Why Outcomes Aren't Accidental and Why Most Advice Misses the Point with Gary Preisser

0:01Boom!

0:03John Lee Dumas:Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, brought to you by High Level, the all-in-one sales and marketing platform. Today we'll be breaking down why outcomes aren't accidental and why most advice misses the point. To draw these value bombs, I brought Gary Preisser and EO Fire Studios. Gary is founder and principal advisor at Stonebriar Wealth Advisors. He's a seasoned financial educator helping individuals negotiate taxes, retirement, and estate planning through clear strategies, seminars, and client-focused guidance. Today, we'll be talking about alignment over chasing returns, real performance, not paper gains, true diversification under stress, tax timing versus tax minimization, and oh, so much more.

0:42John Lee Dumas:And a big thank you for sponsoring today's episode goes to Gary and our sponsors. If you are building a real business, you need real infrastructure. High Level gives you website hosting, funnels, email marketing, automation, calendar booking, payments and course hosting all on one platform, plus award-winning 24-7 support. Get a 30-day free trial and my full bonus stack that includes a 50-minute private call with me and much more at highlevelfire.com, highlevelfire.com. Fire Nation, 50 days will fly right on by. The only question is, will you have something to show for it? I created a free YouTube series called 50 Days to Something, a step-by-step path to build a real product, service, or offer in just 50 focused days.

1:25John Lee Dumas:Start today for free at eofire.com slash YouTube. Gary, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey, Fire Nation, it's a great question. And instead of talking about how to become successful, I think we got to aim at what we're trying to accomplish. And I think most people, when they think about measuring success, they measure it with accumulation, net worth, portfolio size, retirees talking about what's their number. And assets matter. Income matters, stability matters, all those things matter, but they are inputs, not outcomes.

2:06Assets are not trophies, they're tools. Their only real value is in how effectively they are used, how they're utilized. Now, different households are going to value different things. Some prioritize travel and experiences, others focus on legacy or security. And I know Fire Nation cares a lot about building something meaningful and creating impact. Nobody has the same definition for success, but whatever your values are, success is about how intentionally you deploy your capital, financial, personal, or otherwise, to support those values. And that's why timing really matters because impact is not random.

2:49It is time sensitive.

2:51John Lee Dumas:And we're going to be getting into this and more today as we talk about why outcomes aren't accidental and why most advice actually misses the point. So you mentioned time alignment. I want to dive deeper into that, Gary. Let's talk about time alignment specifically over chasing returns. Now, you believe that wealth improves when money is aligned to when it will be used, not just how much it earns. So why is time alignment more important than headline returns? Well, when most people think about growing their wealth, the first thing they think about, it comes back to risk. How much volatility can they tolerate to get as much growth of their wealth as possible?

3:28The problem is in our industry, risk often gets treated like a feeling. You get asked about how you would feel if you lost 13 % in your portfolio. And of course, nobody feels good about potentially losing money in their portfolio. Then based on these questionnaires, based on these feelings, investors get labeled conservative, moderate, aggressive. Those are subjective terms. They don't mean anything to me because they mean different things to different people at different times in their lives. What's conservative to one person may be aggressive to someone else. So it doesn't tell us anything about when they will need the money and more importantly, what its purpose is, what it's meant to accomplish.

4:11So growing wealth is so important. It is absolutely critical. We cannot rely on subjective labels. So when a client asks me, where should I invest my money? My first question isn't about their risk comfort. It's about timing. When are you going to use it? What are you going to use it for? If they're planning to buy a car in two weeks, well, I'm not going to put that money in Bitcoin. I'm not going to put it in the market. We're not going to put it at risk in any way, shape, or form. But if they're not going to touch it for 40 years, if the purpose is for long-term retirement, now volatility is not a threat.

4:45It's an ally. It's what we need to have happen in order to actually grow our wealth. The difference isn't the person. It's not the feeling. It's the purpose, and it's the time. Volatility is destructive when capital is needed soon, if we need it right away. But over time, volatility gives us our best chance to grow real wealth. So the real question shouldn't be about how much risk can you tolerate? It's about when does this money, when does this asset need to show up to be utilized? That purpose determines timing. Timing is what determines the structure. And once we have that structure in place, then we can determine the best investment choice for that individual.

5:29John Lee Dumas:Let's talk about real performance, not just paper gains, because most investors seem to focus on these nominal returns. But how should people evaluate performance after inflation, after taxes, after fees? This is one of my biggest issues with the industry, because we focus on an average rate of return. Based on a Monte Carlo simulation, if you average 7 % rate of return, then you're going to have an 82 % chance of being successful. That is dealing with the law of large numbers, and it doesn't customize the need to the individual. So a 7 % rate of return, is that good or bad? Well, it depends on a couple of things.

6:08The first thing it depends on is how much risk did we take in order to get that 7%. Because if we're taking as much risk as the market, we should get the same reward as the market. If we're taking less, we get less. If we're taking more, we should get more. So risk is the first thing we have to understand. The second thing we need to understand is what did the market do? Because if the market only did 5 % and you did 7%, that might be great. If you had 7 % and the market did 30%, well, that's a different story. And so one of the key metrics that everyone needs to understand is something called alpha.

6:43In order to calculate alpha, we need to understand your beta. Beta is exposure to volatility. Again, risk is not a feeling. It can be measured. The beta for the benchmark, the S &P 500 is a one. If you're taking less risk, you should expect less return. If you're taking more, you should expect more. Let's use a quick example. The market's up 20%. You get 7%. Is that good or bad? Well, if you're taking half the risk of the market and the market did, you have a beta of 0.5 and the market did 20%, you should expect half the return of the market. You should have gotten 10%, but you only got seven.

7:24That's an underperformance of 3%. That's what we call negative alpha. Now you still made money and 3 % in one year might not be that bad, but if you consistently underperform over years and decades by 3%, percent, Fire Nation can do their math. They understand what an impact that can make. That difference is compounding dramatically. So the goal isn't necessarily to beat the market every year, but it is to grow efficiently relative to the amount of risk that we're taking. We should expect to at least match the market because the market is free. If we want to take half the risk of the market, we put half our money in the S &P and put half of it in the money market, we're going to get 10 % without paying anything.

8:06Ideally, we want to outperform the market. We want to go as hard as we can get as much out of it as possible. But the real key is that negative alpha is completely unnecessary and it is destructive. And the reality is we can find the information is right in front of our noses. Go to Morningstar.com, Yahoo Finance. There's myriad other websites that talk about the alpha. Nobody knows what to look for. They don't know what it means. But if we are trying to actually grow and have an impact, we have got to make sure that our assets are growing efficiently for us. And the best way to measure that is with alpha.

8:45John Lee Dumas:I think this moves us into true diversification under stress because everyone claims to be diversified. They're like, oh, I have a diversified portfolio. Oh, I'm investing in the S &P 500. Therefore, I have a piece of the 500 companies. What actually qualifies, Gary, as true diversification? and what tends to break when markets are under real pressure? Well, a lot of people assume that if they own a lot of something or a lot of things, then they are diversified. But it's not about owning a lot of investments. It's about owning different ones. And when I say different ones, I'm saying those that behave differently at different times.

9:24You may own Apple and Microsoft. Those are different companies, but they are very closely correlated. They're going to move in a lot of the same directions, not exactly the same, but close. That's not diversification. I've seen portfolios with thousands and thousands of individual securities, but they all move in the same direction. So when the market struggles, when we're under stress, all of these drivers, whether it's interest rates or if it's market risk or if it's global issues, whatever those risk factors may be, whatever those drivers are, if our investments don't behave differently, then all of our portfolio is going to move based on whatever the market is doing.

10:13The key is we have got to understand, again, the purpose of our assets. No matter how diversified we are, if we need assets in the short term, the next couple of months to the next couple of years, no level of diversification can truly protect us. And that's going to force our portfolio, our plan to fall apart. And that's what really matters. As long as we understand the purpose and the timing of our investments, then we can choose investments that are protected against loss to give us true diversification, true protection in the short term. And then we can choose different investments that are taking risk for the long-term, giving our diversification time to actually function properly.

10:59John Lee Dumas:And Fire Nation, we're going to actually be talking about tax timing versus tax minimization, asset location, why that matters, structure being the difference maker, when we get back from thanking our sponsors. If you've ever tried getting a traditional bank loan for your business, then you already know that it's not exactly fast or easy. Between rising costs, tighter lending standards, and all the hoops you have to jump through, it can feel like you're stuck waiting when your business needs capital now. That's why I want to tell you about Revenued. Revenued is for small business owners who need fast, flexible access to working capital without relying on your personal credit score.

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12:09John Lee Dumas:That's revenued with a D dot com slash fire. Apply today and be ready for whatever comes next. Fire Nation, if you are building a real business, you need real infrastructure. That is why High Level is Entrepreneur on Fire's featured partner. High Level gives you a website builder and hosting, funnels and landing pages, email marketing, appointment scheduling, payment processing, course and membership hosting, and so much more. Everything you need to succeed, all under one roof. No duct tape, no juggling five platforms, just one clean system for your business. And their award-winning 24-7 support has your back when you need it most.

12:46John Lee Dumas:When you sign up at highlevelfire.com, you also get my exclusive bonus stack, a 30-day free trial, a private 15-minute call with me, JLD, access to my weekly live office hours, a digital copy of my book, The Common Path to Uncommon Success, my 50 Days to Something Execution Roadmap, and more. Visit highlevelfire.com and start building your something today. Gary, we're back, and I want to talk about tax timing versus tax minimization. You said controlling when taxes are paid often matters more than actually even reducing them. So how should investors rethink tax strategy through that lens? Well, I love minimizing taxes.

13:29It's one of my favorite things to do, but it's not enough to reduce our taxes for last year. What I'm more concerned about is how do we reduce the total tax liability over our lifetimes, and that may extend into our estate. And so most investors, we only think about taxes once a year when we're preparing our returns. But tax returns, that's reporting. That is not planning. And we have to plan because timing makes all the difference. When we pay the tax determines how much tax is paid. We may have$300 ,000 of income. If we have to realize that all right now, we're going to pay a much different tax than if we can realize that over a 10-year period.

14:16So when we pay tax determines how much tax. And in order to plan to try to reduce our overall tax liability over our lifetime, we must look forward, not backwards. Most tax planning is looking backwards. We've got to look forward. Now, a forecast is never going to be perfect, but at least it can give us a direction to make decisions now. If we expect, like a lot of people in Fire Nation, we expect our businesses to grow, we expect our income to increase in the future, well, then why are we deferring taxes now when we're at lower rates? Let's get that money into a Roth and let it grow tax-free, and then when we're in a higher income tax bracket, we can decide something different.

15:01If we're expecting our income to go down because we're about to retire, well, it may make sense to defer taxes now and then convert to Roth down the road. The timing makes all the difference. And we have to be looking forward to truly understand what is the best decision, not for everyone, but for us in our unique situation.

15:21John Lee Dumas:Let's talk about asset location and why it matters. I mean, where assets live, taxable, tax-deferred, tax-free, it can actually matter more than what assets you actually own. So walk us through how asset location impacts long-term outcomes. Something that not many people talk about. Asset allocation is super important. That's determining how much risk we're taking, which investments we are choosing. And again, once we choose the purpose for those assets, and we know the timing, then we can make the choice of how much risk we should take with those investments, which investments to choose, knowing we want to have positive alpha in those investments.

16:01But there's one more layer that is super critical. And I'll use a quick example here to explain asset location. Let's say that you have two investment options. One that is super high risk, high beta. You expect that it will earn about 20 % per year. The other is low beta. You expect it to earn about 5 % per year. And you want about half of your assets in the high risk, half of your assets in the low risk. It just so happens that half of your assets are in a traditional IRA. Half of them are in a Roth IRA. What asset location says is put the high risk portfolio, the high risk investment completely in the Roth account.

16:44Put the low risk in the IRA. We want to get as much growth everywhere, but we want the highest growth in our tax-free accounts because that means we get to keep more of it. We're not going to pay tax on that higher growth. We still want our IRA to grow. We just don't want it to grow as much as the IRA. And the sad reality is when I look at most portfolios, I would see that half of the Roth would be high risk, half would be low risk, half the IRA would be high risk, half the IRA would be low risk. It doesn't make any sense. This simple shift, utilizing asset location can make a difference on average if you've done properly of about 1 % per year.

17:29And we understand the impact of compounding. What a difference will that make over a career and throughout a lifetime?

17:36John Lee Dumas:Let's talk about how structure is the difference maker. I mean, this is diving deeper on what you were just saying, because many strategies, they look great on paper, but then they just collapse in real life. So what kind of intentional structure is required to make a wealth plan resilient under stress? This is one of my favorite things to talk about. So I'll probably talk forever about it. But every financial decision we have ever made, whether it's in our personal life, whether it's in business, is driven by cash flow. Where we live, where we buy our home, where we vacation, how much inventory we have in our business, how much we spend on marketing, where our kids go to school, what we eat.

18:20Everything comes down to cash flow. And then when it comes to your investments, your advisor slides a risk questionnaire across the table and asks you how you feel. And it doesn't make any sense to me at all. It's not about how we feel. It's about what are we going to use the asset for? that purpose determines the timing, and then the timing determines the plan, and that structure determines the investments. So to create a plan, we have to start, and the only thing that really matters, we got to talk about cash flow. When is the asset being used? The problem is, for generic portfolios, everyone that is conservative, whatever that means, gets lumped into a generic portfolio, and all of it is designed to provide income at any point in time.

19:16Once we segment our portfolio with purpose, giving it a structure for the assets that we're going to spend in the next five years, we should invest very differently than the assets we're going to invest in or that we're going to utilize in 25 years. Keeping that timing in place gives us a portfolio, first of all, that is customized to each individual household, not to large groups of people that feel the same way about risk. But it also gives us something that's adjustable because life changes. Our purpose evolves. Our cash flow needs shift. And a real plan, a real structure needs to be set up so that it can move forward through time.

20:02John Lee Dumas:Gary, if Fire Nation's really jiving with what you're saying, and they want to connect with you, they want to read your book, they want to learn more, what is your call to action for our listeners today? The first thing is reach out to us, Stonebriar, wealthadvisors.com, or differentiatorsofwealth.com. This is the recent book that we wrote that talks about these principles. Read the book, understand these principles, and how you can apply them to yourself. Because the key to having a secure financial plan is not to organize your finances by product. It's to organize it by time. And this book, these principles really can make a huge difference.

20:47One of the things I admire about Fire Nation is we're not satisfied with just doing things the way everybody else does them. We're not satisfied with just good enough. These principles can make a real difference. That's the differentiator's name for us over in the short term, as well as the long term in our business, as well as in our personal lives. And so read the book, reach out to us. If there's anything we can do, we are here to help. So you can reach out to us through the website.

21:18John Lee Dumas:Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with GP and JLD today. So keep up the heat. And for links to everything we talked about, visit eofire.com, type Gary in the search bar and the show notes page will pop right up. And Gary, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we'll catch you on the flip side. Hey, Fire Nation, a huge thank you to our sponsors and Gary for sponsoring today's episode. And Fire Nation, are you an entrepreneur on fire who's looking to share your amazing message with the world?

21:53John Lee Dumas:If yes, we are now accepting applications for entrepreneurs on fire. to learn more about becoming a guest, visit eofire.com slash guest. And I'll catch you there or I'll catch you on the flip side. If you are building a real business, you need real infrastructure. High Level gives you website hosting, funnels, email marketing, automation, calendar booking, payments, and course hosting all on one platform, plus award-winning 24-7 support. Get a 30-day free trial and my full bonus stack that includes a 15-minute private call with me and much more at highlevellfire.com. Highlevellfire.com. Fire Nation, 50 days will fly right on by.

22:30John Lee Dumas:The only question is, will you have something to show for it? I created a free YouTube series called 50 Days to Something, a step-by-step path to build a real product, service, or offer in just 50 focused days. Start today for free at eofire.com slash YouTube.