Episode 141: Entrepreneurial Success Comes with Risk but Are Your Financial Strategies Secure?

Risk is a huge part of entrepreneurship. But it’s more than a numbers game—it's about identifying where your finances stray from your core values and life goals. As we come closer to the end of the financial planning stage of the Whole Wealth Journey, we dive deeply into the realm of risk management and the unique risks facing entrepreneurs. 

Join us as we share insights gained from a lifetime of entrepreneurship - plus three decades of helping other successful entrepreneurs discover what’s next. Whether navigating the emotional complexities of business exit planning or optimizing tax strategies for lifetime income and legacy planning, our discussion emphasizes the importance of taking all the time you need for planning your whole wealth journey. 

Matthew will introduce you to a 79-year-old entrepreneur who’s discovering what’s next after becoming the best in the world at his craft, a career of selflessly helping others. How does he begin to explore Life 3.0, and will he allow Matthew the opportunity to help?

Jim will offer us some insight on the power and purpose of an Employee Stock Ownership Plan (ESOP) as a potential risk gamechanger for business owners. We revisit a pivotal conversation with Jim’s old friend, Tommy, a very forward-thinking entrepreneur who leveraged an ESOP to not only secure critical hires, but also gain a competitive edge that completely separated his business from the competition.  

Through personal stories infused with vulnerability and hints of sarcasm, you’ll hear firsthand how we guide entrepreneurs through the world of wealth management - how they think about money, how they create it, use it, invest it, risk it, improve their relationship with it, so ultimately … they can be free of it. 

You can learn more about The Whole Wealth Journey by visiting The Gebhardt Group. You can follow us on Instagram @thewholewealthjourney

Transcript

Matthew Grishman: [00:00:00] You know what, that just opened up is the next conversation is you guys get to sit down and talk about this conversation of risk and the three different components of risk. We just, we don't dive into this enough and help people understand this enough again as an industry. Because 

Jim Gebhardt: it's 

Matthew Grishman: about more, Matthew, all the more until more, huh?

Until we don't need anymore. 

Jim Gebhardt: No, it's not about needing more. I want more. 

Matthew Grishman: We could always want more until we don't anymore. Right. And that's the shift. And then what happens? Uh huh. And then we need to figure out what's next, right?

Hey, welcome into the whole wealth journey. 

Jim Gebhardt: What's that? It's 

Matthew Grishman: our podcast. Come on. It's podcast day. 

Jim Gebhardt: Podcast day. 

Matthew Grishman: I love being here in studio with you. When [00:01:00] we are here to discover wealth with a Y. What is wealth with a Y brother? 

Jim Gebhardt: Wealth with a Y is about being intentional with your money. and helping you see what are the values that mean the most to you.

What are the people that mean the most to you? What are the places that mean the most to you and aligning your money for that mission? 

Matthew Grishman: Awesome. That's what we're here to do. So who are we? Oh yeah. Jim Gebhardt and Matthew Grishman. We are the co creators of this podcast, the whole wealth journey. Who's it for?

Who should be listening today? 

Jim Gebhardt: It is for those entrepreneurs that are out there that have these thriving businesses and they have plenty of money and they're trying to figure out, I'd like to do something with my money than just collect more money. 

Matthew Grishman: Awesome. Well, let's go. I have some gratitude today.

Jim Gebhardt: Okay, fantastic. 

Matthew Grishman: I'm all ears. The Grishman family has officially produced the next great Grishman entrepreneur. There is a new entrepreneur in the Grishman tribe and his name [00:02:00] is Hank Grishman. Well, welcome to the club. Hank Grishman has officially incorporated Grishman Associates. Wow. In the great state of New York.

Wes Gebhardt would be so proud with Gebhardt Associates. Right? There's Gebhardt Associates. There's now Grishman Associates. How about it? At 79 and a half years old. My father has entered the world of the entrepreneur. Holy cow. That is awesome. It is awesome. And there's so much opportunity. I have a little bit of positive focus with this gratitude because I'm 

Jim Gebhardt: thinking SEPs and SIMPLs Defined Benefit Plans and all kinds 

Matthew Grishman: of stuff.

Big fat Defined Benefit Plan. Like you need that at 79. Right now. Exactly. Let's defer some taxes, Hank, because, you know. Why not? I love the positive focus opportunity here of what I look forward to. As a school superintendent, he's been mostly responsible for managing half [00:03:00] of a balance sheet. The goes ins.

No, the goes outs. The goes outs. Right? Sure. How he spends it. The goes ins, he's, well Somewhat scripted. I was gonna say, you know what? I need to change that. He has been responsible for both sides of the balance sheet. In fact, the goes ins might be part of his unique ability that I kind of had a sense and I'm just realizing it now.

He is the only superintendent in the state of New York who has never lost a school budget vote. Now, this might be a foreign concept to our California tribe members who are listening right now who don't remember life in California pre Prop 13. In the state of New York, every school district votes on its own school budget.

because if that budget passes, there's a direct financial implication to your property taxes because the bulk of your property taxes go to your local school district. They 

Jim Gebhardt: don't have majors like we have in California. They do 

Matthew Grishman: not have majors. And what 

Jim Gebhardt: the hell is a [00:04:00] major? 

Matthew Grishman: I listen to people 

Jim Gebhardt: say major D, major.

I'm like, what in the heck is that? 

Matthew Grishman: It's 

Jim Gebhardt: more 

Matthew Grishman: money. Oh, 

Jim Gebhardt: go. Why don't I go have some almonds 

Matthew Grishman: while I'm at it? Exactly. It's the school district trying to raise the money they actually need because the state of California has done such an awful job of managing the money that they have on the goes ins from our taxes that schools just don't get nearly what they need to educate our children.

Jim Gebhardt: So that's quite a beyond hall of fame. That's goat status. So 

Matthew Grishman: every year, Hank proposes a budget with his board of education to the public in the district. This is how much money we want to raise to do. A, B, C, X, Y, and Z. Hank is 47 for 47. That's pretty good. That's, 

Jim Gebhardt: that's a wee bit beyond pretty good. I think where 

Matthew Grishman: I'm excited.

Jim Gebhardt: That's undefeated in sports terminology. It is undefeated. I know you're not really a sports guy. 

Matthew Grishman: Well, I'm not, but I'm getting there. If he were sitting right here, I don't know if he [00:05:00] could tell you why that happens or how that happens other than, well, Grishman, they love me, right? Which I appreciate because I got a little of that.

But to actually spend some time with him now, and have the time and the space to figure out exactly what it is, what is going on there that allows you to be 47 for 47 when no other superintendent in the history of the state of New York has been able to go undefeated like that in getting every single school budget to pass, getting all the dollars you need?

Jim Gebhardt: Well, I'm gonna go out on a limb and suggest it has something to do with connection and communication. It might. It very much might. It might. 

Matthew Grishman: It's 

Jim Gebhardt: something in that world of unique ability. There's something in the connection column and something in the communication column that builds the third word that is kind of paramount to all of that, which is consensus.

Matthew Grishman: Yeah. That seems to be what he's gotten, 47 out of 47 times. I'd say so. 

Jim Gebhardt: Well, that will be, as Jim Kelly would have said, that will not [00:06:00] be a small conversation. 

Matthew Grishman: Well, what do you and I love more than perhaps our families and our people? What do we love more than helping? A budding entrepreneur explore their unique ability to figure out what's next.

I can't think of anything in business I enjoy doing more than that and now I get to do it with my dad. Oh my gosh. If he lets me. 

Jim Gebhardt: I was going to say maybe if he lets me. He did call me earlier today but I'll call him back later. Did he? No. Well 

Matthew Grishman: they're coming out in a couple days for a visit. I'm busting your chops.

I thought maybe he did. I'm busting your chops. Well I'd be honored if he called you and started this journey. That would be lovely. Right? That'd be lovely. What are you grateful for today? I have no idea. No. Um, that's fine. That's a wrap. There we go. Let's just rip today. Do we even have to look at the script?

Can we just go? I think we 

Jim Gebhardt: should. At some point. We got a couple of good things to talk about. You know, in that, in that column of connection. Yeah. I'm going to use, I have a lot of gratitude today, but the one that's bubbling up [00:07:00] is a conversation I had last week with a very long time client and 25 years or maybe more.

And it came as a result of. A deposit that he made into one of his accounts that I've just kind of been going along with it. It has to do with a particular exit strategy called an ESOP, which is where you sell the business to the employees. Well, like I said, I've known this, this gentleman a long time.

I've known his business partner for most of that time, but not very well. And some other ancillary members of the family. And I've really not had much interest in engaging much because of some of these ancillary members of the family. Uh, Uh, just not my cup of tea, just not how I roll. 

Matthew Grishman: Well, you're not all things to all people anymore.

No, 

Jim Gebhardt: no. And then I found out, so I, so he makes his deposit and, uh, not a huge communicator, you know, certainly very short phone calls, very short, you know, one [00:08:00] sentence kind of email kind of guy. And I was like, Hey, Tommy. Saw that deposit. Would love to just get together with you and sit down and hear the vision, hear the game plan.

Fires right back. That'd be great. How about next Thursday? Boom! Wow, we're off to the races. Next Thursday. Sit down. Quick start. Love it. Hey, by the way, my partner, I cashed him out. I own the business 100%. Nice. Really? So, the circus is leaving town? Oh yeah, yeah, yeah, yeah. That's all done. All done. I own 100%.

Huh. Tell me more about the ESOP. Employee 

Matthew Grishman: stock option plan? 

Jim Gebhardt: Ownership plan. Yeah. And so we, we sat there for like an hour and 20 minutes. Wow. And went deep on a variety of subjects relative to the business, relative to family, relative to finances. And I said, you know, it really sounds to me, Tommy, like we should do some planning.

Not just the financial planning, but also the personal planning on what you're going to do after this little thing that [00:09:00] you've been running for 30 years. Did you share any statistics with 

Matthew Grishman: him about what happens to many after that? No, but 

Jim Gebhardt: I was going to on the show today. That led to, you know, I think, I think the wife and I should really come in and sit down with you guys and do some planning.

And after I got myself back up off of the floor and got back in the chair. Right. Because, I mean, we've really never gone anywhere in this conversation in the past. And now it's just like whoosh. Like just. Can't, now he can't do it fast enough, right? Because the nature of an ESOP transaction is it's going to take a few years.

It's not a, it's not a 2024, 2025 item. What 

Matthew Grishman: entrepreneur have you ever met that doesn't see the vision of the future and wants to like pause and take his time going through with it and doesn't want it done yesterday? I mean, that's part of how we're wired. Yeah. We see it and I want it now, because now I can't unsee it.

Jim Gebhardt: Now I can't unsee it, and the challenge is, for most business owners, they don't spend the time on the planning. Sure. [00:10:00] Either getting the business ready, getting themselves ready, or getting their personal finances ready. So that's what I'm, it's a long gratitude, but that's what I'm grateful for is that we're off to the races with a guy that I've had a tremendous amount of respect with.

But don't really know him super well. But my goodness, that, that hour, hour and a half conversation really kind of took things to a much different level. And now I'm, I'm super excited to have him get to know you and vice versa and help him start to, you know, look at that exit with a whole different degree of confidence.

Sure. Because as I shared with him, and he's an incredible businessman, but he has a little bit of a tendency to go off and do things a little bit on his own without much communication. Sure. And I shared with him, I said, okay, look, an ESOP is not something you do in isolation. It is an orchestrated, well planned strategy.

And you don't just go off willy nilly and, you know, make [00:11:00] deposits and sell shares back to the ESOP trust and da da da da da da, to really maximize the benefit of this. And okay, so let's take a look. Take an offering up here and just talk very briefly about the benefit of an ESOP transaction to a business owner.

Matthew Grishman: How did he come to the conclusion that the best exit strategy was an employee stock option purchase plan? 

Jim Gebhardt: Was not involved in any of that, which is kind of exactly what I'm talking about. Like at some point, I'll take some, I'll take 

Matthew Grishman: some 

Jim Gebhardt: accountability in terms of, you know, not being in touch with him enough on that.

But again, it was a little bit of a, you know, I'm just leaving. I got a sleeping dog over here that, 

Matthew Grishman: and you're not going to chase somebody who for 25 years has been somewhat elusive and not wanting to, and that's okay. Yeah. Well, there was, 

Jim Gebhardt: there's asterisks to the conversation that, you know, I was equally culpable.

All right. There always. So the nature of it on your part, thank you, thank you, Dr. Phil and ESOP transaction has a, has a lot of pluses to it. One of the big pluses to the ownership that is looking to sell. Is [00:12:00] there is a way to defer your capital gains tax on the transaction for your lifetime and it gets kind of assuming 

Matthew Grishman: it a little bit over time or deferring it completely can 

Jim Gebhardt: you can and this is we could do we could and will do an entire episode on ESOPs.

But there's a way with what's called 1042 qualified replacement property to be able to take the proceeds from the sale of the business. Invest them in certain securities. And as long as those securities are not transacted or matured during your lifetime, you therefore defer till your death or the death of your partner, your spouse, and then you can step up in basis.

Matthew Grishman: I assume by securities you're not talking about Nvidia or Tesla stock. 

Jim Gebhardt: Most certainly I am. Oh. Uh, now they have to, there's, there's a whole measurement tool. So it can't be individual stock. It can't be. You just can't trade it. Ah. But you can trade it under unique provisions to this. Nice. You can take margin loans against what are called floating [00:13:00] rate notes, and I'm going way down the rabbit hole of the technical mumbo jumbo here, but suffice it to say, it is a powerful strategy for the employer.

in the sense that they can defer the capital gains tax on the transaction. It becomes an incredibly powerful tool for the employee because now they have ownership in this business. Yep. That again, we'll, we'll do a whole show on this. I'm not going to go down the rabbit hole on that. But one of the most unique things that Tommy shared with me is he said, from a recruiting standpoint, he's brought on three critical hires in the last year.

As a result of being an employee owned business, because these were all very talented players. If Ty goes to the runner and your offer and Bob's offer and Sam's offer are all the same, but one's an employee owned business and that key hire can have some skin in the growth and the success of that business.

That's where he's been able to pick up three really critical hires that he [00:14:00] thinks at the end of the day, he would not have been able to do had he not gone down the ESOP route. 

Matthew Grishman: Well, cause really, dude. In that case, there's no tie. You know that in baseball, that's a An axiomatic something or other? Yeah, that's kind of like the over the back call in basketball that doesn't really exist.

There's no foul for coming over the back. It's if you make contact. But I mean, you know, Dikembe Mutombo, God rest his soul. Was brilliant at being able to reach over the little, the little guard and take the basketball away from him without 

Jim Gebhardt: seven foot, whatever. 

Matthew Grishman: That's what I'm saying, but he never got called for an over the back for that.

We used to, and it's the same in baseball with, you know, tie goes to the runner. There never is a tie physics. Don't allow. The tie. And that's why instant replay now makes it clear that someone got there first. And in this case with Tommy, he's kind of beating out all the runners by having ownership capability and his recruiting calls.

That's 

Jim Gebhardt: a good point. 

Matthew Grishman: No, [00:15:00] no tie there, baby. That's an obvious winner to me. 

Jim Gebhardt: Yeah. 

Matthew Grishman: Way to go. Uh, well. Lots of gratitude. That ties beautifully into what we've been talking about, what we're going to continue to talk about as we're kind of rolling out the Whole Wealth Journey curriculum, what we do when we work with an entrepreneur like Tommy to be able to fully prepare.

For that transaction, for the ESOP, right? This idea of you guys sitting down and having some conversation about what's next, what does life look like, and helping Tommy and his partner prepare for this transaction. I mean, what was the statistic you shared an episode or two ago? 

Jim Gebhardt: I got lots of them, but I got a new one.

A new one? I got a new one. The regret statistic? No. Well, there's that one. Sure, we'll bring that back up. Sure. But by the end of 2024, Okay. all baby boomers will be 60 years old. And older. All baby boomers will be between the ages of 60 [00:16:00] and 80. Right. And the majority That makes sense. The youngest boomer hits 60.

Right. And the majority of business owners in the United States, doesn't matter in the industry, are north of 60. 

Matthew Grishman: Right. Even though some of them don't start their business till almost 80. That's a whole He's in a whole new category. Right. 

Jim Gebhardt: There's all kinds of data. I've been enjoying something called the, through the Exit Planning Institute, there's a document that they do called the Ownership, the Business Ownership Readiness Survey.

Okay. And I, you know, you know me and reading and data and I like to munch this stuff for lunch. 

Matthew Grishman: Mm hmm. 

Jim Gebhardt: And it's really interesting how That's where the statistic that, you know, the regret statistic comes from. Which is? The fact that 75 percent of business owners regret the transaction one year after the sale of the business.

Why is that, Jim? Oh, well, thank you, Bob. It's because they didn't do the personal planning. Right. It has nothing to do with the [00:17:00] transaction. Maybe not the financial planning. Maybe not the business readiness part, but it really at the end of the day is the lack of personal planning on what the heck they're going to do.

That's going to be fulfilling and purpose driven. And as you and I well know, and it's littered all over our website is wealth with a Y. That Y really stands for purpose, right? And you've got to have your feet hit the floor in the morning. Post transaction with a purpose on things that you're going to want to do and okay, sure You're going to go build your dream house and fill in the blank Colorado Carmel Kentucky, Montana, Connecticut, Montana Build two of them in Montana.

Sure. 

Matthew Grishman: Yeah, we don't know anybody who's done that then what right then What are you gonna do in retirement then? What right? 

Jim Gebhardt: So this whole concept of having a successful business and And Successfully navigating the minefield of exiting that business successfully [00:18:00] and with fulfillment is a three legged stool that takes a hell of a lot of planning.

Matthew Grishman: A continually sustaining source of fulfillment, not something that's like building a house, I'm done, and now what? Now what? There has to be something ongoing. That when your feet hit the floor every day within the project of building the house, there is fulfillment that continues beyond that project.

Sure. 

Jim Gebhardt: Maybe, maybe your kids are entrepreneurs. I mean, the, the coaching group that I'm in with Dan Sullivan's team, our coach is a, an incredible guy by the name of Chad Johnson up in the great state of Oregon. He has 11 children and last I knew. Makes you look like a rookie in that department. I'm warming up.

Most of them, if not all of them are entrepreneurs in some form or fashion. 

Matthew Grishman: Hmm. 

Jim Gebhardt: Right? So, after the sale of his business, sure, he's got other businesses that he's invested in and interested in and, and putting energy in, but now he can actually help and get passionate about supporting his other little budding entrepreneurs in the family.

I mean, [00:19:00] I could totally dream and fantasize about that in my own life down the road. Sure. But you have to have a purpose. And too often, when that leg of the stool is either missing or hasn't been very well developed in the way of a written game plan. Mm hmm. And you need a written game plan in the business side of it with the goals and the aspirations and what you're looking to do in terms of a sale down the road.

And obviously a written financial plan, which we've been in the business of for 178 years. That missing piece in the middle, what we would, what we would call what's next, right? That life 3. 0 planning that we talk about. That's what's got to happen. And it can't be some loosely little, well, you know, I'm going to work out and, uh, You know, I like to play a little bit of golf, uh, Matthew, uh, so I'm gonna golf and I'm gonna work out.

Cool. 

Matthew Grishman: And what else are you gonna do? And what are you gonna do? 

Jim Gebhardt: Uh, I'll go to the grocery store with my wife. 

Matthew Grishman: Sure. If you've been here for the last couple episodes, we've kind of modeled a little bit of [00:20:00] how we start having that conversation. We do things like take a little bit of an inventory, right?

Unpack your story. Where are you today? That's where we kind of start with the conversation of figuring out where we are today. Then we go through defining your story a little bit, and start seeing where you want to go. Especially using our favorite tool, the Clarity Compass. And that's where a lot of that work begins.

We can't, we can't know what Life 3. 0 looks like. Until we understand what you value at a core human necessity. This center of the bullseye, this is why I get out of bed every day. 

Jim Gebhardt: Okay, I have a question. Sure. Do you know anyone, do you know anyone, that has ever taken a vacation without knowing where they're going?

Like, I mean, I'm sure you hear people that are like, I'm gonna pack the bags and I'm gonna go to the airport and we're gonna walk down the aisle and we're gonna get on whatever flight strikes our fancy. But do you know anybody [00:21:00] that's ever done that? I 

Matthew Grishman: know one person who has done it, in his car. 

Jim Gebhardt: Got in the car and just started driving in a, in a direction.

Matthew Grishman: Yes. And he's someone we talked about two episodes ago, I think. Our Shaving Ounces guy. Okay. Cousin David. Yeah, well he's a bit unique. Uh, 

Jim Gebhardt: well. He, he would be in the, um, uh, who's the Outlier guy? 

Matthew Grishman: Malcolm 

Jim Gebhardt: Gladwell? In the Malcolm Gladwell study of life, he would be the outlier that is chopped off at the end of the, uh, the, the graph.

Matthew Grishman: Oh, yeah. He's not a statistic that counts in anything that's created for humanity. 

Jim Gebhardt: So in your lifetime, my lifetime, my parents lifetimes, we've taken vacations with intention. We are going somewhere. We know. That the vacation is to a place. Ah, now I know where you're going with this. Thank you. Yeah, yeah.

Take a more, a little more, a little more caffeine. You'll, you'll catch up. Try it. But The stats are ridiculous on how many, you know, the amount of time people spend planning their [00:22:00] summer vacation relative to actually their retirement. Right. Right. And 

Matthew Grishman: meaning they spend a lot more time doing that, planning a vacation than they do their retirement.

Right. And that's just wall street looking at the financial side of it. Yes. Not looking at the, what are you going to do? 

Jim Gebhardt: Yeah. I mean, so you built this business, right? I mean, what is, what is, Bellwether Stereotypical Boomer, right? It's those SOBs that created the 60 to 70 hour work week, right? So you mean to tell me the majority of the business owners in the United States that are now over the age of 60 They're officially categorized as a boomer.

The inventors of workaholism, you mean? Thank you. Uh huh. Uh, they're now just going to go like Stop. Ride off into the sunset like in a, a western. It's, it, it, it's a huge, it's a huge void in the planning conversations. And fortunately for us, that's the work we love to do. Yeah. [00:23:00] That's where we feel as though we are the best in the business and being able to add value.

It's not the value that we're adding. That's the benefit. It's the clarity for somebody to realize what's missing in this. Okay, bags of money. Check. And we're going to live here. Check. Okay, now what? And getting clear on what those values are that drive them. And then the exercises behind that, that then helps bring to the surface the actions and the intentions that are going to start to get them in motion on a path that's going to be much more purposeful.

Matthew Grishman: If we've got anybody else in the business listening in today, any of our peers who've decided to join the tribe and listen in on to some of the things we're doing. My partner said it really well, we've gotten really, really good. That conversation, the conversation that goes way beyond the money. And after, you know, nearly 30 [00:24:00] years each year of hanging around the industry and watching How the sea of sameness has grown and evolved.

It really hasn't. So I'm going to put a suggestion out there to our industry, to people in the business, you want to really add some major value to this incredible group of entrepreneurs who invented the concept of workaholism, help them figure out what's next, help them figure out how they're going to use their time.

Because all the work you've put into helping them manage their money, helping them save it, helping them grow it, helping them accumulate it, helping them deal with inflation with it, all of that great work we've done as an industry to protect the dollar is going to mean nothing without the purpose.

Without something to attach it to. Without the fulfillment. Yep, absolutely. Without an engine to drive it. 

Jim Gebhardt: Well, I guess we've got some work to do. 

Matthew Grishman: We do. There's financial work to do. That needs to [00:25:00] happen as we help somebody build this blueprint for what's next. But it's not the biggest, hardest part of the job.

And we're going to talk about it today. And we're going to talk about it in terms of now that we've kind of set some foundational work the last couple of episodes on unpacking the story and starting to move forward on what is the story going to start looking like as we look at Life 3. 0, there is some building of the blueprint that requires some, some money work, some lifting in the, in the money category.

Let's go. Let's go. I'm ready. We've just spent all this time talking about all these important things with time and what's next and now we're going to go back into talking about some of the money stuff. 

Jim Gebhardt: Absolutely. Because here we sit in an election year. As we've said on the show many times, as we've, as we've talked about with our clients many times, the level of risk, the amount of risk that people are feeling on the planet, perhaps has never been higher.[00:26:00] 

And the risk conversation, while it's not necessarily purpose driven, it's very important because without the end of, at the end of the day, in order to be able to go, you know, focus on your purpose, you need to have your financial house in order. If you're going to have your financial house in order, And it's our experience with most of the business owners, entrepreneurs, whatever you want to call them, they're already taking extraordinary amounts of risk with the business.

And quite often, last Friday in our conference room, I was having a conversation with a business owner that takes extraordinary risk every day. And let alone all the stress and the strain that comes with the work, but when it comes to the money that he safeguards with us, It's pretty boring. Yeah. It's pretty, I mean, relative to the spicy stuff he's doing at work every day, we're like the best vanilla ice cream you've ever had.

Matthew Grishman: How much do entrepreneurs, in your experience, appreciate [00:27:00] having control, as much as possible, over their choices, and ideally outcomes, although we know we don't have a lot of control over outcomes. You and I have explored that, and we'll continue to explore that, but entrepreneurs, how often do you come across an entrepreneur who Wants to control as much as they possibly can of their own actions, their own attitudes, their own behaviors.

All of them. Their own choices. All of them. All of them. All of them. So in financial planning land, when it comes to our money, how much of that do we actually have control over versus stuff we don't have control over? Oh, I mean, do you see where I'm going with this? I do now And, and this is, this is where I think the money conversation.

All be it something 400 some odd thousand people who are licensed like us are having. I think this is where you and I have the money conversation in a little bit of a unique way. Sure. A little different. In that we are looking at the fact that there are really only three [00:28:00] things, three things we have control over when it comes to our finances.

And you just teed up probably one of the most important ones. Which is risk. The amount of risk we take as business owners is massive. 

Jim Gebhardt: Yeah. 

Matthew Grishman: Just ask him on the 1st and the 15th of 

Jim Gebhardt: every month. 

Matthew Grishman: Yeah. What happens on the 1st and 15th of every month? I get paid. Oh, how does that happen? 

Jim Gebhardt: Cause I paid me. I paid myself.

I paid my employees, right? It's really not, the 15th is a big payroll number too for many businesses, but usually it's the first, because then you got the rent, you got the healthcare, and you got the bup, So, you've gone down this path of betting on yourself forever. 

Matthew Grishman: Yes. 

Jim Gebhardt: And You don't know any different.

You don't know any different, and consequently, the natural blind spot is to just continue to double down and triple down on yourself, on your thoughts, on your beliefs, and invest in the same regard. [00:29:00] And we have tools in our tool bag that help us kind of measure the appetite for risk that is both at the client level, as well as at the portfolio level.

And then, ha ha ha, and you're going to say this much nicer than I am, what the plan requires. And generally, that's three different numbers. Sure. Three different temperatures. Sure. And generally, the plan is in the middle. Sure. Because the entrepreneur wants to be in the left lane zooming, or we had a client a couple weeks ago whose portfolio really wasn't in the left lane, but it was in the middle lane going a good 75, and they didn't even really want to be in the right lane on the freeway.

They wanted to be on a surface street going like 40. 

Matthew Grishman: Walking. They wanted to walk. They didn't even want to be driving. 

Jim Gebhardt: And, you know, their plan was actually okay with that. 

Matthew Grishman: Yeah. 

Jim Gebhardt: So you're going to say it much nicer than I am when it comes to these, 

Matthew Grishman: Well, 

Jim Gebhardt: [00:30:00] these, these 

Matthew Grishman: controllables, sure, there are, risk is one of those things we do have control over.

And I love when you and I get into a conversation with an entrepreneur who doesn't know anything but risk, risk, risk, risk, risk. I'm thinking of one of the most recent entrepreneurs you and I met, met him, met him on a rooftop. Yeah. And, uh, One of the first questions he asked me was, So if I were It was a, just to 

Jim Gebhardt: be clear, it was a rooftop lounge.

Right. We weren't, we weren't hopping building to building like Superman. Oh, like, I kind of felt that way. Rooftop to 

Matthew Grishman: rooftop. 

Jim Gebhardt: Like we're in Mary Poppins and we're the Leaping a single bound. Yeah, exactly. I like 

Matthew Grishman: that. Um, one of the first questions he asked me was, Was if I were to invest and he gave me a specific sum and it was a large sum of money But if I were to invest a sum of money with you How much are you gonna make me and I looked at him and I will say this to every entrepreneur We have this conversation with that's not the right question to [00:31:00] ask me I might have been a little more aggressive and said that's pretty stupid question, but I wasn't doing that in a judgmental way It's just not the right question Question to ask, and it's the 

Jim Gebhardt: tired question to ask.

Matthew Grishman: It's the, it's the industry standard question to ask as he has shared with me, since he has said to me since I was testing you, 

Jim Gebhardt: right? 

Matthew Grishman: I'm like, sure you were. I was testing you. Because the right question to ask is, if I give you a certain sum of money, how are you gonna protect it for me and make sure it's there to support me when I'm starting to figure out what's next down the road.

Right. But most entrepreneurs, that would be an 

Jim Gebhardt: elevated conversation. 

Matthew Grishman: They, they're not wired to think that way. So my response to him in that question of, how much are you going to make me and sharing with him, this is the wrong question to be asking. Well, why is this the wrong question to be asking? Well, what's your business worth?

The, the current business that you own, what, what's it worth these days? A lot, I don't know, uh, north of a hundred million dollars. Right, and did somebody give that [00:32:00] business to you or did you create that? Well, do I look like somebody who stands on third base and thinks he hit a triple? I hit that triple.

I'm like, you damn well, yes, you did. And that's why I have so much respect for you. You're really good at creating wealth. You don't need my help with that. And that seems to be most of the entrepreneurs you and I meet, right? They're really good at creating wealth, right? They don't need our help with it.

No, not creating it. No, they might need in the very early stages Some help with just you know, getting the anchor off the bottom to get started, but once they get going that's their talent That's their ability. They've got a set of you know, what's and they go kill it where they need our help is Understanding that as they create the wealth There is risk that that wealth is exposed to and it's our job to manage that risk so that that wealth can be there to Support them As they begin designing what's next in life, that life 3.

0, [00:33:00] because without that wealth being stable, being there, you really don't have the foundation or the basis to create life 3. 0 and the generational wealth and legacy that I know most entrepreneurs want to see come to fruition within their children, their grandchildren, their great grandchildren. They want it to continue.

They want it to go on. They're building something Much bigger than just to serve themselves. At least the entrepreneurs we like to hang out with. Oh 

Jim Gebhardt: yeah, I mean, last Friday, in our conference room in the Lafayette office, sitting with a long time client, 45 year old entrepreneur, has had some partial liquidity events in different businesses that he's involved in, and the conversation came down to, You know, so what would make you feel better in terms of this cash?

I mean, do you have other businesses you want to invest it in? Do you want to do some premium vanilla ice cream? What, you know, what are you thinking? And he's like, well, that's why I'm here. I can't, I can't do that. I can't. [00:34:00] See what you can see. I'm like, okay, so 

Matthew Grishman: he wants suggestions on what to do. 

Jim Gebhardt: Yeah I mean, this is you know, this is a very smart very hard working guy who could easily figure this stuff out on his own Mm hmm, but he was looking for what I would call prudent Recommendations on what to do with this money.

Sure and We put it in some really, very intentional, very purposeful, boring stuff. Sure. Because he's about 10 years from wanting to, you know, hit the exit and a lot of it went into municipal bonds, California tax exempt municipal bonds. Sounds exciting to me. To his tax bracket, it's going to be pushing almost 7%, right?

Double tax free. 

Matthew Grishman: Yeah. 

Jim Gebhardt: Some other insurance related solutions we won't get into because compliance will have a, you know, a cow. And there was really nothing sexy. There was, there was no, and, and to his credit, he's like, and I, I don't want complexity. My life is very [00:35:00] complex. The businesses I'm involved in are very complex.

Matthew Grishman: So he doesn't want some inverse, reverse leverage, private equity, hoo ha with, uh, B shares and, right. I want 

Jim Gebhardt: simplicity. And I'm like, well, that's good. You're in the right kitchen. Because that's what we like to do. We're, we're simplifiers by nature. 

Matthew Grishman: Yeah. 

Jim Gebhardt: Most of our clients live in very complex businesses.

Their lives have a lot of complexity. And when we get together with them, it's very transparent in terms of what we do. Sure. It's all on Schwab. com and you can go see it all. Sure. And I was just, I was really struck with how, how he left the conversation feeling so much better. And we were doing what we do.

We were doing vanilla ice cream. We weren't doing anything exotic or sexy because he already, he's already doing that. 

Matthew Grishman: Right. There's a certain amount of wealth that's created that I think you and I have been very good at encouraging our entrepreneurs to recognize that their most valuable investment for creating wealth is investing in themselves.

[00:36:00] Most of them come to us intuitively understanding that already. You and I have been supportive in reinforcing that. And then as they get a little bit older and a little bit more success, and they're starting to create more wealth with their ability to invest in themselves, it's you and I educating that entrepreneur on Now, how does this money serve you for what's next?

And that's what opens up a fresh kind of conversation about what risk is really all about. They see it with a new set of lenses when they realize that this isn't necessarily capital that I'm going to continue to speculate and invest in myself. This is capital that. I need to support my very basic needs, wants, wishes.

Jim Gebhardt: Well, and also for a lot of time, a lot of business owners, that, that liquidity, right? Because most of their wealth is tied up in the business. Right. And when they start to have some liquidity, either from dividends and distributions from the [00:37:00] business and bonuses, or whether it's partial liquidity or they sell something else, a lot of times that liquidity and having that.

That capital available, right? It's not a retirement account. It's not equity in a home or a building. It's not equity in a business. It's actually in a 

Matthew Grishman: brokerage account. And it feels like this, right? It's just space. I asked, 

Jim Gebhardt: I asked the client Friday. Yep. I said, so, what would feel great to having just cash in the bank?

And he was doodling on a, on a performance report that we gave him. And he was thinking, and I, and I took it away like a school teacher, right? I took his toy away. He's like, Oh, I want that back. I said, no, no, no, no, no. You got to answer the 

Matthew Grishman: question. Just, 

Jim Gebhardt: just think about this for a second. And what would feel comfortable having in cash?

Matthew Grishman: Liquid. 

Jim Gebhardt: Liquid. And he said a mid seven figure number. And his wife was like, What? 

Matthew Grishman: Are you, are you [00:38:00] serious? Mid seven figures, meaning like five million bucks. Like mid seven figures. Yeah. 

Jim Gebhardt: And she's like, that's disgusting. And he's like, well, no, no, it's not. That's, he asked me the question. That's what, that's what I would feel good about.

And I said, okay, okay. And that's a lot of money, 

Matthew Grishman: right? Sure. Sounds like there's a little guilt over wealth in there. That could be, that's another conversation. Well, sure, that could be a different episode, yeah. 

Jim Gebhardt: And I said, okay, is that what you want in actual cash? Like in a money market fund earning interest?

Or that's just what you'd like to have liquid in your trust account? You know, some of it's invested, some of it's cash, some you have cash at the bank at a different institution, blah, blah. He's like, yeah, yeah, that, that's good. I said, great, we're halfway there. And you could see, you could, I, I mean, it was one of those moments where I wish we had a camera and I could record his physical, you of all people who have taught me so much about physical body language.

It was like Frosty in the greenhouse. I mean, he started to like [00:39:00] melt into the chair a little bit with relaxation at the thought of being. 50 percent of the way to his goal. Now that's a goal we've never discussed. That's a goal that we've never talked about. It just kind of came up in conversation. This is apt to happen with us.

And he, I mean, his demeanor changed. He sat back in his chair. He didn't take a big old sigh, but it was, it was really fun to see. 

Matthew Grishman: That's cool. Cause you know what that just opened up is the next conversation is you guys get to sit down and talk about this conversation of risk and the three different components of risk.

We just, we don't dive into this enough and help people understand this enough, again, as an industry. No, because it's about more, Matthew. All the More. Sure. Until More. Uh huh. Until we don't need anymore. 

Jim Gebhardt: No, it's not about need and more. I want more. 

Matthew Grishman: We could always want more until we don't anymore. Right.

And that's the shift. And then what happens? [00:40:00] Uh huh. And then we need to figure out what's next. Right. So when it comes to risk, how much risk are you taking? That's one of the very first things we need to measure. How much risk are you actually taking with your money? A lot. Well, and there are If you're a business 

Jim Gebhardt: owner?

Matthew Grishman: Sure. Who has 

Jim Gebhardt: payroll and rent and all the 

Matthew Grishman: other things on the balance sheet that you gotta pay for? But can we quantify it a little more than a lot? We can. And that's what we have to do. We have to quantify, we have to assign a value, an actual numerical, left brain, quantitative value, to how much risk you are actually taking with your financial resources, because You and I have found over time that the amount of risk you are actually taking doesn't necessarily match the amount of risk you want to be taking.

Jim Gebhardt: Oh yeah. Does it? Rarely. Right? And Rarely. Because more often than not. The client is taking [00:41:00] excess risk almost to almost more than they 

Matthew Grishman: want, 

Jim Gebhardt: like one and a half to two times almost consistently. Yeah. A 

Matthew Grishman: lot more than 

Jim Gebhardt: they want because we get lulled to sleep with the dreamy. Everything goes up. My real estate goes up and my stock portfolio goes up and, Oh, I know.

Money market pay something now. That feels really good too. 

Matthew Grishman: Yeah, but that's kind of boring now. I mean, come on, 4 5 percent in money market? Oh, I like it. When I can make 30 percent in my stocks? 

Jim Gebhardt: I know it's boring. Right. I know it's boring, but as we've always said, and we have like 74 shows on this, cash is an asset class.

Absolutely. And cash has a job. Absolutely. Okay, so you're, you're, you're making the point that there's, The amount of risk that we are taking. Correct. What else is there? 

Matthew Grishman: There's the amount of risk you want to be taking. And, and this is where we're kind of flushing out a little bit of a discrepancy between Those two key points.

Yeah, but I 

Jim Gebhardt: didn't know I could take less risk. You can. I 

Matthew Grishman: didn't, I didn't know that that was an option. Oh, those [00:42:00] wonderfully paying four and five percent money markets would represent taking a little less risk. Yeah. You and I have talked about buffered ETFs that we use in our practice. Yes. That's taking less risk.

Yes. There's a third risk number that needs to be understood in all of this because there's the risk we're taking, there's the risk we want to be taking, and then as we start to uncover, Life 3. 0, what you need, want, and wish for your future. There's the amount of risk you should be taking to get what you want out of life.

To make it all work. Right. And that isn't necessarily the same number as the risk you want to take or the risk you're actually taking. Right. So we've got three numbers in the risk world that we need to quantify and assign, and then it's our job to get those damn numbers in alignment. And get them to where they need to be.

Yeah, it's Goldilocks theory. Oh, I love Goldilocks. Right? Right? The porridge is just right. Yeah, find the right one. Not too hot, not too cold. Not too cold. And it's just right. This is, this is super [00:43:00] important. Understanding, as an entrepreneur, I mean, I've told this story and I'm going to tell it again. When Miles was four, I threw him on my back and we climbed our first waterfall in Yosemite.

We went up Bernal Falls. How do you climb a waterfall? Uh, well you climb the trail next to it. Okay. The water's a little hard. You don't climb the 

Jim Gebhardt: waterfall. Right. You 

Matthew Grishman: climb the 

Jim Gebhardt: tree. You're on a trail. You're on a trail next 

Matthew Grishman: to it. 

Jim Gebhardt: East, west, north, south of the waterfall. Exactly. Okay, just, I'm your 

Matthew Grishman: compliance officer today.

Thank you. And in this case, I think the trail is actually west of the waterfall if I'm like, I got the map in my head. So we go up to the top of this. We've got the kids. They're little. We got them on our backs. And we get to the top and my legs are on fire. The backs of my legs are on fire. I had no idea how I'm getting back down the hill.

Wasn't it late in 

Jim Gebhardt: the day? 

Matthew Grishman: It was, and our goal was to actually get to the top. You have Vernal Falls, then you have Nevada Falls, and we wanted to get all the way to the top. Because there's a holiday in it and on the top of that? There is, and a hot chocolate machine, [00:44:00] and you know, I wanted to get to the top for the hot chocolate.

But that wasn't happening. My legs were noodles halfway up. I looked at Amy, and I was scared with how we're going to get back down. The hill and escalator. It was her. Well, I was looking for the elevator, but that was out of service. Everything's always broken in Yosemite. It's such a letdown. I mean, you pay so much to get in and they can't keep the damn park up.

Come on, people. We need a measure for that. State of California, right? No, no, actually, I guess that's the federal government. I can wail on for that one. So, my wife, Amy, God bless her. She always, in these moments, She has this unique ability of really remaining calm in crisis situations and as silly as this little story sounds in the moment It was a crisis situation.

Well, yeah, you don't know how you're gonna get down I don't know how I'm gonna get down and nightfall 

Jim Gebhardt: is gonna come and I'm responsible. You're the 

Matthew Grishman: bear buffet I'm responsible exactly and Amy looks at me and says just slide on your butt. You'll be fine Oh, I didn't think of that. So I start sliding on my butt.

And as my heels are catching these little [00:45:00] footholds, I'm realizing that it's not the backs of my legs that are on fire that are helping me get down. It's my quads. It's the front of my legs. Here's the point of the story. The muscles I use to get up were not the same muscles that we were going to use to get down.

The same mountain. 

Jim Gebhardt: As many times as you've told that story, and I think I've heard it most than more Americans. Oh, 

Matthew Grishman: yes. Uh, it never loses its impact. It's such an important, it's one of the most important experiences I've had in my life to help me better understand the full financial journey of the entrepreneur where we are walking up this mountain and in some cases split it.

Build and create 

Jim Gebhardt: and build and create. Build and build and build. Invest and build and risk create. 

Matthew Grishman: Right? All of that. God, we can do that better when we're here than when we do that virtually. That was so good. We just go. And at some point, as you've always said, we as humans can only see in one direction.

Correct. We can't see the fact that we're going to get to the summit [00:46:00] of that mountain and we're going to need to get back down the other side of the mountain. And we're going to need a whole different set of financial muscles and skills To do it successfully. And that's well there. Better be 

Jim Gebhardt: there.

Better be a trainer. Yes. There better be a a, a Sherpa, a retirement trainer Sherpa. A retirement Sherpa person. Ooh, advisor. 

Matthew Grishman: Can we change our titles to Retirement Sherpa? 

Jim Gebhardt: There you go. 

Matthew Grishman: Exit Planning Sherpa. Sure. Exit Sherpa. 

Jim Gebhardt: I like, I like, uh, trainer. I, I like to train. You wanna be a trainer? I do wanna be a trainer.

Matthew Grishman: Yeah. Not like 

Jim Gebhardt: a, not like a circus trainer, animal trainer. But I just, I like the, I want to actually, do you want to be a Sherpa trainer? No, no, no, no, no, no, no, no, no. I don't want to be a trainer. Okay. I want to be as fit as a trainer. 

Matthew Grishman: Oh, there you go. I 

Jim Gebhardt: would like to be able to wear a muscle shirt like that and actually have the muscles to go along with it.

So I don't actually want to be the trainer, but. Right. You just want to look like the trainer. Oh yeah. 

Matthew Grishman: Yeah, yeah. 

Jim Gebhardt: Come on. I know. I'm with you. Come on. We've got two trainers at our gym. This one [00:47:00] woman who just, you know, just. It must be hot temperature wise because she's always wearing just an athletic top.

There's no middle. Right. And then she's got her, her, uh, her workout shorts, you know, her workout leggings on. Right. Because Shriner offers 42 pack abs, right? 

Matthew Grishman: Well, because it's generally hot because they're working out a lot. Right. 

Jim Gebhardt: Yeah. And then, and then the other guys that are the trainers that, you know, their arms are my legs.

Right. Right. And, you know, I don't even know how they can scratch the top of their head because they've got so many muscles, they can't even really, you know, bend their arm like that. Right. That's what I'm talking about. Sure. I 

Matthew Grishman: covet thee. And they're as scantily clad as, as the women that you were describing.

And I could see you being that one day. Sure. Where you have to hire somebody to wash your hair. Sure. That'd be great. That's awesome. Well, I think we've hit the risk button pretty good here and it just, we're trying to build some awareness that this is something we actually have some control over, right?

And that, and that's when we get into. This [00:48:00] financial preparation. I don't even like saying financial planning. That's so everybody else uses the same term. I like challenging a little bit of that. It's, it's financial preparedness, right? It's preparing for the transaction and not being one of those statistics by recognizing these three things that we do have control over one being the amount of risk that we're actually taking.

Based on the amount of risk we should be taking and the amount of risk we want to be taking. So that's the first thing we do have some control over. 

Jim Gebhardt: Well, it's really fun to have conversations with entrepreneurs and say, Would you like to take less risk? 

Matthew Grishman: Wait, I can? 

Jim Gebhardt: Uh huh. And that's what's the fun part is 

Matthew Grishman: they didn't know it was a possibility.

Jim Gebhardt: They didn't really recognize that was an option and, oh man, does that change the conversation? Is that the most fun part of our job? When we present an 

Matthew Grishman: option to a client they never knew was possible and the light turns on. Yes. It's very, very [00:49:00] intoxicating. There you go, Mr. Sherpa. Yeah. Right. Way to turn the light on.

So the, the second thing. There's a second thing that we have some control over. It may not feel like it during an election season, but we actually do have some control over the big dirty T word, taxes. That is one of the places that if we plan properly, I'm going to give you an example and then we're actually going to push pause.

I have a client who I've been playing phone tag with this morning. One of our clients. Who recently lost her husband. She's about to purchase a house. She has two different types of brokerage accounts with us. One is an IRA, an individual retirement account. That is what we would call a tax qualified.

account, meaning that it has a wrapper around it that defers the taxation of what happens inside of that account until she takes the money out one day. She has a second account, a non qualified [00:50:00] brokerage account that is subject to what we call capital gains taxes. Every time we buy a security and sell it for a profit, instantly, as soon as we sell the security, she's going to owe capital gains taxes, both at the federal level and here in the state of California.

So the question we have Is we're about to help her go purchase this house. We need to take some money out of one of these accounts. Which account do we want to take the money out of? And I don't know the answer to that yet because we're yet to have the conversation, but the conversation is, do we want to sell some securities inside of the IRA because we don't know exactly how much money we're going to need yet, and then we're only going to pay taxes when we pull money out of the account, or do we want to sell something in the non qualified account?

realizing a capital gains tax instead of ordinary income. And would that be better? But again, that happens on the transaction, not when she pulls the money out. So there are [00:51:00] tax implications to this decision for this client. The best part is we have some control over how she pays her taxes to realize what's next for her, which is buying this house.

Sure. So, there's some conversation in the world of tax planning, and there's a third thing we have control over, but God, you and I have been going for a while, and I think Amy and Beth would appreciate it if we got out of the studio and got home today at some point. Sure. So, let's, let's. What's the third one?

Do we share it, or do we save it? The third one? Okay, we call it the goes ins and goes outs. But that's all I'm going to say. So the three things that you have control over is number one, risk, number two, taxes, and number three, goes ins and goes outs. And we're going to talk more about taxes and the goes ins and goes out when we get back together in studio on the next episode of the whole wealth journey.

And with that brother, that's a wrap. Hey, thanks for [00:52:00] joining us today on the whole wealth journey. It absolutely means the world to us that you would invest time to spend with us. If you liked what you heard today, like. Subscribe and please leave us a comment. We would love to hear what you thought about today's episode.

And better yet, ask us a question and we'll get back to you. See you next time on the whole wealth journey. 

Amy Bingham: Jim Gebhardt is a registered representative of and securities offered through Brokers International Financial Services, LLC, member SIPC. Jim Gebhardt and Matthew Grishman are investment advisor representatives of Gebhardt Group Incorporated, a registered investment advisor.

Brokers International Financial Services. Services LLC and Gebhardt Group, Inc. are not affiliated. The opinions in this podcast are for informational purposes only and are not intended to provide specific advice or investment recommendations. To determine which investments or financial advice may be appropriate for you, consult a financial advisor prior to investing.

Any reference to market performance is [00:53:00] based on historical information and there is no excuse. Expressed or implied guarantee of future performance. Opinions expressed on this program do not necessarily reflect those of Brokers International Financial Services, LLC. The topics discussed and opinions given are not intended to address the specific needs of any listener.

Gebhardt Group Incorporated does not offer legal or tax advice. Listeners are encouraged to discuss their financial needs with the appropriate professional regarding your individual circumstance.