids turns 30, 35, and 40, I'll just give them a third, a third, a third. And then all of a sudden I've I call that divide, distribute, destroy. That's what most non-Rockefeller Method trusts look like. Where Rockefeller Method is like, let's have incentives in this. Let's create a set of instructions and guardrails that say, why would a family member be able to benefit from this? And when could they benefit from this? How could they benefit? And it's just a set of rules and instructions so that if they're doing something that's productive and they're in a good place in their life, they could have access to it. And if they're not, they don't have access to it because we don't want to make it worse. You know, there's people that just inherit money. They have no purpose and everybody goes, they should be happy, but they're not because they're devoid of like, what do I do on a day-to-day basis? Yeah, I think people love them just for their money. They didn't earn it, so they feel a sense of guilt and shame and they become kind of those trust fund babies. So the second piece of the Rockefeller method is insurance. So it's about buying the type of insurance that's permanent in nature that'll be around one day longer than the individual is. So when they die, it goes into the trust and replenishes any money that was potentially lost because of inflation, because of taxes, because of, you know, maybe a business that didn't go quite as well because those kind of things happen. It helps replenish the money from generation to generation instead of just starting over from generation to generation. So would it increase your taxable estate? Only if done improperly, only if you didn't set up the right trust and have the right ownership of the insurance. If it's properly owned and properly handled, it, you'll have more money, but you won't have a bigger tax problem because you'll be able to avoid income tax in all cases, but there's also a way to remove it from the estate so that you don't have the estate tax if you start early enough. Estate tax is kind of a procrastination tax. People that just are successful, they didn't prepare early enough.

Right.

They end up paying it, you know, but even if it's, if, as long as you're not dying soon, there's probably ways that you could get that out of your estate. You just need a little bit of time to do it and a good attorney. Yeah. So, you know, we look at like GE back in 1947, they used the Rockefeller method as a company. They just said, hey, we want to recruit the top talent. The best way to recruit that talent is offer a pension. The way that we could pay for that pension is we buy life insurance on the executive when they come on board, and that way when they die, it replenishes all that we spend on the pension and more. And so they had a positive return to help protect that, and they would do that for years, and then they eventually stopped doing it because Wall Street said, why would you go for something that's going to get you 5% tax-free when we can get you 10%? Conservatively in the market, cuz in the '90s the stock market was doing double digits year in and year out and it was a great economic boom. And the problem was in 2000, 2001, and 2002 was 3 negative years in a row and they had to still pay out pensions. Sure. And it started to kill the account. And so they, they decided to be risky instead of risk averse and it cost them. There's some strategies that make sense to be more risk averse. There's other strategies that make sense to take risk. What's the strategy? Well, take some calculated risks in your business.. But then when you take money out of the business, reduce the risk on that because you have influence over the business. Stop taking risk on things you know nothing about. Right. So there's a lot to this Rockefeller method overall, but you know, if people just DM me @GarrettBGunderson on Instagram, the word Rockefeller, I'll give them the audiobook. It's my most popular book. It's, I think, number, you know, 1 or number 2, depending on the day in life insurance, top 5 in wealth management on Amazon, top 12 on retirement planning most days. You know, it's, it's super easy to listen to. It took a long time to make it that simple. And it's really useful on how you can get 20% more cash flow from existing assets when you use the Rockefeller method, or how you can create 33% more income from your retirement plans because you don't have to take from them every year. If you have a separate set of, of cash that when there are market downturns, you don't pull money outta the account, you pull it from something more stable. And so it teaches divers— distribution diversification, tax diversification, and boosting, you know, I mean, there's one strategy that you probably get 50% more cash flow, pay no tax if you're gonna sell a business. So there's some really, really useful things for business owners in that book. But if anything, I don't care where you start. And if you're just barely starting a business, you don't have two nickels to rub together. I started doing the Rockefeller Method at 19 years old before I was even married with $50 a month. It was really rudimentary. It was very simplistic, but it was a start. You don't have to be extraordinarily wealthy to leave a legacy. You just have to be really intentional and have the right framework.

And that's your Instagram @GarrettGundersen or @GGundersen?

Garrett B. Gunderson, as in Breck Garrett B. Gunderson.

Garrett B. Gunderson on Instagram. And just send you Rockefeller.

Yeah, just DM me Rockefeller. Follow me, DM me Rockefeller. I put out a couple videos a day that are just daily nuggets on how to think about legacy, how to think about tax, like just stuff that's gonna put more money in your pocket, help you keep more of what you make. I think it's helpful.

What's your take on debt? In your book Killing Sacred Cows 2.0, you had a section on debt. I thought it was very helpful. And can you go over that a little bit? The different types of debt and what type of debt to absolutely avoid?

What's interesting is like, we've, you know how there's like just certain words in the world that we kind of use and it's not the real word. Like when we call Kleenex tissue, Kleenex is the name brand. Yeah. But it's actually tissue. You know, there's just certain things like we call it a Coke, but it might just be another soda that someone's drinking. But like, we kind of do this with debt. Anytime someone borrows money, they call it debt, but that's not the technical definition. If we look at a balance sheet, it's our assets versus our liabilities. When we have more assets than liabilities, like let's say tomorrow you and I find a business that we could buy for $500,000, but we know it's worth $750,000. It's just the person is in bad health and they just need to get the money now. So if we borrow the $500,000, the world tells us we're in debt, but we know the truth of the matter is we have $750,000 asset that we borrowed $500,000 to acquire. We're $250,000 in equity. Equity is actually the opposite of debt, yet everyone's going to say they're $500,000 in debt when the reality is they're $250,000 in equity.

Got it.

And that's just, that's just the semantics we've chosen as a society. Then you get people that go, well, there's good debt and there's bad debt. Okay. Well, that's, I know what they're saying. They're saying, hey, are you borrowing to consume? That's a bad debt. Agreed. We put money on a credit card to go on a trip. We come back, we don't, we have the memories, but now we have the lingering amount that needs to be paid and we didn't have the money for it.

That's debt.

Agreed. But on the other hand, what they're talking about with good debt is, oh, well, what if you buy a piece of real estate or a business? That's good debt. Well, it's leverage. It's not debt. It's a loan. So I know that this seems a little bit like ticky-tacky, but it's everything because it's a mental game. And the mental game is if you think borrowing equals debt and debt equals being a slave to the lender and that you should avoid debt like the plague. Then you might do things that aren't actually helpful for you. Yeah.

And very few companies would get built. Like, look, nothing would get done.

Bonds. This is what's fascinating to me. If you have bonds in your portfolio, that is debt for that company.

Yeah.

That means they issued a loan to you and agreed to pay you an interest rate. And you have these financial gurus saying you should never borrow. But if you're putting money in a bond, you have someone else borrow. So that's hypocritical, right? It's just a matter of like, they're— what they're saying is you're not smart enough to just let the big corporations, which I kind of disagree with. We have to look at a couple of things. Like, if you borrow money, does it destroy your peace of mind? It's probably not worth borrowing. But I have a loan on this house I'm sitting in right now, 2.75% interest rate. That's pretty cheap money.

Yeah.

I can put money in treasuries and do better than 2.75%. So I'm fine having this loan, but you know, if it was 15%, I would want to pay this off really fast. Yeah. Because it's hard to get a guaranteed 15% sustainably, you know, because you're going to take certain risk with that where it's pretty easy to get 2.75% with almost no risk.

Yeah. I got that. I got that same loan in 2020. Same rate and bought a house on a lake and it's doubled. So yeah. And the cost of inflation, I mean, that's a valuable loan because inflation has gone up more than 2.75%. I mean, everything's more expensive and now the house has doubled and I mean, yeah, I've paid interest on it, but you know, yeah.

People love to argue with me about that point that, which is, let's just say that I have a, let's say my mortgage is 10 grand a month just to easy round numbers. Mm-hmm. 10 years from now, my mortgage, if I'm still paying, would be $10,000 a month. Right. How will that $10,000 a month feel versus today, 10 years from now?

Much less expensive.

It'll feel like $5,000. Yeah. Inflation helps you when you borrow. It punishes you when you save. This is why it's such a mental kind of like messes with people because they're like, I'm just going to pay off my mortgage and then I'm going to have all my money in a retirement plan. I'm like, yeah, but that retirement plan's if it's deferred tax and not a Roth, you're going to have to pay tax on the future, in the future. And you don't know what tax rates are going to be because they're actually historically low right now. You know, from 1944 to 1981, they were above 50% for the, you know, top tax rate. So what happens if you defer and then they raise the tax rate? And by the way, you don't have— you sell your business, you don't have the write-off. You pay off your mortgage, you don't have a write-off. Your kids have moved out, you don't have a write-off. That's a, that's a pretty dangerous way of kind of going about doing it. So Yeah, I, I want people to be responsible with their borrowing, but we either have debt or equity. The question is, when you borrow, does it lead to debt? Or when you borrow, does it lead to equity? And can you manage it? That's the real question. Kiyosaki would say, you know, hey, you should always borrow. Dave Ramsey should— would say you should never borrow. I think it depends. The guidance is, who are you? What do you want? What difference would it make if you paid it off? Would like, Would your spouse just be able to sleep at night? 'Cause that's worth something, even if it doesn't make financial sense. I have a friend that had a 3.1% mortgage, and when he wanted to start his first business, his wife said, "Can we just pay off the mortgage?" 'Cause he had stock options. And he goes, "Those stocks are gonna go up faster than 3.1%." She goes, "I just sleep better." So he paid it off. He sold 19 businesses since. I think it was the right move because then there's less tension, there's less stress. Like, I believe that we are our greatest asset. And if we're stressed out because we're making a good economic move, but it keeps us up at night. And then also we don't have the energy or we get more grouchy or it creates stress within our family. It's not worth it. Like your ability to produce value, protect that, grow that. Don't do that at the expense of someone else's like story that says, oh, you should put your money in this crypto thing cuz it's gonna do amazing. Or you should put your money in, you know, this penny stock or whatever it is. Like people buy these stories because they wanna make up for lost time because they wanna get rich quick cuz they wanna get rich easy cuz they wanna, They want to have the result without the effort. And that's where I think a lot of like people get taken advantage of. And I've been there before. I, you know, in my 20s, I started a hard money lending fund. I was doing bridge financing. I didn't love that stuff. I was buying. I had over 100 doors of real estate, didn't love it, but I was like, oh, this is what rich people do. But I also was never present when we had a family event and during the best years of my life, during my kids being young, like I just learned, you know, later, like The fortune I learned before I was 30, I remember I was sitting down with Dan Sullivan. We were both speaking at this event and I was like 29. I was like, man, I'm just going through it right now. It was 2008. And he's like, ah, you're just early. Most people go through this in their late 30s or early 40s. You're just doing it. You're just getting there early to learn the lesson. I was like, all right, I guess, I guess that's the case. But you know, 'cause focus is a hard thing to have where distraction is easy. It's easy to get distracted. It's easy to say yes to something that feels productive, that but might not be in your best interest because you're chasing something at the expense of yourself. And, you know, that's— I wouldn't go borrow to buy a bunch of real estate tomorrow because it also comes with property management and taxes, and it would come with, you know, I'm selling some land right now that has a cabin on it because it just— I spend more time there in my mind than I do with my feet. And it's like, all right, why do I need that? I, you know, it was only because I, you know, I do have my dream cabin that we're definitely going to keep. But sometimes more is not better. Sometimes more equals a distraction. So don't borrow so much that it destroys you or, you know, hurts your family. But at the same time, my wife is totally comfortable with having a loan on this house. She's, you know, that's so, so we kept it. It's just very efficient.

I was doing some deals with a, a billionaire, his name's Ryan Jumaville, lives down in Florida. He was, I think he built United Dental, I think it was a company he built, something like that. And we would look at a deal and at the end of it, he would always ask, is this the easiest dollar we could make? Like, is this the easiest dollar we could make? I mean, he had this, he had a cupcake business that was on a licensing deal and he wanted to know if we should turn it into a franchise and the complexity of turning it into a franchise versus just keeping it as a licensing deal and getting that recurring revenue and not having to provide any service. Whatsoever. And he's just like, I get it. I see that that'll be bigger, but that's not the easy— but wouldn't— why wouldn't I take the easy 3 points and do nothing and to literally do nothing and take the 3 points? And that was a big lesson for me in terms of— because, you know, as a serial entrepreneur, we like to just— we see an opportunity, then we get excited about it, and then we just, you know, then sometimes it's, you know, ready, shoot, aim. And we just start going and then the next thing you know, we're tied, tied into it. One of the things that helped me was, uh, I built a business over 25 years. I sold it in 2019 and when I sold it, I did the exercise of figuring out, including the, uh, pre-tax sale price and all the money I made along the way while I was in the last phase of that business, how much money did I make an hour? I just calculated it.. And then I said, okay, that's my floor going forward. And what that does is it, I have to say no to almost everything because if it's not gonna, most things won't generate that. And it keeps me from, you know, having a startup compunction and just, you know, just saying yes to things. Now I will say that some of the learning and, you know, and, and maybe, maybe maybe it would be helpful for you to share a little bit about some of the things that people do wrong when they get wealth, they acquire wealth, they sell a business. But one of the things I did was I started making small investments, $100,000, $250,000 that would— that I didn't research properly enough.

And, and then you and everybody else that sells a business, we've all done it.

And then, and then what? And then the other side of it was the cost to just account for it.

Exactly.

The time, the time and the cost and everything. And now, I mean, it's like I got, now I have all these AI companies coming at me and they're just, and I'm, they're just like, you know, you should, you invest in, and I'm just like, I don't have the time to research this. And I'm just, I don't want another headache that I'm running around trying to figure out how to get out of in 2 years.

Yeah. I mean, I have a lot of clients. And they've given away a lot of money.

Yeah.

In the old days, like, and like, there's really good private capital deals, but there's a lot of bad ones.

Yeah.

And pre-revenue startups just get destroyed all the time, but they have compelling stories and it's who sells the vision. And, you know, it's like they sell the story that people buy into. So I'm really clear that, you know, focus is the better game. You know, it's not diversification, it's distraction is what most of them are in. I'm like, unless you have intimate knowledge of how it works, I think that you would know why it would work, who's involved, because you could have a great idea and the wrong team and it doesn't matter. You could have a decent idea and the right team and it does. Like it comes down to the people that are behind it. How do they deal with economic changes? How resilient and resourceful are they? You know what happened? Like, and I don't want to be on investor meetings most of the time. And, you know, like I've given away more money than I'd care to admit. In my 20s and, you know, doing that. And, you know, and I still thought I learned the lesson. And yet I invested a very small amount like 2 years ago, 'cause someone tugged at my heartstrings. I put the minimum in and now like they're not even involved with the project. I haven't heard what's going on. It's like, you know, but it's still, it's money that I could have just deployed in a much better way. It could have been a, it could have been tuition for a semester for my, for my son. It could have been, You know, uh, it could have been a number of things. It could have been a coach. I mean, there's— and it's— I get how tempting these things are, but that's why being clear about what you do and what you want and being clear about the value that you provide and sticking to a model that you're engaged in is game-changing. So many people sell their business and now they're bored, and now that boredom, they make bad investments because people come with these seductive stories and it sounds cool to be an angel investor. It sounds cool to you know, get involved in those kind of things. But it's not because you had such an intimate knowledge of your business. Now you're investing in things there's no way you understand at that level.

Right.

And it's like, you know, yeah, find purpose, find a way to be a value creator again, because if not, you're probably going to lose a lot of money.