We’re talking about a marriage of entrepreneurship and finance with Wayne Titus, author of The Entrepreneur’s Guide to Financial Well-Being. As an entrepreneur, you have the passion and persistence to turn your visions into reality, but that doesn’t mean you have the financial expertise to grow and scale a company or create long term wealth for your family.
To ensure a thriving future, you need a trustworthy advisor and a clear process. How do you choose that advisor? What do you need to know? Wayne will tell us about that and explain how the right person to watch your financial back, you’ll have the freedom to focus on what really matters to you. Your family, goals and your company.
Wayne Titus: I had a successful career. I was climbing the corporate ladder in a big six accounting at the time. I worked with Fortune 50 clients, big businesses. I was married, am married and I have two children. I was really kind of living that dream, and then, in 2000, the tech bubble burst around the same time my father in law passed away, he was 62. ENRON collapsed, WorldCom failed and September 11th happened all in that very short span of time.
I began questioning, who was I serving? What impact was I really making? What was important and what was I really called to do on this earth? What’s my thing?
I wasn’t getting that out of my job.
I sat back, I had about two years of prayer, meditation, reflection, I explored lots of different job opportunities, and I took this short cross-country ski trip with my wife and my two boys.
They went to bed early, and I was staying up late trying to figure things out in my mind and I had what I would call an epiphany. It became very clear to me that what I needed to do was to use my skills that I learned over the years to focus on service to entrepreneurs and families, integrating tax financial and investment strategy.
That led me to start two firms in January of 2002, my tax and accounting practice which is a CPA practice, and then also, my registered investment advisory firm, which is a fee only fiduciary advisory firm working with clients.
About four years ago, I decided that I could serve and make an even bigger impact if I redirected my skills towards educating people about what’s important in this process that I’ve learned over the years and applying this knowledge of finance, tax, and investment strategy.
I started putting together and perfecting our processes internally so that I can teach other people here, but also, I began to get this idea of how do I educate other people on what to look for. I can’t serve everyone in the world, but I certainly can make an impact through education. I’ve always enjoyed leading seminars and teaching and doing those kinds of things.
This was just another opportunity to apply that in this way, and that’s what really brought me to writing this book, An Entrepreneur’s Guide to Financial Well-Being.
Taking Care of Your Business
Rae Williams: If you had to choose one unique story or idea from the book that listeners will remember, what would that be?
Wayne Titus: It would probably be the story about Edie, she’s a person that worked in the corporate environment, she had a successful CRM consulting business, she worked in a corporate environment, left and started her own company.
She has a family, her husband works in the corporate world, she has children, but she’s pulled in in a number of different directions. So I’d say that the most impactful story would probably be Edie’s story. Edie’s story basically talks about the challenges that she faces. but I want to just take one step back.
Entrepreneurs, like I do, feel the business is our baby, right? It’s something that we love and care for. In fact, there were some researchers in Finland that made a discovery in some controlled experiments where they showed fathers pictures of their business and their children as well as pictures of other people’s business and their children.
The MRI scans those dad’s brains of those entrepreneur’s and dad’s brains were similar, whether they viewed the business of the photo of their business or their children. But they were not the same when they started to see the photos of other people’s businesses or other people’s children.
These scientists understood that they needed to ask additional questions. They started asking questions like how much do you love this and how much do you believe in this? But at the end of the project, the researchers concluded that entrepreneurial love is strikingly similar to parental love. The results were stronger, even stronger in situations where that business was growing.
I think the first thing you have to put into context is an understanding that an entrepreneur feels very strongly, obviously about their own family and their own children. But their feelings are just as strong or sometimes you know, maybe in certain cases stronger as it relates to businesses and especially as they’re growing.
“Your love for your children continues to grow as your children grow. It’s the same in the business.”
The struggles that Edie has are what I would relate to as kind of the labor pains of entrepreneurs. You don’t know what you don’t know when it comes to business and personal finances. You could be a biologist, a writer, a marketing expert. Maybe you didn’t study accounting or finance in school, but even if you did, you’re probably too busy running your business and you’re too busy to be focused on that kind of stuff.
I’d say that’s the first pain that she feels. The next one is, if you’re successful, you’re probably feeling a little bit overwhelmed because you’re entering the new territory, and you really have no idea how to deal with it.
People don’t go out and start businesses every day. While you may have lined up some advisors to help you, you might have a nagging suspicion they don’t really understand what’s happening to you or your business or that they’re able to help you moving forward. What’s their expertise?
I think the third labor pain is you’re focused on the business and you’re probably telling yourself; “I’ll get to my finances later. I don’t have time for that right now. That can wait.”
I think those are the three kinds of pains that Edie feels as she’s going through this process. She’s pulled in a lot of directions, she’s successful, she’s exhausted. In the first few years that she was in business, her business ran at a loss, she didn’t owe any taxes, but now that she’s growing, her tax bill starts to climb, has started to climb, and now she’s trying to figure out how can I minimize that? She’s seeing all that money going towards taxes, so what can I do to minimize that and to save for our future?
Rae Williams: What’s the first step for you, your advice to people in finding an advisor that’s going to help you out with that, to alleviate some of that pain?
Wayne Titus: Well, I think, the thing to recognize is that people have trust relationships with their advisors. They’re not likely to want to disrupt those trust relationships because they’re hard to reestablish with other people. I think that there’s a few things that entrepreneurs can look at to help them better understand if it’s a good relationship. Maybe a trust relationship.
Is it really the best relationship for them and their families?
I think first thing is they need to understand the difference between compensation and how that may be swaying advice, as well as responsibility—what is the legal responsibility that that advisor might have with them.
I’m not talking about just the investment advisor but the accountant, the CPA, you know? Understanding that relationship, I think that’s the first thing.
I think another thing is, to understand that sometimes, when we deal with multiple advisors, we’re dealing with an unintended silo effect. The tax advisor might be telling the entrepreneur, “Hey, you should be changing this in your investment strategy because it’s costing you taxes.”
The investment advisor maybe saying, “Hey, you need to talk to your tax advisor about that. I can’t give you advice on that,” and so now you’re in a situation where you’re bifurcating the advice. It’s not integrated. It becomes inefficient.
“You can’t optimize a solution when you don’t integrate things.”
I think the third thing is, you really need to understand what kind of advisor are you dealing with. In Atul Gawande, the hero at another book called Being Mortal, in that book he talks about the three types of physicians that are out there; there is the patronistic physician, there’s the interpretive physician, and then there’s the integrative physician.
The patronistic doctor basically says, “This is the situation, this is what you should do.” Do what I say, not what I do kind of attitude, right?
They’re telling you what you should do. They don’t really care about how you feel about it.
The second kind of doctor basically will give you all the information about all the different situations and say, “Here are all the potential solutions, you decide,” right? They’re not giving you a recommendation.
Then there’s the interpretive doctor, who basically says, “Hey, here’s the situation as I understand it based on what you’ve told me and what your results are. These are the different kinds of treatments that we could go through. Here’s the one that I think is best for you and this is why.” That is much more helpful.
Typically, that’s what most people are looking for in a doctor. They want somebody to help them understand because it’s not their area of expertise, it’s an area where they need help.
They don’t know what they don’t know. It’s the same thing in the situation with the entrepreneur. They don’t know what they don’t know, so they can’t ask questions when they don’t understand the nuances of a particular tax situation or short-term holdings as it relates to how dividends are taxed or other complex situations.
The CPA might know that, but if the investment advisor is not working to the direction of the CPA or that approach is not integrated, the loser in that equation is the entrepreneur because that money goes to taxes, and nobody wants to pay more tax than are legally required to.
Why Get an Advisor
Rae Williams: What else do people lose out on? What doesn’t happen to them if they don’t have a good financial advisor, if they don’t kind of follow some of these recommendations?
Wayne Titus: Yeah, it’s not just having a good financial advisor. I think it’s understanding how these very complex systems integrate. Back to Atul Gawande book, The Checklist Manifesto. He talks about years ago when they were building these cathedrals in Europe. There was a master builder and they knew exactly how to build that and they would direct people, this is what you do, this is what you do, so forth and so on.
Well, there aren’t any master builders left in today’s society because we’re building these huge skyscrapers. You have to have engineers involved that do engineering as it relates to the soil, as it relates to wind current, as it relates to structural support for the building. You have to have people involved in the wiring and the piping and the plumbing in the building.
All of that, it’s highly sophisticated and you have to have a team of people working to integrate these things; you can’t do it in a vacuum. It’s the same thing for an entrepreneur. An entrepreneur is in an incredibly complex situation with their business, with their personal situation, as it relates to taxes, investment, and finance.
“Are we going to be able to achieve what’s important to us?”
How can we optimize this? It’s not just a matter of having a financial advisor and this is what you should invest in. It’s how do these things work together to work for you.
Let me give you a quick example. Some entrepreneurs will save to retirement accounts and that’s where they’ll avoid a lot of tax because they’re putting that tax, those savings away pre-tax. But, when they retire and they go to take that money out, they’re going to be taxed on it and when they’re seventy and a half, they have to take minimum distributions and other things happen.
Typically, what we see in our practices, people end up paying more taxes later if they don’t do some integrated planning.
Having an idea of what your strategy should be over a 20- to 40-year time period, as it relates to your financial plan, in order to minimize tax, then you select the investments that support the investment strategy for that client.
There’s a lot of complexity there. It also depends on where do you save that money; do you save it in a Roth IRA? Do you save it in a retirement account? Do you save it in an individual or trust kind of account or joint account?
All these questions come up or should come up and then a plan should be developed to integrate that and having that process, having that team to do that is extremely important as it relates to that complex world of an entrepreneur.
Getting Back on Track
Rae Williams: Give us a few success stories, these don’t necessarily have to be in the book but just people who started in one state and you know, got on track with their finances, whether through an advisor or just understanding, and came out on the other side.
Wayne Titus: One of the examples that comes to mind is a younger couple, they wanted to retire early and have a vacation home, so they spent a lot of money buying that vacation home, but they didn’t put it in the context of what that long-range plan was.
How long could they stay in that home? What were the expenses going to be? Where were those dollars going to come from in the future to pay for those things? That was something that was extremely important and was an oversight. Understanding what goals and objectives are, gathering a lot of information, that’s what we call content.
Putting it into a process so that you can clearly delineate what are the things that you want to do. How should we lay that out over a 20- to 40-year time period so that you have the best opportunity to achieve that?
Some client goals are to just save enough for retirement so that the money lasts till they pass from this earth. Other clients want to leave a legacy. I’ve had many situations where if you look at that strategy, you can actually change it from just having that money last through the time that you leave the earth to having a higher likelihood of potentially leaving a legacy. You can do more if you plan in advance.
I think ultimately, that financial wellbeing can be improved when an entrepreneur seeks out somebody that’s an integrative or interpretive kind of advisor in this situation.
Basics of Wealth Transfer
Rae Williams: In your book, you have a chapter that’s on basically wealth transfer and wills and that kind of thing. Are people not doing that very often?
Wayne Titus: Well, there’s a number of things actually that people should know first off, if the money is not going to outlast them, then there really isn’t much of a need for a wealth transfer strategy. But, the risk with that approach is that if you pass early and don’t have that wealth transfer strategy in place, you can really harm the people that you love the most by not doing some basic planning.
I always talk about the proverbial Plymouth bus. We don’t have any buses in our town of Plymouth here, but if we had one and I got struck by it while crossing the street, I have got a plan. I know what’s going to happen if that tragedy occurs. I hope it doesn’t happen, but an entrepreneur especially is in that situation because there is a lot more complexity. There is the business itself, and the value of the business that has to be managed.
It is not as simple as transferring it through a will. There are all of these issues of succession and how you preserve the value.
“There is a lot more complexity as it relates to financial wellbeing for entrepreneurs.”
A simple example is your children. Many people overlook their adult-age children, but if they are out on their own, making sure that they have durable powers of attorney and health powers of attorney because as a parent even if you’ve got a 21-year-old child, you cannot speak for them.
For that or with that physician without having this document signed.
So, there is a lot of complexities that cross between legal and practical and accounting and finance and investments and that is one of the reasons why we included that because it such an important aspect of what we call holistic planning.
It is looking at the whole puzzle and then figuring out what the pieces are and how they fit together.
It is not just putting together the outline of the puzzle where you have all the straight edges all the way around. You’ve got to fill in all of that detail and so that was a very important chapter to include because it includes some of that detail and the reasoning behind that.
Rae Williams: The concept of financial scrapbooking—could you give us a little bit of information about that? How do we use that?
Wayne Titus: Yeah, financial scrapbooking really is a concept of documentation, right? Everybody knows what a scrapbook is, when you pull that scrapbook out you can look at the past and see the progression of things, but you can get to that last page and you know exactly where you are in that person’s life and in whatever that series of photos that you are looking at and financial scrapbooking is the same way.
Your financial picture changes all the time and it is important to take periodic snapshots of that financial situation and where those links are. You know so many entrepreneurs now manage their finances with their mobile device. Logging in with their thumbprint on the iPhone or in some other way and they move money back and forth. What happens if something happens to you and you end up in the hospital and you can’t speak for yourself or actually manage any of these affairs either temporarily or more permanently?
“Who is going to be able to come into your life and take care of that?”
Even if you met with your spouse every day about finances, if you change your password what’s your password? You know there are a lot of situations were a lot of people in the United States live alone so they don’t have a spouse or a close friend that’s heavily involved in their personal financial life, and if they ended up in the hospital, certainly your friends or your family would want to help you out.
But unless you have a financial scrapbook, something that could help direct people and make it a little bit easier for them, it is going to be incredibly difficult and time consuming. So financial scrapbooking is a way to shortcut what could be a very difficult and complex situation for the people that love and care about you should something happen to you.
The cool thing is that it also alleviates stress on those folks because it is one less thing that they have to worry about.
They are already worried about your situation and how you are being cared for and whether you are going to recover, why should they have to worry about whether or not you have got the right password to get into a website or to do some banking for you?
A Challenge for Listeners
Rae Williams: What are your top three pieces of advice and just like a sentence or two for entrepreneurs specifically to take action on right now?
Wayne Titus: I’d say understand the relationship that you have with your advisors and whether you really truly have the right advisory relationship whether it is with your CPA, your financial advisor, investment advisor, whoever. Are they an interpretive advisor? Are they really there to guide you through this process or are they compliance focused or product focused? Are they helping you understand these things that you don’t know, right?
You don’t know what you don’t know.
These advisors should be helping you identify where are your blind spots. So, look at the relationship. When you look at the relationship, the other piece that you should look at it, look at the process that they have in place in order to serve you and their other clients. Do they have a well-defined process? Do they have their checklists? How is it consistent and will their process get you through to the result or high likelihood of the result that you are seeking?
So, understanding your goals and objectives is important, but what is the process that they use to do that? How are they going to look at things holistically and integrate that tax, financial and investment strategy in order to have you have the highest opportunity for success and wellbeing in the future.
Rae Williams: All right give your readers a challenge. What’s one thing that they can do to change their life?
Wayne Titus: I’d say for those that have read the book or reading the book, I think the one thing that they should probably try to best understand is how have they developed a holistic plan with their advisors in order to accomplish what is most important to them.
How have they worked to minimize tax? Do they even have that plan in place? And I’d say the first thing is if you don’t have that plan in place, you should start trying to figure out how you should do that now. Don’t put it off until tomorrow, right?
There is a thing that’s called the time value of money, the longer you put it off, the more difficult it is to recover from that and once you pay taxes, you can’t go back and un-pay them. So, if you wait until next year to do this, you potentially already pay taxes on something that maybe you could have better sheltered yourself. So, I would say look at your situation.
“If you don’t have a plan, you should look at how you’re going to plan with your advisor.”
And whether it’s going to integrate the tax financial and investment strategy to have that high opportunity for success, and if it doesn’t or if you are working with a patronistic advisor that says, “Just do this,” doesn’t help you understand it or somebody that provides you a menu of options but doesn’t provide recommendations—I’d say you need to seek another relationship.
You don’t know what you don’t know. There’s a lot of folks that think that they could get through and minimize tax on their own, these are highly complex systems and they work together. So if you don’t want to waste a lot of resources by reading this book, I think you’ll learn more about how it’s complex and how best to move forward.
Connect with Wayne Titus
Rae Williams: All right and then are there any topics that you think are important to cover that you want to talk about or things that you definitely want your readers to know?
Wayne Titus: Well there is a section in the book that we cover that talks about the differences between different financial models, financial industry models. I think that is very, very valuable, what we find most clients or prospective clients that come to us, one of the things that they find most valuable is just an understanding of the industry and what drives the industry and what the responsibilities are of the people in the industry.
When they learn that information, it’s like the scales fall off their eyes. The blinders come off and then they go, “Aha! Now I understand why I feel the way I do.” And they potentially seek another relationship. So I think it’s important to look at that and be educated on what drives that financial industry and how that might impact you and your family negatively.
Rae Williams: Awesome. How can our listeners connect with you and follow you?
Wayne Titus: They can follow us, we have an Instagram account, AMDG Financial. They can reach me at [email protected].
We have an author page at waynebtitus3.com so there are going to be more resources that are on the author page That is probably a great place to connect with us.