In today's episode we discuss how to start building you wealth now. Make sure to tune in to find out how you can become more valuable in the marketplace and to create a feeling of certainty in yourself.
Learning how to become more valuable to the marketplace is an essential WealthBuilding skill, and one which Kevin and Christian talk about in depth today.
The best time to start building you wealth is now, regardless of what’s happening in the economy, Brexit, interest rates or any other ‘market’ that is simply out of your control. When you really know yourself and where you can best deliver value to others, you’ll create a feeling of certainty that you won’t get trading time for money for somebody else.
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Chris Rodwell: Hello. Welcome to episode 14 of WealthTalk. My name's Christian Rodwell, the membership director for WealthBuilders, and I am joined by Mr. Kevin Whelan, the founder of WealthBuilders.
Kevin Whelan: Hi there, Chris. How's it going today?
Chris Rodwell: Well, it's been pretty manic this week because we've just launched the Foundation Programme and it's been exciting, right? We've got so many people contacting us wanting to know more, jumping on board. We've just done a Facebook Live today, so it's all actually a go at the moment, and yeah, welcome to all of the new Foundation members. All our founder members.
Kevin Whelan: Yeah, it's cool. I'm looking forward to working with them and I put my reputation on the line, Chris, so we better deliver.
Chris Rodwell: That's it. Got a double money back guarantee there, which all the details are up on the website anyway, so ... In fact, probably when you're listening to this the launch period, the initial discount period will be over, but if there's still some places left then you can head on over to wealthbuilders.co.uk/launch, find out details about Foundation Programme there, and if there's still time jump on board and be part of that with us.
Kevin Whelan: Yeah, but there are still people out there who kind of know they want to create more wealth. They know that they can jump onto our resources and get a step-by-step process, but they come back with those drifty questions, Chris, which is, what about Brexit? Is it the right time to do things? What about Mr. Carney is going to be replaced at some point? What about if interest rates go up? Isn't the stock market at an all-time high? We've had a 10-year bull run. That's bound to come crashing down around our knees, so shouldn't I just whoa and stop everything and sit on my hands and wait for a better time?
Chris Rodwell: Yes.
Kevin Whelan: Yeah. What a bunch of questions that is.
Chris Rodwell: Well, we did say in last episode of WealthTalk that we were going to move on and start diving into each of the seven pillars. However, we've had these questions coming up quite regularly now, and we thought we better address these before someone really focuses on those assets and the pillars.
Kevin Whelan: Yeah, particularly is the initial assets that we'll be talking about, the home capacity asset, the pension asset, and the investment assets, they're pretty much determined largely, Chris, by what happens in markets. The property market and the value of property and how's that going, and the interest rate market, and the mortgage cost market, and the stock market, and so forth. The thing about markets is that's what they do. Markets rise, markets fall, and one of the challenges, and it's a really important principle, which is why I wanted to do this podcast before we dive deep, is because there's still a principle that we really need to nail and I don't think we've nailed it in the previous episode, which is this.
Kevin Whelan: If you can learn to be the person who's part of the value, in other words, part of the value add, you do something that creates value, then you're not delegating your way to anything. You're not relying on if this does that. You're relying on yourself being able to bring value, and the way you bring value is to think about how your wealth dynamic, the way that you naturally bring value, or the way that you can explore bringing value can drive your own personal economy. You do something that forces value. You know? So that when you do that you're in control of that value. Even if markets go down there's still ways ... You're looking puzzled, Chris, as like I need to give some examples.
Chris Rodwell: I'm just thinking that when you get to that point it must give you an unbelievable feeling of certainty.
Kevin Whelan: That's a great point. If you think about something getting on in their life and they're thinking about downsizing them and the property market crashes, and then they're just about to draw their pension. You've had the tax-free cash to stick a few quid in the bank and then they want to draw their pension and the stock market crashes. Then interest rates are low so they can't even get any decent return on their savings, kind of like now.
Kevin Whelan: How certain is life? It's entirely uncertain, so certainty doesn't come from thinking about markets. It comes from thinking about flowing value and wealth flows to value. We talked about this in many of our previous podcasts that wealth flows to value. Should we talk about some examples where individuals can create value?
Chris Rodwell: Yeah. Well, let's look at perhaps in the different pillars you could give some examples.
Kevin Whelan: Well, you can create value in every pillar, really, except it's very difficult to create value, let's say, in the stock market, but I can certainly show anybody ways to mitigate the risk of the crash in the stock market. While you can't wake up tomorrow and fancy buying a pair of Nike trainers and all the of the sudden Nike shares are going to go up, that's not going to happen. You can't really do anything about that, which is why the stock market is not a great place to build wealth. It's a place where you might want to start your journey if you're just building some trackers, you're building some traction, if you like. But the real way to build wealth comes from the entrepreneurial pillars. We refer to assets as pillars, right? We've talked about that before?
Chris Rodwell: Yeah.
Kevin Whelan: The pillars that you can do extraordinary things are the pillars of property, the pillars of business, the pillars of intellectual property, and the pillars of joint ventures. Because in each one of those you can do something yourself that even if the market goes down you've driven value into your life either in cash or in some form of appreciation. Shall I give you some examples?
Chris Rodwell: Please do.
Kevin Whelan: Yeah. Let's give you another example, another paradox just before I do that. If, let's say, you've got money, your savings, and the savings is in the stock market and the stock market crashes and you're drawing money at a fixed level, you need a certain level, or you're drawing money based on the return you get, so the market gives you 4% so you spend 4%. The market gives you 6% so you spend 6%. If the market crashes and it goes down by 10, 15, 20% or whatever then the very definition of that, if you're trying to keep your money in the right ... keep the same value, is your income will go down. Your income is coupled, it's interconnected, inextricably linked to the value of the asset you hold, which is the stock market.
Kevin Whelan: Well, let's flip that. Let's say you've got money in a property that you rent out, right? We won't go into the details of different property strategies, but let's say you do that. The property market falls and your property goes down by 10, 15, or 20%. The rental income doesn't, so you're still accumulating rent and there's no relationship, certainly not immediately, that says, "Property market's fallen. Everybody pays less rent." It doesn't, or it doesn't work that way, so automatically you decoupled, you've disconnected the value of your income from the value of the asset.
Kevin Whelan: Now, the ways that you can force appreciation, you can create value. Well, first of all, you have to be educated enough to do it.
Chris Rodwell: Always begins with education.
Kevin Whelan: Well, it always does and always will, but the education, let's say, in property ... Well, let's give you an easy example. I was talking with some property developers I really like recently out in Tunbridge Wells and they were saying they've got eight strategies to add value. Now let me give you a couple of those so I don't steal their thunder if we ever get them on a podcast soon, but one of those might be there's been a massive change in the world as far as property's concerned, let's say in pubs. Right?
Kevin Whelan: Pubs used to be a place where people would go an accumulate, and they'd socialize, and they'd smoke, and they'd drink, and all those things. But increasingly pubs are just no longer valuable, so let's say you ... You don't have to be the owner of the pub or the owner of the asset because you can joint venture it. Let's say somebody knows how to do that and they buy a pub and they get permission to turn that into apartments. The apartments are being sold to first-time buyers with help to buy, so there's a demand. Demand is not really going to be affected at that level by Brexit or by interest rates necessarily because young people always need to get on the housing ladder.
Kevin Whelan: What you've done is then you bought something at a price that's commercial pounds per foot. Commercial property costs less to buy than residential property. You change the use. You lever the property. You get leverage, in other words. Not just debt leverage, but that will be often the way to do it, but you completely change the value. By adding value you created an incredible extra amount of money, and even if the market crashed a bit and your typical margin was a 30% or a 25% return on your investment and the market fell, you're only going to lose a small proportion of that but you're always going to be positive.
Kevin Whelan: The forced appreciation from an example like that, and now if we look around, Chris, on the High Street we'll see banks are closing. They've been converted. I've seen dentist surgeries converted and doctor's surgeries converted. Even churches are being converted in a kind of a bizarre sort of a way. What that means is there is plenty of opportunity out there, A, to learn how to do it, but, B, if you don't want to learn how to do it, you just want to understand it, you can work with somebody who does that, who creates that value, and instead of having your money parked in the stock market in a kind of a static way you use your money in a more empowering way. Your money comes to life. You get a bigger return on your investment. You get a return on your intellect if you remember the ROIs, and if you choose well and you resonate with the people with whom you're working then you can build that great return on interaction.
Kevin Whelan: So many different powerful ROIs that create incredible extra value, so even if you never want to be a developer ... I'm not saying everybody wants to be a developer. That's not what I'm saying. I'm saying you can understand that as an exercise in forced appreciation, in creating more certainty where everybody else is fearful of the uncertainty of markets. Does that make the point?
Chris Rodwell: It does, and we have a number of examples of members in the WealthBuilders community in the Facebook group sharing similar stories.
Kevin Whelan: Yeah.
Chris Rodwell: That's a great example, Kevin.
Kevin Whelan: Yeah.
Chris Rodwell: Okay. What about any of the other pillars? Is there another way that you can think someone could add some value or learn how to be a value creator?
Kevin Whelan: Yeah. I mean, one of my favorites is understanding the principle of the lifetime value of a client. I don't think I've covered that one before, Chris, so that might be a new one.
Chris Rodwell: Would this be in the business pillar?
Kevin Whelan: Yes, it would be in business because ... Well, you could actually apply the lifetime value of a client to a property because if you built a property portfolio you would work out, "Well, how long does this property get tenanted?" If you've got a good property, well, it could be indefinite, right?
Chris Rodwell: Yeah.
Kevin Whelan: That's probably one of the main reasons why people like that, but in business ... I see a lot of business owners and I'm a business owner myself, and one of the things I noticed about business owners is there are three types of business owner. No, it's not the drifters, and the DIYs, and the dynamics. It's three different ones.
Kevin Whelan: There are those who are almost craftspeople. People who are doing the job they love and they do it as if they had a job but they're doing it on their own terms, and that's okay but it doesn't create wealth because you're constantly trading your time for money. You're doing it, and then you're invoicing it, and then you're checking, and that whole process. Lifestyle businesses, that's not really great place from a wealth building perspective but it's great to give time freedom, and so that's a good thing.
Kevin Whelan: The second are those who are what I call profit chasers. What I mean by profit chasers is they have a business, and they do the work, and then they make profit, and then they do the work and they make profit, but it's still trading time for money. It's not uncommon for accountants to do that or lawyers to do that. It's still an hourly rate, but they've got sort of partners in one hourly rate and ...
Chris Rodwell: Transactional, yeah.
Kevin Whelan: Yeah, it's all transactional. What I prefer to do is look for businesses both to work with investing or build that have a different characteristic altogether. That's to sit down and look at, what is the lifetime value of a relationship with a well-served client where you deliver exactly what you promise and you focus on the consistency of delivering to them the value they are seeking? Now, that was a mouthful, so let me break it down.
Kevin Whelan: It's self-serving to have a business that focuses on the lifetime value of the client because if you've got a business, let's say ... I have a business, okay. I'll mention it because I'm very proud of it. It's a business that provides the support both in terms of compliance and reporting to SSAS trustees, pension trustees, those people who have taken their pension, they've completely changed their relationship with their pension, turned it into a special kind of a pension we call SSAS. That wonderful, small self administered scheme, which is the worst marketing title in the world, but none the less ... We look after a large number of people. Now, let me just give you an example.
Kevin Whelan: Let's say, just to make numbers up and make them very round, if the average SSAS client holds their money in their pension for their lifetime and then they pass it on to their spouse, and then they pass it on to their children because it's a trust fund for the family, now even ... It doesn't matter what timeframe you put on it, but if you put on a timeframe of 30 years, let's say, then if they're paying 1,000 pounds per year to be in the scheme that's a 30,000 pound client for every client who says yes. Now, this isn't selfish to say that because in order to keep 1,000 clients happy you've got to focus continually on adding value.
Kevin Whelan: A lifetime value-driven business focuses on adding lifetime value. When you focus your business that way so you don't think about the profit, you think about the value, and then if you think about that and do the maths on that, if there's 1,000 people at 1,000 a year that's a million pounds of recurring income year after year after year after year. Now, how much value is that and how much more value would that be compared to a business that just made a few thousand pounds in profit and focused just on the profit? You see what I mean?
Chris Rodwell: Mm-hmm (affirmative).
Kevin Whelan: When you focus on value and you look at the lifetime value, and you look at how you deliver value, and that's where you start, which is why I love working with new WealthBuilder clients. I'm so looking forward to working with the Foundation members because we'll encourage as many of them as possible to see the entrepreneurial value in creating ideas like that so that they begin to see creating lifetime value is a worthwhile cause. Not just for a great client and a happy relationship, but it drives incredible value to their business and I'm so looking forward to helping people do that. It's a different way of thinking though, isn't it?
Chris Rodwell: It is, and we covered this in an earlier episode is the employee versus the entrepreneur mindset. If you haven't listened to that then I'm trying to think of what episode that is, but we'll link to it in the show notes, that's for sure. But definitely the wealth mindset, and also wealth dynamics gives you a wonderful clue as to where you can add value.
Kevin Whelan: Yeah, it does. Particularly for those on the start of their wealth building journey because more often than not, I see people kind of get a little bit of education and then they think the way to build wealth is to chase that asset because they've heard of it down the pub that's still open or on some website. They'll chase some kind of strategy without really thinking through, is that right for them? Are they used to adding that value? Do they somehow now become a novice in the creation of a new asset and forget and discard all of the value they've created up to that point without taking that into account and showing how they could bring that to the table even in a joint venture?
Kevin Whelan: If somebody's got a brilliant brain with numbers and they want to get into property, say, and somebody's brilliant ... they meet a property expert who's brilliant in property but not great at doing the finance then you can form an allegiance and create value from each other because one needs the other. That's, again, where value in wealth comes from. It's that connectivity between one wealth dynamic and another, as well as being in control of where you think your own best value is.
Kevin Whelan: Wealth dynamics, clear picture of where you're going, a clear understanding of how you add value and how you add value on a recurring basis or renewable basis or a lifetime value basis, these are all the skills that WealthBuilders, once they do ... Here's the thing. If you're in a job or you're in a craftsperson type of a business you're used to that trading time for money and you'll continually do it. You'll never ever get off that treadmill in the same way as ... That's why I think you just referred to it as a rat race continuum, and it is, whatever you're doing.
Kevin Whelan: But as soon as you can give yourself some focus for, say, three to five years of focus on this sort of stuff you can be financially independent for the rest of your life, whereas you'll always be uncertain if you're chasing the money because the only way you can ... If you don't have something recurring the only way you can build wealth is save some money, pay the tax on it, and then park it. Yeah, it's the slow way to do it, and I'm continually bamboozled at the lack of education that's going on in this country and it flummoxes me. Still now even though they get exposure to us they go, "Oh, what about Brexit? What about this?" It's the drifty mentality that, obviously, causes me a little bit of frustration, but in the end, we do end up working with those people who can see past that and they want to really focus on how they can do a better job for themselves to build wealth in whichever pillar. I'm happy to dive into any pillar you want, but every single one of them is all about the same thing.
Chris Rodwell: Yeah. When you understand the process of turning the wheel of wealth, which we've discussed on previous episode, and you turn that once and it works, and you get recurring income, and you've got one pillar in place, and then you've got two, three, and four.
Kevin Whelan: Exactly. Now, not everybody needs to build seven, okay? It's not about, "Oh, I've got seven pillars." It's about how many different ways do you need to make it easy for you to build your wealth in a way that suits you with the pillars you want to build for yourself? What's interesting for me is somebody could build and choose the same strategy, property, say, as an example, or business, and they could just do the same thing and repeat it.
Kevin Whelan: You don't need to learn something new, except you just need to be aware that, have you created enough value so that if some market does change you've insulated yourself from that as far as possible? That's why I always recommend thinking about building multiple pillars so then, whether the stock market goes up or down you're really unaffected, whether interest rates go up or down you're really unaffected, whether Brexit happens or doesn't happen you're really unaffected. You might be mildly irritated, and I get mildly irritated from time to time, but never ever worried because creating wealth in multiple ways makes you financially bulletproof, and that's the best place to aim for.
Kevin Whelan: There's a process for it, Chris. Anybody can do it as long as they focus on the right things and not get caught up in the trap of, "Oh, it's all too complicated," because it isn't. You just go one step at a time.
Chris Rodwell: That's why I love pillars six and seven, the intellectual property and the joint ventures, because when you learn how to build a business and you focus on your skills and your strengths and where you deliver value then it's very easy then to turn that into some kind of intellectual property.
Kevin Whelan: Well, exactly.
Chris Rodwell: [crosstalk 00:22:40]
Kevin Whelan: Exactly.
Chris Rodwell: And partner with others, and there's additional income streams right there.
Kevin Whelan: Yeah, and what's interesting about that is it's a natural progression because if you think about the words .. You know I'm a great student of the English language, Chris, and if you think about the word author, it stems or it's the stem of the word authority. If you become an authority on something ... We've heard people talk about if you master something and spend your 10,000 hours doing something then you have the right to have authority in that area. As you build your wealth you're creating an authority in how you did that, whether it's with like you, we've escaped the rat race, whether it's with me with the seven pillars of wealth, whether it's some expert property trading or some expert business buyer or some value they bring to the world where they're so good at it, they're so recognized for it, they're sought out. Being sought out then creates enormous value for themselves and also for different ways they can layer even more value on top of that.
Kevin Whelan: You can license things. You can create a franchise from it, as has been done in ActionCOACH, for example. There's just so many different way, and I look for those ways and wherever possible see business owners maybe who can't see that recurring income in their business. I talk to them and say, "Well, if you're chasing profit, how could you get 5% of your revenue recurring?" Then start there. Don't just completely change your business model, but could you do a little bit on subscription?
Kevin Whelan: Subscription as a strategy, I call that, which is my other SAAS. The SSAS pension were SAAS. Subscription as strategy is what I kind of challenge business owners to think about and say, "How much income are getting automatically in your business?" They go, "Well, none, really." "Okay. How could you get 5%? If you're doing a million, how could you get 50,000 automatic?" Then just start helping them build little by little by little. That business is worth infinitely more when you don't need the owner to be there because the money just recurs, recurs, recurs, but you have to focus that way. You have to see yourself about what that value is you're adding and continue to want to add it and be proud to do it.
Chris Rodwell: I've been privy to a few of those conversations that you've had, and-
Kevin Whelan: Yes, you've heard them, haven't you?
Chris Rodwell: ... within a couple of hours, it's phenomenal some of the ideas and the light bulbs that go off.
Kevin Whelan: Yeah. Yeah, yeah. It's fun to do and I love to do that at that kind of high level, but we're looking to compact all of that wisdom into the foundation program as well so that you can begin to get those insights really at the very beginning. Almost like I'll be going to play some golf over the bank holiday and I know my swing's not perfect. I wish if I could change it, I'd have gone back right at the beginning and got the good fundamentals really at the beginning. Now I'm just sort of a clumsy, old geezer pushing the ball with a sort of mid-handicap, but I wish I'd done it right. I didn't because I thought I could DIY my way around a golf course and you can't do that [inaudible 00:25:54] doing well.
Chris Rodwell: That's sounds like a good place to end things for today.
Kevin Whelan: Okay. Next time we must get some case studies, right? Because we now know we are in control of our own personal economy. We don't care what happens to interest rates. We care to understand it but we don't really worry about that. We don't really worry about the stock market because we can control our own personal life, and we want to do that, and we will build the wealth in all of those different pillars. Why don't we bring some of our students to the table being interviewed saying what they've done to give the real-life examples to the theory we've been waffling on about for 14 episodes now, Chris?
Chris Rodwell: Yeah.
Kevin Whelan: I think we need to get somebody else in on the story. What do you think?
Chris Rodwell: I think so. It reminds me of the Jim Rohn quote that says, "The same wind blows on all of us. It's the set of the sail which determines, obviously, the outcome." The same things happen out there. The economy will do its thing.
Kevin Whelan: That's a good point. That's a good point.
Chris Rodwell: It's down to taking control and being the value creator.
Kevin Whelan: Being the value creator, and that's what we'll be teaching all through the program. It just runs through the DNA of the whole thing however we meet people. We'll continue to give free value too, so I'm very comfortable that we continue to give as much information as we can to those people who just want to consume it at their own pace. But don't let the market determine when you start to build your own wealth. Just do it when you're ready.
Kevin Whelan: All right, lesson from me. Next time, lessons from others. How about that?
Chris Rodwell: I like it. Thanks for tuning in today. We'll catch you on the next episode of WealthTalk.
Kevin Whelan: See you.