Bret Hoffman, ChFC®

Last week we showed a client how he could immediately create almost $32,000 in passive income. And without investing into anything new. Just looking at how to turn lazy assets into cash flow. Oftentimes people can’t see the cash flow right in front of them. It’s not their fault, they’re just not trained to see it. But once you see it, now how can you build that momentum to build more? More people are finding it better financially to build cash flowing assets rather than just accumulating money in accounts. Financial freedom can be achieved by anyone you just need to know how. Taking one small step is better than none. If you’re looking to accelerate your wealth rather than just accumulate, the time to start is now.

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Was Tuesday's PPI "good," or was it "bad"? S&Ps plummeted 33 points in reaction, so... bad. But then that was retraced almost as quickly. So... good? The market doesn't actually care whether PPI was good or bad. It only cares whether market participants believe that it will be good or bad -- by how much i.e. too much, and whether participants believe that they were right or wrong. It's not semantics. It's not nuanced. It's different than acting on a "good," or "bad" number. Interpreting whether participants thought what they anticipated was correct, led to anticipating what they would believe about tomorrow's CPI... this afternoon. And this led to a 5248 buy signal that rallied 26 points to its 5274 target. All without knowing what CPI would be. Without guessing or believing what CPI would be. Without caring what CPI would be. Only anticipating whether participants already believed it will be good. And notice on the chart how this morning's PPI reaction fell to its target? Now CPI's anticipation has already fulfilled its target. So, what do you think participants will believe about CPI?

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5/31/24 WRAP UP UMBS 6.0: 100.13(+13bps) 10yr yield: 4.50 It was a basically uneventful day that helped rates recover from Wednesday's worst levels. Remember that we will have a lot of data next week. It hits fast and hard on Monday with PMI data that could kick the week off with a great or worse start. That said, unless very risk averse, we want to float into next week with fingers crossed. Have a great weekend! ### Daily Market Commentary (5/31 OPEN) Rate sheets today should be better than yesterday and quite a bit better than Wednesday when we saw the week's worst pricing. Reprice risk on the day is low. All the action will come next week and the week after. This morning's slightly better PCE inflation data was good for rates, turning the knob a bit to maybe help open the door next week to lower rates. There is definitely risk floating into next week. No one knows how the Jobs data will come in. However, we have a real potential to see rates drop more significantly over the next couple of weeks. For loans closing in less than 15 days, cautiously float. These loans are going to be the most tricky to decide when to lock. Monday brings PMI data that could either help or hurt rates. JOLTS data on Tuesday. Unless afraid of losing any ground, I'd float into next week and risk it...but there IS risk...we could lose some of yesterday's and today's gains. Loans closing in 15-30 can float. I would only consider locking the most risk averse loans here. The next two weeks could bring the best rates we've seen in awhile if we can get some of the data to come in our way. Loans closing in 30+ days should float. Although rates are creeping higher, we will see them fall again in time for these loans to wait it out. Technicals: The UMBS 6.0 coupon is at 100.19, +20bps. The 10yr Treasury yield is at 4.49.

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You'd probably never believe this… One of the most common comments I hear as a financial advisor is, "I used to do that." You wouldn't believe how many people have told me they used to be financial advisors. Why is this such a common occurrence? Because 80-90% of financial advisors quit and leave the business within three years. Many of them take internal roles within their firms, so when a financial advisor needs help, they can say, "When I was on your side of the desk." Sometimes it's annoying, awkward, or hard to hear, "I used to be a financial advisor." Did I succeed because I worked harder than they did? Or were they simply cannon fodder for a sleazy organization (which is quite common)? I like to think of it as being lucky, or as God's way of placing me exactly where He wants me. Have I worked through exceedingly difficult conversations, managed challenging relationships, long hours, high stress, education requirements, compliance, self-governance, and maintained general friendliness? Absolutely. Did that put me among the top 10%, 5%, or 3% of financial advising professionals? You bet. But when I meet others, I remind myself that I don't know their stories, and they don't know mine. I think deep down... they have some insight, some wisdom that I never got. If you were an FA and have left, what lessons have you learned that could help those starting out? What lessons did you learn to help out a vet like me? (photo is of me, with zero days experience as a financial advisor, 14 years ago 😶 )

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What would you do if you had a nice profitable $1 million project on paper but the cash flow was going to be so tight it seemed impossible to manage? Would you still take the job even if it meant DOUBLING your labor costs on the front end of the job, but keeping the overall labor cost for the project steady? Before you say no to the project completely, let’s break it down: We had a construction contractor who was in this exact situation with a VA hospital roof job. They had materials and labor ready, but cash flow was a complete NIGHTMARE. We stepped in to help. They needed $600,000 worth of materials upfront. They could invoice when materials arrived, but payments took 60 days. They felt stuck. I asked them, “How can you complete this project with the best performance and efficiency possible if cash wasn’t a concern?” The idea of paying double labor costs seemed daunting, especially on the front end of the job when you haven’t received any money from the project yet. Why would someone ever do that? Of course, you need to worry about cash. In tough scenarios like this, you need to think outside the box, and challenge yourself to think from a different perspective. Changing the questions you ask yourself is the key – For example and in this exact scenario asking yourself “how can I perform this job in the most efficient way, so that my team can perform their best if I didn't have to worry about cash” - that question FORCES you to think about doing the job in a DIFFERENT manner. By shifting their mindset and reworking the schedule as if money wasn't a concern, putting double the labor up front, they turned a 16–18-week project into a 12-week project. They used their own crew and sub-crews with downtime, efficiently ripping off the old roof and installing the new one. Here’s the exact breakdown: - Labor costs doubled in the first month: $200,000 instead of $100,000. - Needed an additional $150,000 upfront for labor. - Finished six weeks early. - Invoiced twice as much in the first month: $500,000 instead of $250,000. The result? They saved six weeks of labor costs, significantly increasing their profitability by 3-4 times. The project became cash-flow positive within the first month. We (Mobilization Funding) provided the upfront cash needed for labor and materials, fitting perfectly into the cash flow model, and we worked together on the different options and created confidence in the execution where everyone wins. When you’re tackling a big project, ask yourself: (1) What terms do you need? (2) How can you complete the job most efficiently and perform the best if Cash was no concern? (3) How can you shift your mindset to find creative solutions? (4) If cash is needed, what options are there, and how can that cash best serve you? Have you built relationships with lenders that can help you? Have you ever faced a cash flow crisis on a big project? How did you handle it? Comment below with your experiences! 😊 #cashflow

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Why do so few advisors (<1%) NET more than $500k and even fewer still net $1m? The answer is simple, but not easy: The advisors making $500k, or $1m or more, are willing to do the hard work that everyone else is unwilling to do. Every single day. From prospecting calls, to raising fees, to graduating clients, to most importantly, investing insane amounts into professional development, the best advisors have dedicated their lives to doing hard stuff. At this point the broke advisor will be preparing their excuses about having a higher calling, or family, or not being money motivated, all of which shows a total ignorance about the lives of top advisors. Either way, stop making excuses. Own that you choose not to live up to your full potential. That you are limiting the good you can do in the world. That you’d rather watch Netflix or scroll social media than be a top tier advisor. Thoughts?

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Turning losses into a potential tax benefit: Tax loss harvesting. We look at a client's portfolio and identify positions in the red. Then intentionally sell those investments to lock in the loss for tax purposes. Benefits: 👉Offset future capital gains 👉Deduct up to $3,000 against ordinary income I like to say, when life gives you lemons...use the tax code to your advantage. 😀 Rules to remember: ▶️Can't buy back the same position within 30 days (wash sale rule) ▶️Move funds into similar, but not identical, investments For larger portfolios, we use direct indexing - owning individual stocks instead of index funds. In 2023, the S&P 500 was up 20% at certain points, but most gains came from just 7 stocks. By owning individual stocks, we harvested losses on the other 493 while maintaining overall upside. Result: "Tax alpha" - an extra boost to after-tax returns. Works for non-qualified accounts, not qualified accounts (like IRAs/401(k)s) But if you're sitting on some losses in your portfolio right now, it's worth asking: how can I put those to work for me? --- *Instrumental Wealth is an investment adviser in Tampa, Florida. Instrumental Wealth is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. A copy of Instrumental Wealth's current written disclosure brochure is available through the SEC's website. Not an offer: This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has knowledge and experience to understand and make an evaluation of the information, the risks associated therewith, and any related legal, tax, or other material considerations. To the extent that the reader has any questions regarding the applicability of this information to their specific situation, they are encouraged to contact David Silver or consult with the professional advisor of their choosing. Forward Looking statements: Certain information contained herein constitutes “forward-looking statements.” Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.

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So you are building an agent in May of 2024? 😅 LangChain There are 10,000 ways to do something, first none of them work, documentation refers to versions long depreciated, and when you finally get your agent to run, you forgot what you actually wanted to do. LlamaIndex Here are 10,000 libraries you need to import. but we only tell you later. Hey but our RAG is a-ma-zeballs, so we got this one going for us, right? Btw, what are multistep ReAct workflows? Hugging Face We are doing a bunch of cool things, and we can host models and data really efficiently. Our Agent framework is a bit of an afterthought. Go check out our leaderboard! But wait 2.0 is coming soon. BCG X Agentkit We use docker wrapped around langchain wrapped around OpenAI to have a cool frontend that does stuff. Ain't that something. We are BCG!!! XAgent - We published a weird video in September '23 and coded something on top of AutGPT. Also we only use OpenAI. BabyAGI - I exist(ed)!

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Alright, I would love some input from my annuity experts here on LinkedIn. I'm trying to avoid duplicating existing resources, yet I’m unable to find a comprehensive guide addressing this question: “Is there a reason you would ever do a living income rider on non-qualified dollars?" Let’s discuss this within the context of the tax characteristics of the two types of dollars, setting aside the myriad other factors we could consider. The conclusion I have reached is that using qualified dollars is generally more advantageous for a living income rider, for several reasons: Not Subject to Net Investment Income Tax (NIIT): Qualified annuities are not subject to the NIIT if AGI exceeds $250,000 for married couples or $200,000 for singles, thereby avoiding the 3.8% surtax on investment income. Required Minimum Distributions (RMDs): Qualified accounts are subject to RMDs starting at age 73. Annuities with a living income rider can provide a structured income stream that meets these requirements. Consistent Income Stream: Qualified assets offer a predictable income stream in retirement. By converting these accounts into an annuity that typically pays out more than the minimum RMDs, planners can more accurately predict yearly taxable income from qualified accounts. Estate Planning Considerations: Qualified annuities do not receive a step-up in basis and are taxed as ordinary income upon distribution. This can simplify the inheritance process, making it more straightforward for heirs. Conversely, using non-qualified dollars for a living income rider presents some challenges: Net Investment Income Tax (NIIT): Non-qualified annuities are subject to the NIIT if AGI exceeds $250,000 for married couples or $200,000 for singles, incurring an additional 3.8% surtax on investment income. Step-Up in Cost Basis: Non-qualified investments outside of an annuity benefit from a step-up in basis upon the owner’s death, significantly reducing potential capital gains tax liability for beneficiaries. An annuity does away with this benefit Capital Gains Tax Rates: Non-qualified assets outside of an annuity are taxed at capital gains rates, which are generally lower than ordinary income tax rates, making them more attractive for long-term investments. In conclusion, while I sometimes use non-qualified dollars in annuities, they are primarily for accumulation purposes. Employing qualified dollars for a living income rider maximizes tax deferral benefits, assists with RMD compliance, limits exposure to NIIT, and ensures a stable retirement income. Non-qualified dollars, when utilized outside an annuity, offer preferential tax treatments and a step-up in basis for heirs. I would love to hear your thoughts and any additional insights you might have on this topic! #Annuities #RetirementPlanning #FinancialPlanning #TaxPlanning #WealthManagement #IncomeRider John Schwalenberg The Advisor to Financial Advisors Tracy Lownsberry Sheryl J. Moore

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Want to know if the CFP pro you're meeting with actually does comprehensive financial planning or not? Ask them for their data gathering checklist. It should look something like this...

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TLA of the day? QBI - Don't stop reading if you are not yourself or don't work with business owners because the qualified business income deduction shows up on a lot more returns than you might think...and it's confusing a lot of your clients QBI for business owners can be VERY beneficial and is often incredibly underutilized by S-corp owners in particular (check out what Patrick Lonergan or Thomas Kopelman put out on the topic if you want to level up in this area) QBI for all the non-business folks is an example of creating a better tax experience through proactive and effective communication #taxes are already painful and confusing enough as is, as a #financialadvisor you need to make sure you are setting expectations for your clients on how the investments/planning you are helping them with will impact their tax return All that to say, I pretty often will see QBI come through on a return from certain REIT dividends and just as often will see taxpayers confused by the fact that they have a business deduction and no business If you use that type of investment it's a really easy conversation just to set that expectation and help the client skip past the uncertainty and anxiety of filling like there must be a mistake on their return The real question is how many people generating these QBI deductions can confidently say where they come from or which of their clients are receiving them? Happy Tax Planning!

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Short-Term Muni Snapshot For The Week of April 17th The SIFMA Muni Swap Index for this week is a 4.35%. The move higher of 68 basis points is the largest weekly change we have seen since January 31st. This move higher was expected as dealer's unsold inventory levels had grown to over 3.7 billion. To put things in perspective if you look back over the past 20 years this week's 4.35% is tied for the 4th highest the Index has been. I am not including the 4 weeks in 2008 (housing market collapse) and 2 weeks in 2020 (Covid) where macro events caused a massive shock to the markets. With SIFMA at a 4.35% and SOFR at 5.31% the tax-exempt to taxable relationship sits at an attractive 82%. In mid January that number had gotten as low as 36% which was the low point for the past 12 months. SIFMA Averages For The Past 5 years: 2024 3.42% 2023 3.33% 2022 1.23% 2021 0.04% 2020 0.55% This morning dealers attempted to push daily rates down slightly but ended up getting approximately 200mm sold back to them. With rates on daily paper somewhere in the range of 4.15% to 4.25% and weekly paper (SIFMA) at a 4.35% it will be interesting to see which mode sees the most demand. There is still a LARGE amount of weekly paper sitting on dealer's balance sheets. #vrdb #vrdo #vrdn #municipalbonds #sifma #moneymarkets NOTE: THESE ARE JUST MY OBSERVATIONS OF THE MARKET AND ARE NOT FINANCIAL ADVICE. I AM CURRENTLY NOT REGISTERED WITH ANY SECURITIES DEALER OR INVESTMENT ADVISER.

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If you don’t have the capital to buy an air bnb but want to replace your income through rentals this year… This is for you. So I met a guy making over $20k/month with air bnbs BUT he doesn’t own a single air bnb He does what is called air bnb arbitrage. Now if you’re not familiar with this strategy here’s a quick out lay. 1. Identify a high cashflow market for air bnbs 2. Find a few landlords looking to rent their properties and offer to pay $100-500 over their monthly rental fee IF they let you sublease it on air bnb. 3. Get a couple credit cards w/ 0% introductory rates to fund the furnishings and decorations 4. List on air bnb 5. He pays rent and utilities each month from the income as a short term rental But since air bnbs make 10-20x more than long term rentals he’s pocketing the the rest (the arbitrage) Now he’s not getting the tax credits andthe equity appreciation that the owner gets… But, he no longer needs a job… And he can probably afford to buy now that he has that sort of income What do you think? Worth it or no?

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Tax-Exempt VRDN Market Weekly Wrap - Here Comes June Cash Dealers unsold daily mode tax-exempt VRDN inventory levels had been slowly creeping higher all week forcing them to raise rates to 2 week highs (4.0%) in an attempt to get bonds placed. (We ended the week with daily rates 65 bps cheaper than comparable weekly paper). By late this afternoon the amount being offered had dropped down to approximately 300mm after opening close to 1.7 billion. (See the attached graph of daily mode VRDN dealer inventory for the entire month of May). On Monday expect to see daily rates plummet as June reinvestment cash hits the market. Currently dealers are offering a total of 1.2 billion. (300mm daily and 900mm in weekly paper). I think we see daily rates drop 75 bps to 100 bps on Monday morning. Now is the time remarketing agents can be really aggressive on rates as investors won't have much choice as there will be very little product to invest in. On May 31st of last year daily rates were coincidentally at the exact same level as this morning (4%). It took 4 days but rates bottomed at a 2.40% the next week. I think we see something similar this June. What can we expect for weekly rates (SIFMA) for next Wednesday? First lets look at what happened last year. The SIFMA Index was a 3.56% on May 31st and it dropped 72 bps to a 2.84% the next Wednesday. The current SIFMA Index is 3.36%. How far the Index falls this year will be largely determined by what we see happening with rates in the daily market on Monday, Tuesday and Wednesday. The Index is currently 63% of taxable levels and dealers really want to keep issuers and investors happy while trying to carry as little unsold bonds as possible. It is way too early to say with any real conviction but I think we see the Index fall down into the 2.75% to 2.85% range. (Also very close to last year.) **Have a nice weekend. As always if you find this information helpful/interesting please feel free to like and share. I feel this market is on the verge of a growth phase and someone out there could benefit greatly from the added knowledge of the how and the why these rates are determined. This is a 100 billion dollar market that has largely been overlooked over the years. Market education (for issuers AND investors) is the key!** #vrdb #vrdo #vrdn #municipalbonds #sifma #moneymarkets NOTE: THESE ARE JUST MY OBSERVATIONS OF THE MARKET AND ARE NOT FINANCIAL ADVICE. I AM CURRENTLY NOT REGISTERED WITH ANY SECURITIES DEALER OR INVESTMENT ADVISER.

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𝐀𝐟𝐭𝐞𝐫 10 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐫𝐚𝐭𝐞 𝐡𝐢𝐤𝐞𝐬 𝐬𝐢𝐧𝐜𝐞 𝐌𝐚𝐫𝐜𝐡 2022*, you and your clients are finally seeing a reduction in rates 😅. If interest rates continue to ease, many people may simply slip back to what they were doing back before rates started to rise. But there is a huge opportunity for financial professionals to help clients make the most of rates coming down that will also protect them from the risks of future rate hikes. Don’t let this opportunity pass you by. Here are a few ideas to consider.  🪣 Have your clients top up their investments with any reduction in debt payments caused by the rate cut 🏠 Estimate client mortgage costs and the effect on their financial plan if they renewed today, or if they were faced with rates 3% higher than they are paying right now. And look at how their plan would change if that were to happen 💸 Evaluate the interest cost of debts outside of their mortgage 🤔 Explore what would happen to their cash flow if they refinanced their debts to get rid of higher interest balances 🧪 Test leaving debt payments the same even with lower rates to see how much faster they’d be debt-free 💡 Look for a lending partner if you don’t already have a debt expert on your roster. This can help clients put any debt strategy changes in place If your role with your clients is to help them create and follow a financial plan, grow assets, or protect their resources and family, then debt management should 💯 be part of what you consider whenever you give your clients advice. 𝐈𝐟 𝐲𝐨𝐮 𝐰𝐨𝐮𝐥𝐝𝐧’𝐭 𝐨𝐯𝐞𝐫𝐥𝐨𝐨𝐤 𝐭𝐚𝐱 𝐬𝐚𝐯𝐢𝐧𝐠𝐬 𝐟𝐨𝐫 𝐲𝐨𝐮𝐫 𝐜𝐥𝐢𝐞𝐧𝐭𝐬, 𝐲𝐨𝐮 𝐬𝐡𝐨𝐮𝐥𝐝𝐧'𝐭 𝐨𝐯𝐞𝐫𝐥𝐨𝐨𝐤 𝐜𝐚𝐬𝐡 𝐟𝐥𝐨𝐰 𝐩𝐥𝐚𝐧𝐧𝐢𝐧𝐠. Take some time in your strategic summer to think about how debt management concepts could support your clients’ goals and help you grow your business. Examining client debt 🔎 goes hand-in-hand with cash flow advice. The combination could help you find opportunities to help your clients manage the impact of interest rate changes. Refinancing is not a requirement for a successful cash flow plan, but exploring debt structure options can make a big difference in some cases. Our new Cash Flow Planning Implementation Program helps participants generate new revenue from cash flow planning within 90 days. The next live kick-off is September 19, but you don’t have to wait until the fall. The program is open on demand for the summer, and you can start your 90 days any time from July 4 to August 30. Learn more  https://lnkd.in/g_AAdgE3 Sign up here 🙌 https://bit.ly/4bItvQ0 *https://lnkd.in/gyw8d3hJ CacheFlo #FinancialProfessional #CashFlowPlanning #CFP

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So you’re thinking about leaving your broker dealer and curious about what it would look like if you went to the RIA world? The percentage of financial advisors becoming more curious about whether they should go RIA has been on the rise. In past years, the majority of the advisors we worked with went from one broker dealer to another and in the process were able to solve certain problems that were symptomatic of their BD or found new opportunities they were previously restricted from accessing/discovering. Back in these times it was popular to go from one wire house to another, or switch from a W2 employee model to an independent practice. Is one of these options better than the others, it depends what you want and right now the world is your oyster. 
 Over the past 4 years the industry has evolved with a few new business models in the RIA space that many financial advisors are unaware existed until they start to exploring. For years financial advisors, especially those affiliated with BDs, thought that almost all RIAs were out of the question for them because they needed to retain a broker dealer license to continue offering commissionable products or that they wouldn’t own their clients if they joined another RIA they were too restrictive. While some RIAs are still restrictive, the ways that advisors can build out their practice is more à la carte than you might realize. If you’re thinking about sitting down to a nice dinner and exploring some options outside of your zone of comfort food, here are some of the new options to consider:
 Starting your own Fee RIA: perhaps the most time consuming and high start up expenses, generally advisors with $100MM + in fee based assets explore starting their own RIA by utilizing one of about 5 different custodians to run their business on. Most often we see a securities attorney work behind the scenes creating regulatory documents and hold the business under an incubator with assignment provisions to transfer over ownership of the RIA after you resign. 
 Starting your own Hybrid RIA: while still time consuming and high start up expenses, generally advisors with a high number of clients with brokerage business will explore going hybrid. In essence advisors become multi-custodial and synthesize all of their client accounts into performance reporting and trading systems to keep things running smooth. 
 Join an existing RIA: this is by far the most popular option for financial advisors, especially those that want to tap into the scale, support, and infrastructure of an existing firm. Within these category there are a bunch of sub-categories to consider: Co-Op RIA Co-Op RIA with CIO offering Fee Only Employee RIA under payout rate Fee Only Employee RIA salary + bonus + equity 
 This is just a flavor of the different routes advisors are going. If LinkedIN allowed me to share more before running out of characters you would see more options #oystersrockefeller #ria #brokerdealer

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Want to sleep better at night as a business owner? Turning a profit should be your number one goal, full stop... Want to get that term loan or line of credit with a single-digit interest rate? You have to be profitable. ✅ Want to sell/exit your business some day (assuming you're not a VC-funded unicorn play)? You have to be profitable. ✅ That is a hell of a lot easier said than done, believe me I understand. But we talk to many business owners each week who are operating their business in the red consistently and think they can borrow their way out of it. It doesn't work like that. I was reminded of this when listening to a recent The Value Builder System™podcast featuring Anne Mahlum. She built her fitness center brand starting with $175K of her own money to an eventual exit of $100MM. There was a ton of great insights to learn from, like how she led her growing chain through the pandemic when revenue went to near zero, to thinking about how to deal with potential investors and acquirers and making sure to have interests aligned. But what stuck out to me was that she had been profitable almost from day one. She didn't take on millions in equity or debt and go "figure it out". She took an already profitable business model and used targeted outside equity investments to accelerate growth, and was extremely successful. Even if you don't get to a spot where you sell your business for $100MM, you can't go broke making a profit. Listen to the pod episode here: https://lnkd.in/edJ8G8wc #entrepreneurship #management #leanstartups #business

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