Bruce Ward, Financial Advisor – Cutter & Co., Unique Financial Planning with a Focus on Helping Business Owners

We engage in conversations with successful business owners to learn the little things that made the journey of building their companies special. Then we discuss how they plan to hand off their business to the next generation of leadership. 

This episode is with special guest Bruce Ward, CFP, CHFC, CLU, RICP, Financial Advisor with Cutter & Company. 

As a Coast Guard officer and trained navigator, Bruce learned three guiding principles: 

Where are we?

Where are we going?

How do we get there? 

Bruce continues to apply these principles as a financial advisor. First, he begins with a comprehensive review so he can clearly understand your current situation. Next, you’ll discuss where you envision your situation next year, in five years, and beyond to determine realistic financial objectives. Finally, you’ll work together to create a customized strategic plan that will be implemented and will be “course corrected” along the way to help you reach your financial objectives. 

Creating a financial strategy that is unique to your goals is an exciting process that, when complete, provides comfort and satisfaction knowing you’re working toward a future for you, your family, and your business. Bruce is there every step of this fulfilling, lifelong journey providing information, tools, support, clarification, and advice to help keep you on course and in command of your financial future. 

Bruce’s clients include: 

·         Business owners who want to maximize the value of their business and then successfully exit that business.

·         People who need a comprehensive retirement-income strategy to help ensure retirement will work for them.

·         Families wanting a tax-efficient investment portfolio to avoid paying taxes, under current tax law, on the growth of their money. 

Bruce’s clients value his flexibility, personalized approach, and the choices he provides to help them feel in charge of their money and less stressed about retirement. 

You can contact Bruce at: 

Phone:  636-779-1634

Mobile:  314-960-3221

Email:  BruceWard@CutterCo.com

Website:  https://www.cutterco.com

LinkedIn: www.linkedin.com/in/brucedward

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If you would like to be a guest on the You Don’t Know What You Don’t Know™ Podcast, or know someone who would make a great guest, let us know at: https://innovativeba.com/contact/ 

Thank you for watching this video!  Please subscribe, comment and share with those that need to hear it.  

About Steven Denny: Steven Denny co-founded Innovative Business Advisors in 2018 and serves as a Managing Member of the firm. Steve has been actively engaged in M/A activities in a wide variety of industries for the last 14 years and has developed specific products to assist clients in growing their profitability and enterprise value. His specialty is working with established private companies in the lower middle market with annual revenues from $1 – 50 million.

For support, business inquiries, or if you have a question or comment about buying or selling a business, getting a business valuation, or growing your business with classes or coaching please visit: https://innovativeba.com/contact/ 

Transcript

0:02  
Welcome to the You Don't Know What You Don't Know podcast by Innovative Business Advisors. Successful business owners who have started, grown and led businesses share their journey and direction for the benefit of those traveling the same path. So today, we're talking with Bruce Ward of Cutter and Company. And Bruce is an unusually talented individual that works with business owners and individuals to teach them how to create and build wealth specific to business owners. Bruce shows them how to use various compensation models to attract and retain talent, to provide financial education to employees, to prepare and provide for executive benefit programs and to create retirement savings programs that are beneficial to the owner and the employees. Bruce is really focused on helping business owners retire from their business with the nest egg they desire to lead the life they dreamed of living. What I found most remarkable is how easy it can be for owners to do this. Bruce has got a way of describing it that I think you'll find very, very interesting. So Bruce, before we get into that, tell me what makes your business a little different and special?

1:16  
My, my clients see me as caring deeply for them and doing things other advisors wouldn't. An author in our industry said, you know, wrote a long time ago, our job as advisors is to take our clients over the mountain of complexity into the valley of understanding. Oh, interesting. That's where everybody wants to be. They don't want to understand all the complexities. That's my job. And, and one of my strong points is that I make the complicated easy to understand. I cut through the clutter. I find the solution that works, and it's usually very different or unorthodox, and then we implement that. And, and I can demonstrate. I'll show you that through a couple stories I have. So one of them was a client. She came to me. She had recently gotten divorced, and her husband was an executive, and at the divorce, right after the divorce, he goes down to the HR department, takes her off as beneficiary of his group life insurance names his two minor children as beneficiaries, and then he does the bachelor thing, buys himself a motorcycle, runs off road and kills himself. Oh, my goodness. Now there's $550,000 of life insurance, death benefits, and no beneficiary, because the kids are minors. Kids are minors. Right. Okay, so I got to learn a lot about probate law when that happened. So what happens is that the probate court has to open a conservancy, conservancy. Yeah. And then the money gets handled by the conservatorship laws, you know, in the state of Missouri. Well, those laws say that that money has to be put in CDs. And the law also says the money has to be put in Missouri bank CDs. So effectively, probably the safest, I guess, investment you could have. Right.

3:12  
Probate Court does not want to lose money for anybody. Yeah. So I protested. I said, well, we'd like to do this. And he says, he said, Bruce, I don't think you understand. I'm an attorney. I run the probate division. I can't supervise your investments, so put the money in the CDs, because the law says I can say that. So we did, and we, I chafed under that rule for a little while, and then I said, I'm going to change the law. And so I had a buddy who was in the Missouri legislature, and I went to him, and I said, Chuck, I'd like to change law. And I told him what it was all about, and he says, That's a great idea, Bruce, here's what, here's what I'll do. I'll pass the law. I'll sponsor the law and get it passed. You have to write the bill. Okay? So like, like, how many financial advisors have written legislation in the last 5 years? Without being elected to office, right? It's like citizenship to the community, merit badge for adults. And so I said, Okay. So I started working on something, and then I got a call from the Missouri Bar Association, their trust and probate Chairman down in Springfield, and he says, Oh, we're watching your bill, and we would like to work with you on that. Well, as it turns out, that in the statutes, the conservatorship rules are right here, and then the supervised probate estate rules are right here, and they say the same thing. Okay. They the same problem I had. And I said, Well, I can get this bill passed. I'll include your stuff with my stuff, because it makes sense to do that, you get to write the bill. And they go, Okay. We expect attorneys to do that. So we worked on something a little complicated, and we took it to the legislature, and now we're at a hearing, and one of the reps from Texas County said, I'm from Texas County, and you know, you guys can in St Louis, can can do this type of work, but I don't think there's anybody in Texas County who can do what you're asking. So he says, I'm going to give you a resubmit on this and come back next year with a solution that works. I said, Okay. So then I am talking to a few other people in the industry, and then somebody proposes an idea, and I go, Oh, that'll work. So we wrote that into the bill, and it made it whole lot simpler. And then we testified and we got it passed. Now the cool thing about it is, by the time the second year rolled around, my guy had term limited out. So speaker Tim Jones took over the bill. Oh. And so he testified for me, you know, in the committee. So it passed through the house easily, and I had to push it through the Senate, and then we got it passed. And then the funny thing is, my client's attorney goes back to the probate court and says, Okay, now we want to make this, we want to make this investment change, and the guy at the probate court says that law was written just because of me, wasn't it?

6:28  
Her attorney says, Yes it was. So now there is more than one option to be able to invest proceeds. Right, right. We use, they have to be fiduciary accounts. Well, it was funny because then I went down to Cape Girardeau talking with a couple of attorneys a couple years ago, and I mentioned that I had gotten this law passed, and they go, Thank you very much. That was such a godsend to get that bill changed. So I knew it was good public policy. And then another story is clients, they were, they had a 401k plan with a different vendor, with a different advisor. And the advisor, the plan wasn't working well. It was expensive, 50% participation, and it was kind of a real pain in the butt. And so I took a look at it, and I said, Okay, here's here's how I'm gonna fix it. So a couple of years before that, I had worked the Chesterfield Regional Chamber of Commerce and had put in what's called a multiple employer aggregation plan. Okay, an M, E, A, P. And really what it means is that what gets aggregated are the costs, so each individual company gets their own plan, and they can customize it as much as they want, and then they kind of join a pool for the investments in the administration. So what happens is that now that they have a very low cost plan with all the fiduciary protections they can possibly get in the law, it's easy to operate, it's easy for everybody to understand it, and it's effective. Okay. And so what I said was, we'll do that. That takes care of most of their problems. The last problem is their participation. They said, We just can't convince the other half of the employees to join the plan. And I said, Well, here's what we'll do. We'll put in an auto enrollment program. So auto enrollment says, when we start the plan, everybody gets put into the plan. The new employees, when they meet their probationary period, they get put into the plan. So I said, what we'll do is we'll put everybody into the plan, and we'll tell them you're in the plan. And this is how it works. If you don't want to be in the plan, you have to log into your account and opt out. They go, we don't know. They'll probably all opt out. I go, yeah, we'll see. And so we did it. Nobody opted out. They have 100% participation from day one. Okay. Now, why am I making a big deal out of 100% participation? Older employees can be pretty expensive from a worker's comp point of view, medical insurance point of view, and if somebody is working at age 65 or 68 or 70, it's because that employee wants to be there and you like a, like, like have to. You know, you don't want a 69 year old employee who's working only because if he doesn't work they're gonna starve.

9:58  
So you want people into the plan. And when you start to see their plan balance grow, they become very attached to the company. So the company gets a lot of benefit out of that loyalty that that growing plan balance engenders. So that's important. And another thing that we did, because a whole bunch of nice features to the plan, and so we have a, what's a safe harbor, a safe harbor plan. But before we dive into some of those features, I want to, I want to step back to a couple of things you said, because I think in a couple of examples, you know, we work, we work with business owners all the time. Right. So I think there are, first off, there are, there are two kind of fundamental truths about business owners. One is, they all want to make more money. Right. Okay. They all want to make more money and pay less taxes. Okay. So I think that's, that's kind of a fundamental truth. And the second thing is, they rarely plan for retirement or leaving the business. They think they're going to own the business indefinitely, right? They rarely plan their exit. Most of the time statistics, you know, in our experience and the general statistics, generally speaking, three out of four exits are motivated by some type of event, usually illness, a death, a divorce, some type of event motivates them out. And, and the other folks you know just come to the point at some point in their life where they're either burned out or they're tired of going to work, and they kind of begin to think about leaving, right? So again, I think the two big issues are business owners want to pay themselves more and pay the government less in taxes, and they don't plan well for exit, right? So I think one of the things you talked about, which is fascinating is a business owner, when they are getting ready for exit, they are not often planning the amount of proceeds they're going to have from their business. So if they're working with somebody like you, right? What I find with most, with most wealth managers, is the wealth manager is working with them on their investable assets, and they tend to forget that this business owner has this business over here, which is this illiquid asset that they never really know what the value is. But, but Bruce, one of the things that you taught me which was so cool is a business owner that is smart about this with the right investor advisor like yourself can tackle both problems at once. They can, first and foremost, figure, learn how to pay themselves more in their business and reduce their taxable liability, while at the same time improving the overall health of their business, so that when they get ready to exit, they've got enough money set aside with what they've paid themselves and what the business is worth to really, really achieve the objectives they want to achieve, right? Right. So I was not aware of how simple and easy it is to get these plans up and running until you you kind of penciled it out for me. So do that for our audience. Tell you know, this, this with the Chesterfield Chamber of Commerce is incredibly simple and incredibly cheap. All you've got to do is join the chamber, and now, even if you have two employees or more, right? You can, you can opt into a to a program like this, right? Right. So a business owner, when we would talk about planning to exit your business successfully, that means, when you want to with the lifestyle you want to, then have money to maintain that lifestyle. Yeah. Okay. So  
what business owners kind of get themselves in a trap a couple different ways. One is they have this certain cash flow that's coming through, and oftentimes business owners run a lot of their personal expenses to their business. Legitimately. Yeah, to the to the maximum extent allowable, right? Okay. We're not talking about-- We're not talking about tax fraud here. Yeah, yeah. We're talking about legitimately running business expenses, or personal expenses through. Okay. 

14:29  
So a mentor of mine long ago says, you know, companies have two checkbooks. The blue checkbook at the office is the gold checkbook at home. Okay? And what a lot of business owners like to do is, I like to spend money out of the blue checkbook. Okay? Well, when you sell the business, you sell the blue checkbook. Yeah, the blue checkbook goes with business. That's right. All those expenses that were being paid out of the company now are going to get paid out of your checkbook, or the one your wife controls, and or they're not gonna get paid. Right. Okay, so business owners aren't always like, that's not top of mind. They're thinking about, like, retiring and how to plan for this. That isn't typically top of mind. They forget about those expenses that are being covered by the business. Right. And then another issue is we find that business owners don't get as much money for the business when they sell as they were hoping to. Okay. So the two whammies there is now their expenses increase, and they're not getting as much money from the business as they were anticipating. And part of that second part is, is, is one of two things. One is, typically they let their foot off the gas on the business a little bit. So the business has been coasting for a while and not operating at its optimal level. So it it potentially may not be worth what it was at one point in time. And the other aspect that we find is that business owners think of a number. Well, I'm going to get, for the sake of example, I'm going to get a million dollars when I sell my business, but they forget that the million dollars is then has to have taxes paid on it, you know, fee, transaction fees and so forth. And so their their net number is significantly less than what their headline number is. Right. Okay. And so the way business owners can solve this problem is to put in a retirement plan, put in a 401k plan. So the standard 401k plan is put in a safe harbor plan. So everybody puts in, everybody puts in 5% or more of their money, their their pay into it, will receive a 4% match. And so an employee, business owner puts in 5% they get a 4% match. Okay. With the safe harbor plan, the business owner can then defer a lot of money into the plan. So a business owner at at at age 50, they can start putting in $30,000 a year into the plan. They can defer 30,000 into the plan, plus then whatever their company matches. And then on top of that, they can add, if there's cash flow again. Now this is a lot of caveats here, if there's a cash flow for it, and if you've got the proper demographics, you business owner can put in a whole lot more money. So a 55 year old business owner could put in $75,000 into the plan each year. Each year. 

17:43  
And a cool thing about it is the business owner treats himself as an employee, the the furl that goes into the plan can be split between pre tax and Roth. And so each person gets to decide how much of their money is going to be Roth money. And why is that significant? Well, if you could put in $40,000 a year into your plan as Roth money. You know, first of all, Roth account, you only put in $6,000 outside you could, you know, 40 with the company, match $40,000 of Roth money into the plan and you do that for 10 years you know, you'll have a half a million dollars, at least, of tax free money. Okay. Kind of almost makeup for the difference with the haircut you have to take with a million that you sell the business for. So and then the employee can also dictate how much of the match is Roth money. So you can go from, you know, one to 100%. Okay. And so, you have, you can put in a lot of money, and you can make it, you can tax defer the money now, or take it as Roth money. So one of the things you know that we were just talking about is business owners who underpay themselves. Right. Yeah, because their accountant has said to them, Look, just pay yourselves enough salary so that you meet the basic requirements of Social Security so you don't get flagged for an audit. So, you know, maybe I'll just use the sake of example here, a business owner that might pay themselves a salary of $65,000 a year, whereas if they had to go higher for their replacement, they'd probably have to pay them $100,000 a year, right? But they think that they're saving some money because they're not paying the Social Security tax on their on their salary, and then, you know, they get the difference in in profits or distributions in the business, and then they pay tax on that without the Social Security tax. Correct. Right? They say in the 15% Social Security tax, on the margin, --the difference. Well, on the marginal amount to between 65 and the ceiling, okay. Which is a good strategy, particularly if you combine it with one of the strategies you're talking about. Okay, so you've got, let's just say that you got 100 $150,000 of distribution, and you don't need all that money to live on. Okay? If you put in a 401 k plan, you could then, you can defer on a percentage of your pay. So you can defer, so you can use, the old rules is you can only defer a percentage of your pay compared to your other employees. And that's why people didn't like 401k plans, because they are only restricted to 5, 3, 4, 5% of deferrals. Okay? Now they can put in $30,000. You know, you have a 52 year old chiropractor, who's, you know, has the total of, you know, $200,000, 65 in the salary and the rest of it as distributions, right? Well, then let's go ahead and put $30,000 as a deferral into the plan, and you can decide whether you want a pre tax or Roth or whatever combination. Then you get a company match on top of that, we'll say, you know, 4% 65 and it's another $2,400 right? 

21:17  
And if a 52 year old chiropractor has two assistants, you know, a 25 year old and a 35 year old in the business, and he's, you know, and they're getting paid, you know, 30 $40,000 a year, and he's 55 well, you can also have as part of the plan design that instead of splitting the money evenly, the profit sharing money evenly, they can, you can go through a formula where the business owner would get two or three times more money than the employees. So all of a sudden, instead of so if the business owner is putting in 4% on the match, may have to put in eight or 10% total in order to get $75,000 out of into the plan. Which is a significant difference. But now we're talking about putting in a 401k plan and a profit sharing plan. Well-- And doing so in a way that basically, what you're what you're doing for the business owner, is you're taking money that they would have paid in taxes and and and reinvesting most of that money for their retirement, right? Right. And some of which is a tax deferral, and some of which is under a Roth, where it's where it's tax free. Right. And something you said, you don't add the 401k plan. So here's, this is a nuance. The 401 k plan is, the K means we're taking a profit sharing plan and we're adding the, what we consider the 401k feature, the deferrals, employee deferrals, and match, okay? So what you actually do is you put in a profit sharing plan and you add the 401k feature. You don't turn any of the profit sharing plan features on, just the 401k features. Since you already have the plan there, you can turn on the profit sharing features, and now that's where you put in a ton of money. Thanks for clarifying that. It's very important. Well, yeah, and it's a simple, it's a simple concept too. Yeah. So yeah, you can, you can keep it to just a 4% of pay for the 401k plan. Or you can, if you want to either be generous or put a ton of money away for yourself and you have the right demographics, you can make it work. So if somebody, let's just go back to the the first example if somebody's underpaying themselves. Well, you put in $40,000 a year into the plan, and you do that for 10 years, now you've got a half a million dollars of tax free money. Okay, so is the plan designed for the people who need something interesting or clever, but not too clever, it works. A 401k plan can can take care of a lot of a lot of issues and and then at the same time, you can not force, but encourage all the all the participants, to increase their contribution every year, so that when an employee gets out to be, you know, age, you know, 60, 62, 65 there's a big pot of money there and the employee can say, Okay, I think I've got enough money to retire, and actually retire, and not keep him on the, he or her, on the payroll. Yeah, everybody wins. Everybody wins. And it's, it's, it's, works out really well. And on these 401k plans too, one of the things that the Department of Labor, Department of Labor runs 401k plans. Okay. Now there's something I have to say about the Department of Labor. Everybody fears an IRS audit simply because they've never been audited by the Department of Labor. So you don't want to be clever. You want to follow the rules. However, the rules give you a lot of flexibility.

25:20  
So we can set it up so we automatically enroll it. We can set it up so that we automatically escalate the contribution every year up to a certain limit. No kidding, you can do auto escalators? Auto escalate. Okay. Start everybody at 5% escalating up to 10 or 12%. Okay. You know, like 1% a year, up to 12%. Now an employee is deferring 12% 4% match, they're saving 16% of the money. They do that for 20 or 30 years, boom, they've got a chunk of money. Yeah. Okay? Yeah. And then we have default options. Okay, what's a default option? Default option is, if an employee doesn't make it a decision that we use the default programs. And so the Department Labor says, Here's what we can use for default options, investments, right? And so what the, what typically, what people typically choose are their target, what are called target date funds. So they target the year you're going to be turning age 65. Okay. All right. So if an employee does absolutely nothing, then his investments will be geared towards saving for the year he turns 65. So, you know, so a 20 year old, 20 year old employee would have mostly all stocks. 64 year old employee is going to have more bonds than stocks. So the, so the the risk portfolio of the of the investment adjusts based on where their age is and how long they're out from, from, quote, the retirement age of 65. Right, right. Now, that's one of the options. So the the Chesterfield-- As a default. As a default. Yeah. Okay. You can also do   
risk based funds, okay? And so risk based says, somebody says, Well, I'm aggressive today, but I'll be, you know, well, some people say I'm aggressive they're aggressive, you know, through age 75. All right, I have clients who are like that. And so you can use those investments too. And then you can always, you can always change your mind, okay? And you can always monkey with the system too, by targeting the year, not the year you're going to turn 65 but maybe the year you're going to turn 75 and that way you keep more stock of your portfolio longer. So there's lots of ways to monkey with it. But the important thing is, the employee is responsible for naming the beneficiaries, and the plan will do everything else for them. Okay. Or an employee can take control. Now, when I, when I explain that to owners, and especially owners who have a a CFO. They say, well, that, you know that default options, you know, we don't need that, or they, we don't need all of these extra features on the plan because everybody's going to just take charge of their money and make all these great decisions.

28:23  
And I say, I tell them, in a company, there's 5% of the people who think like it, okay, and then all the higher paid people and the better educated people, okay. Everybody else in that business would rather stick pins in their eyes than choose their investments, create their properly asset allocated funds. They just don't want to do it. They don't want to get and they don't have to remember. They don't want to have to remember to escalate their contribution every year. Yep. Okay. So that's that's important. Now another thing with the 401k plan is you have a lot more flexibility, and it's a lot more effective than, say, a simple plan. You know, I've run into companies in St Louis, 30 50, 80 employees, and they have simple plans, and they go, yeah, all we do-- So let me just hit the pause button for a second. What's the big difference between a simple plan and 401k then? Okay. The big difference is the rules are the contribution rules are similar, the the 401k rules and the simple contribution rules are similar. Okay. The limits are lower on a simple plan. Okay. The big difference is a simple plan, everybody has their own IRA. Okay. Okay. In a 401k plan, it's, it's a pool. It's a pool. It's a, it's a, you know, there's a trust that holds everybody's money, okay? And what, what makes, what's special about that is that when the company writes the simple plan checks, they can't see what people are doing with the money, all right? And they say, well, that's not our responsibility. And yet, if you have somebody has a retirement plan with you for 30 years, and they've screwed it up by pulling money out of it or keeping the money invested in money market, you know, those types of things that people do, then they're going to have employees, 65 year old employees who don't have any money in their retirement plan. Yeah, they're not very happy. Yeah. And they're, can they blame you? They can. Can they take you to court? They really can't. Okay? But they're going to be really upset. All right? And so as a business owner, you can't see what people are doing with their money. You can't see how much money they've got and whether they need any help and all those other things. Plus, you can't do the auto escalation, you can't do the auto enrollment, and so what you have simply is company writes a check and they're all done with it. Okay.

32:11  
With the 401k plan, you get all of the, you get all of those features that benefit side I was talking about, and you can see where everybody's money is. You know, a business owner, or I can go on to a website every day and see how much money everybody has and where it's invested. And so we can flag employees who are doing it on their own but not doing a good job. So you can help those employees then. Right. And that's just, that's really, really important. And we have employee meetings, regular, regular employee meetings, where we talk about, make sure you have the proper beneficiaries listed. If you get a divorce, you know, you gotta take care of that situation. If there's a death in the family, new children, all that other type of stuff. All the other things that were life changes, right? All the life changes. And so we have the education to take care of that. Encourage them to invest the money. We don't spend much time talking about the actual investments themselves, because I, that's an individual talk that I can have with people, and they always have the default options. So we talk about important things. From an employer's fee perspective, is there much difference in terms of program cost if you have a simple versus a 401k? In terms of I'm talking about the costs or fees that the business pays. Okay. It's interesting the way the Chesterfield Plan is set up is that there is a small administration, administrative fee for plans under 100 under $250,000. 
Between 250 and $500,000 plan, the fees get cut in half. Above $500,000 there's no cost, you know, there's no outside cost for the administration. There's no hard dollar cost for the administration. Interesting. Okay. And then, so an employee, can get into the plan and have all of the costs of the plan covered, and the cost of the investments for less than 1%. And then a lot of, a lot of small plans, a lot of plans with 20 and 50 and 100 people in them, you know, the investments are all over 1% and we're all in at under 1%.

33:42  
So it's a whole lot less expensive. And, I mean, the actual dollar cost is negligible. And if you have a startup plan, you get tax credits for several years. You get a tax credit for installing auto enrollment. You get a tax tax credit for the first five years to cover hard dollar costs that you actually have to write checks for. And then the employees can get a tax credit depending on their their income level for their contributions. And then the company can get tax credits based on the employee of the salary that for their contribution for lower paid employees. Okay? And so what happens is that you put in a plan, and all of a sudden you get all these tax credits. You know, you may be spending $500 a year for a couple years, and then, you know, essentially $100 for the rest of the, you know, after that, that's it. So the tax credits are fabulous. If you've had a simple plan for a couple years you can roll it over, and it's considered a new plan, and we get to, you get the tax credits on on that, or you start up a plan from scratch, you know, you get tax credits for that also. And so the cost to the plan, especially the hard dollar cost of the plan go away. Interesting. All right. And so that really isn't, that isn't really an issue. There's another area I'd like to talk about, but let's just kind of make sure we get all this-- Yeah, so it, so it sounds like it, sounds like it it really is, again, when you and I had talked about it before, I think it's incredibly inexpensive first off. And specific to the business owner, it gives a business owner a huge range of options in terms of directing their own compensation. So the business owner is the one person that has the ability to set their own compensation, and they've got the profits of the business to work with as well, right? So they can, basically, they're responsible for their own compensation and the profits of the business, so they can use those in concert to build a a a tax deferred and maybe even tax avoided retirement savings program that serves them and their families very well once they leave the business, right? Right. And it's, it's not real complicated, they just need to sit down with the right folks that can help share with them all these things that you and I have talked about, how to put these, these features into place, and be able to, you know, get the maximum benefit from each of these features for for them and their families. And another thing about having a 401k plan, it's a recurring feature. Without question, right? Now, you've got a differential so, you know, as you're bringing people in, you've got a, you've got basically free money, right? You're giving them a match, which is, in essence, a little more than they had expected. 

37:01  
And employees, a lot of people don't, don't know a lot about all the different money techniques, but practically everybody knows that they should have a 401k plan. And if you have nothing, it's like, well, why work there? And if you have a simple plan, he says, well, we don't have a 401k plan, we have a simple plan. Then you have to try to explain that. And then you go, why don't you have a 401k plan? So you might as well just have a 401k plan, get it over with. And a 401k plan with a profit sharing option is even a greater benefit, right? Right. Yeah, in the right circumstances. Yeah. So. You know, I had a large company I was dealing with. It was a not for profit, and we had, we had everybody in wage categories. It was really kind of funny. It was a, it was a rural health clinic system, and so the doctors were about the third tier down, third or fourth tier down, because they made so much more money than everybody else that they would suck up all the profits. And so we had to set it so that they would get a smaller, and we, there's also, it's very complicated. I don't even start to understand it, but there's very complicated as to how you, how much money and what percent of pay can go to which group of people. Yeah. Again, you have to have the right demographics, then we can have that conversation. It's a fascinating conversation, but if you don't have the right demographics then let's not bother. Very cool. And another thing that I have found is, and business owners can get caught in this trap too, is tax efficient investing. Okay. So let's, let's talk about tax efficient investing. So tax efficient investing is more than minimizing the taxes, the income taxes you pay on the growth of your investments every year. So we're just going to presume that your investments grow most every year, that if you're making money, you're going to have to pay some amount of tax. Okay? And so what I find is there's kind of two extremes on advisors. One set of advisors, you know, they've got your investments, there are after tax investments, and they're buying and selling and creating all sorts of long and short term capital gains on the growth of your money. And then they say, the taxes you pay on the growth of your money, are so good that we're going to overwhelm the value of your account with the small amount of tax that you pay. My clients say, Oh, you cost me a $10,000 tax bill last year and I don't like that. Don't do that again. Okay? So I don't buy it the clients are digging that. You know, their advisors are creating 20, 30, $40,000 of taxes on the growth of their money. I don't buy that at all. Okay? So there are advisors who don't care about the taxes you pay, and then there's some advisors who say, Oh, we're not going to pay any tax on the growth of your money. Okay? I learned a long time ago for every give me there's a gotcha. So if you're not going to pay any taxes on the growth of your money, you're gonna pay taxes when you take them out, and you're gonna pay taxes when you die.

40:29  
So I look at creating tax efficient investing as your money grows, paying almost no tax on the capital gains that you, that you recognize in your account. And then when you take it out, is very, comes out very tax efficiently, but all comes out as long term capital gains and return of principal, okay, not ordinary income. And at death, the value of the entire account gets stepped up to the value of the date of death. And so if you have a an account that you have, you've put in $400,000 into the account now it's worth a million dollars when you die, now whoever gets that money is to step up to a million dollars of cost basis. It's essentially tax free going to the beneficiaries, whether it's spouse or your children or grandchildren. Okay. Some investments, all that money is ordinary income, right? And that difference between a million dollars of tax free money and a million dollars of ordinary income money is huge. Could be 30%. Yes, right. And so what I, my mantra is that you want tax efficiency on putting the money into a program, whether it's your 401k or your personal investment program. I want tax efficiency as the money grows, and I want tax efficiency as it comes out the full life cycle. Okay. So the one thing is-- That's a, that's a different way of thinking about it. Yeah. You want a tax efficient, full life cycle investment program, and you want flexibility built into it. You start in the business, people are, you know, they start working with me even when they're 35, 40, 45 years old and here's their situation. Well, they say, Okay, I want to work until I'm 65 or 70, and then I'm going to live until I'm 90. Right? Between age 45 and 90, the world can turn upside down three times, and if you have an inflexible plan, you get stuck with these choices that you've made that either you can't get out of or you can get out of but it's very expensive. All right? And people find that they don't like being caught in a trap of, Oh my God. So my job is to help people build flexible plans that are tax efficient, that are kind of they don't have to worry about it. You know, we try, you know, we try to keep the money on an even keel, so we're not taking real highs and lows. And we just want the wealth to grow quietly, so that you've got a pool of money when, when you need it, for college, for new home, for vacation home, for retirement. So. Yeah, for whatever purpose. That's-- Well, that's what makes you different, Bruce, that's right, you, you, you guys do things a little differently. And I think the way you help business owners, in particular, grow their funds for the what I'll call the next chapter of their life after their business ownership. Helping them really make sure that they understand what does the exit from their business look like? What portion of their you know, full retirement funds, if you if you want to think of it as retirement or for the next chapter of their life, what, what portion of that is going to come from, what they get from their business, and what portion of that is going to come from what they've built into their business over time? I think is, is very unique. I haven't seen many other wealth man--, matter of fact, I can't think of another wealth manager that has done as much education in that regard as you have. So I think you and your firm do excellent work in that and that's why I wanted to bring you on. I think a lot of business owners, particularly small business owners, can really benefit from this and utilize the resources of their business to serve them and their family at a higher level for a longer period of time. And that's, and that's really what it's all about isn't it? Yes. You know, getting the most out of your money so that you can get the most out of your life. Yeah. So. Yeah. What else, anything else you'd like business owners to think about as we as we get to wrapping this up? Just one more thing. And this is a philosophical issue. We talk, when we talked about using the 401k plan. Yeah. You know, a lot of business owners are hoping to get a check when they, when they get out to retirement, they're going to have to take, they're going to have to take a payout, right? And that may or may not be a good idea, but a lot of business owners kind of get stuck in that position, right?

45:36  
Or the business isn't worth as much money as it needs to be to retire how they want. And so when we talk about putting in a 401k plan, if you think about it as you are buying yourself out-- Over time. Over time. So you start at age 50 or 55 or even 60, if you have to, you know, if you wait, if you wait that long, then you know you're buying yourself out over the next 5, 10, or 15 years. So you put in the money and it goes into your account, and then when you get out there you got it, right? 
Business owners like to reinvest their profits. Oh, I'm reinvesting my profits. Well, you may not recognize all that, all those profits that you've invested when you sell the business, or it's illiquid, or you have to take a payout of it. So if you reinvest some of those profits into your 401k plan, then when you get out to retirement, you got a bucket of money and it's yours, and you can decide what to do with it, when to spend it or when not to spend it. So. Pay yourself first, right? Pay yourself first and-- Invest in yourself first. You're investing in yourself. You're paying yourself because you're you're buying, you're funding your buyout, so you're paying yourself first. You gotta be-- I have found that there's really nobody else out there waiting to save a business owner who has not saved enough. And so  
we just want to make, we want to do everything we can to help business owners be successful. Couldn't agree more, that's what we're all about as well so. That's right. Bruce, thanks for your time. Well, thank you-- This has been very, very informative. How can people get in touch with you? If they listen to this and say, Bruce, I'd like to learn more. What, where would you direct them, and how would they get in touch with you? Best way, so Cutter and Company is in Ballwin and at the corner of Clayton and Kehrs Mill Road, right across from the street from the Wolf Cafe. Yep. So for those who are local, you know it's easy to find us. 

47:54  
Phone number my, I like my cell phone because that way people can get a hold of me when I'm driving around, area code, 314 97, 99, no, let's see. My, my phone number is, cell phone is 314-960-3221. And my email is Bruceward@cutterco, not company, CutterCO, CO .com. Excellent. And, and SEMO also has my, all my contact information. Yeah, we'll, we'll drop it into the description here, so you can find all Bruce's contact information in the description as well. If you missed it in the, in the audio portion of this. I certainly appreciate you having me in so I could, I could talk to you and and all your contacts with this important information. Ah, it's very important information. Yeah, we want to, we want to help spread it out there, Bruce, so there's, there's a lot of business owners that don't know about this and can really benefit. And I hope they'll invest the time to give you a call and talk about their particular situation and and I know you'll demonstrate well the way you can help them. So appreciate it very much. All right, thank you, Steven. Thank you. All right. Thank you for listening to the You Don't Know What You Don't Know Podcast. We invite you to visit www.youdontknowwhatyoudontknow.com and sign up to receive updates on upcoming episodes. You can also let us know if you'd like to be a guest or recommend a business owner to be interviewed. Find us on LinkedIn, Facebook and YouTube, where you can like, follow, share and join our efforts. Thanks for listening. We hope you join us again.