From Tax Strategy to Wealth Preservation: Mark Kanakaris on Financial Mastery

Intro: Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for High Velocity Radio.

Lee Kantor: Lee Kantor here. Another episode of High Velocity Radio, and this is going to be a good one. Today on the show we have the Founding President of Kanakaris and Associates, Mark Kanakaris. Welcome.

Mark Kanakaris: Thank you. Thank you for having me.

Lee Kantor: Well, I’m excited to learn what you’re up to. Uh, for folks who aren’t familiar, can you share a little bit about your practice? How are you serving folks?

Mark Kanakaris: Sure. So we are a full service tax, investment and estate planning firm here in Woodstock. Been here for 17 years. So we kind of cover the whole gamut, you know, from what you make is what you keep, you know, get you prepared for retirement and make sure that you have your estate planning documents in order. So there’s no messes later on.

Lee Kantor: So who is your kind of avatar for your ideal client? Are they people that are already at that stage ready to retire, or are they up and comers who maybe haven’t, or who are in the kind of growing their wealth stage?

Mark Kanakaris: Well, we’ve got a mix of everybody. Predominantly. What we’re geared for is for people within the first five years before and after retirement. But we have a lot of folks, um, you know, business owners, because they need a special hand-holding. We’re able to guide them through the tax work because a lot of accountants just don’t give them the tax. Call it insider thinking that they need to have to be proficient with their cash flows, how they handle their taxes, recognizing income, and, uh, how how to set up the right kind of investment plans for retirement plans, whatever it might be for themselves or their employees.

Lee Kantor: So is your firm, um, would it help a retiree eliminate. They wouldn’t need a CPA. They can use you for both the CPA and for wealth management.

Mark Kanakaris: Correct. We do all that for our clients included in our management fees are a one stop shop. We do it all so and we take a proactive approach. We don’t have people say, oh gee, Mark, should I convert? We’re actually telling them how much the Roth convert and why. So one of the biggest things we find with Roth conversions is people try to drag it out. And what they don’t realize is that Irma taxes, well, it’s not really a tax, but the Irma costs and their Medicaid will end up eating them up if they don’t get aggressive with their Roth conversions.

Lee Kantor: So when you’re, uh, helping with both sides of the equation there, it seems more efficient because I know a lot of folks have a difficult time getting their wealth advisor and their CPA kind of on the same page.

Mark Kanakaris: Yeah. We, uh, in our workshops, we talk about the three monkeys, your tax guy, your financial guy and your lawyer and getting them all. Most people just don’t think they need to have them all in the same room once a year saying, what do we need to do for our client? And it’s a big challenge. And and a lot of efficiency is lost there. I mean, a tremendous amount in my opinion, obviously.

Lee Kantor: So now talk Talk to me how you work. So say I’m using your firm for this kind of thing. Are you meeting with me every year? Like, what does it look like when you’re in a relationship with your clients?

Mark Kanakaris: So we meet with our clients usually several times a year. Obviously we’re going to see them twice a year, at least at tax time alone, because we’re going to have to, you know, drop off your return. We go over things. When you pick it up, we’re going to have a meeting. And there’s usually follow on meetings from that because we’ll figure out based off of this year’s taxes what kind of Roth conversions. And then you know, what tax laws change. Maybe more advanced tax strategies like using charitable trusts or Nim cuts or flip cuts to to, you know, offset future taxes. So we’ll usually have sometimes five and six meetings with the client a year just because of the tax work. It’s so heavily involved.

Lee Kantor: And is this fee based or um is it a percentage of the portfolio.

Mark Kanakaris: Yeah, it’s all fee based. Guys are percentage of the portfolio. So we take our percentage as well and we knock it all out. And for most of my clients, I tell them that you’ll save more money in taxes than you’ll ever pay me in fees by a landslide. You can’t even you can’t even compare the two.

Lee Kantor: And that’s, um. So because because you have, uh, the knowledge of the wealth management side as well as the tax side. So then that helps even in the investment side, I would imagine when you’re, uh, kind of helping them build, you know, put their portfolio together.

Mark Kanakaris: Yeah. More than most people realize, especially those. And I see it all the time as people who have non-qualified money, which is money that maybe came out of their bank account they gave to an investment guy, and he just went and put it to work. And every time he makes a trade or has dividends or income, that stuff hits their tax return. Well, one of the biggest things I see is, is all I see people with non-qualified all the time and I’m like, well, where’s your Roth accounts? Because this is money that you could put into a Roth and they’re never doing it. And it just it blows me away that people don’t think to do this. It’s a no brainer to me for somebody who’s got nonqualified money to automatically if they’re working, of course, to be putting money into their Roth. I see it all the time. It really shocks me to see how much that opportunity is mixed. Probably more than most, more than anything else, I would imagine. And then, of course, they’ll invest backwards. They’ll put their trading account in a non-qualified account, so they’re throwing their tax return all over the place because of their gains and losses. Instead of investing that way in their IRAs, where no matter what they do so that money comes out of the IRA, there’s no tax issues.

Lee Kantor: Now, when you’re working with the retired, um, how do you recommend they navigate the spending of the money? I know that’s a challenge for a lot of folks that are retired. They’ve spent their whole life accumulating, and now you get time to spend. And that’s trickier than maybe they anticipated.

Mark Kanakaris: Well, you know, in retirement, every day Saturday. Right. Can be what we do is we? Yeah, we, uh, we have an income chart that we put together, and it’s just it gives us a baseline to work off of, and we’ll take a client. We’ll show them the Social Security and their investments and a nominal rate of return and say, we just make this rate of return. Here’s your budget that you can live on on a day to day basis. And usually we’ll show them a couple of we’ll show them the max amount that they can have. And if that’s more than what they’ll ever need, then we’ll show them what they really need so that they’ll see what their nest egg that they may be leaving as an inheritance. So we can deal with the taxes on the inheritance. But once you have that road to go off of that baseline every year, you could say, you know, just make up some numbers. Hey, Mr. and Mrs. Retiree, you can have 100,000 a year, but we need to make sure that every year our investment accounts worth so much money. If that starts to change to the downside, we have a problem. The other thing we find, too, is a lot of folks who, even if they have that chart later on in life, they’re never going to spend what we tell them to spend, because I call it the rule of 85. I say, look, your knees, my knees, my back, your shoulders, all that they’re going to hurt. And the thought of traveling and doing a bunch of things at 85, when we’re aching all the time doesn’t sound that exciting anymore. So your spending will probably drop from outside activities. So we’ll probably find that we’re saving a little bit more than what we anticipated. Now, of course, if we do better than anticipated, that makes a big difference.

Lee Kantor: Now, how do you help folks when it comes to insurance? It seems like you you, uh, have carved that area out as not part of your, uh, services.

Mark Kanakaris: No, we, um, we’re fully licensed in insurance, so life insurance, annuities. If we need, um, for the people who are working disability, uh, we have access to all that stuff, and we do quite a bit of it. It’s, you know, it’s always case by case. Some clients like the guarantees of annuities, the guaranteed payments. Some people, uh, they’ll come in and say, look, there’s no way I’m going to get all this money and pay the taxes. So maybe they’ll buy a big life insurance policy to offset the taxes or to buy their their heirs. The time to pay the taxes on that money over the ten year period that they have to pull the money out and give them just cash to work with. We see that becoming a more popular idea. I’m of the opinion that we’re in the cheapest taxes we’ve seen for a while. Let’s stick with Roth conversions that no longer make sense.

Lee Kantor: So now when you work with your business clients, um, how do you go about helping them kind of maximize their deductions and minimize some of their liabilities?

Mark Kanakaris: So there’s a lot with that. You know, first and foremost, you know, we make sure that their books are in order, you know, enough that if they ever were to get audited that they’re going to be able to stand through an audit. And luckily, audits are not as frequent, I think, as people think they are. Once we know that’s in place, you know, we look at what they’re spending money on, how they’re spending money, if they’re doing really well, you know, we have to see how many what kind of retirement plans, if they have to have a retirement plan for all their employees to keep them, versus if they’re just having one for themselves, where they can dump a lot more money in it. We have a gentleman now with a medical practice, and, uh, most of his employees are all subcontractors to him. So he can set up a set plan, and he could put a ton of money into his retirement account and avoid paying the taxes on it now. Yes, it’s going to be an IRA. It’ll be taxed later on. But right now he’s in such a high tax bracket, he needs every deduction he can get his hands on. And sometimes we look at, hey, what purchases are we making? Maybe we need to, you know, uh, look at bringing in new, uh, new, uh, inventory for next year early, uh, prepay, maybe next year’s advertising sometimes just to get the, to get the expense out so we can keep the taxes down. So we’ll have, we’ll have like, uh, right about now is when we start our Q4 huddles to say, what are we going to do to end out this year and keep our taxes where we want them to be?

Lee Kantor: Now, what about for the retirees that are struggling kind of financially? Maybe they anticipated having more income. Is there any advice for that person? Um, to maybe create additional revenue streams or maybe, uh, having to invest in maybe getting buying a business or something along those lines?

Mark Kanakaris: Uh, you know, when people are kind of when they didn’t save enough, you’re caught in this. It’s been my theory right now. I would tell that client, you know, the market’s doing good. Let’s grow that money until we can create the income we need. Or can that money be converted to something like, like an annuity for, say, and maybe give them the income they would want? But hopefully you don’t have to use that whole nest egg. I always like to leave some liquidity in case an emergency comes up, but that’s such a case by case basis. Um, you have to take it, you know, person by person. I don’t know if I would tell them to go out and buy a business or start a business, but, you know, some folks will work part time in retirement. Just one. I always think it’s just to keep you busy, but if it helps you from having to use your nest egg for a few more years and let it grow. That usually helps, because I find that the first 5 to 10 years of retirement can have the most impact on a retirement, so I really want to avoid big losses in that that time period to the best of my ability. So that’s why we’re active money managers. So we’ll get out of the market. We don’t like what we’re seeing. Uh, because the mathematics, you can’t beat the math. If you take a big hit early in retirement, you could be permanently hurt for the rest of your retirement.

Lee Kantor: So. So then when you’re wealth advising, so you’re buying individual stocks for individual, um, clients.

Mark Kanakaris: Correct. We have several portfolios based on their risk tolerance and what they’re designed, what they want them to do. And we use stocks and ETFs. Um I don’t we do some mutual fund work. The 401 KS that we manage for some company that we have 41K services for. Obviously they’re all based off of mutual funds. But to be an active money manager we use stocks and ETFs, portfolios that we backtest and do a lot of making sure we’re buying what we think are the best of the best companies out there to, you know, grow our clients money safely. We have a lot of criteria that goes into how we build it. You could have a whole podcast on how we build just one of our portfolios, but there’s a lot of things that we go through to screen it back, test it to make sure that this portfolio has got good chances of being a successful portfolio for the year. And then every year we kind of look at it. Was there any poor performance, any of the companies not, you know, making the grade, so to speak, and then we’ll replace them with something better. And that way we can also keep in tune with the market more.

Lee Kantor: And then how often do you make those changes?

Mark Kanakaris: Usually once a year. Once I buy a stock I’m going to I’m going to hold it or trade it for the year depending on the ebbs and flows. You know, the whole thing is trying to you know, you can’t perfectly time the market, but you have a pretty good idea when the bottom is marketing it out and you have a pretty good idea when it’s topping out. And when we see those big bottoming outs, we start buying in there. And I always kind of say my clients probably think I’ve bought stock a days. They think I’ve lost their mind. And I always say, I’m looking for the day where everybody thinks, from here we’re just going to go to zero, and that’s the day I’m looking to buy. And there, you know, it helps. You know, the money’s always made in the buying. And hopefully that really helps with what helps our clients keep those big returns in their pocket.

Lee Kantor: So, um, are you optimistic in the way the economy is going and the way the market’s going? This is are you bullish or like what? Or you’re kind of a uh, on the fence.

Mark Kanakaris: Long term bullish. Yep. Definitely long term bullish this week. Been kind of choppy but you know still seems to be moving up. But yeah I think long term bullish I think once we get some of the deregulation out of the way I think when interest rates come down and hopefully inflation will come with it. Um yeah, I’m definitely bullish. I think that we’ll probably hit some sort of bump sometime in the next year. Can’t really tell you when because, you know, there’s a lot of concern about the unemployment. And unfortunately, I think that we’re going to need to see higher unemployment to get inflation down. You just can’t have everybody working and spending it, you know, big rates and expect inflation to come down. Um, people aren’t saving like they used to, so they’re spending more. I see a lot of reports on it. There’s a lot of talk about it. So, um, once we kind of get through that or if that can work itself out, which would be the obviously the most ideal route I think will be fine. But I’m bullish, you know, especially over the the current political administration’s outlook on the market. I think it’s going to be a good four years. Well, three more to come.

Lee Kantor: And then you’re okay with the preponderance of, um, the AI stocks kind of pulling more than their share of the weight for the, say, the S&P 500.

Mark Kanakaris: You know, that’s that’s talk every day. And we’re always saying every day that we’re in an AI bubble. And will it bust. I you know I think as long as earnings continue to be there for these AI companies, the AI bubble will continue to grow. Uh, I, I think AI is the future. And at some point as, as you know, as I mean, the big companies are selling to the big companies when you see the big mid companies really embracing AI. I think it’s I think then you’re going to know we’re fully enveloped in a big AI world. Uh, it’s going to be the cost of AI. I think for some companies are going to be expensive. But you know, we’ve been looking into AI and even AI, small AI companies, and they’re selling their services at record rates. And I think those companies would get into AI early and get those people who are using their AI chats or their AI agents. You know, once they lock up that customer, I think as long as they’re pretty happy, they’re going to stay with this company for a while, and you’re going to see these companies have really big, positive revenue for long, long times. They’re always they’re always going to be talking about retention rates.

Lee Kantor: So how are you seeing AI impact the financial world? Well is it affecting your firm?

Mark Kanakaris: Ai. We use AI in our firm. Absolutely. Um, you can use AI a variety of ways. Obviously, we use AI to help update our CRM. We have AI, AI trying to help us predict what the market’s going to do. Uh, there’s a variety. I mean, the big firms, the big box firms, they’re using AI and anything they think they can help them figure out where the market’s going to go before it goes there. That’s that’s one big use. But we also use a lot of you know, we’re using it to automate more things in our office. So we could be more efficient for our clients and not have to hire as much as many, you know, full time employees.

Lee Kantor: Now, when you’re looking at the lens of an individual, uh, client, are you looking at it? I know your services are both tax and wealth management, but which are you? Are you leaning more one way than the other, or how do they how are you kind of viewing that?

Mark Kanakaris: I kind of think that your income and your wealth drive your taxes, so. Uh, I can’t say they go totally hand in hand because I think the wealth part, your wealth management drives the taxes. So I think that’s the bigger thing that we focus on. But as because we build our portfolios and put our clients in the right portfolios based on the kind of money we have. It makes us not have to be so constantly looking over our shoulder, making sure we did the right thing. As long as we manage our funds right, the taxes tend to take care of themselves. And what I mean is, we have a lot of people with very large non-qualified accounts. We just have to be careful in how we buy and sell those accounts that we don’t create watch sales. And as long as we can avoid that, then the clients keep more of their profits. So we try not to do too much trading in those because we don’t want to, you know, just create them to death and create just what could be a what look like to look on paper like a tax nightmare. But again, you know, the devil’s in the details and you pay for me to be in the details on the tax side. I’m not worried about that.

Mark Kanakaris: We don’t have it covered. We do have it covered. But I think the wealth really the wealth management side kind of drives the taxes. So the wealth drives it. And at the end of the year, the tax kind of cleans it all up. And it helps us sometimes say, what do we need to do different next year. Some of our clients, because maybe they’re bumping income brackets or tax brackets. And we have to, you know, do larger Roth conversions or maybe even, hey, you know, maybe we should take a different approach on some of these investments. The change isn’t an investment. Hasn’t been a big of a deal. Usually what we find is that our IRAs that are growing, we’re you know, we’re trying to always keep them from jumping tax brackets when they go in to start taking their RMDs. So we’re trying to always encourage our clients to do large RMDs for Roth conversions before they retire. Uh, to keep them from jumping those brackets, because with the income chart that we create for our clients, I know roughly when you’re going to wind up in a new tax bracket so I can plan ahead of that. Now, of course, if I have a great year in the market, you know, then maybe I’m right.

Lee Kantor: Then you have to make some adjustments.

Mark Kanakaris: Right? And good problem to have. Obviously good problem to have.

Lee Kantor: Right. Well, I mean and the reverse could happen if you have a bad year then there’s other problems. Um, right.

Mark Kanakaris: But that’s really a bigger issue on a non-qualified really on your IRA account, if that’s what you’re counting on for your retirement income, more so than your taxes. Right. Because if your IRA came down, you’re and you’re taking RMDs because that’s where you’re taking it from. It’s you’ll take less. Um, but yeah.

Lee Kantor: Now, um, you mentioned that, uh, your clients usually are coming to you in a few years before retirement. Are they moving typically from a different firm, or are they maybe they would do it yourselfers that got a little gun shy and realized that this is more complicated than they envisioned at this stage?

Mark Kanakaris: Um, the DIY ers, you know, the do it themselves. Sometimes I think, uh, I don’t see as many of them coming over. I think it’s, it’s I’ll just say it’s just ego. They think they can do a better job. Um, and they’ll do that for a while. And let’s be honest, in a bull market, they think they’re doing a great job, but they’re, you know, listen, rising tide raises all ships. So in a bull market right now, I mean, Elmer Fudd could do a good job in the market, you know, to do an outstanding job, take somebody with some insight, but you could do in the market as a DIY or the people that are getting a retirement. You know, when they start saying, I want to retire in a few years, they like knowing they have a plan in place. They know they like to have their money’s in the right bucket so that they know. And even if I tell them if something happened and God forbid you had, let’s just say you had a health scare and you had to retire early, you know exactly where you’re sitting. You may not like it, but you know where you are and you know it’s not the end of the world.

Lee Kantor: So is something happening with their current advisor when they switch to you, like, are they being ignored? Like, is there some problem that is the trigger that gets them to you?

Mark Kanakaris: Or like we hear a variety of things, but normally we do. I think a lot of people feel that they don’t hear from their advisor. Um, I think that’s a big one. The ones that are working, they don’t have an advisor. So, you know, maybe we met them through a tax office event or a dinner workshop and they’re coming in like, you know, I’m getting ready to retire, and I really haven’t talked to anybody, but maybe we said something that made sense to them. So it’s a it’s a bit of a mix. Um, we do hear a fair amount of people think that their advisor didn’t care. They thought they weren’t, you know, big enough potatoes, so to speak. Um, we hear that some I don’t know if that’s the highest one, but maybe if it is the most common one, it wouldn’t be by much. We hear kind of a variety of things because we see everybody from all walks of life.

Lee Kantor: So what size portfolios are appropriate for your firm?

Mark Kanakaris: You know, I have this don’t close the door on anybody attitude. But the clients that we have the biggest impact on and make the most money and have the most tax effect on tend to have at least $1 million. But it doesn’t mean if you don’t have $1 million, I’m not going to take you. I mean, we took a client today with 29,000. It’s her. It’s her life savings and how important it is. I know what the money’s got to do. And I’ve got a portfolio that’ll do exactly what you want it to do. And I’m. And I think that’s a win win situation.

Lee Kantor: And so you don’t have to have a mega or you don’t have to be a movie star or an athlete to use your firm.

Mark Kanakaris: No, but it’s funny that we seem to draw a lot of wealthier clients because we do. We do have more wealthier clients than we did, say, over a half a million then don’t have a half a million. But we don’t. You know, I don’t discriminate. My practice isn’t for sale. So, um, at this point, I’m at a good place where I’m just here to materially improve upon what people have already started. You know, it’s no longer about me. It’s about what can I do for others. I’ve got all the things I want. I just want to do a good job. And I get a lot of personal gratitude when I call up somebody and say, hey, look how much your account’s grown. And they’re like, oh my gosh, that’s that’s really one of the best things I get out of my job. Or I saw a tap loophole where we could Roth convert a ton of money for pennies on the dollar that they never saw before, like we had a guy two years ago do a $30,000 Roth conversion. It didn’t cost him a penny in taxes. I to me, that’s cool stuff. I love all that. Just I love seeing my clients win, whatever that means to them.

Lee Kantor: Now, how do you handle kind of the the adult children of your clients? I know a lot of firms don’t have any plan in place to really get the next generation, like the the wealth advisor ages with the client. Do you have any kind of, uh, succession, uh, strategy for the children of your clients?

Mark Kanakaris: Well, the ones that have clients, the clients that are here, uh, we always invite their children to come in and get their taxes done from us and get to know us just because we are we are their advisor. And a lot of the times they go, I’ve been listening to dad or mom saying, you’ve done a good job. I just changed jobs. I want to give you my 401 K and see what you can do. And we have that happen quite a bit. Um, we had it just happened last month, and that’s how a lot of them seem to come in. Or when people do pass, the errors will go well if the blah blah blah thought you were great, I should probably stay with you and we’ll say, well, great, let’s try it for a year. And if you’re happy in a year, you should stay. And if you’re not, happy New Year, let’s talk about it. So we do try to keep people in that way as well and keep them engaged. But usually the best way to get them started just doing their taxes so they know who we are and they’ll feel comfortable with us and we do a good job with their taxes. When an opportunity comes up, they’re like, hey, let’s talk to Mark. He’s done a good job so far, so I want him to feel comfortable with me and feel that I’ve got good credibility when they when I work with them on their in their investments.

Lee Kantor: So a lot of times the taxes is kind of the first point of entry. And then from there it just evolves.

Mark Kanakaris: Yeah. Usually evolves on its own because everybody knows that we do both. When you walk in you see our tax side, you see our investment side. So there’s there’s no you know, there’s no like hey you guys do this. Wow I didn’t know that. So they can see it. They know about us. And uh you know when they feel comfortable they do it.

Lee Kantor: And if somebody wants to learn more, have a more substantive conversation with you or somebody on the team, what’s the website? What’s the best way to connect?

Mark Kanakaris: It’s Ken Harris and Associates comm I know it’s a mouthful, but I think the K. Aws is still working. And, you know, I always tell folks, just click on there and give us a call, set up an appointment, phone calls. Fine. If you just want to talk to me, you don’t want to come to Woodstock. Um, we do what we seem to. As you know, everyone’s doing a lot more virtual appointments than ever before. So we’ve been doing a lot more virtual appointments, and, uh, people get to know us a little bit, and sometimes we do a couple before they come in, but, you know, know who you’re working with.

Lee Kantor: Absolutely.

Mark Kanakaris: Well, I try to tell them, let’s have a couple of chats before we make a decision. Make sure I’m a good fit for you. And you’re a good fit for me.

Lee Kantor: Well, Mark, thank you so much for sharing your story today. You’re doing such important work, and we appreciate you.

Mark Kanakaris: Thank you.

Lee Kantor: All right. This is Lee Kantor. We’ll see you all next time on High Velocity Radio.