Hi, everyone. Welcome to What Works. This is a show for consortium advisors that taps into over 1,000 years of experience shared by our consortium advisors.

I’m your host, Don Patrick, and I’m here to guide the conversation with guest advisors and lift the hood on what works for them in business and life. It’s all about learning and growing.

So let’s go.

Don Patrick: Hey, everybody. Welcome to episode number four of the IFG podcast, What Works. And today’s guests are Jerri Hewett Miller and Dan Miller. They’re the owners of Wealth Horizon, located in Atlanta, but they’re really in the mountains and really at the beach, and I’ll let them tell you about all that. So, Jerri and Dan, welcome.

Jerri Hewett Miller: Thanks, Don.

Daniel Miller: Great to be here.

Don Patrick: So, we’re going to be having an interesting interview. I’ve never interviewed two people simultaneously, so we’ll just see how that goes.

Jerri Hewett Miller: Okay, and I’m going to let Dan answer first, and then I will give my thoughts on whatever the question is.

Daniel Miller: I was going to offer the same, but okay.

Don Patrick: Well, now we have that straight. Let’s dig in. Really just want to hear a little about yourselves, your family, and a little about your history, and each of you have a very interesting history, I think.

Daniel Miller: Well, I guess I’ll start. I’m from Cleveland, Ohio, originally. I came to Atlanta in 1977 to attend Emory University, undergraduate business degree, and never left up until a couple of years ago. I was actually a stockbroker with both Lehman Brothers and Bear Stearns from 19, late 1985 to 2002, at which time I exited the business and did some entrepreneurial business ventures. And Jerri and I had actually been fixed up on a blind date in 1984 and went our separate ways for 27 years.

And then I came up as her match on match.com. We reconnected and hit it off immediately. Got married. She tried to persuade me to come join her in the business. And I was reluctant for several years, but then I saw how much she helped people. And I love that aspect of the business. And I did join her in 2018. So it’s been eight years.

Jerri Hewett Miller: And I came from North Carolina directly out of college, went to University of North Carolina and have a useless degree in clothing and textiles, at least for this industry. And went to work for 10 years as a buyer of women’s apparel, kids’ apparel, and traveled to New York and L.A. all the time. After 10 years, I was very tired of that travel and had the opportunity through a friend to be introduced to this industry. I found the first three years of selling life and disability insurance, I hated it, but I was really good at it. So ended up rookie of the year, sold disability like crazy because I really believed in that.

Through that experience, I met a woman who was a CFP and worked with high-net-worth clients. So she kind of took me under her wing. And I moved into her office and really started focusing on planning and wealth management. After three years, I decided I was ready to go out on my own. I had my CFP and all the other licenses and designations that I needed and opened Wealth Horizon 30 years ago. When Dan and I met and knowing his background, knowing his high level of empathy and understanding of problems and then solving them, I did immediately think about him joining because I was getting busier and busier and really had more than I could handle. And after about five years, I joke and say he was on the dark side when he was a stockbroker, but he came over to the lighter side when he joined Wealth Horizon.

After he joined, we had a growth, tremendous growth spurt and doubled our business and it’s worked out really well. I remember Don and I having a conversation before Dan joined and he was devil’s advocate and everything that could go wrong, but I think we’ve been very fortunate that we’ve worked through those problems, challenges that of course come along with any kind of partnership.

But when you add marriage on top of that, it can create some additional challenges. We owe the success of that transition not only to IFG and to Don and Land and your guidance, but also, of course to Madge Caldwell. We hired her, we worked with her for a year, and I say she literally saved our marriage. And she put our practice on a firm foundation so that we could grow it and double it to where we are.

Don Patrick: Yeah, I’ll never forget that phone call. So I have helped, I think, 24 partnerships dissolve. Business partnerships, I think, are harder than marriages. And then I got that call from you on a Saturday morning.

I’ll never forget it, Jerri. And I go, ”Oh, no, here we go. Great. We’re going to destroy a marriage and a business all at one time.”

Jerri Hewett Miller: Well, the marriage, at least, we had five years under our belt.

Don Patrick: I know it can do that, but no, you guys, you approached it really well. Worked really hard on hiring Matt, he had sent the foundation.

So since we’re on partnerships, how do you make your partnership work? What do you think makes it work? And what are some of the challenges?

Daniel Miller: Well, we do handle every client together. So we approach it as one book and we have found, as I think some of the other married partners have found, that couples really like getting both perspectives.
And it’s interesting because a lot of times the gentleman will align and kind of connect with Jerri and I’ll connect with the lady. Not always the case, but that works very well. We do kind of have separate responsibilities. Jerri loves the planning and really does that almost entirely. I had a lot of experience when I was a stockbroker with options and I’ve always said options can be your best friend or your worst enemy.

It just depends on how you choose to use them. And you’re right, I did start in 2016 and so it has been eight years. 2018 was when we were introduced to structured notes. And that’s really been a large part of my focus and I think Jerri was very hesitant at first because she didn’t understand them and thought that they were risky.

And I maintain that they’re less risky than strict asset allocation, but over time, we’ve had enormous success, and we’ve definitely enhanced our client’s return. So it’s a complex job, managing that side of it. Because notes get called, notes expire, you have to find notes that give you the type of income or growth opportunity that you’re seeking, and there’s thousands of them to sit through. So, that’s really a large part of my focus.

Don Patrick: Yeah, and we’re gonna dig into that a little bit because it’s a number of folks in the Consortium are using notes, others are not, and for various reasons, and so we’re definitely going to want to dig into that, but so what I’m understanding in terms of making the partnership work is it’s really a division of duty, primarily.

Daniel Miller: Yes, although our client meetings are typically conducted by both of us, not exclusively, but typically. And we seem to play very well off of each other. So it’s worked very nice.

Don Patrick: So is one of you sort of the lead for client A and another one is the lead for client B. In other words, for follow-up communications and things of that nature, how does that work?

Jerri Hewett Miller: Yes, that is the case now that Dan has time under his belt and has met virtually all of our clients, either in person or by Zoom, and the new clients that we’ve attained since the time that he came on board. We are trying to have certain clients that he’s really the contact or he picks up the phone and calls them.

A lot of my clients that I’ve had for many, many years, they’re always going to look to me as the lead advisor, and that’s fine. But it’s nice to have Dan, when there’s a particular subject that we want to pick up the phone and talk to clients about, it’s nice that Dan has his list of clients that he can call, and I have my list.

Don Patrick: Great. So, you love financial planning, Jerri. What kind of software, what kind of tools do you use, how do you present it, and kind of walk us through what it’s like with a good respected client as well.
Jerri Hewett Miller: Okay. We use WealthVision, and again, I probably used the software for 30 years. Can’t remember the gentleman’s name, who is very wealthy now, because he started it and sold it to Fidelity.
Don Patrick: That’s right.

Jerri Hewett Miller: I love the software because I like to dig into all the behind-the-scenes and make sure all the numbers work and match, and then I can simplify it for the client. We do ask all of our new clients to go through the financial planning process first before we’ll talk to them about investments. That works very well because we tell them, this is–we want to make sure it’s a mutually valuable experience for both of us.

So we tell them that up front and that they’ll need to spend some time with us to go through that process. And the clients love it because we’re not as focused on return. Sure, they want to know how their portfolios are doing, but we can always bring it back to their plan. Are you going to be okay?

Okay, this happened. Are you still going to be okay? Worst case scenario, and we stress test, what if you have a long-term care need and you don’t have long-term care, where, what assets are going to fulfill that expense? So that is my passion. If I could just do wealth vision every day, create plans.

I know it’s weird. Most people hate that part of it, but I just feel like I intimately get to know a client situation. And I have kind of an innate ability when they ask me about something. I already know if that’s going to work for them because I’ve dug so deep into their information.

Don Patrick: So do you charge a separate fee for this plan or you just bring them through the planning process and charge asset management fees? How does that work?

Jerri Hewett Miller: In the past, we charged for every fee, I think, because of the way our lifestyle has changed. We’re not taking on a lot of clients. The past couple of clients have been referrals and they have enough assets that they already know that they’re going to be okay.

So we’ll do a plan for them. I’ll do the plan because I want to know that everything’s going to work, but they already have the sense that they probably have enough assets. So we kind of let that go by the wayside, not that we wouldn’t consider charging a client. I do believe that people value what they pay for.

And I recognize this in myself. If I see something having value and it costs more than something else that I think is lesser quality, I’m going to buy the one that costs more. So I do believe it’s the same way with clients. If they pay for a plan, they have skin in the game, and they’re going to be more committed to that plan.

That being said, I think because we stress the plan so much, that all of our clients are focused on that rather than the wealth management part of it.

Daniel Miller: Historically, what we’ve done is assign a fee based on the complexity of the plan as we perceive it, charge 50% up front, and then if they have meaningful assets, million plus, we will waive the second 50% upon transfer of those assets.

Don Patrick: Okay. So, you just got a referral, walk us through the meeting process and do you have names for them, like discovery meetings and just kind of what that looks like?

Jerri Hewett Miller: In fact, we just had a referral last week that we were in Atlanta and met with face to face. So, the first meeting for us is an initial consultation.

This woman actually gave me her financial plan that Truist had given to her and she was going to give me all the assets to look at and I basically put, I didn’t touch that when she moved it toward me. I just didn’t touch it. And I kind of backed up because we want them to know in that very first meeting we want to get to know them.

I love what we’ve been going through about intentional listening and following the breadcrumbs and Dan and I intentionally used those tools with the meeting with her and we can see by the time she left, she was smiling and she really, really liked us, and the person that referred her told us that, that she really liked it.
Don Patrick: So you got on her stage.

Jerri Hewett Miller: Exactly, exactly. And very interesting woman. She’s living in France, still has a house in Atlanta, but sells French wine to businesses in the United States and other contexts. So very interesting, but we made it clear that the next step is a meeting where we want to analyze her information, and then we want to come back to her and explain to her what, how her portfolio is put together.

We ask her to take the Riskalyze. We use that for every client. And then, so, the next meeting, she will expect that we will sit down with all the information that we have for her. And then after that meeting is when we’re going to come back with recommendations. Because sometimes that happens in the second meeting, but a lot of times, we’re at the second meeting, we’re talking about our philosophy of investing and the different things that we do and how we’re different and structured notes clearly separates us, and we explain to a client, we use 20% of their portfolio to increase their income plus it has downside protection.

So they always like that, they’re very curious. And this woman had an MBA and was very financially sophisticated, and she was interested. Her ears perked up when we told her about these, but she had never heard about them before.

So the next step is we sent her an email and we’re waiting to hear back so we can have that second appointment. But that’s very typical, sometimes the second appointment, especially these days, will be Zoom. Often the first one these days is a Zoom.

Daniel Miller: We always start out with the question, why are you here? You have someone who’s been handling your investments. What is it that caused you to initiate this meeting? And we gain a lot of information from that in terms of where, in their mind, their existing advisor is not fulfilling their needs. And it really helps us gauge how to approach them.

Don Patrick: Great. So, from what I understand, that second meeting, that’s when you’re kind of showing them the findings and sort of presenting the plan. Is that correct?

Jerri Hewett Miller: Yes.

Don Patrick: Okay. And you do that. Do you give them like a bound printout paper? Do you use like a TV screen or if you’re on Zoom, obviously.

Jerri Hewett Miller: We do not give them anything printed. We introduce them to what we call their personal wealth management website. And we show them that on the screen. We, I’ve already run some reports that I want to share with them if I have all the necessary information and I also can tell them at that point, “This is the information that we’re missing for me to really do a complete plan for you.”

But most people really like the fact that the website is, I call it a living breathing plan, because they can call me any day and ask me what their projected cash flow looks like and it’s based on real numbers today. I think that’s, again, when I look at the financial plan from Truist, it’s a bound copy. And when she threw it across the table at me, I felt pretty much that was her attitude. “Well, here it is. I don’t know what to do with it.”

Daniel Miller: The other thing that makes that tool so valuable is the ability to model different scenarios. So a client comes and they say, “I’m thinking of buying a lake house.”

Well, let’s take a look at what that movie looks like down the road or any other considerations. “I want to help my children.” It’s very easy to plug in the variables and see how that plays out.
Don Patrick: So yeah, the clients are empowered. They end up making the decisions and you show them the ramifications of the various choices, correct?

Jerri Hewett Miller: Yes.

Don Patrick: Yeah. it’s a game-changer. When I started 40 years ago, a hundred-page plan, now, you know, “Here it is.”

Jerri Hewett Miller: Yeah. And then they put it in a drawer and they don’t look at it.

Don Patrick: Exactly. Well, I would say, if I go to the doctor’s office, I want speaking in English. If there’s an issue, I want to know what my choices are, what they recommend and why, and I sure as heck don’t want a hundred-page plan.

Jerri Hewett Miller: Right. This is a pet peeve of mine. Speaking of doctors, every time you go to the doctor’s office, you have to fill out four pages of what you’ve already told them the year before. So I’ve always done the gathering of the information in a face-to-face meeting. I’m not going to send my clients a questionnaire because they hate filling it out as much as I hate filling out questionnaires. And I can get the information I need from them with a phone call, or have Greg call and get information that we’re missing. I just think the questionnaire, some people love it, but I just think it’s cold. I think it turns clients off that they have to do so much work.

Don Patrick: I totally agree with you. And that’s part of the reason they’re hiring you. They don’t want to mess with this stuff.

Jerri Hewett Miller: Right.

Don Patrick: So, and then you’re running the money. You’re the money manager, basically. Correct.

Daniel Miller: I wouldn’t characterize it that way. We’ve used Alpha Management for many years. And actually, only in the last few months have we discontinued that relationship. Although we have enormous respect for Brad and Anna and they’ve been wonderful. But Jerri is intent on getting out of the money management business because that’s the part of it that she enjoys. She enjoys planning. So we have begun moving initially our retirement accounts to IFG Investor Solutions, and we have a lot of confidence that’s going to relieve us of enormous burden, and that they’re extremely competent, Bryce and his team, and so we’re excited about that. And just like Jerri loves the planning, I really enjoy the structured notes and it’s fun for me. So from that standpoint, yes, I’ll identify attractive notes and things that we should be moving clients into, but I wouldn’t call myself the money manager.

Don Patrick: Well, you oversee it.

Daniel Miller: Yes.

Don Patrick: You go and watch it. So now, you got the new client, gone through the planning process, implementation, what does it look like year after year with the client meetings and things of that nature, and how you handle the progress we’re making?

Jerri Hewett Miller: Well, honestly, we talk to our clients a lot throughout the year. So that annual meeting is not a big mile marker necessarily. We do have some smaller clients that we only talk to once a year and, you know, in these days after COVID. It’s a phone call. Our clients in Atlanta don’t really want to even drive to the office anymore.

They’ve gotten used to Zooming, but I update their numbers before the meeting. So we’re ready to show them the two reports that I think are the most important, five-year cash flow. I mean, if they can see that, they get a level of comfort that if all of our information is correct, they’re going to be fine.

And if we look at the next five years or we look at the cash flow until they’re 90 or 95, whatever we’re planning for, that gives them a great sense of comfort. The other report is we always update their balance sheet, of course, and their net worth statement, so they can see the progress that they’ve made.
Most of the time, I’ll pull a report from a past year, maybe three years ago. And show them how much progress they’ve made.

Don Patrick: Great. I remember Jerri when you joined IFG, you were burned out. You were doing everything. You were managing the money and you weren’t sleeping at night. You’re doing trades, everything.

And I remember you said, “I just want to go on bike rides on Wednesday afternoons with Dan.” And you’ve had a huge transformation in your business over the past, what, six, seven years, I’d say.

Jerri Hewett Miller: Yes. And we’re going through another level of that transformation. And not letting go of the trading and the money management was a big mistake.

I wish we’d have done it five years ago. I wish I’d have done it 10 years ago, but we’re doing it now. And I really like the way we’re doing it because we do still have that 20% that we’re putting in the portfolio of the notes. But I want to get to the point where I can work like five or six hours a day and not worry about what’s going on in the market or the world and enjoy our lives. I mean, it took Dan and I, how many years to find each other again?

Daniel Miller: 27.

Jerri Hewett Miller: 27 years, right? And a quality of life is so important. We have a friend here in the mountains that coined an acronym, QTR, and it has been our theme for the past four or five years, well, since COVID and we share it with our clients.

Daniel Miller: Yeah. Well, I explained what it stands for.

Jerri Hewett Miller: Yeah. Quality Time Remaining.

Daniel Miller: A lot of it.

Jerri Hewett Miller: We all have X amount of days left on this earth. We don’t know how many days. We have seen clients retire and we have one that came to us, a couple, they thought they would never be able to retire. After they came to us, they were able to retire within a couple of years.

We saw it was possible. Right before COVID, we took them to dinner to celebrate their retirement. The following week, they were going to Italy for the first time ever. They had to cancel it because of COVID. She was diagnosed with a glioblastoma brain tumor, which is a death sentence. I hate to say it. And she passed away last week to survive for 18 months, but they never were able to make that trip to Italy.

And it makes me sad. We all have stories of our clients that are similar to that. But for us, we are in the very fortunate position where we can make our lives, our relationships, our family our top priorities.

Don Patrick: You had to work hard to get there, many years.

Jerri Hewett Miller: Many years, and it took me, it’s taken me at least three or four years to change my mindset of what work means, and it’s okay not to be on the hamster wheel anymore. I’m not visible in Gwinnett County like I was, and that’s okay.

And I can work four or five hours a day, honestly, and get all my work done and then go play tennis or go work out, just sit on our wonderful screened-in porch and look at the gorgeous mountain.

Don Patrick: Yeah. So let’s talk about that evolution of the business where you were doing everything. You had a full-time assistant, you had office that you own. Then COVID hit, and you basically become virtual. You’ve got two homes now in Florida and up in the mountains, correct? Your assistant retired, you’re using the virtual assistant program.

Jerri Hewett Miller: Yeah, Dan, do you want to talk a little bit about Lynn retiring?

Daniel Miller: Sure. Lynn was everything that we could have asked for and more, and we did everything possible to make her compensation package so attractive that she’d never want to not walk out to her front lawn and pick up that basket of money.

But, eventually, she did, and she decided to retire, and it was a huge concern for us, particularly now that we were working primarily virtually and what a godsend the virtual assistant program and specifically Greg Cobb has been to us because with Lynn’s help through the transition, it has truly been seamless.

And I don’t know that Greg spends the amount of time on the phone with our clients just laughing about different things and talking about trips and so on and so forth. But our clients love him and feel very comfortable accessing him when they need to, and he’s been phenomenal.

Jerri Hewett Miller: I’ll address kind of how the transition happened. And honestly, after you hear the story, you may agree with me. My belief is it was totally divinely guided and set up. And it was like right in front of us and we couldn’t say no. So, interesting, when COVID hit, Dan and I came up to the mountains and we thought we would be here for a couple of weeks.

And at the time, we had a little mountain cabin that I’d bought 20 years ago and two bedrooms, two bath. Not very big. And after, I remember it was August, so we came up in March and we pretty much stayed. And in August I looked at Dan and I said, “If we’re gonna work here,” We now know we love being here full time, “But if we’re going to work here, we have to find a bigger house.”

So in just a matter of 30 days, I identified a house that came on, right on the market. And we were in Colorado when I saw it. It was in the neighborhood we wanted to be in, which is directly across from our club, which is a big part of our social life. We play tennis there. And so I called him from, we called him from Colorado and we offered a little bit more than they were asking.

And that’s when everything was going crazy. Something would go on the market and it’d be gone. And we gave them like three hours to respond, never thinking that they would respond. But they had eight showings that day and sure enough, in three hours, five minutes after our deadline, they called and they accepted our offer, which was unbelievable.

So I’m gonna make a long story short. We bought the house. And we met the owners, Jimmy and Georgianne, who we are friends with now, and within six weeks, they saw our mountain cabin, our little mountain cabin, that we had not put on the market yet, and they’re like, “We want to buy it. We want to buy all the furniture. This is exactly what we’re looking for. A two bedroom, two bath cabin in the woods.” So, the next thing that happened is we had rented Kim and Hank’s second home in the Keys.

Daniel Miller: Third home.

Jerri Hewett Miller: Third home. Okay. However many homes they have. For the month of February, and that was what, two years ago, Dan, I guess.

Daniel Miller: It was three winters ago.

Jerri Hewett Miller: Okay, because I know the winters here in Cashiers and they can get gray and dreary and I need sunshine and I need warmth. So we’re spending a month there and we look at each other and we love it. We’re like, “Oh wow.” And we could work from there and it just was wonderful so, again, we got a phone call while we’re there from one of our neighbors in Atlanta in our subdivision.

And he said, “Would you guys think about selling your house? You’re never here. And we’ve got a couple that’s interested.” So long story short, that happened. We were doing a renovation up here. They let us stay in the house until our renovation was finished. And then we found the house in the Keys. It all happened very quickly, but it all just flowed and it was easy. And here we are today.

Don Patrick: So you are true snowbirds.

Jerri Hewett Miller: We are snowbirds. And we’re way too young to be snowbirds, but we are.
Daniel Miller: And we eat dinner and go to sleep early.

Don Patrick: Early bird special.

Daniel Miller: Yeah, exactly.

Don Patrick: So you weren’t from up there. Very complicated business to pretty much outsource. So let’s.. I call it a lifestyle business now, and it’s a fantastic story. It’s great.

Daniel Miller: Yeah. I think being fully transparent, it wasn’t without second guessing and wondering, I mean, our lives changed so dramatically and I still maintain that COVID was the best thing that ever happened to us.

I know it certainly wasn’t for many people, but everything changed in our lives and that’s why initially I didn’t want to sell our office because I just wanted our clients to know that there was some brick-and-mortar that still tied us to Atlanta, but it became clear that they didn’t need that.

And then we got an unsolicited offer on our office. And that was after our adjacent, tenants had a water leak and we didn’t know about it because we were not there and we went back for Lynn’s retirement luncheon and found mold growing up the walls and they still wanted to buy it and we said, “Of course, we’d have it all remediated.”

And they said, “Yeah, just put the sheetrock back. You don’t have to paint or put the carpet back. We’re going to change all that anyway.” So we had an office, a home, and a cabin that all sold without ever being listed without real estate commissions. Pretty amazing.

Don Patrick: That’s amazing. The story. That’s great. So you joined the consortium about eight years ago, is it? Or is it longer?

Jerri Hewett Miller: 2013. 10 years ago. December 2013 I think is when Land and I met, no, when I met Kim at a Barron’s Women’s Conference. Then I met with Lan in January and then February 2014 I joined, yes.

Don Patrick: And why did you join the consortium?

Jerri Hewett Miller: Don, I was looking, I had been looking for exactly what the consortium is. So I’m one of those LPL long haulers. I can’t even remember when I started with LPL.

Daniel Miller: There were 2,000 advisors then.

Jerri Hewett Miller: Yes, and I read today we have 23,000, so, yeah. And I hung in with all the changes, but in the beginning, those 2000 advisors and the conferences that we had were like IFG.

And so the bigger and bigger that LPL became, the more I felt like a tiny tadpole in this huge, huge lake. And when I met Kim at Barron’s, and she started telling me about the consortium, I was like, “Kim, this is exactly what I’ve been looking for.” And when I met Lan, I mean, and you, I just immediately knew that this was the right place for me.

And I didn’t hesitate, which is how I usually make a lot of important decisions when they feel really right. And I’m so glad that I did. I’m glad that I had the years with you guys before Dan joined, and certainly, what we have now with our study groups, it’s again, it’s part of our quality time remaining.

It is a pleasure to go to the retreats and see our friends and go to study group and get support anytime we need it from just picking up the phone.

Daniel Miller: It has been an unbelievable support structure. I mean, aside from all the inspiration and expertise that we’re able to tap through fellow advisors.

Now we’re working with the virtual assistant program. Now we’re working with Investor Solutions. Without IFG, we don’t have that.

Don Patrick: Correct. Well, we’re super happy to have you two with us. You are the epitome of what a consortium member is. You two are great people and you’re great at your business. You care about your clients, care about your friends.

Jerri Hewett Miller: You know, the past couple of years in our study group meetings, the other members of my study group, most of them are, building teams, transitioning their business to younger people, they’ve got plans for their practice, and the future of their business. We definitely have a lifestyle practice.

And now I’m comfortable saying that. I wasn’t comfortable saying that a couple of years ago, but Josh Donley said to me one day, he said, “I have a lifestyle practice and that’s what I want. I don’t want to change it. I want to be with my boys.” And now I embrace that. And honestly, there are some members of my study group that would love to have what we have now.

Don Patrick: You simplified everything in spot, not complicated.

Daniel Miller: Yeah, the other interesting thing was right before COVID hit, we were pursuing hiring an associate advisor and there was a young lady who we thought was extraordinary and we made her what we thought was a very, very compelling offer, and understanding that it would mean that we couldn’t spend all week, every week in the mountains, that it would require us to be in Atlanta more to bring her along.
And her father decided that that was her best time to negotiate. And she didn’t calculate jury’s response accurately. And jury just turned her back and walked away and fortunately, then COVID hit, our lifestyle would not be what it is now, even had she started then, it would require much more active presence with her.

So when Jerri talks about divine intervention, I mean we have been very fortunate and we look at the tea leaves and we try to read them.

Don Patrick: Fantastic. It’s a great story. I love it. So let’s jump into structure notes. How do you use them? How do you find them? Do they replace part of the fixed income? Do they replace part of the equity? And I’ll just let you go with that.

Daniel Miller: Okay. They can do both. Like I said, options and their combination of options and zero coupon bonds. And I can go into specifically how they work. That might be a different discussion, but for most of our clients, we were looking for income, particularly when you got point zero, zero, zero something in your savings account at the bank, and we were able to go out and find notes, particularly when the market really pulled back substantially, we were able to take advantage of that and find notes that were paying us, some as much as 15% on a annualized basis, distributing monthly. And having as much as 50% downside protection. And typically they work with three underlying indices and you can kind of select which ones you’re comfortable with.

We keep it pretty vanilla and use the S&P, the NASDAQ, and the Russell. And, I mean, the market had already pulled back 30% if we weren’t really all that concerned that we were going to pull back another 50% from there. And so that’s how we got into it. It was a fortuitous time.

We also have clients that use them for their growth potential. And those notes are typically also based on underlying indices. And it’s the worst of those indices that will dictate what happens. So in this case, it’s been the Russell for a long time. What the growth notes, we initially focused a lot as our international presence and kept pure international notes, and I mean, we have notes, five-year notes that we’re paying 350% participation on the worst performer of those two indices. And it was just unbelievable. And we still, even domestic indices, we still can find notes that are paying well over 200% participation of the worst performer.

And so even the Russell, that’s been such a laggard, hasn’t really hurt us because when you have a participation rate that multiplies the return, it’s not so unattractive. And secondly, it enables us to stay in these attractive notes. Because if all three indices were up, these notes are either auto-callable, which means they go back to the institution or their issuer callable, in which case the institution has the discretion as to whether to call them or not.

So one of the things, of course, we look for is notes that have at least a six-month no-call period because it’s notes that get called every three months. That’s just, that’s an enormous amount of work to replace them, and that’s kind of the way we use them. Now, of course, interest rates have come up, but still don’t come close to approaching the type of coupons that we’re able to obtain through the structured notes.
And they also give us this enormous downside protection. I don’t do anything that’s less than 30% downside protection and those are notes that are called barrier notes in that if they’re down 31% at maturity and they hadn’t been called, then our client’s down 31%, but if they’re down 29%, our client gets all their money back if it hadn’t been called previously and it goes to maturity.

We’ve never, knock on wood, we’ve never had one that exploded on us and that’s the reason I go for deep downside protection. There are plenty of other notes that can be selected. There are buffered notes, in which case the institution, the issuer may give you 10% of downside protection where they eat the first 10% of the loss.

So if the market’s down 18%, your client’s only down 8%. Well, that’s not bad, but to me, with this portion of a client’s assets, I don’t want to have that conversation. We’re not down as much as the market. That’s the conversation that we have with regard to the rest of their portfolio, the asset allocation that’s intended to mitigate the downside.

This, you know, I got to do notes that I feel very confident, and they can be backtested, so you can see over historic five-year periods from day to day to what degree they’ve ever not offered full return of principle. But I just, I want to make sure that I don’t have that conversation with a client where I have to say, “Well, it exceeded our downside protection.” or “We mitigated your loss.”

I want this to be a positive experience and we have clients that didn’t understand them. We tell them when we explain it to them that we know we’re going to have that conversation probably a couple of times again in the future because it’s not clear what the terms are when you look at your statement and it’s not clear to remember the discussion we had, but we have clients that absolutely love these and would be eager to put in more than the 20% that, that we use as a guideline.

But we pretty much adhere to that. And they’ve just been a wonderful contributor to our performance.

Don Patrick: That’s great. Are you using them in the advisory accounts or brokerage accounts, or both?

Daniel Miller: Strictly advisory, and I have to say that I would discourage anyone from considering doing these in a brokerage account.

You will get paid a very nice commission, particularly on auto callable notes when the market’s going up and you pick notes that have 3 month no call and they keep rolling and you might make 6 or 8% on that money over the course of the year. But the client is not, that’s not a fiduciary approach to your client. That’s not a best-interest approach to your client and while the client may be satisfied with the coupon that they are getting, that’s because they don’t know what they could be getting. And it’s typically on a note 3, 4, 5 years. It’s typically about 2% difference. That’s the 2% that they’re paying the guy who’s doing it in a brokerage account.

Don Patrick: Gotcha. Well, that’s a great summary of it. It sounds fantastic. And the fact that you can actually get them to understand it after a few conversations is great.

Daniel Miller: Well, we have clients, we did a note last week. it was a custom note because the market had pulled back a couple of days.

We want to take advantage of that. And we called our clients, we called this one client who was so excited when she answered the phone and I said, “I love that, that you’re so enthusiastic when you see my name come up.” and she says, “Well, I know it’s gotta be something good.” She says, “What note are we buying?”
Don Patrick: That’s great. I love it. Well, we’re going to wrap this up. It’s been, you guys have been fantastic. This has been so interesting. I’m going to ask each a question, or basically to share with us something about yourself that others don’t know.

Daniel Miller: I think the most significant thing in my history is that both my parents were Holocaust survivors, both from Vienna, Austria.

And so I have enormous respect for my heritage. It is incredibly troubling to see what’s going on in our country at this time. And again, that’s a whole nother podcast, but I’ve always been very proud of that history and legacy. I think European values are different than American values, and they’ve definitely influenced my approach to life.

Don Patrick: That’s great. Jerri?

Jerri Hewett Miller: Well, mine is not quite as profound or something that you normally would be proud of but it’s a very interesting fact. I do not have a high school diploma. And the reason is back before, you know, kids could take all of these AP classes and get college credit. I went to a program as a high school junior at the end of my junior year, where I went to a college campus and spent the summer and took English and history, and as long as you made a certain GPA, you were allowed to stay, and continue getting your degree, but my school board of the small rural North Carolina area where I grew up would not recognize that. So they refused to give me my high school diploma.

Don Patrick: That’s amazing. I love it. That’s a great story. Well, Jerri and Dan, you’ve been fantastic. Thanks so much for sharing everything and spending the time and sharing with your fellow consortium members.

Daniel Miller: Well, we appreciate the opportunity and to those consortium members, our fellow members, we want to say that we’re always available to you if there’s anything that we can help you with or guide you on. It is our pleasure. It’s the culture of IFG. It’s the reason Don put all this together. And we’re always available to you.

Don Patrick: All right, we’ll see you next time.

Daniel Miller: Thank you, Don.

Jerri Hewett Miller: Thank you.

Well, that’s it for today’s show. Thanks for listening.

If you’ve got something to share, send an email to dpatrick@thebraintrust.net. We want to know what works.

Until next time. See ya.