Toby Younis of Messages and Methods live podcast interviewed Mike Allison, a financial provocateur with more than three decades of professional investment management experience.
He is the founder and CEO of New Lantern Advisors and an independent registered investment advisor focused on helping guide folks to a brighter retirement by answering the question, what is your “What's next?”
Michael Allison: I have over three decades of professional money management experience. I retired from one of the larger money management firms and asset managers in the country at the end of 2021. I'd been there for just under 22 years.
It was a two-year process of transitioning my responsibilities to the next generation and my goal post-corporate life was to work more directly with individuals, as opposed to just managing the money and being a closer.
Building relationships on the other side of that transition from corporate life provides me with a more independent life.
I created New Lantern Advisors, a play on words about shining a new light on what is traditionally thought of as retirement.
The financial services industry created this idea that you have to accumulate, save and invest to build up a piggy bank to take with you out of your working life and into whatever you want to do in terms of relaxation, recreation, and volunteer work.
I believe retirement from what you've been doing for a long time is just a transition to doing what you really want to do. Many of us have spent decades working in the corporate working world, raising families. We send the kids off to college; they graduate and the nest is empty.
Then you think about how you're going to spend the next 30, 40, or 50 years.
How can we focus on what we're retiring to, and not as much on what we're retiring from?
Toby Younis: Encore entrepreneurs are people who are looking for how to spend their retirement years and feel like they're achieving the satisfaction that they got, hopefully, during their years as business owners or part of a larger corporation.
What do you mean by what is your what's next?
Michael Allison: It's thinking about what you're retiring to, not as much what you're retiring from, and thinking about what you want to do when you stop doing what you've been doing.
Have a deep, thoughtful conversation with significant others, so there's an alignment about what that next chapter looks like.
It should be consistent with the approach that they've taken over time, but also include the freedom to do the things they want to do while giving up doing the things they don't want to do.
That's the freedom of retirement.
Not a stoppage, but a transition to what you really want to spend your time doing and having the freedom to do it.
Toby Younis: That's very much in line with my personal experience. I had a long-time financial advisor that helped me plan what I was going to do in my retirement.
By the time I was ready to retire, my children were all grown, out of college, and on their own. But the conversations I had with him dealt with financial management and retirement, without any conversation about what I was going to do.
I feel like I wasted my first year of retirement by not doing anything because that's what I thought retirement was all about. You just relaxed, you went fishing or whatever.
I decided that's not what I wanted. I was still vital. I still had my physical and mental skills. I could do a lot of different things and I had interests.
I wonder how your clients respond to you not only helping them from a financial management perspective but for that what's next perspective.
Michael Allison: A lot of people march to this goal of a certain number or a certain age and they walk out and then they're like, okay, now what?
They recreate in whatever fashion they wanted to have time to do.
Then after about a year or so, they decide that this is boring. This is not how I want to spend the next 30 or 40 years. I still have something to contribute to this world.
My approach is that during your transition to retirement, you program in 9 to 24 months of doing what you've been hoping to have the freedom to do.
Travel or play every golf course in every state, whatever you've really looked forward to.
But it should be intentional. Then, know what you're going to do when that time is over.
It's almost like you plan a vacation. It's a long one, but when you come home after that vacation, you know what your next chapter is going to be.
It could be the day after your “retirement,” or it could be two years later, but let's plan for it. Let's make it intentional. Let's budget for it and make sure that is part of the program and how you intend for it to be.
Plan your next phase of life without permanently deciding that your human capital is now worth zero and you’re only worth what's in your investment account.
Toby Younis: We spent a significant portion of our lifetimes learning. I was a sole proprietor and independent contractor, and I learned a lot. I was required to stay up with the latest technology and that has benefited me since.
People can take advantage of their knowledge to do something productive.
One criterion that I use about once a year to choose what is next is how does it help others?
That's why our focus is on encore entrepreneurs and teaching them live streaming and podcasting.
We talk to individuals who are retired and feel like they still have something to offer and a unique way to offer it. They're more up-to-date on technologies than most people would expect them to be.
I want to improve my retirement from a financial perspective, but also with a fulfilling purpose that gives me a reason to wake up every morning.
Each of us has a passion. My passion is media technology, and my interest is communicating and spreading a positive message.
You refer to your “investment superpower.” What does that mean?
Michael Allison: The major responsibility during my corporate life was one of education and taking what can sometimes be complex investment-oriented topics and ideas and explaining them in a way that makes them accessible to people who aren't investment professionals.
I believe the best client is a financially savvy and informed client.
It's important to me that clients know what and why I'm doing the things that I'm doing for them on the investment front. I want to help them understand how it all works and why it works.
I like talking to people that want to get it and I get great satisfaction out of helping them understand how we're doing what we're doing.
Toby Younis: I spent 30 years with regular meetings with my investment advisor. He did his best to advise me of the potential and the opportunity, but he also talked about risk. I loved talking about the potential and opportunity and how good my retirement was going to be.
I really hated talking about risk.
You've described it in your work as a three-headed dragon.
What is a risk three-headed dragon?
Michael Allison: First, there is a way of approaching investing that leads with risk management and making sure that the risk you're taking is appropriate and the right thing to do.
When I talk about the three-headed dragon of risk, there are three components to it.
The first is the confidence to take a risk.
Many people might call that risk tolerance, and that's where most financial advisors stop with their clients. They'll give them some behavioral finance or psychological questionnaire that comes up with a score. The client says I'm comfortable taking this much risk.
That's where it stops.
I think that's very incomplete.
There's also the second head of the dragon, the capacity to take a risk.
During the few years coming into retirement and the first few years in retirement, you go from earning a paycheck to writing your own paycheck. That’s the time when it's not appropriate to take a lot of risks.
It's necessary to dial down the risk in investments to protect the body against certain times early in their retirement.
The year 2022 is a great example.
It's one thing to be younger and accumulating assets. You can ride out the storm.
It's a very different thing when you are taking money out of your investment accounts to live on and the market is way down and you're selling assets that are depleted and you're having to sell them when they're down. It makes it very difficult to rebuild.
On the other side of that is a concept called the sequence of returns risk.
If you retire and the market goes up for the first several years of your retirement, then that gives you a tailwind and a kitty to not only take money out for your living expenses but also not impair the accounts.
The reverse of that is happening right now, which is you're taking money out, selling out of your accounts when assets are down, and it makes it very hard.
The capacity to take a risk is a life cycle question, and it's an important element of being a fiduciary and putting the client first.
Even if you want to take a risk, it's not appropriate to do it right now. Let's really dial it down.
Diversification helps with a lot of that risk management, along with tools that are beyond bonds and stocks. There are other ways to protect the downside in the investment accounts.
The third head of the dragon is compensation for taking a risk.
That's a simple risk-reward concept to buy low, and sell high, when assets are overvalued in the extreme, as we saw in the bond market late last year. The bond market had the worst first half of any year, the worst six-month performance period basically in years.
That's partly because of how overvalued they were. Yields were minuscule and to some extent equities bonds or stocks as well.
Make sure that you get compensated for the risk that you're taking in terms of returns available. If assets are attractively valued, then that gives you a margin of safety to invest. It's really about getting compensated for the risk you're taking in terms of return opportunity.
Those are the three components of risk. It's important that advisors help clients to understand just how much risk they're willing to take.
This Is only one part of the equation. There are other elements that have to be addressed. As that great philosopher, Mike Tyson said, Everybody's got a plan until they get punched in the face. I think we're all getting punched in the face in 2022, so far.
Being prepared for the other elements of risk management is a key aspect of how I work with clients.
Toby Younis: It's also important to remember that they call them cycles for a reason, right?
There are going to be ups and downs. You have to find yourself running along with that wave in a way that's not as dramatic as the wave I took.
I filled out one of those questionnaires that you described, and it analyzed me as moderate risk. I had my own company. I was providing for a family of six children, a spouse, two dogs, and a cat.
I thought as I progressed through that, once the children were out of college, I would go to a higher-risk model. But I remained at a moderate risk level my entire investment life. My financial advisor was very aware of that and would advise me on what to do in terms of buying and selling.
Mostly, I left it up to him because there were two things that I was never good at. One is the market, and the other is golf.
What is it that brought you to where you wanted to start a company like New Lantern Advisors?
Michael Allison: Over the course of my career, I had a lot of responsibilities in terms of looking after the savings and the hopes and dreams of investors. But I was a step removed because I worked for an investment management company and asset manager.
Our clients were the advisors who had clients.
What I really wanted was to have a tightly linked and direct relationship with folks to have a more direct impact on their lives.
I wanted to work with the folks that I thought I could help the most.
I've leaned into this segment of folks who are within a few years of retirement or thinking about retirement and helping them understand where they are, where they want to go and what's on the other side of that.
One of the other elements of it is there's financial capital and there's human capital.
If you look at historic valuations in financial assets and historically undervalued human capital in terms of low wages, there's a lot of wage pressure cyclically in long cycles.
Cyclically, human capital is undervalued relative to financial capital.
We have 12,000 people a day turning 65 in the US, and that's going to persist for another five to seven years before it starts to taper.
That's a lot of people that my industry has convinced to leave the workforce and declare their human capital worth zero at a time when they are about to get revalued because of demographic shifts in the shrinking labor force.
A big part of what's next is don't give up on your human capital because it's about to get revalued higher.
It's one of the best inflation hedges you can think of because it's very difficult to hedge in an inflationary environment.
It's easier, particularly if you're an entrepreneur, to have pricing power with your labor and the services that you provide.
The best recommendation I can give to someone is don't declare your human capital worthless at the exact time it’s about to grow exponentially.
It's like selling a stock. Buy low, sell high.
Continue to monetize your human capital in the best way that gives you fulfillment. Fulfillment and satisfaction are what retirement is all about.
If you have been doing something for a long time and now you want to do something else, that's totally fine.
But don't hang up the skates and say I'm done. I'm just going to live off my financial assets at the exact wrong time.
Toby Younis: It's such a waste of intellectual capital that an individual accumulates over a lifetime. Not only has the individual accumulated financial capital to invest in retirement, but there's this wonderful resource of intellectual capital that they can use. Not only to do what they want to do, but to help other people.
There is a movie called The Intern starring Robert DeNiro where he becomes an administrative assistant. He retires as a CEO of a company and decides to do something else and eventually gets to the point where he's helping Anne Hathaway achieve her objectives.
That has to be very satisfying.
That's how we feel about the work we do. When we can help someone achieve their objectives with their already accumulated intellectual capital, it makes me feel better about what I do.
What is an example of an improvement experienced by a retiree who you have worked with?
Michael Allison: It's not an entrepreneurial example per se, but it's a good example of how this can work with a household, a family. Both the husband and wife were in similar boats but worked for different companies.
The gentleman worked for 38 years for a company and was ready to do the traditional, hang it up thing. They did pretty well in terms of resources, but he didn't have a good answer for “what’s next?”
Getting out of the Northeast to have some freedom and warm weather in the winter did not address what he was going to do when he was all done working for the company.
He liked the work he did. He was enjoying it. But he wanted to downshift. The transition that he worked out was simply working part-time.
He had great institutional knowledge that his company didn't want to let go of. At the same time, he was at the traditional retirement age.
This is very shortsighted on the part of many corporations. There's still an undertone of ageism when it comes to running people out. That is damaging to their franchise because those people are a reservoir of institutional knowledge and intellectual capital that gets built up over time and they are going to throw it out the door.
The company he worked for had the wisdom, and he had the wisdom to say, I can get 75% of what I want for another few years by working three days a week and remotely in the wintertime.
It's really about having deep and insightful conversations with yourself, your family, and the kitchen table committee and working it through.
The path for him was to say, I like what I'm doing, but I don't want to do it as much.
Fortunately, the company he worked for had the right response, which is we value you, we value your institutional knowledge, and we'd like to have access to it, but also give you the means to transition to a different pace.
That was a good outcome indicative of this idea that you have this reservoir built and just because you reach a number or a date, it is shortsighted to declare it not worth monetizing anymore.
What I really love about what you and Shelley are doing for your audience is giving the tools for encore entrepreneurs to build something of their own making. Maybe they have a lot of passion and ideas that they never got to put to work in their prior life before retirement.
But now they have freedom and enough resources to build that up and it doesn't have to happen overnight. You've got a runway of it might take me three years to scale this up, but I really am now doing what I want to do.
That's another way of serving people.
Toby Younis: My career evolved in Washington, DC, dealing with the federal government. A lot of the people that I worked with when I was working aged with me. So I knew people in government who were aging and would retire.
What would happen is a significant portion of them would go to work for government contractors who were interested in having their knowledge about how to deal with the government.
One of those people, who's been doing government contracting for 30 years, knowing all the very complex rules and regulations, can go to work for a contractor.
There's nothing that prevents you from sitting in meetings with other people who are selling to the government or merchandising to the government or writing responses to proposals for the government. It’s a good place to take that expertise and do something with it that doesn't necessarily mean having to establish your own company.
There are lots of ways to implement the value of your accumulated intellectual capital.
Michael Allison: That's why so many encore careers are consulting and coaching. That is the direct monetization of that reservoir of intellectual capital.
Toby Younis: I have one friend who works from her home office and attends meetings with the sales and marketing professionals who are selling and marketing to the government. She's there to advise them where they would overstep the rules and regulations and what could hurt them in various ways.
She gets a salary for her work in those meetings and advising them of what's right or wrong about what they're doing.
You've established a financial advisory services firm intending to help people to plan out and have a comfortable and successful retirement.
But, there's this dichotomy. You're telling them don't retire. Explain the dichotomy. How does that fit?
You're telling them it’s time to retire, but don't retire.
So how do you explain that to your clients?
Michael Allison: I’m helping them prepare for retirement and have a roadmap for the other side, but then not retire.
It goes back to this idea of financial capital and human capital. It's an asset allocation decision.
You still can contribute and be compensated for that contribution based on the body of knowledge that you've built over a career. But do it on terms that differ from what you've had to do for the last 30 or 40 years. Do it on terms that are of your choosing. Time commitment, location commitment, all those things.
That's something that shouldn't be sold short and stopped.
Retirement is a transition from doing something that you may or may not have enjoyed. But it's at least been a great value over time in terms of what you've built up. It's not just the specific job skills. It's also learning how to deal with personalities and bureaucracy and all the complications of life that only you have.
If you've lived a certain number of years on this earth, that's worth something, too. Just having gotten this far.
I'm ready to transition out of doing what I've been doing, to do something new, taking with me the valuable asset that's between my ears: the body of knowledge that I've accumulated being a maturing adult.
How do you want to apply that knowledge going forward?
That's not so much a dichotomy, it's just a matter of managing a transition from one phase of life to the next.
Toby Younis: Tell us about your website, what people can find there, and what resources you have available to them.
Michael Allison: The tagline is Align Your Financial Self for the Rest of Yourself and Think About Your What's Next. That's the philosophy behind New Lantern Advisors.
The About Page has the origin story of where we came from. There are two components to the practice. One is advisory services. That's wealth management, financial planning, and investment management. Then there are portfolio services, which is a way to serve “Do It Yourselfers” as well as other advisors on behalf of their clients to do a lot of the same things that I am doing from an investment standpoint for my own clients.
That's a way for me to grow without having to build a huge firm and all the bureaucracy that comes with that. I’m very transparent about fees and I’m a fee-only fiduciary. I don't work for anybody else with the client. I have no commissions or conflicts.
I have a blog and I also have a weekly newsletter called the Sunday Drive, which folks can sign up for that comes out every Sunday. It’s just a Sunday drive around the internet. Some lighter-hearted, not necessarily investment-related things, a lot around longevity.
Resources and tools are about education and lots of content around certain subjects that I think are important to think about for the folks that I would work with. The best client is a financially savvy client. I want to do everything I can to help people understand what's going on in the world and the ways to think about things they need to think about.
The intention of the website is to educate, offer insights and give people an opportunity to get in touch. Let's have an introductory call to find out if we might be a good fit to work together. I'm very longevity-focused. From a demographic standpoint, investment in longevity research is one of the great investment opportunities over the coming years.
Get to know me, learn some things about retirement, investing, and taxes, and reach out to set up a time to chat.
Toby Younis: What are your retirement plans?
Michael Allison: Having moved from the Boston area to upstate New York, I want the freedom to escape this part of the country during a few months of the year and either spend time in Florida or in my home state of Texas.
I also plan to have the freedom to spend time with my two young adult children. My daughter lives here, which is one reason we moved to Saratoga Springs. She is in her mid-twenties and our son is a senior in college.
Figuring out what he's going to do and getting him through his last year of college comes next. Then I’ll be spending time with my wife doing some traveling.
That's the beauty of this business. I can work with folks anywhere. I can be anywhere, and you can do the same.
Toby Younis: That's one thing that we explained to our encore entrepreneurs. You don't have to have an office.
Michael Allison: It's not a location. It's a state of mind.
With technology, you can spin up a business.
Failure rates historically were quite high on new businesses because it required a lot of upfront investment, and overhead you had to cover. If you didn't ramp your revenues fast enough, you went out of business.
But now it takes so little startup capital.
That's one of the great things about being an Encore Entrepreneur is you have enough resources. Maybe you never make another dollar kind of resources, but you've got enough resources to buy you the time to build what it is you want to build.
I've looked at research in terms of encore entrepreneurship and the rates of business formation of folks that are our age and the success rate. There's a lot of built-up value that we've accumulated over time that can be brought to bear when you control your own destiny.
You're not living in the confines of the corporate structure, where they have the impetus to push down on costs.
If you are an entrepreneur, it's up to you what you do and how much you make.