Iyassu: Welcome to Inside Flows, episode 14. I'm your host, Iyassu Essayas and I'm here with guest, Gary Preisser Hey Gary, how you doing?
Gary Preisser: Hey, Yasu. Nice to see you today.
Iyassu: It's great to have you. Happy Friday. And you are one of the very few but amazing folks out there who started a business called Stonebriar Wealth Advisors. And so on this show, we typically have folks who are in the registered investment advisory industry. I usually have Nishit ⁓ Ryan on the show, but you are our special ⁓ Wealth Advisor guests, I want to welcome you to the show and thanks for reaching out to get this thing going.
Gary Preisser: Absolutely. Thanks you so much for having me.
Iyassu: Yeah, so we're going to have our typical Friday weekly recap and then go into a special topic with our special guest, Gary. But before we start, I'd love to give you an opportunity to give an introduction to who you are, how you started your firm, what you provide clients and just so folks can get to know you.
Gary Preisser: Absolutely. So I've started or my partner and I started Stonebriar about five years ago now, I guess four and a half. And we both have worked in the industry before we worked together at a firm in Orlando. And we saw things that we liked, we saw things that we didn't. ⁓ I actually came through the accounting background and doing a lot of small business consulting. And so that gave me a very different, unique perspective when it came to personal finance. and it came to wealth management, we look at things differently. We look at things from a cashflow standpoint. We'll talk more about that today, I'm sure. But we're holistic. Every decision that we make affects every other decision. And so we can't just look at investments. We can't just look at taxes. We have to look at everything together, including the state planning, income planning, et cetera. And that's what we do at Stonebriar is take a holistic view. of the entire financial picture and understand how each portion of it can fulfill purpose for each one of our clients.
Iyassu: Yeah, we're going to talk a little bit more about the Cash Flow Clock that you created and you also wrote a book on it, which is pretty cool. I checked that out. ⁓ Do you want to talk a little bit about how you got into the industry? Because I think our audience members tend to skew on the older side and ⁓ kids don't care about history that much. But as you get older, you're like, that story is kind of cool. ⁓ did you get into this space?
Gary Preisser: Yeah. You I had no intention of getting into this space. I'm the I'm the son of teachers, football coach and an English teacher. There's not a lot of need for financial or wealth management for teachers. Unfortunately, that's changed later in their life, but especially growing up, know, is interesting. I only thought that the three professions were being a teacher, a lawyer or a doctor.
Iyassu: You
Gary Preisser: And I knew that teachers didn't make any money. And I thought at the time that all lawyers were scum. So I didn't want to be a lawyer. And so I just assumed I'd become a doctor. Right. When that didn't work out, I had an opportunity, like I said, to get into accounting. saw the difference that taxes made on the tax preparation side. I also saw the misinformation, the miseducation when I saw clients come back and get really excited about a $10,000 tax refund.
Iyassu: You
Gary Preisser: I'm like, why are you excited about this? First of all, you're going to spend it on nothing. And then the other issue, of course, is they have been loaning $10,000 to the government for at least a year, interest free, and they're happy about it. And so that's where my roots as a son of teachers really came through, is wanting to help people better understand their finances. And that grew into small business.
Iyassu: He
Gary Preisser: consulting, helping small business owners, which are so important to understand their finances. They didn't get into the business to understand finances. They got into the business to provide a service or to provide products, whatever the case may be. But that information makes such a difference and determines the success of that business or the failure. And so when I got an opportunity, it's been about 17 years or so now. to take those same concepts and apply them on an individual basis. Because every decision we make comes down to cash flow. We see that in businesses very clearly. We see that with individual households as well. And yet when it comes to investments, we get this risk questionnaire that asks us how we feel. ⁓ How you feel about the market as opposed to when are you going to use the money? And what's the purpose of that money? And so that's kind of my story and what provides this different perspective. It seems like it's different, unfortunately, and allows me to look at a client's plan and a client's needs, really a client's life in a different way that provides structure to protect them against bad decisions.
Iyassu: No, that's great. I had a of a similar, not same, but lightly similar experience as you. I went into college wanting to get into pre-med and then quickly got out of that. I went to finance. I just had not the greatest experience with a doctor. And I was like, yeah, I don't really want to turn out to be like that kind of person. What else can I do? And I kind of looked back into, you when I was a kid and you know, my dad had got me into mutual funds.
Gary Preisser: Hahaha
Iyassu: He's like, you know, I think I had like some allowance that he owed me a lot of money for because he didn't pay me. And instead of paying me, he's like, you know what, we're going to invest this and we're going to put it into the Steinrow Young Investor Fund. And I was like, okay. And then all of sudden I was like reading annual reports and I went back to that. My, I guess my roots, if you want to call it that. And that's how I got into it. But yeah, I had the same experience. like, I'm to be a doctor. And yeah, that wasn't happening.
Gary Preisser: You Yes? And I'm so glad that didn't work out for me because it's, ⁓ you know, I think you probably feel the same, but what an inflection point for your dad to introduce for you so early in life to have that opportunity.
Iyassu: Yeah Yeah, yeah, it was. mean, thankfully the company he was working at had, they had been doing a big push to get employees to contribute more to their ⁓ 401k plan. And so that's when my dad started and he loved to read books. He's like, ⁓ let me read about, you know, investing. And then he got me into it. So, yeah, yeah. Like the, I love doctors is not a knock on doctors. It's, more of a personal thing. You know, I just, didn't have the guts for it.
Gary Preisser: you
Iyassu: And so I was able to help other folks out in other meaningful ways. And I think you talk about that a lot on your website, ⁓ helpful in very different ways. And that's essentially what this industry, at least in the investment advisory space for ⁓ planners and the advisors and the wealth managers is they're really selling ⁓ ⁓ a lot of folks don't understand that ⁓ wealth management is very personal. ⁓
Gary Preisser: Yes.
Iyassu: for personal things, they like to keep it to themselves or with the family when the right step is to get a professional and help you build your wealth in ⁓ that are customized to you ⁓ and household. that was.
Gary Preisser: I could not agree more. And it's ⁓ that the industry has ⁓ to standardize and try to scale their services instead of exactly what you said, make it customized to each individual because this is very personal. We're not talking about laws of large, the law of large numbers. We're not talking about millions of households. We're talking about one household. and what are their needs. what I love about this industry is that just a half hour conversation with some advice, kind of like an inflection point that you had with your dad, can make the difference of hundreds of thousands, if not millions of dollars for that household and for generations to come. And that's one of the best ways that we can help people.
Iyassu: Yeah. And, and, you know, for folks who don't have a financial advisor right now, I always say it on the show, get one, like they, will help you out. You know, it's, it's really tough to try to manage your own wealth by, you know, trading that that's not a probably a good use of your time. There's always somebody else on the other side of the trade that has more information and is smarter and, can make better trades than you. But an advisor can puts you in a good asset allocation, planning, estate planning, tax insurance. Like they can put you in strategies that can holistically take care of you like Gary said earlier. ⁓ I a sense that this industry, when you do these kind of... ⁓ risk profile. you're a person and you do, if you're a household and you do like a risk profile, like I feel like a lot of that is due to a bunch of lawyers who got together and said, we don't want to get sued anymore. this is how we comply with the law. So you have to do it. And then you get this. And I wonder how much of the industry is driven by compliance versus, Hey, this is actual need. Yes, we're going to abide by the law, but this is an actual need that we need to.
Gary Preisser: Yes. It's about compliance.
Iyassu: provide for a client. I'm seeing, you know, I go to these conferences all the time, like Future Proof or the Invest Net Conference, which I skipped this year, but these are really good conferences to hear how advisors are thinking. I think personalization is a personalization and planning is two key themes that I'm hearing more and more of where ⁓ advisors and wealth managers are starting to personalize the wealth building strategies of their households. And so I think what that does is it opens up more opportunities for advisors to provide clients with different experiences. if you're an advisor, you can kind of ⁓ the asset management part ⁓ the side and say, okay, well, we use DFA, that's it, or we use BlackRock. And someone's standard asset manager, not pay so much attention to that, but pay more attention to the planning. So sometimes you have households that are... faith-based or they care about sustainability or they care about, know, they're not just a cookie cutter, you know, some lawyer came up with a risk profile, know, Myers-Briggs, and then you have to play that standard. Like there's customizations out there. And I think a lot of people don't know that. A lot of folks who are not in the investment advisory space don't know that. ⁓ kudos to you guys who are ⁓ the advisors out there and wealth managers.
Gary Preisser: Yes.
Iyassu: who are bringing that customization, that personalization to the investment advisory wealth management space. Because I think that's a huge opportunity that you guys should take.
Gary Preisser: And I think it's the only way to do it properly. And I appreciate what you're saying about having an advisor, but the other side of that is just because you have an advisor, I feel like the old way of doing it, hopefully this doesn't happen as much anymore. The advisor says, trust me with your money, but don't pay attention to what I'm doing with it because this is too complicated for you to understand. It's like the wizard of Oz behind the curtain. Pay no attention to that guy. And that's ridiculous, first of all, because it's not too complicated. Now we don't want our clients to your point necessarily day trading. That's not what we're recommending. They have better things to do. But a big part of what we do is that education piece to allow our clients to understand how to hold their advisor accountable for what's happening. This is not something where, okay, you're hands off, especially for retirees, which most of our clients are. They've got to, this is now their career. This is now their job. It doesn't mean they have to be reading the stock market and following it every day. That is where we can help. But it's not abandoning any responsibility for the outcomes because it really should be customized to their needs. And the only way for that to happen is for them to be involved. And there are some easy ways to help ⁓ clients hold their portfolios accountable. One of the things we teach right off the bat is the concept of beta. How much volatility do they have? And alpha, are they outperforming or underperforming the benchmark? And we don't see a lot of people that are familiar with that. They look at average rates of return instead of alpha. And alpha is not the end all be all. That's not the only measuring stick, but it should be, it's one way where you can say, okay, am I doing better than what, or as good as I should be doing, or am I doing worse? So you can have those conversations with your advisor and really understand what's happening because this is your life. You can't just, can't just say, well, This is advisor did this to me. You have to have this back and forth. It needs to be a collaboration.
Iyassu: Yeah, a hundred percent. I agree with you. And I think a lot of the wealth managers and ⁓ on the independent RA side, ⁓ owner operators that I've spoken to, ⁓ they say those, deeper relationships with the clients tend to be the best clients where, you know, kind like a teacher teaching, you know, students, know, if you're a really good teacher, your, students thrive. And lot of the folks that I've talked to, yeah, their, their households are thriving right now. So. chalked it up to being great teachers.
Gary Preisser: It's got to start with education. It absolutely does.
Iyassu: Yep. So we're going to move on to our weekly recap, where we talk about some stories that made the headlines that are reflective of the investor advisor space and some market commentary as well. think the big dominant one is always it's AI or inflation. That's just the common theme that affects everyone. But I like to pick out some cool stories that that happened and just kind of get folks up to speed when they're in their car driving home from work. And, you know, they probably missed a couple things. early Monday, earlier this week on Monday and Tuesday, we saw on the Wall Street Journal, they reported that Alphabet and Blackstone announced a massive, you $5 billion joint venture to create an AI cloud company. And I think what's interesting about that is for members who don't ⁓ really up with what's going on with Google, ⁓ Google getting into the hardware space where they created these processing units ⁓ basically like chips ⁓ compete with Nvidia. And Nvidia is the most dominant player in the AI hardware space. ⁓ have their GPUs that ⁓ software uses to compute to basically process your requests. And the margins ⁓ on are insane. ⁓ whenever, just for audience members that don't know, whenever ⁓ you a ⁓ business you're in an industry where your margins are really, big, then what that does is sends an indicator to competitors to come into the space and basically drop those margins down. And so that's what basically Google is doing. saw exactly when they saw they needed a technological. ⁓ They needed a technological upgrade to their own processes for AI that weren't reliant on Nvidia, but they also saw an opportunity to kind of compete with Nvidia. And so they. created this joint venture with Blackstone, which is a private equity shop that owns a bunch of data centers. And it's valued at $5 billion. And we should start to see the next year or so these TPUs being produced on mass and provided to other competitors like Meta or Microsoft, maybe even OpenAI might want to purchase some of them. ⁓ Or at least get access to the data centers that have access to these new Google TPUs. So I don't know how your clients are thinking about AI or do you have conversations with clients about AI? Are they on the afraid side or are they pretty ⁓ progressive on, hey, AI is going to be very helpful to us? ⁓
Gary Preisser: I usually get a little bit of both, is always the case with something like this. I think it's clear that AI is not going away. ⁓ This is a great tool that will be part of our lives, I think, forever. That being said, as far as investments are concerned, ⁓ still a lot of volatility. There's... ⁓ a lot of concern about a bubble and I don't know if that's ever gonna be the case or not. The real key for our clients is understanding where they have volatility in their portfolio and how that's going to affect their day-to-day life ⁓ because then it becomes more of a headline as opposed to really affecting them ⁓ their portfolio. But these are discussions that we're having because AI is so dominant and it's led to so much growth, but what goes up sometimes goes down and we need to be aware of that and cognizant of kind of where that industry is going because it's driving so many other parts of the market as a whole.
Iyassu: I love the fact that you brought up, know, when an industry goes up, it can also go down. I'm wondering, you know, what are conversations like when the market does go down? ⁓ Are folks, you know, quick to say, hey, know, sell, sell, sell, like get me out of this stuff. want to go to cash or, you know, are they more disciplined, you know, attributing to your, your education ⁓ of your. to their households. What do you typically see?
Gary Preisser: Well, I'm going to brag on my clients a little bit because one of the things we're most proud of here at Stonebriar is several weeks ago when the market was down, we got calls from our clients saying, it time to do my Roth conversion? Because the best time to convert to a Roth is when the market is down, we're get a discount on our taxes and then we ride the rebound up tax free.
Iyassu: Yeah. ⁓
Gary Preisser: So we did a bunch of Roth conversions in April. And guess what? Last year, when the tariffs hit, we did a bunch of Roth conversions. So by looking at it from a holistic standpoint, a good day in the market means you're going to pay more taxes. And I'll take that deal any day of the week. Let me be clear. But when a bad day in the market might be a tax opportunity, but only if we're prepared for it. The other aspect, the other side of that, and that kind of goes into the cashflow clock is if we have enough income and liquidity covered for the next five to 10 years, then that volatility becomes, it becomes noise and really an opportunity. We have more of our clients, even in their 70s and 80s, that when the market's down, it's buy more because their income and liquidity for the next five to 10 years is already covered. They can afford to do that. If you are pulling assets or pulling income from volatile assets, including large cap growth stocks, then that's a completely different conversation. Every movement in the market is a threat. And it's like you're just, you're living in fear constantly. And fortunately for our clients, in most cases at least, we're able to create a structure, design a structure for them where it's not a threat anymore in the same way that it might be otherwise.
Iyassu: Yeah, it sounds like you give your clients peace of mind, which is really nice.
Gary Preisser: That is the goal. That's the goal.
Iyassu: So moving on to Wednesday, Bloomberg reported that Elon Musk's SpaceX is officially filed for a NASDAQ IPO. And they're looking to raise over $75 billion for this IPO. There's some interesting aspects about it where I don't think audience members are corporate governance gurus, but SpaceX is releasing less than 10 % of their outstanding shares. ⁓ call it the float, the public. And that, you less than, I think it's like four or 5 % is going to be valued at $75 billion. ⁓ So if you want to think about wealth generation, that would mean that when Elon is compensated for his work and his ownership of SpaceX, he gets into like the trillion dollar kind of category, which is insane. ⁓ It's like
Gary Preisser: It's nuts.
Iyassu: I mean, he has to hit these crazy goals in order to get paid that a much like get million people on Mars. But just from a corporate governance standpoint, it's printed on paper, you can read it. He could potentially be a trillionaire. And you know, that's on top of his wealth that he's built on Tesla. So it's the AI boom is real. And we're now we're not talking about when I was a kid, you know, 100 millionaire was like the thing that was like the richie rich kind of moment. And then
Gary Preisser: That's right.
Iyassu: I was in college, it's like, ⁓ you're going to be a billionaire. You're to be a Bill Gates billionaire. Now it's going to be Elon Musk trillionaire. It's kind of crazy and nutty how these numbers have just grown.
Gary Preisser: And the orders of magnitude above billionaire to get to that point just is astounding. It's, yeah, it's a new world. It's a different world.
Iyassu: Yeah, well, you know, good luck on Elon getting folks on to Mars. If you can figure that out, ⁓ you you you earn that trillion dollars. So by the end of the week, Main Street Bloomberg reported that mortgage rates have surged to their highest August. So we're looking at six and a half percent ⁓ a 30 year fixed loan. ⁓ ⁓ know, for folks who are looking to ⁓
Gary Preisser: You
Iyassu: buy a new house, it would probably be a little tough. 6.5 % is, that's challenging. And for folks who are new home buyers, so the ones who are in their maybe late thirties or early thirties, or sorry, late twenties, early thirties, I don't know if this would be the greatest time to buy. If you have that 20%, you can put it down, but that's 6.5 % on your mortgage is going to be pretty tough. I think my first house I bought was at 3.5%, 3.6%. So, you know, it was a very, very big difference. And, you know, for folks who have an annual income, you know, of maybe a hundred thousand dollars or.
Gary Preisser: It's a big difference.
Iyassu: maybe $75,000, 6.5 % is, that's quite a lot for them to be paying monthly out of their paycheck.
Gary Preisser: Well, that's hurting me right now because I'm selling a house and I have my mortgage on the house is at 2.625%. And I just wish I could give it to somebody. My HOA doesn't allow me to rent it, which really is frustrating because otherwise I would keep that house forever. But it's a different world and... I see this a lot with my clients who want to help their kids and grandkids get into houses. And so this really is part of our conversations on a regular basis. But I also want ⁓ potential home buyers to think about because the interest rates are so high, there's fewer buyers out there, which means that it becomes more of a buyer's market. me personally, I'd be happy to get off of that house as quickly as I can. so if you're willing, and I'm not, we need to be very careful about this because mortgages can, we've seen the impact of that. But we also need to be aware that a mortgage is a tool, right? And we can utilize that, we can leverage it and understand that even if we're at 6.5%, that doesn't mean we have to be at 6.5 % for 30 years. At some point in time, interest rates will go down. You will have a chance to refinance. You should not leverage yourself to the hilt where you have no margin for error at all. Let me be very clear about that. But we need to look at mortgage instruments as tools. A lot of my clients are from that generation. They're like, I got to pay off my mortgage before I retire. And that's a thing if you can do it. I see clients that pull money out of their IRA to do it and pay 24 % in taxes to pay off a 2 % mortgage, which doesn't make any sense to me. But one thing I recommend for all of my clients is to have a home equity line of credit available. Not to pay for it, not to have a balance on it necessarily, but when you're choosing how to utilize your assets, which is the only value that assets really have is when they're being used.
Iyassu: You
Gary Preisser: We wanna have optionality. Even if it's at a seven and a half percent, if you're only gonna use that for a couple of months, the impact is a lot different than having that for 30 years. So be aware of it, be cognizant of it, make sure that you have a plan for it, but we don't need to be scared of it either because it is a tool and it is all relative.
Iyassu: Yeah, my mother always taught me live within my means for folks who have never bought a house before or who have made the mistake of buying a house that's too expensive for them. ⁓ know, after you buy the house, you have to fill the house, right? And so there's a lot of purchasing that goes ⁓ with, you know, home you just bought and my old employer, the founder of my old ⁓ shop, mutual fund I used to work with.
Gary Preisser: Yes.
Iyassu: He used to love home builders because that was a driver of the economy. And he would always say, like, once a house is bought, you got to fill it, right? And so that tells me the economy is doing great. It's a very different scenario nowadays with home builders. They're not that great of an ⁓ anymore because they made some strategy changes. But ⁓ have to fill that house. There's a lot of expenses that go along with that house. So you want to live ⁓ your means.
Gary Preisser: Yep.
Iyassu: So you don't have to go and take out of your IRA to pay down a 2 % loan. So yeah, that really resonated. that's our weekly recap for today. And I think we're going to pivot towards the special topic with Gary. And why don't we just jump into it, Gary, since you already hinted at parts of it. Take us through the Cash Flow Clock and your framework and you
Gary Preisser: Yes, yes, please don't do that. Please don't do that. Sure.
Iyassu: what was the inspiration for it? then tell us what the conversation should be about the cashflow clock. I was reading up on it and it's very, very interesting. And I liked your approach. I think sharing it with the audience is going to be very helpful for them.
Gary Preisser: Absolutely. So like I said, every financial decision we make, where you live, what you put in that house, where your kids go to school, even what we eat, where we vacation, everything comes down to cashflow. And so why do we do things differently when it comes to investments? Why do we deal with generic portfolios and risk allocations that are not customized? And by utilizing the cashflow clock, because a plan is not stagnant, it moves through time. And so that's why we like to look at it instead of a pie that's being sliced up. Let's look at how your money is going to actually function throughout time. And so the first section of that is usually the first one to five years we utilize what's, that's the lazy zone, as we call it. It's for money market, for short-term savings, emergency funds. It could be for vacation. It could be for education. Maybe you're paying for weddings. Whatever those short, shorter term cashflow needs are, we cannot afford to take on any volatility at all. We call it lazy because it's not going to keep up with inflation. Everyone says, there's inflation, inflation. We don't put all of our assets in lazy money. We have a specific purpose and specific timing for those assets. And I don't care about inflation over the next five years. I do, don't get me wrong, but not nearly as much as liquidity. It's about liquidity. So even if we're underperforming over a couple of years, it's a lot different than not keeping up with inflation over 30 years. So the job for lazy money is to be available, to be liquid, and to be utilized. Even as we go out about six to 10 years, I still can't afford to endure a 30 % drop like we saw in 2008. or some of the issues that we've seen recently. We don't have time to make up for those losses. And so we need to eliminate volatility up to 10 years. This is what we call the safe zone. And what the difference between safe and lazy is we should get a little bit higher rate of return, high enough to keep up with inflation at least. So we're not losing value over that time. But the key still is liquidity. We gotta have access to the money. Once we get past 10 years, that 10 year horizon and beyond, that's where we can afford to take on volatility. That's our volatility zone. That's where we need to take volatility to really drive well past inflation and actually grow our assets. Now, the biggest problem with volatility is that those assets will lose value. It's not if they will. They will at some point in time. We don't know how much. We don't know when exactly. But the problem with that volatility isn't as much the loss or the movement on a day-to-day basis. Over time, the volatility zone, especially if we're choosing the right investments, will give us our best chance to grow. The problem is when we're relying on those assets for short-term income. When the market just dropped 20 % and we need this money, so we're selling out of desperation. What the Cash Flow Clock really does is provide that peace of mind, as you said. where we have time, we can allow those assets to grow without feeling like we need this money for the short term to live our life. I don't want, we want to make sure we're protecting our clients from volatility affecting them on a day-to-day basis. For some of our clients, it actually makes sense when the market's down, great. We're going to shift money out of the lazy or safe zone because we have enough of a cushion and bring it over to the volatility and buy the dip and ride it up.
Iyassu: Mm-hmm.
Gary Preisser: Everybody's a little bit different from that standpoint. But the key is to have those zones segregated with specific purpose and specific timelines so that nothing gets mixed together. One of my biggest issues with the way the industry does it usually is that automatic rebalancing. You may have that 60-40 split and you may be pulling income from that 40 % bond portfolio. But what happens as soon as you do that? Everything gets rebalanced, which means the large cap gross stocks are being sold to fund at least 60 % of your income needs. Now, when the market's up 10%, everybody's happy and nobody really cares. But when the market's down 30%, that's the last thing that you want to do. But it's happening over and over and over again on grand scale because we don't have a customized plan. that's segregating the assets or segmenting them based on purpose and timeline.
Iyassu: think one of the cool things that you also say is you can generate more money, you can't generate more time, and I don't think people appreciate that enough. think one of the cool things that you also say is you can generate more money, you can't generate more time, and I don't think people appreciate that enough.
Gary Preisser: They don't. Time is the only asset that we can't generate more of. It is finite. And what's interesting to me is in our industry, we talk about time as durations. We look forward, we do a Monte Carlo simulation, and we say the average rate of return over this many years, then you're probably going to be okay. Well, forget probably, that's not good enough. We have time and time we need to manage.
Iyassu: Mm-hmm. Mm-hmm.
Gary Preisser: We have time and time we need to manage. And we need to understand, but we also need to understand that life is lived in moments. It's not just five years from now. It is on that specific date. I need that money to be available to function, fulfill its purpose. And we need to understand, but we also need to understand that life is lived in moments. It's not just five years from now. It is on that specific date. I need that money to be available to function, fulfill its purpose. And so this goes back to the customization. We cannot customize for everyone if we're only focused on the duration of time, as opposed to those moments of timing. that make all the difference in the world. Those inflection points, right? When your dad gave you that mutual fund, that moment changed the trajectory of your life. You didn't realize it yet. But there are so many moments on a daily basis, on monthly, yearly basis, and going forward to generations that if we're not at least planning for, and it's impossible to plan perfectly, right? I joke that we at Stonebriar create perfect financial plans if we know when our client is going to die. If we know everything is gonna happen to them between now and then, we know everything's gonna happen in the market between now and then, and everything is gonna happen in the tax code, right? And that's of course impossible. But we should still strive to create a plan that meets the needs, or fulfills the purpose for each one of our clients. We're like the Apollo moon missions, speaking about going to Mars, it's off course 99.9 % of the time, but we're constantly making adjustments.
Iyassu: Mm-hmm.
Gary Preisser: not because they got a year older or not because they feel differently about volatility in the market, but because their needs have changed. And the cashflow clock allows us to have an objective way, a clear way to make those adjustments that are so critical as that need arises. It allows us to stay aligned to the purpose for each one of our clients.
Iyassu: So thinking about just other advisors or your peers, what are they fundamentally mispricing when it comes to matching a client's of wealth strategy with the actual timing of their life goals? Where do you see the gap at with some of the peers out there?
Gary Preisser: The questions are the wrong questions, right? Like I said, instead of asking about cash flow, they ask about feelings. How do you feel about, are you conservative? Are you aggressive? Are you moderate? Guess what? Those terms mean nothing because they are subjective. They mean different things to different people at different times in their lives. What's conservative to you may be aggressive to me, and what's conservative to you now may be aggressive for you 30 years from now. So this is why going back to beta, at least we can understand how much volatility we actually have instead of just a risk classification. But you know, you get prospective clients that come to you and say, if I gave you $500,000 to manage, I'm gonna give you a piece of this to see how you do. What are you gonna do with it? And at first, early in my career, I'd be a little defensive and say, well, what are they looking for? And all these things. Now it's not, I don't answer that with a statement. I answer it with a question. What is the money for? If we start with that question, purpose, and I love Simon Sinek, start with why. Why is the money there? Assets are not trophies. Look what I have. Okay. Look at me, what I've accomplished. Assets are tools. Their only value is in how they are being utilized. We spend a lot of our time with our clients encouraging them to spend more money, which I think most advisors, because we get paid on how much we're managing, that's the last thing they want to have happen. It's all about accumulation. In our clients, it's tough for them because they're so used to saving for retirement, saving for the future, they don't realize they're there. I give my my client Frank a hard time because every time he comes in and sees me, oh, I saved $200 last month. Aren't you proud of me? I'm like Frank, you're 94 years old. What are you saving money for? What's the purpose of this money? If you want to just give it to your kids and give it to him now, whatever that purpose is, that should be driving the conversation every at every single point.
Iyassu: you
Gary Preisser: Our clients are, they admire the ants from Aesop's Fables, you know, that saved food for the winter. And that's great. But I remind them that the end of the story, the ants didn't just look at the food, say, what we did. They used it. They ate the food and they, they utilize it. They fulfilled the purpose for that asset. So if we start with purpose based questions,
Iyassu: Mm-hmm.
Gary Preisser: then the rest of it becomes very clear because once we know the purpose, then we at least have a pretty good idea of the timing of when that's going to happen. And once we understand the timing, then we can design a structure so that we are assigning volatility in the right places and not just spreading it and saying, congratulations, you're diversified because you own 8,000 different. holdings inside of your 25 mutual funds, we're assigning volatility to the timing and the purpose for each client.
Iyassu: Yeah, you just reminded me of the parable. I think it's called the parable of the three sons where the dad gave the sons like, you know, basically some money and two of the sons used it to do kind of cool things. And one son just like kind of buried the coins under a rock. And then when the dad came back, the dad was pissed at the third son. He's like, basically it was, was an allegory or analogy towards talents and, you know, growing your own talents and growing yourself. And yeah, you just reminded me of that.
Gary Preisser: Mm-hmm. You It's absolutely true. It's a big part of it is we, I think we live in fear of losing what we have instead of really seeing that as a tool to expand. It's that abundant mindset instead of the scarcity mindset. once it's impossible to have an abundance mindset unless you know that your income and liquidity needs are taken care of. And I think that's the peace of mind that the cashflow clock really allows is, okay, I can breathe. I can look at this from a long-term perspective instead of wondering how am going to eat tomorrow? And most of our clients are not to that situation. That's an extreme version of it. But there's still, I see way too many people with plenty of assets, but because they don't have a design structure for them, they never feel like they're on stable ground. And so they can't look at it from an abundant standpoint.
Iyassu: So would you, so the Cashflow Clock is an actual book. Would you recommend other advisors or wealth managers to read that book? if so, where can they find it?
Gary Preisser: The book is available for free on my website. You can't get much better than that. So stonebriarwealthadvisors.com. ⁓ And whether you use the terminology or not, think the mindset from the methodology, I think is the only way to really create those customized plans that are what's best for the client. It actually makes it what's best for the advisor because it's a very clear recommendation and it's based on what the advisor is telling us.
Iyassu: You
Gary Preisser: It's not saying, well, you're 60 years old and you seem like you're moderately conservative, so this is going to be okay for you. No, what do you need? Because a 60 year old that's still working and that will have plenty of social security when that starts to cover all their expenses, they should be invested very differently than a 60 year old that's already retired and is pulling out of their IRA until social security hits. And they're not going to have enough. They're going to be constantly pulling from that IRA. And yet, if they both fill out that risk questionnaire similarly, they're going to end up with ⁓ the same allocation, the same portfolio, and it's not going to function for both of them the same way. With the cashflow clock, it forces you to ask those questions about purpose and timing, and it gives us a much better chance to create a functional and effective plan for each client and also be able to know how to adjust that as needed.
Iyassu: So Gary, we're at the part of the show where I get to ask my favorite question, which is, what are you looking forward to next week?
Gary Preisser: ⁓ Next week, well, going back to the housing question, tomorrow I'm starting to pull out carpet from my house that I just bought and replace it with new flooring. ⁓ I don't know if I'm looking forward to that. ⁓ looking forward to that being done. So for me personally, that's of the things that I'm excited about. But the thing that really drives me and gets me up in the morning is the opportunity to make a difference in the lives of our clients.
Iyassu: You
Gary Preisser: Each individual is so precarious. They're in a precarious spot with all the volatility, all the new stories that we talked about during the podcast. can, if we don't have that design structure in place, it can affect them so dramatically. And if we can help provide that peace of mind, help provide that guidance, help provide that structure that they need to allow them to fulfill their purpose and to add value to their lives and the lives of those around them, man, that's one of the things that really gets me excited, not just next week, but any day of the week.
Iyassu: Yeah, it's definitely a coach and spot inspirational talk right there. I loved it. Let's go. So everybody want to thank Gary for joining us on episode 14 of Inside the Flows. Gary, thanks for your presence. Wonderful to have you on here. Talk about your perspective. Talk about the Cash Flow Clock. I'll put in the description Stonebriar's website, a link to the Cash Flow Clock
Gary Preisser: That's right. Let's go.
Iyassu: And, if you guys want to keep the conversation going and you are a registered investment advisor, an asset manager, wealth manager, us on inflows.com. It's free to join, free to use. We'll post the podcast on there as well today And I want to thank you all for joining. Again, special thank you for Gary at Stormbriar joining us and talking about the Cashflow Clock. We'll catch you guys next week. Thanks, Gary.
Gary Preisser: Thank you.
Gary Preisser: Hey, Yasu. Nice to see you today.
Iyassu: It's great to have you. Happy Friday. And you are one of the very few but amazing folks out there who started a business called Stonebriar Wealth Advisors. And so on this show, we typically have folks who are in the registered investment advisory industry. I usually have Nishit ⁓ Ryan on the show, but you are our special ⁓ Wealth Advisor guests, I want to welcome you to the show and thanks for reaching out to get this thing going.
Gary Preisser: Absolutely. Thanks you so much for having me.
Iyassu: Yeah, so we're going to have our typical Friday weekly recap and then go into a special topic with our special guest, Gary. But before we start, I'd love to give you an opportunity to give an introduction to who you are, how you started your firm, what you provide clients and just so folks can get to know you.
Gary Preisser: Absolutely. So I've started or my partner and I started Stonebriar about five years ago now, I guess four and a half. And we both have worked in the industry before we worked together at a firm in Orlando. And we saw things that we liked, we saw things that we didn't. ⁓ I actually came through the accounting background and doing a lot of small business consulting. And so that gave me a very different, unique perspective when it came to personal finance. and it came to wealth management, we look at things differently. We look at things from a cashflow standpoint. We'll talk more about that today, I'm sure. But we're holistic. Every decision that we make affects every other decision. And so we can't just look at investments. We can't just look at taxes. We have to look at everything together, including the state planning, income planning, et cetera. And that's what we do at Stonebriar is take a holistic view. of the entire financial picture and understand how each portion of it can fulfill purpose for each one of our clients.
Iyassu: Yeah, we're going to talk a little bit more about the Cash Flow Clock that you created and you also wrote a book on it, which is pretty cool. I checked that out. ⁓ Do you want to talk a little bit about how you got into the industry? Because I think our audience members tend to skew on the older side and ⁓ kids don't care about history that much. But as you get older, you're like, that story is kind of cool. ⁓ did you get into this space?
Gary Preisser: Yeah. You I had no intention of getting into this space. I'm the I'm the son of teachers, football coach and an English teacher. There's not a lot of need for financial or wealth management for teachers. Unfortunately, that's changed later in their life, but especially growing up, know, is interesting. I only thought that the three professions were being a teacher, a lawyer or a doctor.
Iyassu: You
Gary Preisser: And I knew that teachers didn't make any money. And I thought at the time that all lawyers were scum. So I didn't want to be a lawyer. And so I just assumed I'd become a doctor. Right. When that didn't work out, I had an opportunity, like I said, to get into accounting. saw the difference that taxes made on the tax preparation side. I also saw the misinformation, the miseducation when I saw clients come back and get really excited about a $10,000 tax refund.
Iyassu: You
Gary Preisser: I'm like, why are you excited about this? First of all, you're going to spend it on nothing. And then the other issue, of course, is they have been loaning $10,000 to the government for at least a year, interest free, and they're happy about it. And so that's where my roots as a son of teachers really came through, is wanting to help people better understand their finances. And that grew into small business.
Iyassu: He
Gary Preisser: consulting, helping small business owners, which are so important to understand their finances. They didn't get into the business to understand finances. They got into the business to provide a service or to provide products, whatever the case may be. But that information makes such a difference and determines the success of that business or the failure. And so when I got an opportunity, it's been about 17 years or so now. to take those same concepts and apply them on an individual basis. Because every decision we make comes down to cash flow. We see that in businesses very clearly. We see that with individual households as well. And yet when it comes to investments, we get this risk questionnaire that asks us how we feel. ⁓ How you feel about the market as opposed to when are you going to use the money? And what's the purpose of that money? And so that's kind of my story and what provides this different perspective. It seems like it's different, unfortunately, and allows me to look at a client's plan and a client's needs, really a client's life in a different way that provides structure to protect them against bad decisions.
Iyassu: No, that's great. I had a of a similar, not same, but lightly similar experience as you. I went into college wanting to get into pre-med and then quickly got out of that. I went to finance. I just had not the greatest experience with a doctor. And I was like, yeah, I don't really want to turn out to be like that kind of person. What else can I do? And I kind of looked back into, you when I was a kid and you know, my dad had got me into mutual funds.
Gary Preisser: Hahaha
Iyassu: He's like, you know, I think I had like some allowance that he owed me a lot of money for because he didn't pay me. And instead of paying me, he's like, you know what, we're going to invest this and we're going to put it into the Steinrow Young Investor Fund. And I was like, okay. And then all of sudden I was like reading annual reports and I went back to that. My, I guess my roots, if you want to call it that. And that's how I got into it. But yeah, I had the same experience. like, I'm to be a doctor. And yeah, that wasn't happening.
Gary Preisser: You Yes? And I'm so glad that didn't work out for me because it's, ⁓ you know, I think you probably feel the same, but what an inflection point for your dad to introduce for you so early in life to have that opportunity.
Iyassu: Yeah Yeah, yeah, it was. mean, thankfully the company he was working at had, they had been doing a big push to get employees to contribute more to their ⁓ 401k plan. And so that's when my dad started and he loved to read books. He's like, ⁓ let me read about, you know, investing. And then he got me into it. So, yeah, yeah. Like the, I love doctors is not a knock on doctors. It's, more of a personal thing. You know, I just, didn't have the guts for it.
Gary Preisser: you
Iyassu: And so I was able to help other folks out in other meaningful ways. And I think you talk about that a lot on your website, ⁓ helpful in very different ways. And that's essentially what this industry, at least in the investment advisory space for ⁓ planners and the advisors and the wealth managers is they're really selling ⁓ ⁓ a lot of folks don't understand that ⁓ wealth management is very personal. ⁓
Gary Preisser: Yes.
Iyassu: for personal things, they like to keep it to themselves or with the family when the right step is to get a professional and help you build your wealth in ⁓ that are customized to you ⁓ and household. that was.
Gary Preisser: I could not agree more. And it's ⁓ that the industry has ⁓ to standardize and try to scale their services instead of exactly what you said, make it customized to each individual because this is very personal. We're not talking about laws of large, the law of large numbers. We're not talking about millions of households. We're talking about one household. and what are their needs. what I love about this industry is that just a half hour conversation with some advice, kind of like an inflection point that you had with your dad, can make the difference of hundreds of thousands, if not millions of dollars for that household and for generations to come. And that's one of the best ways that we can help people.
Iyassu: Yeah. And, and, you know, for folks who don't have a financial advisor right now, I always say it on the show, get one, like they, will help you out. You know, it's, it's really tough to try to manage your own wealth by, you know, trading that that's not a probably a good use of your time. There's always somebody else on the other side of the trade that has more information and is smarter and, can make better trades than you. But an advisor can puts you in a good asset allocation, planning, estate planning, tax insurance. Like they can put you in strategies that can holistically take care of you like Gary said earlier. ⁓ I a sense that this industry, when you do these kind of... ⁓ risk profile. you're a person and you do, if you're a household and you do like a risk profile, like I feel like a lot of that is due to a bunch of lawyers who got together and said, we don't want to get sued anymore. this is how we comply with the law. So you have to do it. And then you get this. And I wonder how much of the industry is driven by compliance versus, Hey, this is actual need. Yes, we're going to abide by the law, but this is an actual need that we need to.
Gary Preisser: Yes. It's about compliance.
Iyassu: provide for a client. I'm seeing, you know, I go to these conferences all the time, like Future Proof or the Invest Net Conference, which I skipped this year, but these are really good conferences to hear how advisors are thinking. I think personalization is a personalization and planning is two key themes that I'm hearing more and more of where ⁓ advisors and wealth managers are starting to personalize the wealth building strategies of their households. And so I think what that does is it opens up more opportunities for advisors to provide clients with different experiences. if you're an advisor, you can kind of ⁓ the asset management part ⁓ the side and say, okay, well, we use DFA, that's it, or we use BlackRock. And someone's standard asset manager, not pay so much attention to that, but pay more attention to the planning. So sometimes you have households that are... faith-based or they care about sustainability or they care about, know, they're not just a cookie cutter, you know, some lawyer came up with a risk profile, know, Myers-Briggs, and then you have to play that standard. Like there's customizations out there. And I think a lot of people don't know that. A lot of folks who are not in the investment advisory space don't know that. ⁓ kudos to you guys who are ⁓ the advisors out there and wealth managers.
Gary Preisser: Yes.
Iyassu: who are bringing that customization, that personalization to the investment advisory wealth management space. Because I think that's a huge opportunity that you guys should take.
Gary Preisser: And I think it's the only way to do it properly. And I appreciate what you're saying about having an advisor, but the other side of that is just because you have an advisor, I feel like the old way of doing it, hopefully this doesn't happen as much anymore. The advisor says, trust me with your money, but don't pay attention to what I'm doing with it because this is too complicated for you to understand. It's like the wizard of Oz behind the curtain. Pay no attention to that guy. And that's ridiculous, first of all, because it's not too complicated. Now we don't want our clients to your point necessarily day trading. That's not what we're recommending. They have better things to do. But a big part of what we do is that education piece to allow our clients to understand how to hold their advisor accountable for what's happening. This is not something where, okay, you're hands off, especially for retirees, which most of our clients are. They've got to, this is now their career. This is now their job. It doesn't mean they have to be reading the stock market and following it every day. That is where we can help. But it's not abandoning any responsibility for the outcomes because it really should be customized to their needs. And the only way for that to happen is for them to be involved. And there are some easy ways to help ⁓ clients hold their portfolios accountable. One of the things we teach right off the bat is the concept of beta. How much volatility do they have? And alpha, are they outperforming or underperforming the benchmark? And we don't see a lot of people that are familiar with that. They look at average rates of return instead of alpha. And alpha is not the end all be all. That's not the only measuring stick, but it should be, it's one way where you can say, okay, am I doing better than what, or as good as I should be doing, or am I doing worse? So you can have those conversations with your advisor and really understand what's happening because this is your life. You can't just, can't just say, well, This is advisor did this to me. You have to have this back and forth. It needs to be a collaboration.
Iyassu: Yeah, a hundred percent. I agree with you. And I think a lot of the wealth managers and ⁓ on the independent RA side, ⁓ owner operators that I've spoken to, ⁓ they say those, deeper relationships with the clients tend to be the best clients where, you know, kind like a teacher teaching, you know, students, know, if you're a really good teacher, your, students thrive. And lot of the folks that I've talked to, yeah, their, their households are thriving right now. So. chalked it up to being great teachers.
Gary Preisser: It's got to start with education. It absolutely does.
Iyassu: Yep. So we're going to move on to our weekly recap, where we talk about some stories that made the headlines that are reflective of the investor advisor space and some market commentary as well. think the big dominant one is always it's AI or inflation. That's just the common theme that affects everyone. But I like to pick out some cool stories that that happened and just kind of get folks up to speed when they're in their car driving home from work. And, you know, they probably missed a couple things. early Monday, earlier this week on Monday and Tuesday, we saw on the Wall Street Journal, they reported that Alphabet and Blackstone announced a massive, you $5 billion joint venture to create an AI cloud company. And I think what's interesting about that is for members who don't ⁓ really up with what's going on with Google, ⁓ Google getting into the hardware space where they created these processing units ⁓ basically like chips ⁓ compete with Nvidia. And Nvidia is the most dominant player in the AI hardware space. ⁓ have their GPUs that ⁓ software uses to compute to basically process your requests. And the margins ⁓ on are insane. ⁓ whenever, just for audience members that don't know, whenever ⁓ you a ⁓ business you're in an industry where your margins are really, big, then what that does is sends an indicator to competitors to come into the space and basically drop those margins down. And so that's what basically Google is doing. saw exactly when they saw they needed a technological. ⁓ They needed a technological upgrade to their own processes for AI that weren't reliant on Nvidia, but they also saw an opportunity to kind of compete with Nvidia. And so they. created this joint venture with Blackstone, which is a private equity shop that owns a bunch of data centers. And it's valued at $5 billion. And we should start to see the next year or so these TPUs being produced on mass and provided to other competitors like Meta or Microsoft, maybe even OpenAI might want to purchase some of them. ⁓ Or at least get access to the data centers that have access to these new Google TPUs. So I don't know how your clients are thinking about AI or do you have conversations with clients about AI? Are they on the afraid side or are they pretty ⁓ progressive on, hey, AI is going to be very helpful to us? ⁓
Gary Preisser: I usually get a little bit of both, is always the case with something like this. I think it's clear that AI is not going away. ⁓ This is a great tool that will be part of our lives, I think, forever. That being said, as far as investments are concerned, ⁓ still a lot of volatility. There's... ⁓ a lot of concern about a bubble and I don't know if that's ever gonna be the case or not. The real key for our clients is understanding where they have volatility in their portfolio and how that's going to affect their day-to-day life ⁓ because then it becomes more of a headline as opposed to really affecting them ⁓ their portfolio. But these are discussions that we're having because AI is so dominant and it's led to so much growth, but what goes up sometimes goes down and we need to be aware of that and cognizant of kind of where that industry is going because it's driving so many other parts of the market as a whole.
Iyassu: I love the fact that you brought up, know, when an industry goes up, it can also go down. I'm wondering, you know, what are conversations like when the market does go down? ⁓ Are folks, you know, quick to say, hey, know, sell, sell, sell, like get me out of this stuff. want to go to cash or, you know, are they more disciplined, you know, attributing to your, your education ⁓ of your. to their households. What do you typically see?
Gary Preisser: Well, I'm going to brag on my clients a little bit because one of the things we're most proud of here at Stonebriar is several weeks ago when the market was down, we got calls from our clients saying, it time to do my Roth conversion? Because the best time to convert to a Roth is when the market is down, we're get a discount on our taxes and then we ride the rebound up tax free.
Iyassu: Yeah. ⁓
Gary Preisser: So we did a bunch of Roth conversions in April. And guess what? Last year, when the tariffs hit, we did a bunch of Roth conversions. So by looking at it from a holistic standpoint, a good day in the market means you're going to pay more taxes. And I'll take that deal any day of the week. Let me be clear. But when a bad day in the market might be a tax opportunity, but only if we're prepared for it. The other aspect, the other side of that, and that kind of goes into the cashflow clock is if we have enough income and liquidity covered for the next five to 10 years, then that volatility becomes, it becomes noise and really an opportunity. We have more of our clients, even in their 70s and 80s, that when the market's down, it's buy more because their income and liquidity for the next five to 10 years is already covered. They can afford to do that. If you are pulling assets or pulling income from volatile assets, including large cap growth stocks, then that's a completely different conversation. Every movement in the market is a threat. And it's like you're just, you're living in fear constantly. And fortunately for our clients, in most cases at least, we're able to create a structure, design a structure for them where it's not a threat anymore in the same way that it might be otherwise.
Iyassu: Yeah, it sounds like you give your clients peace of mind, which is really nice.
Gary Preisser: That is the goal. That's the goal.
Iyassu: So moving on to Wednesday, Bloomberg reported that Elon Musk's SpaceX is officially filed for a NASDAQ IPO. And they're looking to raise over $75 billion for this IPO. There's some interesting aspects about it where I don't think audience members are corporate governance gurus, but SpaceX is releasing less than 10 % of their outstanding shares. ⁓ call it the float, the public. And that, you less than, I think it's like four or 5 % is going to be valued at $75 billion. ⁓ So if you want to think about wealth generation, that would mean that when Elon is compensated for his work and his ownership of SpaceX, he gets into like the trillion dollar kind of category, which is insane. ⁓ It's like
Gary Preisser: It's nuts.
Iyassu: I mean, he has to hit these crazy goals in order to get paid that a much like get million people on Mars. But just from a corporate governance standpoint, it's printed on paper, you can read it. He could potentially be a trillionaire. And you know, that's on top of his wealth that he's built on Tesla. So it's the AI boom is real. And we're now we're not talking about when I was a kid, you know, 100 millionaire was like the thing that was like the richie rich kind of moment. And then
Gary Preisser: That's right.
Iyassu: I was in college, it's like, ⁓ you're going to be a billionaire. You're to be a Bill Gates billionaire. Now it's going to be Elon Musk trillionaire. It's kind of crazy and nutty how these numbers have just grown.
Gary Preisser: And the orders of magnitude above billionaire to get to that point just is astounding. It's, yeah, it's a new world. It's a different world.
Iyassu: Yeah, well, you know, good luck on Elon getting folks on to Mars. If you can figure that out, ⁓ you you you earn that trillion dollars. So by the end of the week, Main Street Bloomberg reported that mortgage rates have surged to their highest August. So we're looking at six and a half percent ⁓ a 30 year fixed loan. ⁓ ⁓ know, for folks who are looking to ⁓
Gary Preisser: You
Iyassu: buy a new house, it would probably be a little tough. 6.5 % is, that's challenging. And for folks who are new home buyers, so the ones who are in their maybe late thirties or early thirties, or sorry, late twenties, early thirties, I don't know if this would be the greatest time to buy. If you have that 20%, you can put it down, but that's 6.5 % on your mortgage is going to be pretty tough. I think my first house I bought was at 3.5%, 3.6%. So, you know, it was a very, very big difference. And, you know, for folks who have an annual income, you know, of maybe a hundred thousand dollars or.
Gary Preisser: It's a big difference.
Iyassu: maybe $75,000, 6.5 % is, that's quite a lot for them to be paying monthly out of their paycheck.
Gary Preisser: Well, that's hurting me right now because I'm selling a house and I have my mortgage on the house is at 2.625%. And I just wish I could give it to somebody. My HOA doesn't allow me to rent it, which really is frustrating because otherwise I would keep that house forever. But it's a different world and... I see this a lot with my clients who want to help their kids and grandkids get into houses. And so this really is part of our conversations on a regular basis. But I also want ⁓ potential home buyers to think about because the interest rates are so high, there's fewer buyers out there, which means that it becomes more of a buyer's market. me personally, I'd be happy to get off of that house as quickly as I can. so if you're willing, and I'm not, we need to be very careful about this because mortgages can, we've seen the impact of that. But we also need to be aware that a mortgage is a tool, right? And we can utilize that, we can leverage it and understand that even if we're at 6.5%, that doesn't mean we have to be at 6.5 % for 30 years. At some point in time, interest rates will go down. You will have a chance to refinance. You should not leverage yourself to the hilt where you have no margin for error at all. Let me be very clear about that. But we need to look at mortgage instruments as tools. A lot of my clients are from that generation. They're like, I got to pay off my mortgage before I retire. And that's a thing if you can do it. I see clients that pull money out of their IRA to do it and pay 24 % in taxes to pay off a 2 % mortgage, which doesn't make any sense to me. But one thing I recommend for all of my clients is to have a home equity line of credit available. Not to pay for it, not to have a balance on it necessarily, but when you're choosing how to utilize your assets, which is the only value that assets really have is when they're being used.
Iyassu: You
Gary Preisser: We wanna have optionality. Even if it's at a seven and a half percent, if you're only gonna use that for a couple of months, the impact is a lot different than having that for 30 years. So be aware of it, be cognizant of it, make sure that you have a plan for it, but we don't need to be scared of it either because it is a tool and it is all relative.
Iyassu: Yeah, my mother always taught me live within my means for folks who have never bought a house before or who have made the mistake of buying a house that's too expensive for them. ⁓ know, after you buy the house, you have to fill the house, right? And so there's a lot of purchasing that goes ⁓ with, you know, home you just bought and my old employer, the founder of my old ⁓ shop, mutual fund I used to work with.
Gary Preisser: Yes.
Iyassu: He used to love home builders because that was a driver of the economy. And he would always say, like, once a house is bought, you got to fill it, right? And so that tells me the economy is doing great. It's a very different scenario nowadays with home builders. They're not that great of an ⁓ anymore because they made some strategy changes. But ⁓ have to fill that house. There's a lot of expenses that go along with that house. So you want to live ⁓ your means.
Gary Preisser: Yep.
Iyassu: So you don't have to go and take out of your IRA to pay down a 2 % loan. So yeah, that really resonated. that's our weekly recap for today. And I think we're going to pivot towards the special topic with Gary. And why don't we just jump into it, Gary, since you already hinted at parts of it. Take us through the Cash Flow Clock and your framework and you
Gary Preisser: Yes, yes, please don't do that. Please don't do that. Sure.
Iyassu: what was the inspiration for it? then tell us what the conversation should be about the cashflow clock. I was reading up on it and it's very, very interesting. And I liked your approach. I think sharing it with the audience is going to be very helpful for them.
Gary Preisser: Absolutely. So like I said, every financial decision we make, where you live, what you put in that house, where your kids go to school, even what we eat, where we vacation, everything comes down to cashflow. And so why do we do things differently when it comes to investments? Why do we deal with generic portfolios and risk allocations that are not customized? And by utilizing the cashflow clock, because a plan is not stagnant, it moves through time. And so that's why we like to look at it instead of a pie that's being sliced up. Let's look at how your money is going to actually function throughout time. And so the first section of that is usually the first one to five years we utilize what's, that's the lazy zone, as we call it. It's for money market, for short-term savings, emergency funds. It could be for vacation. It could be for education. Maybe you're paying for weddings. Whatever those short, shorter term cashflow needs are, we cannot afford to take on any volatility at all. We call it lazy because it's not going to keep up with inflation. Everyone says, there's inflation, inflation. We don't put all of our assets in lazy money. We have a specific purpose and specific timing for those assets. And I don't care about inflation over the next five years. I do, don't get me wrong, but not nearly as much as liquidity. It's about liquidity. So even if we're underperforming over a couple of years, it's a lot different than not keeping up with inflation over 30 years. So the job for lazy money is to be available, to be liquid, and to be utilized. Even as we go out about six to 10 years, I still can't afford to endure a 30 % drop like we saw in 2008. or some of the issues that we've seen recently. We don't have time to make up for those losses. And so we need to eliminate volatility up to 10 years. This is what we call the safe zone. And what the difference between safe and lazy is we should get a little bit higher rate of return, high enough to keep up with inflation at least. So we're not losing value over that time. But the key still is liquidity. We gotta have access to the money. Once we get past 10 years, that 10 year horizon and beyond, that's where we can afford to take on volatility. That's our volatility zone. That's where we need to take volatility to really drive well past inflation and actually grow our assets. Now, the biggest problem with volatility is that those assets will lose value. It's not if they will. They will at some point in time. We don't know how much. We don't know when exactly. But the problem with that volatility isn't as much the loss or the movement on a day-to-day basis. Over time, the volatility zone, especially if we're choosing the right investments, will give us our best chance to grow. The problem is when we're relying on those assets for short-term income. When the market just dropped 20 % and we need this money, so we're selling out of desperation. What the Cash Flow Clock really does is provide that peace of mind, as you said. where we have time, we can allow those assets to grow without feeling like we need this money for the short term to live our life. I don't want, we want to make sure we're protecting our clients from volatility affecting them on a day-to-day basis. For some of our clients, it actually makes sense when the market's down, great. We're going to shift money out of the lazy or safe zone because we have enough of a cushion and bring it over to the volatility and buy the dip and ride it up.
Iyassu: Mm-hmm.
Gary Preisser: Everybody's a little bit different from that standpoint. But the key is to have those zones segregated with specific purpose and specific timelines so that nothing gets mixed together. One of my biggest issues with the way the industry does it usually is that automatic rebalancing. You may have that 60-40 split and you may be pulling income from that 40 % bond portfolio. But what happens as soon as you do that? Everything gets rebalanced, which means the large cap gross stocks are being sold to fund at least 60 % of your income needs. Now, when the market's up 10%, everybody's happy and nobody really cares. But when the market's down 30%, that's the last thing that you want to do. But it's happening over and over and over again on grand scale because we don't have a customized plan. that's segregating the assets or segmenting them based on purpose and timeline.
Iyassu: think one of the cool things that you also say is you can generate more money, you can't generate more time, and I don't think people appreciate that enough. think one of the cool things that you also say is you can generate more money, you can't generate more time, and I don't think people appreciate that enough.
Gary Preisser: They don't. Time is the only asset that we can't generate more of. It is finite. And what's interesting to me is in our industry, we talk about time as durations. We look forward, we do a Monte Carlo simulation, and we say the average rate of return over this many years, then you're probably going to be okay. Well, forget probably, that's not good enough. We have time and time we need to manage.
Iyassu: Mm-hmm. Mm-hmm.
Gary Preisser: We have time and time we need to manage. And we need to understand, but we also need to understand that life is lived in moments. It's not just five years from now. It is on that specific date. I need that money to be available to function, fulfill its purpose. And we need to understand, but we also need to understand that life is lived in moments. It's not just five years from now. It is on that specific date. I need that money to be available to function, fulfill its purpose. And so this goes back to the customization. We cannot customize for everyone if we're only focused on the duration of time, as opposed to those moments of timing. that make all the difference in the world. Those inflection points, right? When your dad gave you that mutual fund, that moment changed the trajectory of your life. You didn't realize it yet. But there are so many moments on a daily basis, on monthly, yearly basis, and going forward to generations that if we're not at least planning for, and it's impossible to plan perfectly, right? I joke that we at Stonebriar create perfect financial plans if we know when our client is going to die. If we know everything is gonna happen to them between now and then, we know everything's gonna happen in the market between now and then, and everything is gonna happen in the tax code, right? And that's of course impossible. But we should still strive to create a plan that meets the needs, or fulfills the purpose for each one of our clients. We're like the Apollo moon missions, speaking about going to Mars, it's off course 99.9 % of the time, but we're constantly making adjustments.
Iyassu: Mm-hmm.
Gary Preisser: not because they got a year older or not because they feel differently about volatility in the market, but because their needs have changed. And the cashflow clock allows us to have an objective way, a clear way to make those adjustments that are so critical as that need arises. It allows us to stay aligned to the purpose for each one of our clients.
Iyassu: So thinking about just other advisors or your peers, what are they fundamentally mispricing when it comes to matching a client's of wealth strategy with the actual timing of their life goals? Where do you see the gap at with some of the peers out there?
Gary Preisser: The questions are the wrong questions, right? Like I said, instead of asking about cash flow, they ask about feelings. How do you feel about, are you conservative? Are you aggressive? Are you moderate? Guess what? Those terms mean nothing because they are subjective. They mean different things to different people at different times in their lives. What's conservative to you may be aggressive to me, and what's conservative to you now may be aggressive for you 30 years from now. So this is why going back to beta, at least we can understand how much volatility we actually have instead of just a risk classification. But you know, you get prospective clients that come to you and say, if I gave you $500,000 to manage, I'm gonna give you a piece of this to see how you do. What are you gonna do with it? And at first, early in my career, I'd be a little defensive and say, well, what are they looking for? And all these things. Now it's not, I don't answer that with a statement. I answer it with a question. What is the money for? If we start with that question, purpose, and I love Simon Sinek, start with why. Why is the money there? Assets are not trophies. Look what I have. Okay. Look at me, what I've accomplished. Assets are tools. Their only value is in how they are being utilized. We spend a lot of our time with our clients encouraging them to spend more money, which I think most advisors, because we get paid on how much we're managing, that's the last thing they want to have happen. It's all about accumulation. In our clients, it's tough for them because they're so used to saving for retirement, saving for the future, they don't realize they're there. I give my my client Frank a hard time because every time he comes in and sees me, oh, I saved $200 last month. Aren't you proud of me? I'm like Frank, you're 94 years old. What are you saving money for? What's the purpose of this money? If you want to just give it to your kids and give it to him now, whatever that purpose is, that should be driving the conversation every at every single point.
Iyassu: you
Gary Preisser: Our clients are, they admire the ants from Aesop's Fables, you know, that saved food for the winter. And that's great. But I remind them that the end of the story, the ants didn't just look at the food, say, what we did. They used it. They ate the food and they, they utilize it. They fulfilled the purpose for that asset. So if we start with purpose based questions,
Iyassu: Mm-hmm.
Gary Preisser: then the rest of it becomes very clear because once we know the purpose, then we at least have a pretty good idea of the timing of when that's going to happen. And once we understand the timing, then we can design a structure so that we are assigning volatility in the right places and not just spreading it and saying, congratulations, you're diversified because you own 8,000 different. holdings inside of your 25 mutual funds, we're assigning volatility to the timing and the purpose for each client.
Iyassu: Yeah, you just reminded me of the parable. I think it's called the parable of the three sons where the dad gave the sons like, you know, basically some money and two of the sons used it to do kind of cool things. And one son just like kind of buried the coins under a rock. And then when the dad came back, the dad was pissed at the third son. He's like, basically it was, was an allegory or analogy towards talents and, you know, growing your own talents and growing yourself. And yeah, you just reminded me of that.
Gary Preisser: Mm-hmm. You It's absolutely true. It's a big part of it is we, I think we live in fear of losing what we have instead of really seeing that as a tool to expand. It's that abundant mindset instead of the scarcity mindset. once it's impossible to have an abundance mindset unless you know that your income and liquidity needs are taken care of. And I think that's the peace of mind that the cashflow clock really allows is, okay, I can breathe. I can look at this from a long-term perspective instead of wondering how am going to eat tomorrow? And most of our clients are not to that situation. That's an extreme version of it. But there's still, I see way too many people with plenty of assets, but because they don't have a design structure for them, they never feel like they're on stable ground. And so they can't look at it from an abundant standpoint.
Iyassu: So would you, so the Cashflow Clock is an actual book. Would you recommend other advisors or wealth managers to read that book? if so, where can they find it?
Gary Preisser: The book is available for free on my website. You can't get much better than that. So stonebriarwealthadvisors.com. ⁓ And whether you use the terminology or not, think the mindset from the methodology, I think is the only way to really create those customized plans that are what's best for the client. It actually makes it what's best for the advisor because it's a very clear recommendation and it's based on what the advisor is telling us.
Iyassu: You
Gary Preisser: It's not saying, well, you're 60 years old and you seem like you're moderately conservative, so this is going to be okay for you. No, what do you need? Because a 60 year old that's still working and that will have plenty of social security when that starts to cover all their expenses, they should be invested very differently than a 60 year old that's already retired and is pulling out of their IRA until social security hits. And they're not going to have enough. They're going to be constantly pulling from that IRA. And yet, if they both fill out that risk questionnaire similarly, they're going to end up with ⁓ the same allocation, the same portfolio, and it's not going to function for both of them the same way. With the cashflow clock, it forces you to ask those questions about purpose and timing, and it gives us a much better chance to create a functional and effective plan for each client and also be able to know how to adjust that as needed.
Iyassu: So Gary, we're at the part of the show where I get to ask my favorite question, which is, what are you looking forward to next week?
Gary Preisser: ⁓ Next week, well, going back to the housing question, tomorrow I'm starting to pull out carpet from my house that I just bought and replace it with new flooring. ⁓ I don't know if I'm looking forward to that. ⁓ looking forward to that being done. So for me personally, that's of the things that I'm excited about. But the thing that really drives me and gets me up in the morning is the opportunity to make a difference in the lives of our clients.
Iyassu: You
Gary Preisser: Each individual is so precarious. They're in a precarious spot with all the volatility, all the new stories that we talked about during the podcast. can, if we don't have that design structure in place, it can affect them so dramatically. And if we can help provide that peace of mind, help provide that guidance, help provide that structure that they need to allow them to fulfill their purpose and to add value to their lives and the lives of those around them, man, that's one of the things that really gets me excited, not just next week, but any day of the week.
Iyassu: Yeah, it's definitely a coach and spot inspirational talk right there. I loved it. Let's go. So everybody want to thank Gary for joining us on episode 14 of Inside the Flows. Gary, thanks for your presence. Wonderful to have you on here. Talk about your perspective. Talk about the Cash Flow Clock. I'll put in the description Stonebriar's website, a link to the Cash Flow Clock
Gary Preisser: That's right. Let's go.
Iyassu: And, if you guys want to keep the conversation going and you are a registered investment advisor, an asset manager, wealth manager, us on inflows.com. It's free to join, free to use. We'll post the podcast on there as well today And I want to thank you all for joining. Again, special thank you for Gary at Stormbriar joining us and talking about the Cashflow Clock. We'll catch you guys next week. Thanks, Gary.
Gary Preisser: Thank you.
