Welcome And Guest Introduction

SPEAKER_00 0:00

Welcome to the Influential Advisor Podcast. Today we are joined by Dale Montgomery, a certified VFO professional who spent over a decade helping business owners at tax and retirement specialists break through the glass ceilings that come with growth. Dale recently published The Virtual Family Office Advantage from Siloed Advice to Team-Based Planning, a guide to bringing coordinated family-office level planning within reach of small and mid-sized business owners. In this conversation, we'll explore how fragmented advisor teams hold business owners back, why tax mitigation is not the same as tax deferral, and how the right planning model can give a business owner back not just hours, but a life outside the business.

SPEAKER_01 0:55

First, I wanted to ask you because you've had quite a journey from real estate success in the 1990s to losing a lot in 2008, but now you're a certified virtual family office professional. Can you walk us through that path and tell us how those experiences, especially the difficult ones, shaped the work that you're doing today?

SPEAKER_02 1:14

Yeah. Yeah. I've got my le my real estate license in 1990, and a few years later, I got my brokerage license and started a real estate company with my nephew. We built that. I got into doing a lot of real estate investing besides having a brokerage firm. And so I traveled around the country learning from some of the top minds in the country and real estate options and probate properties and entity structuring and uh deal structuring. So I've I've been you know all over just learning all different types of different real estate strategies and investment strategies, and grew a pretty good portfolio with multiple rental properties along with the brokerage firm. Um, but you know, in 2008 it and things changed overnight. Yes, they did.

SPEAKER_01 1:59

And then what happened from there that once that experience Yeah, that that experience really kind of shaped me.

SPEAKER_02 2:05

And I unfortunately got to watch a lot of other people go through it as well. You know, between goodlers and developers, they got hit really hard. Um, and so I watched these these guys um lose basically everything. Because a lot of them signed up personally on the note, whether it be for the development or for the spec homes, um, whatever they were doing, um, a lot of them didn't have the entity structure and the credit with that entity to have the loan with that. And so when everything imploded, uh, they lost their homesteads and and whatever else they had going on. And same thing with the the cellar realtors that I was working with. Um I watched a lot of them get hit hard. And also uh loan officers got hit pretty hard too, because they that's where the biggest changes came after the 2008 crisis is that they revamped the whole mortgage industry, which wiped out a lot of the smaller guys. So um I really watched a lot of people go under in 2008, and it it really affected me. It's my own struggles for sure, with you know, four kids, five kids total, but four of them under the age of seven, and locked our hobby farm and and multiple rental properties. So just that whole process really changed the way I looked at advanced planning and planning in general. Um I still expect the best out of life, and but uh now I've I've worked extra hard to have a plan for the unexpected to protect my family. And that's the same thought process I work with business ours today through the virtual family office is you know, we expect the best, but help them develop some plans for the unexpected that that can happen there. You can come on the left field.

Why He Wrote The Book

SPEAKER_01 3:48

Right. Well, Dale, you've recently written the virtual family office advantage. And so tell me about the driving force behind writing the book. Why was now the right time? And was there any tipping point that made you say, I need to put this into writing?

SPEAKER_02 4:04

Yeah, there really was. I um been working with this group, uh the you know, the virtual family office, uh, the elite resource teams, the virtual family office, they've been around for 11 years now. It's not a new venture, it's not even trying to I I've been working with them for a few years now, and the one thing I noticed is it's it's the the best incredible planning tool for business owners. And I really wanted to, the more I dial go into it and really got to understand it and learn it, the more I knew that I need to get this out to as many business owners as possible, um, because most of them do hit glass ceilings. They are just busy trying to run things on a day-to-day basis, putting fires out. And so having a team help them in the five key areas that we work in, which is you know, tax planning, risk mitigation, wealth management, legal services, and business advisory, come in with a team. We can help them not only, you know, put you know, get some real nice time back in their in their calendars because they're running crazy trying to get handle so many things. As their business grows, the complexity grows. So the business model, the virtual family office really does a great job of helping the business owner get their time back. And it also helps them get past that that glass feeling that that they they run into because of the complexity and them the amount of time that they have during the day to handle everything. So we can help them get to that next level, and then also um help them get to uh a place where the business is ready to sell and help them with the exit strategy. So with all that going on, I knew I needed it was it was more than a social media type of posting that I that would really get the message out there or a marketing plan. I just knew a book was gonna help me get that message out there so a business owner can sit on, uh read or download the audio version to where they can just listen to and hear what that next level of planning will actually do for them.

The Glass Ceiling Of Siloed Advisors

SPEAKER_01 6:08

Gail, I think you described that well. The glass ceiling, like you called it, that business owners reach where they need more coordination and they need better planning in order to be more successful and to be able to focus on their business. Can you tell me a little bit more about what it looks like when they hit that? What specific problems do they start running into and what's it costing them?

SPEAKER_02 6:31

Well, it varies with different business owners, but and kind of give you a kind of a general problem that they've run into is you at the get success, the business is growing, um, there's more demands on their time. There's more advisors that they need to help them get you know to handle all the different things. But what happens is these advisors are usually siloed, meaning they're not communicating with each other. They're they may have what they think is a team, because they have a CPA, uh, insurance, an insurance guy, an insurance producer, uh a financial advisor, and an attorney. So they feel like they have a team of a specialist. But typically those guys are siloed, they're good at what they do, but they're not communicating. They're not looking at the big picture. They're all working in their own lanes that will cause them to hit a glass ceiling because they're usually the business owner now is the coordinator, the quarterback, taking all that advice and then trying to implement it, trying to sort through it, trying to figure out which one they want to go with, uh, as far as the advice or multiple people advising them on a uh you know situation they're dealing with. Now they got to sort through it all. And so what the team-based model does is it allows to have a uh you know central coordinator or director of advanced planning, which is me looking at the whole picture and bringing in the right specialist to take care of the problem. Because sometimes, you know, if there's a strategy that will overlap and take care of multiple needs or goals for the business owner. So having these advanced strategies that we work with through the specialists at the virtual family office can really save a lot of time and hassle for the business owner because our strategies do overlap and take care of more than just a one-dimensional strategy that a fragmented team would come up with.

Diagnosing Needs With A Full View

SPEAKER_01 8:23

I think you said it exactly right there, that it puts the business owner in that position of the coordinator or the quarterback. And this isn't probably something that they were intending or looking to do because they wanted to focus on what they're best at, which is running their business. And so tell me about why it makes such a difference to have somebody that's planning on doing that role, somebody, their financial advisor that's able to quarterback it and relieve them. Does it bring relief to them so they can focus on what they do best?

SPEAKER_02 8:52

We have a proprietary tool called the client um situation diagnostic. And it's uh really intuitive. And so it helps us identify all the planning needs, whether it be on the personal financial side or the business, business advisory, the legal, all the it covers all the different areas. And so it it allows us to look at the whole picture. And so your siloed advisors don't typically have that type of program or the specialists they can bring in to look at the whole picture and then and from there prioritize which areas of planning we're going to start on, and then and just kind of take them off the lift as an or importance. And then we have the the business owners' goals and what they're looking to accomplish as well. So it's it's a very intuitive program, along with the diagnostic, that allows us to look at the whole picture and really raise that level of the standard of planning to the BFO, you know, the family office standard. So yeah, it's it's a it's a fun and exciting thing to do with business owners is is take care of some of the needs that, first of all, they didn't even see or realize, and then help them reach the goals that they were having trouble get to getting to.

SPEAKER_01 10:08

You said, Dale, that the family office, this isn't a new idea, that this goes way back to John D. Rockefeller in 1882. And so can you tell us a little bit about his breakthrough and how did this coordinated model help build generational wealth that today is estimated at is it$255 billion?

SPEAKER_02 10:27

Yeah, back in 1882, Rockefeller had grown his enterprises, his businesses, to a point where he just had too many advisors coming at him, fragmented advice, good kind of what we've just been talking about, is he had all these advisors and he was a quarterback trying to figure out which way to go, what to implement, what not to. And um there was a moment where he went, why don't I just hire everybody? And now they're just working directly, strictly for me, and um and and you know, kind of created a mastermind over his whole entity structure and his his family and everything, to where it really it worked well from. I mean, that the the proof is in putting, as they say, um their net worth and and and the the single family office, uh you know, which is what he created, uh took off in popularity, but it was always reserved for the wealthy, the over wealthy. The the next generation was multifamily office, and then the next generation after that is the virtual family office. And so the virtual family office allows us to do the same kind of planning that the Rockefellers had and the other wealthy. You know, Bolfra's got her family office, Bill Gates has got his family office, and um, you know, the reachings of Netflix and the Waltons, they all have virtual family offices, but they're paying anywhere from 10 to 20 million to over 100 million a year. Um, but the Birchard family office, we bring in highly vetted specialists in those five carriers that I mentioned tax planning, risk mitigation, wealth management, legal services, and business advisory. So we bring in the highly vetted specialists to you know to um coordinate whatever planning needs that they need. Right.

Hub And Spoke Planning That Restores Time

SPEAKER_01 12:16

I love that you say that this used to be something that was exclusive to billionaires because of the costs involved, but now that through the virtual family office model, now it's been made accessible to business owners, and so they can benefit in the same way. Can you tell me a little bit about you call it the concept that's the hub and spoke model? And this goes back to the quarterback, who's in the center of all this. And so the director of advanced planning, when they're at the center, when you're at the center, what does that role actually do? And how is that different from just having a good CPA or a good financial advisor?

SPEAKER_02 12:52

Well, you know, we're working with the team. So um I am the director of advanced planning, but I do have a team around me that helps, you know, but somebody who does the diagnostic, um other ones that set up the meetings and and go through. And so uh, but having that team as a the hub uh allows us to save the business owner a lot of time. And that's really everybody, not just business owners, it our most precious commodity is time. So you can see the business owner time and setting up and coordinating and vetting, you know, we have the specialists already vetted, so they're they're top top tier specialists from around the country. Now we get now the business owner can take that time and work on some of the other things that they want to do to get to that next level. And then we have a specialist to help them get to that next level.

SPEAKER_01 13:42

Dale, when you're working, and I agree 100% that time is that most precious commodity, when you take over that role from the business owner and help them to coordinate everything so they no longer have to, what's the feeling of relief that they express to you when they can get to focus on the things that matter to them most?

SPEAKER_02 14:02

It it is a sense of relief that I see and and and hear in their voice, uh seeing their their demeanor. Um it it's really satisfying to be able to bring that to the business owner and loosen up areas. And a lot of times they're able to put some of the time back into their family where it's really needed in some cases. So um it's a very rewarding, um you know rewarding position that I have. Right.

SPEAKER_01 14:29

And I'm glad that you brought that up because I was thinking about that they would have more time for the business and that they could use that to grow profits and revenues. But then you point out that also for their family that they're buying back time that they can have so they have actual work-life balance and get to see their kids and their their spouse and have a life outside of what they're doing. That seems like a great benefit.

SPEAKER_02 14:53

It is. And you know, you you see it in society here that there is divorces um for successful business owners because they do have to put so much time and energy into the business and handle so many different aspects of the business as they're growing it, it does take a toll in their family life. So this program does help them get some of that time back that they can allocate back to the family.

SPEAKER_01 15:18

Yeah, that seems so important and also hard to put a price on that because when you're thinking about the fact that it's been made available to business owners where they can afford it, but then there's benefits that go beyond just what it does for the coordination of their business book for their entire life. That's pretty powerful.

When Life Insurance Solves Liquidity

SPEAKER_02 15:36

Yeah. Yeah, it is.

SPEAKER_01 15:38

Dale, you share in the book a story, another powerful story. This is about Robert, who he was the company owner who told you three times, don't sell me life insurance. So tell us that story and what happened in the relationship and what it means about that VFO approach that you bring.

SPEAKER_02 15:55

Yeah. Um Robert, you know, you could tell he had been pitched products for a lot of his life. He was, you know, later in the years, uh, so wasn't ready to retire. Um, but he was definitely later in the years. And so we just, you know, we said, All right, no, no life insurance. That's the big at this point, no life insurance, we're not gonna pitch it to you. But before we go any further, we need to find out what you do need and how you know what your your planning needs are. And so, you know, when he came in, he was more looking for, you know, just to get some estate planning done and make sure his his wife was taken care of and she had a son as the second marriage, and so wanted to make sure everything was complacent there. And and so when we took a look at his whole situation, we did notice that there was one big problem that he was he could be running into, which is uh when he passed away, if he passed away before he sold the business, there was gonna be a liquidity problem, and they were gonna have to probably sell part of the business just to pay taxes and things like that. So we looked at some different opportunities, different ways of handling it. And um, you know, some of them would work, but what really worked the best turned out to be life insurance. But what we did is we showed him how it would handle the cool liquidity problem. And so once he saw that life insurance wasn't just something there that people got tax-free money when he died, but it actually was a tool to help his legacy and overall success of his legacy, he was more than ready to go, yeah, this is okay, this makes more sense now. Now I can see what life insurance is actually used for. And um, he was quite excited to put something into place like that.

SPEAKER_01 17:42

I think that's something important that you point out that a business owner can be so focused on what they're doing in the present and not really thinking about the future of it, that if something were to happen to them, that they want to make sure those accession plans and how the business would survive and be there to support their families on an ongoing basis. So tell me about your role in that, the persistence that you showed, even though he had been pitched so many times before and was didn't want to hear any more of it, but that you persisted and so he could see the true protection and value. Why is that meaningful to you to make sure that they do understand that longer-term implication?

SPEAKER_02 18:21

Well, I really want all the business owners I work with that we are not about products. We're about planning. And we use different products for the planning, but we never leave with a product. Uh, it's always let's go through the diagnostic so we can take a look at all the different needs that you have and pull in the goals that you want and what you want to accomplish, and then we can put together a coordinated plan with and with communication from all the specialists coordinating what we're trying to put together. And um, it's very effective.

Tax Mitigation Versus Tax Deferral

SPEAKER_01 18:54

Yeah, it seems like it is Dale. Uh you'd mentioned earlier, I think, some of these five pillars. And so let me ask you about strategic tax planning, because that's one of those pillars. And you tell a story in the book about James, who is a physician. He says, Every April I'm writing these huge checks to the IRS, and I feel like I'm falling farther behind. I think that is something that a lot of people can relate to. So, what happened to that story? When what'd you uncover? And how did the strategic tax planning transform his situation?

SPEAKER_02 19:25

Well, he uh he was very on a big track every year and paying some massive taxes, but we found out after doing the diagnostic that we could save him a lot of money just by changing the way he was structured, his entity structure, sole proprietor. And so we made some adjustments there, um, put in an accountability plan, and then we did some tax mitigation. Um, the one thing I really want, you know, I'm really focused on helping business owners do is instead of, you know, the the the goal is every year, towards the end of the year, right now we're in December here, um, is to figure out ways to drop that tax bill that's gonna be hitting in April. And so what happens a lot of times is their advisor uh will tell them to buy equipment, um, just you know, put money back into the business, put it in the retirement plan, you know, anything to do to lower that tax bill. And the problem turns out to be they're spending money into their business that they don't technically need right now. You know, sometimes it's equipment that they can use, but so they need it now. Right. And so they're buying things that they don't need right now. They're putting money into the retirement account, the 401k or a CEP, whatever it is, but it's usually a qualified plan, meaning they're avoiding, they don't have to pay taxes to put that money in. But the problem with that scenario is business owners need liquidity, whether it be for expansion, for a downturn in the business, or whatever can happen, they need liquidity. So when you start coming money into a cost plan or whatever they're set up with, now that money's stuck in there until they're 59 and a half, and they've created another tax problem in a retirement. And um, and if they leave that a tax problem long enough, it's a it's you know a good amount of money, you know, seven figures and more, um, now they have a problem when they hit required minimum required minimum distributions. Um, so they're gonna end up taking a huge chunk of money every year, which will raise their income, to put them through the erminal brackets, which will raise their Medicare. So the the point of the that whole story is that the goal is to do tax mitigation and not tax deferral. So using tax mitigation, we had up some incredible programs, strategies that we can use to tax mitigation, put the money into uh a program, a strategy that will grow, tax deferred, and it can get at it tax free or tax referred. And um And so now they have this liquidity in a vehicle that will grow with the business, it becomes an asset to the business, or they can sell the business and keep that asset and the cash that's in it. Um so it it's so tax planning is probably the most important one because it's the one that can affect us the most. And so having a good tax plan that creates liquidity for your business is very, very important.

SPEAKER_01 22:27

I think you're describing there's something that business owners certainly don't want to have to keep their eye on all year long as they're thinking of the million other things in their business about it's not just about doing the return and making sure that they've met their tax obligations, but it's looking at the bigger picture, how is this going to affect them down the line? And I think you've really shown the case for why having somebody that has that bigger picture can be so critical. And so they're not missing opportunities or getting slammed later on with bigger bills that they don't want to have to meet.

SPEAKER_02 23:01

Right. Yeah, exactly. And, you know, the average advisors, they have to typically go, you know, a mile wide and an inch deep, and they're good at what they do. But what our virtual family office allows us to do, it's still go a mile wide, but we can go a mile deep in those five key areas of planning. And that's that's a game changer for business owners.

Risk Planning For High Earners

SPEAKER_01 23:23

Yeah, sounds like a game changer. I agree. Tell me about another one of those pillars, Dale. This is risk management. We touched on insurance, but tell us also the story about Marcus. And he was a former military surgeon and whose hands generated over 1.5 million a year. So what was his fear? And how did you help him turn what was his greatest vulnerability into a strategic advantage?

SPEAKER_02 23:47

Well, he um, yeah, as you can imagine, when you're generating that kind of money with your hands, um you start to worry a little bit about okay, what if some happens? Right. And I guess it doesn't even have to be his hands. He was, you know, it's a you know, and the type of business where he was the sole breadwinner. You know, the uh other types of businesses, the business owner could be taken out or get hurt, but the business will still run and kick out money. So for him, we had to set up some different things that he would have some money coming in to support. Um, and then there's other ways to set up his company to where somebody else could step in and start to run it as well and create an income for the company, which will obviously support him. So there was a few different programs that we could have done. You know, disability obviously is one of them, but that can get expensive depending on how you structure it. Um but at the end of the day, we were able to set it up to where if something did happen to him, he still had security and and he let us know that he was so appreciative because it didn't it didn't take the load off of his fear and and burden that he had.

SPEAKER_01 24:54

Had he been thinking about it that way, that if something happens to me that he's relying on his hands and work as a surgeon, or did did you show him that that was a possibility and he wanted to protect against it?

SPEAKER_02 25:06

Um he came in, but that kind of a little bit of a fear of it. Yeah. And it was something that was on his mind for sure, that something happened to me. Um, I don't know how long bills would be paid and overhead would be covered. And so that was something he wanted to take care of.

The Wealth Paradox And Liquidity

SPEAKER_01 25:23

Yeah, I could see that bringing a lot of peace of mind just to know that all of those pieces were in place. Is Dale, you talk about the wealth paradox, that business owners they're running multi-million dollar companies, but with surprisingly little personal wealth that's outside of the business. And so tell me about why that happens and how does the VFO approach help those business owners extract some of the wealth without eroding what they've been working so hard to build?

SPEAKER_02 25:49

Well, when you start a business, that's what you do, is you put everything back into it. Right, you pour it all back in. Yeah, you put it all back in and you just keep growing it, and then at a certain point, it just becomes what you're doing. You just keep growing the business, keep growing the business, and you forget that you have to pull in some of that out and creating you know wealth outside of your business. Um so that's what we do. We we you know, we look at the different aspects of how to pull the wealth out, uh, make sure the entity is set up properly to where we can pull it out. Um, and then obviously tax mitigation goes with a lot of that so we can pull it out and not have to pay taxes on it. So there's a few different ways that we can correct that, but it's you know it starts with you know a thought process first of you know, hey, I need to take insert filling some money, you know, some wealth outside of my business. And um and then that's where we can show them some different ways of doing it, um, and and and keeping that liquidity so we can pull money out, still have you know have it you know for their retirement and for their exit and their legacy, but it's also their liquid if something did happen that they could tap into it and still get the business back up and on its feet.

SPEAKER_01 26:59

Dale, tell me about the different ways that you help business owners to take that money from just investing it back and to put it to work in their personal lives as well, and so that they can build wealth and and prosper with their families.

SPEAKER_02 27:15

Yeah. Um the focus, you know, first and foremost, obviously, is to find tax-efficient ways to get the money out of the business. And then once we do, I believe in diversifying different areas, and we have some really great strategies where the bundle can grow double-digit, um, but we have downside protection. Uh, and so we have a few different types of opportunities that they can really diversify but still protect themselves. And then obviously, if it depending on their age, um there may be some more aggressive strategies that they want to go in where there's even more upside, um, but then there's more downside. So it depends on their age, what they're you know, what point of life that they're in, and then you know what strategies that we recommend. But for me and and our team, we're always looking at ways of mitigating taxes and creating as much non-qualified money, meaning it's the tax has been paid, now we're growing it, and they have that liquidity. Liquidity, I think, is really important instead of having to wait in 359 and a half. And if it's an older business owner and they're already 60, well, then we're we're working with them on how to get the money out of that 401k or that SEP or whatever qualified plan that they have, we're we're working to get that out of it earlier before they hit requirement of distributions, and and then we can create a tax-free income for them during retirement versus having them pull everything off, pay taxes. And and then it's a better legacy as well, because if you leave a qualified plan as far as far as a legacy to your to kids or whoever, you know, 50% of that, roughly, depending on what state you're gonna be in, is gonna go to the taxes. So we show Modelim a uh better legacy, a tax-free legacy for their heirs.

SPEAKER_01 29:04

Dale, I love this because it's like when you give the business owners some of their time back, and that that not only benefits the business, but it benefits their families at home. And so this seems like another way that through this planning that they're able to not just have a successful business, but a more successful life outside of their business as well.

SPEAKER_02 29:26

Yes, it is and that you know what is um for me, I guess, you know, the definition of of success uh is is having the finances to do what you want when you want, but it also has to do with time. And as I uh you know went through all my struggles with losing everything in 2008, that was the one thing I lost was with my family was time, not because I was busy doing things, but I was preoccupied trying to put things together and being the do-all and end all. I didn't have a team. I wish I would have had a team like like we have right now for a business owner um to help go through those types of struggles. But the time is a is a big factor and and being able to um give it, you know, give your time back to your family, your spouse, um, or or time to volunteer, time to to put you know other Disney owned endeavors or hobbies, whatever. Um, so it's creating wealth is part of the picture, but the the other part for me, anyhow, to be just because of my own experiences, it's giving the business owner some of their time back.

How To Connect And Get The Book

SPEAKER_01 30:34

Yeah. Yeah, I think that's super important and something that would mean so much to the people that you work with. Dale, for listeners that want to learn more about the virtual family office and to speak with you and to get a copy of your book, what's the best way for them to connect with you?

SPEAKER_02 30:51

Um, my email address is Dale at TRSFamilyOffice.com. So tax and experiment specials, TRFfamilyoffice.com, or um go to our website, familyoffice.com, and our webpage there. It's not it's part of my uh website. Uh, but they will be able to order the book there and eventually uh it's gonna be on Kindle very soon, at least, and uh they can listen to it there as well.

SPEAKER_01 31:17

Dale, it's been a pleasure speaking with you today. Thank you.

SPEAKER_02 31:20

It's been a pleasure uh speaking with you as well, and uh good time. Thank you. I appreciate it.