169: Build Your Wealth in 4 Steps with Elliot Kallen

29
Aug

Elliot Kallen is the Owner of Prosperity Financial Group, where he helps successful individuals, families, and businesses to build, manage, and protect their wealth. We discuss the four main steps to building wealth, the number one goal for retirees today, and what holistic wealth management is all about.

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Build Your Wealth in 4 Steps with Elliot Kallen

Our guest is Elliot Kallen, the owner of Prosperity Financial Group, innovators in 401k plans, retirement plans, creative investments, tax reductions, and building a legacy. Elliot, welcome to the show.

Great to be here, Steve. Thank you. 

It’s exciting to have you here. I’ve got some questions I’m really curious about. First of all, tell us a little bit about how did you land in wealth management as your entrepreneurial field? So what the road, was it a winding road that brought you here?

Thank you, Steve. It’s a great question. Some people have a straight line in their life. And I have to tell you, mine was not as straight as I would have liked it to have been. It’s a little bit crooked, sometimes it even takes a step backward. I think I’m like most entrepreneurs out there, not sure who’s listening here, is that we have vision, we have dream, and occasionally we have failures, but we don’t call them failures, we call them opportunities, learning lessons, all these things. And this is the third company that I’ve started in my life. The first one was an industrial packaging company. And after leaving the accounting world, the big accounting world that I had for college, and I sold that company in 1987. And then I started after some time an environmental cleanup company and consulting company. And we did that. And then the market began to change at the end of the Clinton and the beginning of the Bush administration. George Bush, the older one. And I knew I wanted to get back into finance, get back into money, get back into math. And so I came to California when my wife was pregnant with my twins and started Prosperity Financial Group. And we’ve grown from an acorn to today, I own two companies here that total almost three quarters of a billion dollars.

So from an acorn to a unicorn?

Unicorn, I like to think of it, entrepreneurs, the second you’re thinking that you’re solid and you’re strong is when things go wrong. So we are a budding entrepreneurial business in a growth mode, no matter how big we get.

Okay. That is cool. I mean, this is what we want, basically a growing business, but it’s all about, it’s all about the journey and be able to continue to grow your business. So let’s talk about frameworks because that’s the theme of this podcast is management blueprint. It’s about frameworks that help people conceptualize how to deal with their challenges in their business and in their financial situations as well. And you have a framework around managing wealth for entrepreneurs. So what does that framework look like? How should an entrepreneur look at the challenge of managing their wealth?

So this is, Steve, every entrepreneur goes through many phases, but I’ve narrowed them down to three for conversation’s sake. And it really doesn’t depend, it does not depend on the widget, the service, and so forth. It really depends on the entrepreneur. So here’s the first phase that everybody goes through, whether you’re Colonel Sanders starting at 65, or you’re a crypto person starting at 26, it doesn’t matter. The first phase is I’m putting it together, I’m trying to get a vision. I’m not sure what that vision is right now. Sometimes I’m working out of my garage, sometimes I’m doing this because no one wants to hire me or the economy isn’t working for me or I’m the only one that seems to see it. And we call that the startup and growth phase, where you’re just lacking money, you don’t know what to do. You’re also many times starting your personal relationships in your twenties and thirties, starting a family, holy cow. I’ve got two kids, two kids here, one on the way. I’ve got a business that I’m trying to start. I got bleeding money. I got to get a line of credit from a bank. There’s a bank credit issue going on out there. They don’t want a loan. That’s phase one. And that’s really hard to save. It’s even coalesce your vision.

Vision number one. Make sure you have the financing, make sure you have the tools, make sure you're beginning to surround yourself with the people that see your vision, and sometimes that means getting rid of people that don't. Click To Tweet

But if you could stay focused in that vision and keep refining it, because I doubt for most entrepreneurs that your first vision is your best and your last. It’s your first, and it’s gotta evolve. So that’s vision number one. Make sure you have the financing, make sure you have the tools, make sure you’re beginning to surround yourself with the people that can help you grow, the people that see your vision, and sometimes that means getting rid of people that don’t. Second phase is now I’m beginning to make money. I’m growing, my family is growing, I’ve got to sock away money for my future and a little bit for the company’s future but I’ve got to put it away. I’ve got to start thinking about my kids’ college, I’ve got that mortgage now that I didn’t used to have or I need to buy a house and I’ve got all the stress of running my company because I’m still in growth mode. I still want to grow. I still wanted to become a 10 or 15, $20 million company, $50 million company, three million like me, multi-billion dollar asset company. There’s a lot going on there. What do I do? And phase three is we’ve been doing this for a while and now we need to think of what’s the next step for our money.

Probably our single largest asset, which is our business. And that business is, maybe I want to bring my children in. Maybe I want to monetize this and sell that over time. Maybe I want to just get out and travel and get some financial retirement goals in place. Like seeing the world that I had no time for. Like spending time with my grandchildren. Like becoming a gourmet cook that I’ve always wanted to do or an artist. That’s phase three. And the hard part in phase two is getting through that knowing that I’m being pulled in a thousand directions. And the great part of that phase three is, boy, do I have some wonderful opportunities in my life, but where do the years go? And that’s what we work on.

Okay. So I wonder if it’s three phases or four phases. You said that there’s a startup phase when you’re trying to figure out where you actually have a negative balance in some ways because you have to pull money from a credit line in order to keep your business afloat. And then you talk about how you accumulate, you start to siphon some money out of business, that’s maybe the accumulation phase. And then you have the preservation. How do you make sure all your eggs are in one basket, which is your business? And how do you make sure that when you’re no longer running this business that it’s going to stay there. So maybe you have to sell the business and then diversify. And then the distribution is all the tax implications of how do you distribute your wealth either to yourself or to your offspring or to your charitable giving. Is this how that is lines up or I’m missing something?

No, you’re right on track. Let’s talk about two and three for a moment. So two, I’m accumulating wealth and I’m accumulating it in my business. And hopefully the value of my property is going up. And we recommend just for business sake, diversify, whether it be buying some rental property, investing in the equity markets and the bond markets, whatever your risk tolerance is, but spread your money around. Don’t do one or the other. Don’t say, I love real estate, I hate investments, I hate investments, I love investments, and I hate real estate. There are lots of great ways to make money. But when it comes to really creating the biggest nut in your life of wealth, it’s going to be the next step in your business career.

So first deciding what to do. I try to recommend to people, even those that have children, to sell the business and not pass it on to the next generation. And the reason for that is most, first of all, the statistics of the next generation succeeding are single digits of success, not 50% or 33. They’re low single digits. In other words, it doesn’t happen very often. And the reason for that is most of your children, they want the success you’ve enjoyed that they’ve seen. You’ve got a nice car, you’ve got a nice house, you’ve got a nice life, but they don’t want to put all that effort in that you did in your 20s and 30s when you were working seven days a week, missing Little League, missing soccer, because you had to get to the office and pack things up or take phone calls or ship out orders or deal with staying up all night long because you didn’t know if you had enough money to cover payroll this Friday. That’s what they don’t want. And that’s why we try to encourage entrepreneurs sell it and distribute the money. And there are really two main roads to distribute your money.

There are lots of sub roads. Two main roads. One is I want to give the money to my children. And two is I’d like to give the money away. Now they’re not distinct, you can do both. I’m a big fan for charity and legacy. And legacy is I want my children to have a better life than me. When I started my business, I knew for my three children that I wanted to leave them better off than when I started. I knew that. Most people think like that. So I want to leave them money, so I want to leave them in an irrevocable insurance process where I can magnify that money? Do I want to leave it in tax-free vehicles where my kids really get a great break? Do I want to spend all the money myself and leave no legacy? The old joke of, I want to die with my last check bouncing. Do I want to do that? That’s a little bit more selfish, but I get it. That’s not my legacy, but I get it. There are people like that. Let the kids make it on their own. I had to let them do it. And then there are those people that have said, I want to leave the world a better place. That world could be my church or my synagogue. That world could be a hospital. And I want to put my name on a wing. That world could be like I’ve done. I’ve created a charity called A Brighter Day. I want to lead teenagers much better than when where they are today Whatever that world is my parents taught me Steve you give away 10 to 20 percent of your money every single year to charity For a long time. I gave to the boys the girls clubs I still get some but not like I used to because I have my own charity my own foundation But I really believe in that but that is not for everybody you’re wearing a UCLA shirt right now. Congratulations. Great school. I hope you’re wearing it because you went there or you have a child that went there. No, it’s just on sale. 

I didn’t go there, but yeah, my daughter goes there. 

So great. So you’re now a parent, future alumnus, alumni organization. If you really believe in what they do, that’s great. You’re going to help education and children in the future. If you don’t think that’s a priority, let your daughter donate to them and you find something else to do. So that’s the same thing for me. I have three kids that went to college. I really don’t give to their colleges. I did give when they were in college, but I think I have more worthy charities than their college. Let somebody else give to those. But you give back. So you’ve got the opportunity in phase three of your life, Steve, when you built this beautiful nutshell of a business, and it’s time now to begin to think of what’s the next phase for you, for your family and for charity. And I love that phase because that’s where I work mostly with people and for me personally and for my clients is how do we give some money away and what’s important about giving away money to you and where would it go?

Okay, well, that’s very cool. I’d like to ask you a little bit about before you give the money away. So how can a vast management firm like yours help people? What is it that you do for people? And perhaps maybe more broadly, what is the problem that you’re solving for the entrepreneur?

Most entrepreneurs think that because they’re do-it-yourself people at heart, I could do it no matter what. I can overcome all obstacles. I’m me. I’m kind of King Kong of the entrepreneur world. Most people think like that. You can’t help it. It’s how your brain is wired. That’s not how it is with money. What you do really well, do really well. What you you don’t, a good entrepreneur always outsources. Find somebody else to compliment you and does that really well. I would never be a good HR manager. Never. So I have an HR manager at work for me. I go to the gym. I don’t have an exercise coach, but I probably should have an exercise coach because I need to lose that last 20 pounds of work, of fat. Do what you do well. What we do really well is we manage assets and money. We help you lower your taxes. We help you sleep at night better. We help you do things that so you can focus on your business and maybe focus on your family.

Do what you do well Click To Tweet

Because that’s not something we can do. We can give you advice on your business. And I can give you advice on your family kind of like life coaching. But that’s your business and your family, you’re going to end up making those decisions with or without me. But when it comes to what to do with your money, we have a phrase here that says if it’s money, it’s personal. And it’s true. What’s important to you about your money is different than what’s important to the next 10 people about their money. We want to help you develop your plan, find your financial goals, and meet those goals. That’s our job is to meet your financial goals. We know we’re doing a great job when we’re helping you meet your goals. And for many people, they haven’t even established goals. Their goal is, I’m just going to accumulate money. Well, that’s not good enough because it’s accumulate money to do what? And how much will you need? And again, my example is the number one goal for retirees today is to travel. Number two is to enjoy their children and their family more than they did when they were living. Number three is to enjoy great food and great wine. Number four is to get a better game of golf or tennis going. If you don’t have these goals for yourself, and there could be many others, it could be painting, there are lots of great goals out there besides what I just said. Then you have some retirees like I have sadly who are watching four to six hours a day of TV. CNN, Fox, MSNBC, Law and Order, mostly news, 24-hour news cycles. They get angry, they get mad, they get polarized, and I know when they call me up they’ve been watching too much news. But that’s watching TV, and by the way, Steve, the average retiree watches four hours a day of TV in the United States. Not a one hour show, four hours a day. That’s not a good retirement plan. We don’t want that to happen to your retirees. They’ve earned the right not to do that.

The Prosperity Financial Group's mantra - 'if it's money, it's personal' Click To Tweet

So what I’m hearing, Elliot, is that you’re kind of a coach in some ways, maybe you’re kind of a life financial coach, maybe even a life coach, you help people figure out what they can have, what they could shoot for in retirement, and then you essentially help them put together the plan to get there. Right.

It’s not done. It’s not just about money. I’m very fortunate. That could be a personality thing. I’m very fortunate to see that people like to open up to me, they share their life and they’re looking for advice. There are three things people are looking for when they share things about themselves. They’re looking for a hug. Okay, that’s what we’re going to do. I’m going to hug you when we’re all done. Make you feel better. That’s pretty temporary. They’re looking for help. That’s what most people are looking for. Or they’re looking to be heard, which is the psychology, every week, $150 an hour on the couch type of thing where you they’re going to not fix you, you’re going to help you fix yourself. My job is to help you. And I say that when I’m sitting with somebody, would you like my advice? And that advice can be very life oriented and not just money oriented. And it comes from 30 years in this business, 45 years in business in general, 42 years in business in general. And then at the end of the day, whether you choose to take my advice is still your decision, but I’m gonna give you sound, ethical, grounded, credible advice on how to live your life and help you live your life with your children and help them live better lives and how to dispose of your business and your wealth in the most tax advantaged way that you should be doing. 

So Elliot, I’m going to put this back on you. What is your plan? Why are you building this business and what is your grand plan of how you’re going to do your phase three of your framework, which is distribution? Can you give me some more specific and how you envision this and maybe who’s helping you? 

Sure I can, but I also need to preface that or footnote it and tell you sometimes the cobbler’s children have no shoes. That is true. So here’s my basic plan. I’m still in growth mode. So my brain and I don’t know if I’ll ever get out of growth mode. That’s just the way I’m wired to. My business thinks about my brain thinks about business and how to grow. Middle of the night, that’s what I’m thinking about. What’s my next step on how to do this? But I have two children and I have three, I have sadly one took his life, but I have two of my own children, two stepchildren, and I think of them as one family. So at the end of the day, my wife and I have decided, we’ve been together 17 years now, my wife and I have decided that all of our wealth will be split four different ways, very, very evenly with them on that. And we wanna make sure that we’ve also covered insurance costs because you can multiply your wealth by insurance in a lot of ways. Spend $1 to get five to make sure that we’re multiplying that wealth.

Now for my business, I’m not sure at the end of the day do I sell my business if I can get a price. I get literally every other week I get an offer on my business. That’s a silly offer and it’s not a good offer. But if somebody walked in with for 10 or 15 million dollars tomorrow, I’d sell my company. But that’s not happening any day, I think. So we’re still packaging it for a future sale on the company. My children don’t want my company. They want the value of my company. I’m willing to do that. Now we’ve also established, my wife and I sat down almost 10 years now. And I said, look, I help people figuring how to retire successfully, how to have a successful retirement. I said, so let me ask you, what does retirement look like for you? What does it look like for me? And we’re just as human as everybody else, Steve. We said our number one passion, our number one dream is traveling. I used to live in Europe, so traveling all over Europe and all over the United States, that’s number one, and we do a lot of that. Number two, I’m an amateur wine collector. I’ve got a thousand bottles of California Cabernet in my wine tasting room. I have a wine, not a wine storage room, a wine tasting room. A thousand bottles. Number three, I’m a little bit of an amateur chef. I take a lot of cooking lessons. I love to cook. We entertain. Used to be every week before COVID, now it’s once a month, eight, ten people over, and I’m your chef, and I’m still trying to learn how to be a better plater, make it more artistic, so it looks more like it does on a food network.

Okay.

I play golf, Steve, but I’ve learned, and I talked to my wife, we don’t love golf. We like golf. So as long as my back holds up and we can play golf, those are our passions in retirement, and that’s what I’m gonna continue to work towards.

Awesome. Well, this is where the vision, especially how you are looking at your children and helping them, not to the burden of your business, but with the fruits of it. That’s very noble. If people would like to learn more about your approach, your philosophy, and maybe have a conversation on how you might help them, how can they get in touch with you?

Great. It’s my phone, my cell number. I’ll give you my cell. It’s 510-206-1103. I have an office number, but call me on my cell and keep in mind that I am California West Coast time zone. That would be great. So we don’t do this at 430 in the morning. And it’s Elliot E-L-L-I-O-T at prosperityfinancialgroup.com. And let me also tell you that the website is prosperityfinancialgroup.com. And Steve, if I could say one more thing, for those people that aren’t terribly inclined, I started a charity and foundation. I know what it is. It’s become a passion. Eight years ago, I didn’t even know about starting a charity, but we had a child, like I said, that took his life. Horrible, horrible conversation, but we have turned that endless supply of lemons into some lemonade and we are saving lives. So I know what it takes to do that. For those that want to learn how to do that for themselves personally, I’m happy to share my story and all the trials and tribulations of making a difference in the world. 

That’s fantastic. Well, Elliot, thank you for sharing your philosophy and how you approach helping people get to a future and retirement that they deserve. And thanks for joining us today.

My pleasure. Thanks for having me on, Steve. 

 

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