Announcer:
It’s time now on KROS for Financial Focus, brought to you by NelsonCorp Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker, dealer, member of FINRA, SIPC, Investment Advisor representative, Cambridge Investment Research Advisors Incorporated, a registered Investment Advisor, Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. Now, here’s today’s Financial Focus program.
Gary Determan:
Well, real pleasure to have in studio with us, Dave Nelson, as it is the first Wednesday of the month. So, is Santa Claus starting to kick in?
David Nelson:
Santa Claus has kicked in a little bit, yeah. When you look at it, for those that don’t know what Gary’s referencing or I’m referencing here, there’s a term that’s oftentimes used as far as in our industry about the Santa Claus rally. And Santa Claus rally, depending on who you talk to, will dictate as far as what timeline you think in terms of. In reality, it’s right before Christmas, and it’s right after Christmas. But again, most of us think in terms of probably leading up to Christmas, maybe a month prior to that. But clearly, we had five weeks as far as where the market was up, kind of an unusual event. Now, again, it’s coming off of, as many people, I don’t want to open up an old wound here, but as many people know, last year was not very pleasant at all.
We had real estate that got crushed. I’m talking publicly traded real estate that was down 30% plus. You had bonds, 20-year long-term government bonds that were down north of 30%. And then, on top of that, you had stocks that had a really tough year. Again, give or take 30% drop as far as there. This year, it’s kind of flip-flopped, and we’re seeing some pretty decent movements. And what’s encouraging to me, and this is the type of boring stuff that we look at and study the importance of it, it’s looking at as far as not just stocks that most people like to talk about, but overall, what’s happening out there. And we’re seeing real estate starting to firm up. Again, I’m talking about publicly-traded real estate folks, not individual homes. We’re talking about the stuff that’s basically in the form of a stock. These big companies that own a whole bunch of properties, they had a tough year last year, but this year, firming up. Translation is starting to move up a little bit.
The bond market is the biggie, and that’s what we focus on. And the bond market typically leads as far as the stock market. And you’re seeing the bond market, again, the refresher course for those out there that don’t remember, bonds, when interest rates go up, so it’s a teeter-totter, just visualize the teeter-totter here, when interest rates go up, the value of bond goes down. Well, what happened last year? And I’m not saying this in a negative way because this has happened in many cycles. All this stuff has gotten so political, it just makes me want to vomit. I just can’t take it as far as it, you make it comment, and people are trying to interpret it their own direction.
The reality is rates went up, rates needed to go up as far as to try to get control of inflation, but they went up rapidly. And as they went up rapidly, the value of your bond went down rapidly. So, it’s a really brutal year as far as for those conservative investors that had a lot of bonds in their portfolio. Again, fast-forward to this year, interest rates have stabilized, and oh, they’re starting to drop some as far as a 10-year and a 30-year bond are starting to drop. Translation, that’s good news as far as if you own some of those assets. You not only are getting the coupon rate or the interest rate on top of that, now you’re getting some capital appreciation as far as on what you own. If I had 10 grand, today, you may have 10,500 because it went up, the value of the asset itself.
So, it’s pretty good news. I’m not saying it’s over. Probably the biggest concern we have right now is, again, some of the crazy stuff that we look at. In making a decision to invest, you got to look at a lot of things. And again, we talk about this boring stuff here. We talk about this boring stuff on Channel four as far as every week, and we show these graphs and all this stuff. And I think maybe people wonder, is this really important? And it is, otherwise, we wouldn’t be talking about it. The, reality is when you’re making a decision to invest, sentiment is a really important variable. And sentiment is a fancy way of saying how are people feeling? How are corporations feeling? And there’s different ways to measure that.
And so there’s two tools that we use. We use a very short term sentiment indicator, and then, we have an intermediate one, which would be something like six to 12 months looking out. And both of those today are in a zone of optimism, which translates into bad news as far as for stocks, as far as potentially. And why is that? It’s because we’ve had five consecutive weeks up. People have gotten on the bandwagon as far as that didn’t want to be left out. So, there’s a lot of excitement on the positive side. So, stocks have gone up. In translation, they’ve gotten a little expensive as far as over the last month or so.
Gary Determan:
Boring, but essential.
David Nelson:
It is. It is.
Gary Determan:
Because you are talking about people’s futures.
David Nelson:
Absolutely.
Gary Determan:
And you are trying to benefit them as best you can.
David Nelson:
Absolutely. And again, it comes back to a situation of there’s no do-overs, as we tell people, in retirement. And when you stop and think about that, you screw it up, you’re going back to work. So, the bottom line is we take our job very seriously. Every single client I talk to, and this doesn’t go over with maybe about 5% of the people that walk in the door, but the other ninety-five percent of it absolutely positively love this and the way that we approach it. And that is we’re going to make mistakes. And the mistakes can be either small or large. And again, when we mess up, do you want us to mess up being too conservative? In other words, we’re sitting in safe stuff and the market starts moving up. Or would you rather us, when we err, err on being too aggressive? And guess what everybody says? “Be too conservative. I work too hard for the money that I’ve got.”
And again, whether it’s 10 grand or whether it’s a hundred grand or a million bucks, it doesn’t matter. That money is important as far as to the individuals that hand it over to us. We take the responsibility very seriously, and the end result is that we try to customize it as best we can to them. But at the end of the day, there’s a lot of tough guys when markets are working. But when the markets roll over, you get a lot of weak knees out there. And over the last 40 years, I’ve learned that. So, again, we’re always going to default as far as on the side of being too conservative.
Gary Determan:
I was asking how many clients you have, and you gave me the number, I won’t give that number, but you work with a lot of people. And it’s not a cookie-cutter thing.
David Nelson:
Correct.
Gary Determan:
There are people who have a little bit of money. Then, there are people who have a lot of money.
David Nelson:
Yeah, exactly. Again, we’ve got a billionaire that we’re working with out in Wyoming. We’ve got a lady south of Iowa City that’s north of a hundred million. And then, we have clients that have 10 grand with us. A lot of times people will say, “Well, you’re not interested in working with me. I don’t have enough money.” That’s simply not the case. The good news is we have a great team. The good news is that we have people that aren’t just licensed to sell a product. They’re certified as far as to be able to help people make better decisions. Nobody can predict the market. We have tools that we use that win more than they lose as far as in that regard. So, we do have a little bit of a competitive advantage, but at the end of the day, it really comes back to listening to the client and finding stuff that’s appropriate for them.
One little thing, and I’ll throw this, maybe we can even circle back to this, but one of the things that we’ve added the last six months is a piece that we think we’ve got all the bases covered. And time and time again, people bring up this, they’ll bring up that. One of the pieces that we haven’t had, we got the financial planning, we have the estate planning, we have retirement planning. We’ve got access as far as to income tax planning as well as preparation. But what we haven’t had for the bulk of the people that we work with being 60 or above is Medicare. Because Medicare is so much more complicated than people think. So, Medicare planning is now part of our operation. It’s not something that we wanted to do. It’s something that we needed to do as far as to be able to assist people in making that decision because there’s a lot of blunders being made as far as in this space, and we don’t want our clients to be falling into that category.
Gary Determan:
And with that, we’re going to have a lot to talk about. Let’s go ahead and take a break for the weather brought to you by ServiceMaster.
Andrew Stutzke:
Some sun will return for our Wednesday, partly cloudy skies and temperatures actually getting into the low 40s for once. Tonight, we’ll keep skies partly cloudy, dropping to 35, much warmer for Thursday. Windy, partly cloudy. We’ll see highs in the upper 50s. With your WQAD storm Track 8 forecast, I’m meteorologist Andrew Stutzke.
Gary Determan:
Right now, we do see sunshine. We’re at 32 degrees. Our update brought to you by ServiceMaster.
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We do a tremendous amount of disaster restorations we deal with almost every single day.
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Do you have regular business hours?
Michael Armstrong:
Yes. Monday through Friday, 8:00 to 4:30. The vast majority of our work is disaster. So, 24-hour service whenever you need us. We’ll be there to help you.
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Gary Determan:
First Wednesday of the month, we get to catch up with Dave Nelson. Always enjoy having him in studio. I want to talk a little bit about the team that you’ve put together down there at NelsonCorp. You started out over in downtown Fulton with your father-in-Law.
David Nelson:
Yes. Yeah, yeah.
Gary Determan:
You moved to the Lyons area, that little business that was there, they used to be a doctor’s office.
David Nelson:
It was, yes.
Gary Determan:
And now, you’re at this facility as well. Talk about the progression of NelsonCorp.
David Nelson:
Yeah, it’s been interesting. Going back to day one, it was my father-in-Law, as you indicated, he retired shortly after we started. Gene Krueger and myself were brother-in-laws. We had one service assistant as far as that helped us as far as we moved from the downtown. We went out to the… Well, actually the order would’ve been, we were in the Sycamore Furniture, the old building there. We were there about a year or so, but we had rain coming in from above as far as in the office, and we had computers, so that wasn’t good. Every night, we had to cover them up just in case. Anyway, we moved from there, downtown, and then, up north. But along the way, again… And I want to make this distinction because I think this is really, really important. And one of the commercials that we’re running as far as on TV right now, we try to identify this, but I’ll take just a second to explain what it really means.
And that is licensed to sell a product versus being certified as far as to be able to give advice. The old days, basically, it was a commission world. If a client were to come in and talk to me, I got paid a commission on the transaction that I did with them. They handed me 10 grand, I got paid X number of dollars, and I was done. And then, in 1986, I made a very conscious decision to say, “This is a model that’s antiquated, and I don’t think it’s going to be around much longer.” And by the way, I was wrong because it still exists in a big, big way. But I figured commissions were going to go away and we were going to go to a model very similar to like working with a CPA and an attorney where you’re going to pay a fee for service.
And so, in ’86, we adopted that and we said, “Well, we may go bankrupt in the process,” because again, if you think about a transaction, or maybe yesterday, I made a thousand dollars on the transaction. Today, I may make 50 bucks, but I make 50 bucks this year, next year, et cetera, et cetera. It’s a tough transition to make that. So, we made that back in the mid ’80s thinking that, again, this was going to be the model of the future. With that fee-based model, it basically demanded a whole bunch of additional type services and insight. So, the books were out. And again, for those, and this isn’t to sit here and pound your chest, David, about you’re so wonderful, but it is to say that I went through the process of becoming a CLU, which was the first designation that I got, which is basically two years of schooling relating to estate planning and insurance.
Then, it was the CHFC, which to this day, I still think is the most important to my clients. That two is two years of work basically centered around money management and cash flow planning. And then, the third one that I got was the CFP, which is Certified Financial Planner. That’s probably the most recognized. That was really tough. It was a two-day exam that you take. I’ve never taken anything even close to this intense, but that one is much broader. But if I had to bring it down to two things, it’d be tax planning and it would be investments. With that, now, you’re basically, when you talk to a client, it’s not again, a transactional type arrangement. I don’t care when people do business with me because we’re looking at this over the long term. I’m not going to get paid a whole bunch of money on the transaction, the money that I wrestle out of your pocket. I’m going to get paid on an ongoing basis.
And because of that, the relationship totally changes because in the olden days, if you decided you wanted to sell a particular thing that they owned and you want to buy something else, the clients were very skeptical of that because they knew that you got paid a commission as far as on that transaction. So, you’re just trying to talk me out of this and put me into this other one over here because you’re going to get paid a commission on it. All that went away once you came to the fee approach. And then, it’s a matter of now, we got to get other people that have a similar mindset. And that is not only were we legal as far as to handle products, but we’re now also advisory type of individuals where we advise people as far as what moves they ought to make.
So, again, the infrastructure was key, as probably everybody by now knows, the financial, the wealth planning side of the operation was all by itself for a period of time, give or take, probably 25 years. And then, we started adding, and we wanted to add it earlier, but we just couldn’t figure out the legalities of it, is bringing accounting in-house. So, we now have accounting in-house. We have an attorney that comes on a regular basis to our office so clients don’t have to travel. We’ve been doing that literally for 40 years, and now, we’ve added this Medicare supplement.
Again, none of the people in the office are equipped as far as for all the above. That’s why, again, it’s this team approach. We got people that are specialists as far as in retirement planning. We have investment people as far as that primarily oversee the monies as far as how we allocate monies, et cetera. Medicare supplement is a whole different team. We got it pretty good, I know it sounds arrogant to say, but there’s nobody in a 100-mile radius that has the expertise, the tools, the quality of the individuals that we have as far as in our operation today.
Gary Determan:
Listening to you, this came to my mind. You talked about bringing on the Medicare supplement, the other things that you have done to further expand what you can offer to your clients. Is this a decision that Dave Nelson makes? Is this a decision, I don’t think you have a board of directors or do you have a board of-
David Nelson:
That’s correct. It’s family members basically. Yeah, go ahead.
Gary Determan:
Okay. So, do you get together and say, “Hey, I’ve got this idea. I think this is something we should do?”
David Nelson:
Medicare supplement, the answer is yes. It was three years ago, I said, “We need to do it.” Now, it’s a matter of trying to figure out. Most of those decisions, I do make. And then, the good news is we have quality people that can make it happen. The infrastructure, again, okay, you’ve told us all the good, what’s the bad? Our infrastructure for a long time, was as bad as most people out there. In other words, we didn’t have it. I was wearing 15 hats. I’m trying to manage people. I’m trying to manage money. I’m trying to get smarter as far as on tax issues. I’m just trying to get smarter as far as how to manage money, et cetera. You just can’t do it all. Again, I went up, won’t bore people to tears with all the details here, but there’s a gentleman up in Canada that, and hold on, I’ll tell you the number, probably shouldn’t, but I’m going to.
It was 10 grand a day for this guy to slap me around as far as to give me insight as far as our operation, and in return, help me make decisions. And the conclusion is anytime you go through something like this is what that person is, is essentially, one of the core things that I got out of it was, and it was three different sessions over a three-year period of time, and then, you go back with all your assignments. But the thing that came out of it was you, like everybody, is really only good at two things. You just have to figure out the two things that you’re good at, and you have to hire people for all the other stuff that needs to be done. That was really hard to do because, again, one, I don’t have time to interview people, to hire them.
Well, eventually I made time, and again, it was some of the best moves that we’ve ever made. And two, it’s being honest with yourself. It’s really hard to look in the mirror. In coaching, I would bring that up as far as to all my basketball players. You got to look in the mirror, you got to be honest with yourself. At the end of the day, you got to know what you’re good at, what you’re not. I’m not good at managing people, but I’m really good at communicating as far as some complex things and trying to bring them down to a client level to be able to explain it to them so they can understand it. My role became the communicator as far as on behalf of the office, as far as front and center. And the other is I’m going to be part of a three-person team that makes the decisions as far as how we allocate and manage money.
Gary Determan:
It’s very interesting listening to you because you and I both enjoy sports and athletics.
David Nelson:
Oh, yeah.
Gary Determan:
And I found, I played slow-pitched softball for a number of years. Nelsons were always up over there at the Ericksen Center watching [inaudible 00:18:29].
David Nelson:
Yes, yes. Sure. Sure.
Gary Determan:
But I became a better softball player when I realized what I could do and what I couldn’t do.
David Nelson:
Yes, exactly. And again, it’s hard to do that. A lot of people, we’ve got either big egos or we have no ego at all. So, the end result is, it’s pretty difficult. And again, my wife likes to think I’m on the first one as far as with a big ego and whatever. But the reality is I’m able to look at myself. There’s one of my heroes that was a mentor for a number of years for me, and he would talk about he’s only good at two things. That is talking to people. And number two, as far as managing money. I threw in, for a number of years, coaching. The coaching of basketball. I got to a point where I thought I was pretty darn good. And bottom line, people argue with that. I have a few people probably would.
But I think most people, and it’s not just out of luck, it’s putting in the hard work. It’s like anything in life. I had a video library that probably 10 coaches didn’t have combined. I wanted to learn from the best of the best and quickly. I’m not a very patient person, so I wanted to get it done, and I wanted to get smarter fast. Coach Murphy used to tell me… He has the Prince of Peace boys. So, we were always in communication. And early on he said, “Your X’s and O’s, you’re iffy more or less on that, but you can motivate people.” So, yeah, probably my first five to 10 years, it was more about getting girls excited, believing in themself. And the wins we got, I think probably a lot of it were attributable at. There was somebody at the paper, Larry Brennan, years ago, and I said, “I was retiring.”
This was the first go-around. He said, “No, you can’t.” And I said, “No, but I am. I’m done. I followed through with my commitment of X number of years.” And he said, “No, you can’t.” He said, “In all the years that I’ve coached,” he said, “There was two coaches as far as that got more out of their players than I’ve ever seen anybody else. And one was out at Northeast, and the other is you.” And he told me the Northeast. I won’t rattle it off. And it really felt good as far as that somebody that had been around sports as much as he had to be able to see, he said, “A lot of years, you haven’t had a lot of tools, but you’re able to make something out of that.” So, it was really good to see. But in business, it’s really crucial. You got to have a good team, and you got to all pretty much be in sync as far as the direction that you’re going.
Gary Determan:
This time has just flown by, but I did want to bring this up because a real giant in your industry, worked with Warren Buffett for years, just recently passed away.
David Nelson:
Yes. Yeah. Charlie Munger. Guy’s a hundred years old, literally. I’m not joking when I say that. He was still active managing money, just like Buffett. People have no clue as far as what this gentleman has done. I bring up the name as far as what I talk to. I talk to a lot of graduate classes. And the last five years, give or take, I always have to bring it up because they don’t know who the heck you’re talking about. It’s kind of amazing for somebody in our generation, but a real… That team was special. And they did it primarily through not buying the latest technology companies. They did it through buying old school type companies. Apple, he stayed away from Apple for a number of years. They bought it, I don’t know now, maybe 10, 15 years ago and made a fortune as far as on that, a good decision. But yeah, it’s a tough business. And these guys were just a notch above everybody. And Charlie Munger, a massive name in the industry that I exist in.
Gary Determan:
They have trading cards?
David Nelson:
They should, shouldn’t they?
Gary Determan:
Yeah.
David Nelson:
That would be good.
Gary Determan:
Investor trading.
David Nelson:
I certainly would have it. Yeah.
Gary Determan:
Yeah, there you go.
David Nelson:
Yes, yes. I admire the both of them.
Gary Determan:
Yeah. Before we let you go, and of course it is the holiday season, and you folks at NelsonCorp do so much over the holidays, toy and food drive, how’s it going?
David Nelson:
Really well. We had about 350 people last night up at the Eagle Point, the pavilion as far as up there. And part of our entry is to bring along something as far as for others. In other words, canned goods and or some gift as far as for little kids that obviously don’t have what many of us have. We’ve got a truckload last night as far as from that. And tonight, we’ll have another one. This is round two tonight. We broke it into two different gatherings, so we’ll have another 320 people here tonight as far as up there. We’ll fill up, hopefully, another truck, and it makes a difference. Fulton is a beneficiary of that. We’ve got it lined up. We’re going to deliver that to them, I think it’s Thursday, and then, in town here as far as delivering it.
And a lot of good people behind the scenes. And again, all we are is a facilitator. We match, but we’re a facilitator. We’re just trying to remind people of this stuff. We’re trying to encourage people because there’s a lot of pain out there. And again, it’s a very, very sad day. I listened this morning on CNN. I had it on the radio and what have you, and to listen to some of the hardship as far as some of these people as far as over there, and with the destruction that’s going on. We’re pretty darn lucky folks, and we’re thankful, and again, we’re able to, and we’re going to continue to give back as far as into our community.
Gary Determan:
With that said, thank you so much for your time and what you do.
David Nelson:
Thanks, Gary. Thank you.
Announcer:
Financial Focus is a production of NelsonCorp Wealth Management in Clinton and Davenport. The opinions voiced in the show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated. A broker-dealer, member of FINRA, SIPC, Investment Advisor representative, Cambridge Investment Research Advisors Incorporated, a registered Investment Advisor. Cambridge and NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.