Interview with Scott Ford
The Way2Wealth® Method with Scott Ford
When it comes to managing money, it can quickly get confusing trying to figure it all out.
There’s so many options, experts, and conflicting information, that most people end up making bad decisions OR failing to take action because they just don’t know where to start.
Today’s guest, Scott Ford, is here to simplify the complexities around money and paint a clear picture for anyone who wants to build long-term wealth.
Scott is the Managing Director, Partner, and Wealth Advisor at Carson Wealth, where he specializes in comprehensive wealth management using his proprietary Way2Wealth® process.
In this episode, he answers difficult questions like: Where should you allocate your capital? How much should you have saved for emergencies? And what options exist to protect your wealth from taxes, inflation, and market downturns?
And BTW, a lot of “financial experts” will dish out advice, but practice something completely different. Not Scott. All of the financial principles that he shares are ones that he successfully deploys in his own life.
In today’s conversation, you’ll learn:
✅ Value-driven investing strategies for boosting your portfolio while enhancing your happiness and well-being.
✅ How to build a family financial foundation for long-term wealth regardless of market conditions.
✅ Bank-replacement strategies for diversifying finances and compounding interest.
Featured on This Episode: Scott Ford
✅ What he does: Scott Ford is the managing director, partner, and wealth advisor at Carson Wealth, specializing in comprehensive wealth management using his proprietary Way2Wealth process that helps entrepreneurs, small business owners, executives, and families to bring clarity and simplicity to the way they manage their finances and build wealth. He’s also the co-founder and author of Legado Family, which helps families upgrade their relationships, enhance lasting ties, and strengthen bonds. It is Scott’s mission to spread education about finances and give people the tools that they need to reach financial independence through financial wisdom. He hosts The Way2Wealth® podcast, an educational and informational tool for people to understand the complex world of financial management and increase financial literacy.
💬 Words of wisdom: “I’m not going to invest in something that I’m not values aligned with.” – Scott Ford
🔎 Where to find Scott Ford: LinkedIn
Key Takeaways with Scott Ford
- The Way2Wealth® process
- Prioritize self-care and align your wealth with your values using the Legado framework.
- Leveraging wealth to enhance your overall well-being and happiness.
- The Way2Wealth process to tax-reduced and diversified wealth management.
- Using the concept of infinite banking to create wealth for generations.
- Bond allocation as a hedge against increased taxation and interest rate risk.
- The “all-seasons” investing strategy Scott uses to mitigate market volatility and risk.
- Using your unique skills and values to improve your financial decision-making.
Scott Ford on Creating a Family Bank with the Infinite Banking Concept
Scott Ford Tweetables“What most of us think is wealth is money and dollars and things, and actually what we're all chasing is well-being.” – Scott Ford Click To Tweet “Let’s make sure we’re investing in a way that we’re aligned with who we really are as a human being from a value perspective and from a skill perspective.” - Scott Ford Click To Tweet
- The Way2Wealth
- Scott Ford on LinkedIn
- Garrett Gunderson
- Rich Christiansen
- Legado Family
- The Way to Wealth by Benjamin Franklin
- David Green
- Hobby Lobby
- Ray Dalio
- The All Weather Strategy Portfolio by Ray Dalio
- MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins
- Harry Browne
- The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy by Craig Rowland, J.M. Lawson
- Warren Buffett
- Sam Zell
- Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell
- Equity LifeStyle Properties
- Verne Harnish
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Connect with Justin Donald
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To get access to The Lifestyle Investor: The 10 Commandments of Cashflow Investing for Passive Income and Financial Freedom visit JustinDonald.com/book
Read the Full Transcript with Scott Ford
Justin Donald: What’s up, Scott? So good to have you on the show.
Scott Ford: Good to be here, man. Thanks for having me, Justin. Look forward to having a chat.
Justin Donald: Yeah. Well, you come so highly referred. And any time I have friends that sing the praises of their friends, I always want to have them on. And so, it’s funny. I was on your show just a little bit ago, and I’ve been so excited for us to connect. And I have so many questions I’m excited to get into. The more I get to know you, the more impressed I am with you. And we have some mutual friends in Garrett Gunderson and Rich Christiansen, who have both been on my show and just recently dropped the episode with Rich. I know you guys are business partners and I’m just thrilled about our relationship and all the wonderful things that they’ve said about you.
Scott Ford: Well, hopefully, I don’t disappoint but you know what, I don’t take any of that seriously. So, it’ll all be fun and good. Look forward to sharing wherever it goes. And as I mentioned before, anytime those guys say, Rich said, “You got to meet Justin,” I don’t ask questions. I’m like I trust that guy explicitly. And Garrett had mentioned it in the past as well, and he’s also a good friend. So, I’m like, no questions. Here I am. And sure enough, good guy. We had a good time on my podcast and I look forward to reciprocating and hopefully sharing something of value to your tribe.
Justin Donald: Oh, I love it. Well, I mean, just what you stand for, your business, Way2Wealth, just like your whole terminology and process, your orientation to teaching and coaching people to financial freedom is really fantastic. I mean, you have so many strong frameworks. I can tell it’s very thought out. You spend a lot of time fine-tuning and just kind of creating the system of operation, right? Like, here’s a replicable system that many people can get plugged into to figure out how to become financially free. So, I’d love to dig in even at a foundational level into your program and into your systems and how you’ve helped and coached so many people because I know your goal is to coach over a thousand people in this regard. And I know you’re well on your way. So, tell us a little bit about that.
Scott Ford: Yeah. And what’s interesting, I’m not going to claim any brilliance in any of it, Justin. I’ve been doing this for over 30 years now, which not only means I’m getting older. Ideally, you learn some things along the way and I just distilled lots of things that resonated with me through the years from best business practices to how do you manage money, what’s the game really all about. And if I were to just synthesize wealth and money down to two things, it’s cash flow and control. So, the process I created all the way back in 2002 have continued to refine since 2002, continue to refine today. If I can make it better today, no ego, it’s getting changed, we’re making it better, we’re going to upgrade, and I’ll do that as long as I’m involved with it. So, that process is called The Way2Wealth. It’s how to get your financial picture and wealth picture onto one page. So, you have a clear line of sight knowing everything’s covered, and then you can dig as deep as you want because obviously there are pieces to that.
So, I can take that wherever you want to go but I developed it in 2002, Justin, continue to refine it. What I’ll say is, and I think this is very important because I think people would be surprised how often people don’t walk their talk. I literally manage our household finances verbatim of what you’ll hear with the Way2Wealth. I invest our money with what I call all seasons investing. Exactly what that paper describes is exactly how I allocate my capital.
Justin Donald: That’s awesome. I love it. And one of the things that I really appreciate because you’re really great at taking complex things and creating a simple program or approach or diagram, I think that’s so important because this world of finances, this world of estate planning, this world of building wealth, it can be so complex that a lot of people don’t know where to start and maybe don’t start simply because they don’t know where. It’s like what’s an easy way to get started. So, I love that you can fit everything on one page. For years in many businesses, I’ve talked about the power of simplifying anything down to one page, whatever the program is, whatever the process is. Even inside of The Lifestyle Investor community, one of the things that I talk about is how your investment criteria, everyone should have their own investment criteria, and it’s a list of the reasons that you will or won’t make an investment in something. And that needs to fit on one page and you need to be able to reference that because, in a season where you might be emotional about something, you need to go back to when you were using logic and facts and specifics to create this criteria for why you would or why you wouldn’t invest. And so, I love that. I think that’s great.
Scott Ford: Yeah. What I’ll just add just there, Justin, if I can. It’s the same thing in business. So, if I were to just zoom out, I mentioned the Way2Wealth and synthesizing wealth management on one page. The overall process I’ve created through 30 some years of doing this is what I call the infinite entrepreneur. How can we go from force in business, which we all have done? If you’re a business owner, an entrepreneur, you know you’ve gotten too hot, you know you’ve gotten too cold, and both are out of balance. My objective and I live that and I’m like, “Gosh, there’s got to be a better way,” and there is. It’s like tipping that over which that piece we call the wealth continuum, which came from my friend, Rich. I’m tipping it over into what I’m calling the infinite entrepreneur, which is an infinity symbol in flow instead of force. The idea here is if I look at the Infinite entrepreneur, it’s four components and if I synthesized it down to one word, it would be healing. I know that sounds, “Are you kidding me? I thought we’re talking wealth management.” I am. And so, money is like the last piece. So, for me, it’s about individual healing and healing at the eye level is what I call indigenous wisdom, health, wealth, wisdom, and happiness. And how do you do that?
And from that place of healing where you’re recognizing you’re whole and complete, then you can go to your relatives and family and heal at the we level. That’s where Legado Family comes in with my partner, Rich, to create value, symbols, traditions, rites of passage, and then a structure to support that and a family bank to support that. Then you can go to the business or philanthropic all level to the world. Once you’ve done the individual work at the I, once you’ve done the family relationship work at the we, then you can do the healing at the business or philanthropic level. The process there is the four Ps: purpose, people, process, and profits to have a sustainable business or a sustainable philanthropic endeavor. Then we can get to the Way2Wealth and do what I call make the money clean, which is simply aligning our dollars where we’re aligned with our personal values, our family values, and our business values. So, that’s the bigger picture and all of that. Each section can fit on one page. I’ll just if I back to the business because this is what you hit something on like, “Ah, yeah,” years ago I did it in the business because this is what’s interesting with most business owners and entrepreneurs, they typically either have three things. One, their finances are not organized in the business level or the personal; or they’re organized at the business, not personal; or vice versa, personal, not business. It should be both.
And so, how can we have a clear line of sight of the business which we recommend a one-page pack. You get a one-pager over your business and you can be like, “Oh, there’s something’s off here and then you can dig deep in the reports to find what and same on the personal. So, you mentioned that and it made me think of the power of the one-page pack in a business financial picture.
Justin Donald: I love it. And even the power is you are talking about of having your values outlined. So, like what are your personal values? What are your family values? Okay. Now, let’s talk about investing. How do we incorporate these values into investments to help you make a yes or a no decision? Because I don’t think that we should invest just to make money. I think there are plenty of people that invest just to make money and I think there are people that will invest no matter what the outcome is, no matter what the quality of the product is. I think we’re moving into an age, an era, specifically a generation with millennials where they do care more about this stuff than in previous generations. And I love that. I think it’s awesome. But I think that like, for me, I’m inspired to invest in founders, in companies, in products that I think are going to make the world a better place. So, that aligns with my values of trying to do the best I can while I’m here, right? So, part of it’s like, yeah, I want to live a great life but I want to have a life that has meaning, that can have positive impact and ripple effects for years and years and decades and centuries. And if only we could all be so lucky but I think with intentionality, we can.
Scott Ford: Yeah, for sure. You make me think of the 7-generation role in thinking, which we incorporated into Legado, which what I’m calling 7-generation family constitutions. And if I were to just some that up, it’s thinking long term. So, that’s indigenous wisdom. It comes from the Iroquois Confederacy, the Great Law of Peace that’s the tribes that wrote the Great Law of Peace. And when you compare our U.S. Constitution with the Great Law of Peace, there are so many similarities. You can clearly see our forefathers took from that Great Law of Peace and the indigenous wisdom here. They left out some things. One that clearly stood out to me when I read several years ago the differences was the role of women in leadership in government and divine feminine or whatever the word you want to use. And you could see we’ve been flying around with one wing and you end up flying in a circle when you do that. You need both. And 7-generation thinking, so the elders before making a decision would ask, “How is this going to affect my family, other families, the plant family, the animal family, the water, the soil seven generations from now?” And we stopped doing that.
So, to me, bringing that back, thinking long-term, thinking in generations is a healthy right thing to do, which will serve us all. So, as I think of investing, as I think of the business, as I think of the individual healing, all of it, I want to wrap in a wrapper of thinking 7 generations or at a minimum, just thinking long term.
Justin Donald: I love that. That’s incredible. And it really resonates with me because I’m in the process right now of planning 150 years down the road type of plans. I was really inspired when I had the opportunity to meet David Green, the founder of Hobby Lobby, who’s just an incredible guy, just brilliant and wonderful. And this guy, he gives 50% of the profits of Hobby Lobby away to charity every single year. He’s given away $500 million. In fact, I’m in the process of lining up his podcast on The Lifestyle Investor, but I’m spending two days with him in his family office at their corporate headquarters in Oklahoma City here in a couple of months to do what they call the 150-year plan. And so, I am thrilled about it. And I just think we need to get more people thinking long-term like this because that’s what’s going to make today more meaningful and it’s going to create just so much better of a future for so many.
Scott Ford: I couldn’t agree more. And right, it’s like sometimes we think these can be new things. One-hundred-fifty-year plan is friggin brilliant and it’s been around forever. It’s just let’s get back to what works. So, I call it the real AI. So, I love artificial intelligence. The real AI is ancient intelligence. And so, with that ancient intelligence using artificial intelligence, like that’s the marriage where we can, I’m not saying we go back, no, and we don’t lose that wisdom. We make it exponential by pairing that with this technology. Now, we’re getting somewhere but if we don’t, then we’re going to end up where we’re at, flying in a circle like an eagle with one wing because we’re not balanced out. Taking the wisdom that’s been learned, pairing it with the technology and new things that we are innovating and creating that we’re learning, that’s the marriage to me, marriage of those two AIs.
Justin Donald: I love it. Oh, it’s awesome. Yes. Artificial intelligence, ancient intelligence, yeah, let’s combine them. I think that’s great. Now, you, if I recall correctly, have an acronym for wealth, right? Isn’t that something that your team has? I’d love to hear it.
Scott Ford: Yeah, it is. So, I’ll say two things on that. So, regarding wealth, the root word in wealth, the Anglo-Saxon word of wealth is weal, and the definition of weal is well-being. So, what most of us think is wealth is money and dollars and things, and actually what we’re all chasing is well-being. So, I wanted to start with that. So, that’s the first acronym. What are we really after? We’re after well-being. I tell people, look, the process that I’ve created is literally how I manage our household finances. It’s what you’re referring to, Justin. It’s called The Way2Wealth, and I’m going to jump into it. That said, if The Way2Wealth could get you to $1 billion in one year, would you want to sign up? And everyone says, “Of course. This is awesome,” and you’re going to be completely unfulfilled with questionable health and miserable relationships. Do you still want it? “Hell, no. We don’t want that.” What we really want is well-being, this sense of bliss and well-being. So, with that context, and that’s really what we’re after, here’s The Way2Wealth. The Way2Wealth is The Way, the number 2, and Wealth is the acronym.
The Way was very intentional, which is the Daoist philosophy of The Way, being in harmony with what is because that’s all we have. I synthesize it down to living now. It’s really being in harmony in living now but that’s the well-being part. It’s being in harmony with what is. So, The Way is very intentional. It’s not just filling blank space. The 2 is the team. It’s the number 2, which, by the way, ancient wisdom. I took The Way2Wealth from Benjamin Franklin, who wrote the book, The Way to Wealth. I just modernized it, took some of this ancient wisdom, bring it up, synthesize it in my language, and modernize it. That’s what I did. So, the 2 instead of T-O is a number and the point is, it takes multiple people on the team. So, what you want to avoid with the 2 is silos, individuals working as expertise in silos with egos. Some could call Os. Anyway, you want to get rid of the Os and we want to have an A team. So, the A team is collaborative, super smart. You would enthusiastically rehire them. They just want to get to the best answer. They don’t have to have the best answers. They don’t have an ego. The game is won or lost there. That’s the 2.
Then the WEALTH being the acronym, the W is what’s the foundation? So, the foundation is built on a tax reduction plan, a state legacy plan, insurance maximization plan, interest rate, credit review, and cash flow and control, which is the game. That’s the foundation of the plan. So, that’s the W. The E in wealth is established savings, recognizing savings in a warehouse of wealth is different than investing. So, the first thing we want to have is make sure we’re creating capital that we can get our access to. Second, A in wealth is all expenses are covered by income. Let’s get all our expenses covered. So, that’s the income bucket. Bucket number two, income-producing assets, right in line with what you believe, Justin, and what you’ve practiced and what you teach. Let’s get our expenses, candidly, our lifestyle, your word, and then surplus covered by income. Couldn’t agree more. Then the L in wealth is living with inflation. It’s a real thing. How do we live with inflation? We got to freaking grow money after we have the foundation, after we have a warehouse of wealth, after we have the income bucket check. Now, we can really swing for the fences, value-aligned swing for the fences in the growth bucket.
Lastly, tax diversification because taxes is the biggest expense. It’s in the process twice. We just want options, tax-deferred, taxable, tax-free. We just want to see a more balanced approach. Most people listen to the news and put all your money in a 401(k) and max out this and that, and next thing you know, you get all this money in a tax-deferred account that’s completely out of your control. Government-regulated, which what’s so interesting what caused the problem, erroneous taxation, are the same people who are creating the solutions called these retirement plans. Doesn’t that make you just a little bit question what’s going on here? The point is I have those. I have a fair amount of those, but I also have taxable and I also have tax-free. Lastly is H in wealth, which is have the plan updated at a minimum annually. That’s it, all on one page. That’s how I manage our personal finances. That’s our process called The Way2Wealth.
Justin Donald: Well, I love it. I mean, we couldn’t agree more on so many levels. I think it’s really, you know, you talk about the importance of first and foremost having savings that is not to be intermingled with investing. So, this is like for a rainy day savings that in case the worst things could happen to you, you can survive. And a lot of experts talk about three months and I think, yeah, get to three months and then get to six months, then get to 12 months. And some people say even more than 12 months. So, I’d be curious like what’s the magic number? I know get started wherever you’re at now like just find a way to get to the next level. But where do you see that as ideal before people move into that investment bucket?
Scott Ford: Okay. So, here’s my thought on it. Minimum one year is my recommendation for anyone and everyone. That’s my recommendation. I personally am closer to a 50% allocation of our capital, which is a fairly big number in that bucket. And here’s why. What do you do with the money in the bucket? The reason why most don’t put more in is because, look, I’m getting like no rate of return at the bank and it’s taxable. That’s all fair. So, what I do instead is create more of our own family bank. And you can do that through an LLC, like a Wyoming LLC, asset-protected type LLC with a brokerage account, money market at the bank, etcetera. I personally follow the infinite banking concept. I know Garret, our friend, calls it cash flow banking. Same concept. The idea is using something that’s been around for 250 years called dividend paying whole life with a mutual company, which by the way, when I first heard this, I threw up in my mouth a little bit because I’m like, “Are you kidding me?” I started in insurance like I have a complete allergy to insurance. Well, this isn’t for insurance. This is for a tool to practice how do you actually create a family bank. And I haven’t found a better one. If there’s a better one, sign me up, I’ll do it tomorrow. It’s the best option I have found.
So, because of that, I want as candidly as much capital personally as I can get in there because long term, over 20, 30, 40 years, I’m going to average likely 3.5% to 5% tax-free compounded in that. And what’s most important to me is it’s a company that I own. So, it’s like me owning the bank. I’m a shareholder in the bank. So, when it’s profitable, I’m getting those dividends sent to me on an annual basis. And most important, it’s a bilateral contract of like-minded individuals, not like a bureaucracy like our government. So, I have control of that company and what happens to the capital in it and specifically my capital, so I can leverage that at any time without any questions, without any credit report. If I can’t pay it back one year because there’s a downturn in the market, there are no questions asked because it’s my capital that I make the rules on. That gives me so much freedom and flexibility to do creative things with my money. 50% is what I do in my portfolio, like I said, a pretty big number. I want more but I cannot because they won’t insure more. So, I ensure my wife’s insured. Our kids, we have four grandkids, they’re insured. You know, team members that are insured but it’s not the insurance that I’m after. It’s the ability to get the growth at a very conservative competitive number and it gives me access to that capital. And remember, the key to this is what we started the conversation with, the 7-generation thinking. Think long-term.
The other thing that it allows me to do is I can now loan that out. As a family bank, kid, you want to buy a car, house, whatever, pay it back. If someone goes rogue and doesn’t pay back, then you can’t participate in the bank. We all pass away one day, thinking long-term. I’m thinking about their grandkids, great-grandkids. That money is going to get paid back from a death benefit that goes back into the bank that generations from now are going to be able to benefit from.
And by the way, with our work with our friend, Rich, we have a family constitution set up. We’re really clear on our values and symbols, traditions and rites of passage to pass all that along. And then all this bank is doing is throwing fuel to that fire. So, that’s how I think about savings, minimum one year, and then some people I’ve heard Oprah wanting whatever her number is, I think 7 million. So, we’re all different, but I’m more than most traditional planners would say three to six months, I’m going to say minimum one year.
Justin Donald: Oh, I love it. I think that’s great. I think everyone should be working up to at least one year and I would say get to six months as fast as humanly possible. And then, my audience knows really well, I’m a huge proponent of a bank replacement strategy and using whole life. I mean, I think I started this when I was 25, so almost 20 years ago. So, like 18 years ago, I got my first whole life policy, dividend-paying whole life. And so, each of my family members has one. We use it as a bank, and I think, the world of this strategy.
So, for those that haven’t, I think what a great opportunity to get started at some point. And you can do this on yourselves, your kids. Basically, six months and younger is the cheapest to insure. So, the younger your kids are, and really, it’s anyone that you have an insurable interest in, but I also think for those that maybe there are medical complications, you can’t do whole life and you’re trying to figure out other vehicles if you really can’t do that. And I do think that’s the best strategy.
But if you can’t, there are a lot of other ways you can do it, right? So, this whole idea in this, for me, I’m not trying to maximize every dollar. I want a portfolio that really blends well. So, I’ve got some money that’s in fixed income. The goal of fixed income is not to have the highest return. It’s to actually have a return that is pretty easy, pretty simple, pretty good, beats inflation or keeps up with inflation, but I have liquidity with, just in case. So, that’s like another place. So, bonds can be part of that, the cash that you have in your home safer, wherever you have that. These are all strategies.
So, anything under this, saving, your emergency income, having cash in the bank, there are a lot of ways you can do it. So, it doesn’t just have to be money that isn’t earning a return. In fact, I would recommend that the money that you use is earning a return. And there are also hard money lending funds and other type of funds with really quick redemption, high returns, high collateral that a portion of it could be used in as well, where you can get access to it in 24 to 48 hours.
Scott Ford: Yeah, I totally agree with all of that, Justin. I would say a couple of things is that let’s separate savings and investing, which we’re doing and recognizing they’re two different things because they are and that we’re really wanting this war chest that we can get access to. Another reason I like this tool for those who it fits and it qualifies is you get access. Typically, the rule is or definition is liquidity is, savings is you can get access to that capital within 30 days. Fair enough.
I would add, ideally, without risk of loss, all right, so that all of a sudden narrows down the option, and second, ideally, without taxation. That really starts there on the loss and that’s why this is a great tool to you. The other thing that I would add is why I’m close to 50% in the portfolio is because it is my bond allocation, because it’s what they invest in, and why I like them and I have a white paper on this that explains the rationale of how I do what I do. And the idea is this is what they invest in. And because life expectancy for these companies is 120 years, again, they’re thinking long term, they’re buying bonds we never could buy because we’re not going to lock our money up that long. They can because they’re insuring thousands and hundreds of thousands and potentially millions of lives.
And here’s the other benefit that they have. They can navigate interest rate risk in the bond market, unlike we can because they have premiums coming in every year for hundreds of years. And they got to do something with that capital. So, what do they do if interest rates are going up, they’re buying. If interest rates are going down, they’re buying because they’ve got to deploy the capital. So, it’s helping us, as an owner of the company, navigate interest rate risk as well.
Again, it’s not a panacea. It’s not for everyone, I’m sure, in what I personally do. To your point, there’s bonds, there’s savings accounts, there’s money markets, there’s other things you can do. I just like to see minimum one year in savings. And for some people, it’s more. What’s the sleep factor? What’s it take for you to lay your head down on your pillow and be like, ah, I’m good on the savings in the war chest?
Justin Donald: I love it. I think that’s great. And not to mention that there’s purchasing power with these insurance companies. So, unlike a bank that uses fractional reserve lending and really only has a 10th of the money in actual cash at any given time inside their operation, life insurance company in the event that everyone dies, that they have insured at the same time, has to have that cash available for all parties. So, they are, as cash and financially sound as any institution that exists. So, I like that.
There’s also purchasing power. There’s the ability for them to get rates that we can never get. Just it’s an impossibility. It’s easier for them to get out of contracts or locks that we would never be able to get out of. And so, yeah, there’s some power to that.
I’d love to talk a little more about your all seasons portfolio. And part of the reason that this would be fun, I just did a session with the Lifestyle Investor Mastermind where I kind of walk through the asset allocation of the ultra-wealthy and how they have their money. So, we’re looking at groups that are generally $100 million in net worth to many billions in net worth.
And there are several banks that aggregate some of this data. Some do it on a global scale, some do it just here specifically in the US. There are some larger institutions that also do this. There are family offices and there are groups that do research with all these family offices. So, they may have 200-plus family offices that supply data.
And so, every allocation is a little bit different, but there are more similarities than there are differences. And often, the differences are 1% or 2% or 3%. And so, what I have found in my research is that the wealthiest people in the world, and most specifically in the US, generally have about 25% of their net worth in the stock market, 25% in real estate, 25% in private equity, and 25% in everything else. And that breaks down into private credit, fixed income, cash equivalents, cryptocurrency, agriculture, precious metals, all that would kind of be in that last 25%.
And so, I know part of your allocation, it sounds like you’ve got a healthy 50% bond-like portfolio, but that’s not to be confused with the fact that you can actually leverage that, borrow against it, use that for other investment. So, just because you’re sitting in 50%, that’s your bank replacement strategy doesn’t mean that that’s actually how all those dollars are allocated because you can kind of play like a bank with some fractional reserve lending and you can capture other allocations to other things while you have this safe basket sitting there, earning you money, easily accessible. So, I’d love to hear more of your strategy on that.
Scott Ford: Totally happy to jump in. And you’re exactly right, Justin. So, this is what it looks like. So, I’ve been doing this 30-plus years. The genesis of this came from other thought leaders and really bright people out there, and then desynthesizing it, making it my own, taking what made sense to me, setting aside what didn’t. So, here are some of the thought leaders would be Ray Dalio from Bridgewater, we likely all know, the largest hedge fund in the world, super smart guy, and his portfolio that he put together for his family because here he is with his hedge fund and he’s like, if something happens to me, no one’s going to know how to manage this money because I put this algorithm together and I manage it.
So, he wanted to come up with a strategy for his trust that could go on for generations and not need to be overmanaged, hence, the All Weather Portfolio. You can Google it, see what it is. I saw a book behind the Tony Robbins, MONEY Master of the Game. He talks about it. It’s all over the place. I like that.
Then there’s Harry Browne, who was a libertarian presidential candidate. He was in the wealth advisory space. He put together what he calls The Permanent Portfolio, which is basically a 25%, 25%, 25%, 25% allocation, a lot like what you mentioned, maybe different asset classes in it, but it’s a four-quadrant portfolio. I like the simplicity of that. I like the permanent thought of that, of set it and forget it. Then there is the whole asset allocation of modern portfolio theory that most brokers or advisors talk in practice. Okay, what’s good about that? What’s bad about that?
Then there’s Warren Buffett, likely the greatest investor of all time would be argued, and his mentor, Benjamin Graham, and he wrote the book on value investing. This is who taught Buffett. Guess what his ending up allocation recommendation was? 50/50, 50% bonds, 50% equities. And he said, and this is what people missed, it ebbs and flows based on market conditions and based on what’s going on in the environment.
So, based on all four of that well-researched, well-thought-out people and processes, I developed through the years what I call all seasons investing, it’s literally how I allocate our monies. It looks like this. It’s four quadrants. Shocker, 25, 25, 25, 25. The base is the bond allocation. So, if you look at what Dalio recommended, if you look at what Harry Browne recommended, if you look at what, I mentioned Warren Buffett’s mentor, Benjamin Graham recommended, it’s about 50% into bonds. Well, I already explain why I think this is the best place to navigate the bond market. So, I use that. Then you add on top of that, that’s giving me a war chest that I have access to without any questions to use for whatever I want to. That gives me great peace and opportunity to be patient, to let the game come to me instead of me chasing the game. So, that’s the base of it all.
On top of that lies two other quadrants. One quadrant would be equities. Equities could be publicly traded equities. I’m in the wealth management space. I’m very comfortable in that space. It could be private equity, it could be businesses that I own because that’s what equity is supposed to be in that space of 25%. That’s exactly what I do.
The other quadrant is alternatives, like you said, all the other stuff, with the exception of cash and fixed income because I’ve already covered that. So, in this quadrant, the other 25% would be real estate or art or land, i.e., real estate but in hard assets, and land like farmland, etc., or maybe some crypto or precious metals. That’s my allocation.
And when you pair that up with what the large, as you mention, wealthy do or the big funds do, this is what their allocation typically looks like, 40% usually is in stock or equities, 50% of that’s typically publicly traded. They’ll use low-cost funds as an example. The other 50% of that 40 is in private equity, then 30% typically, and this is just me doing family office research. The other 30% is typically in a market neutral or hedged position, a hedge-type fund position, 30%. Then 15 is in inflation protected and 15 in deflation protected. Well, if you break my 25, 25 how I laid it out, I pretty well model that. So, I’m modeling what a family office would do. I’m just doing it my way with this whole infinite banking piece is the foundation giving, in my opinion, more control, more opportunities of compound interest over a 100-year period of compounding. These numbers get silly. I’m going to get that because I’m going to literally keep these in place until I transition out of here.
Justin Donald: Oh, I love it. Well, I just love learning the strategies that people have. I think we all become smarter the more that we learn what other people who are getting great results are doing, and especially when these are methods and strategies and systems that are time tested, right? So, you go way back even to value investing. Benjamin Graham, like a lot of that stuff, is what bought what Warren Buffett does. And a lot of that stuff is what you’re using as part of that strategy. So, I think that’s really cool.
I had the privilege recently of meeting and hanging out with Sam Zell. And if you’re unfamiliar with Sam Zell, to anyone listening or watching this, most would consider him the greatest real estate investor who ever was. He certainly is the greatest alive today.
Scott Ford: Am I Being Too Subtle?
Justin Donald: Yes, great book. And he actually reads it himself. So, it’s a fun read. He’s got this deep, raspy voice. So, there’s a lot of similarities between the way that I’ve modeled things and the way that he did things because, early on, when I didn’t have mentors, I just studied the people that were getting the best results in the industries that I had an interest or a fascination with. And real estate was one of them. And so, I’m such a fan. He grew up in Chicago, I grew up in Chicago, so there’s a lot to like.
So, there was this question that was asked and I thought this is really interesting. And for those of you that don’t know, he is the largest owner of apartment complexes. He was one of the largest owners of office and retail, which he sold all his office buildings prior to the financial crisis, which is incredible that he saw that coming and could time it, so literally sold everything before 2008. A lot of people don’t know he’s the largest owner of mobile home parks, which is really interesting. And that’s where I got my start.
And so, when asked what is the single greatest investment you have ever made, he said his number one investment he ever made was in a mobile home park in 1983 that opened his eyes. Not only was that a great deal and did he get a great return, but it opened his eyes to an entire industry that he then went after for the next 10 years and went public with it. And that’s Equity LifeStyle Properties, ELS. So, it’s one of the REITs. So, it’s something that even for your strategy, you talked about having part of it being cash flow. He has produced an average return of 18% IRR for his investors since day one, which is incredible. And he went on and on about saying, “Hey, right now I’m a seller, I’m not a buyer. We are not in a buyer’s market unless it’s off-market or it’s just an incredible deal. I’m probably not buying. I’m selling.” I thought that was really helpful. So, you’re either holding or you’re selling right now in this economy. So, I’m curious, your thoughts around that?
Scott Ford: I don’t disagree at all how I had the Sam Zell story. You likely know this, he has a gifting strategy. So, for his relationships, he sends a really unique gift. I forget some of them, but I’ve heard him talk about this. Verne Harnish had sent his book out and we talked about it, his scaling up conference and how he sends a unique gift out that’s just really memorable and thoughtful. And so, what a neat guy. And I agree with him.
And this is the beauty of structure– no matter where you warehouse your wealth, making sure you have a war chest so that you can be patient and do what Sam’s saying so that you can capitalize on opportunities when they present themselves. So, I would say I’m in alignment with his thought of holding right now. So, am I in a hurry to deploy my war chest right now? No, I’m going to let the game come to me.
My wife and I had talked about a place to get our toes in the sand at some point. So, Florida, Puerto Rico makes a lot of sense for tax reasons, but that’s a pretty big move. Outside of that, it doesn’t make sense. I’m going to let the game come to me, and I can because the money’s doing just fine. It’s not going backwards. It’s growing at a rate I’m comfortable with and I’ll let the opportunities come to me versus chasing them.
What I didn’t say, Justin, earlier that I want to add context to is the other overlay of how I look to deploy capital is that its values aligned and that I have something unique to add, off ideally, but a minimum one. So, I’m not going to invest in something that I’m not values aligned with because I think there’s an energy exchange with money and I want to be energetically aligned because then I’m not going to be quite as concerned about a downturn or some volatility because I totally am aligned with where my money is being deployed. And it’s for good, at least my view of good.
And then second, what would be even better is it’s not only energetically aligned because it’s a value match for me, but I have a unique skill set I can bring to control to make it better, i.e., for me, I’m a tactical analyst. That was my thing that I got into in the early 2000s. So, I really understand options and tactical analysis. So, I’m very comfortable in that space to hedge myself. Okay, that’s me. So, that’s a unique thing I can bring that others might not. And I did mention that earlier. So, I think there are two key components that I would say, let’s make sure we’re investing in a way that we’re aligned with who we really are as a human being from a value perspective and from a skill perspective. And we’re not investing in things that are completely unaligned or outside of our skill set and uniqueness.
Justin Donald: I love it. And I couldn’t agree more because your skill set, if you’re investing in a place where your insight is taken or that you either (a) they listen to you or (b) you have insight that you can see to help navigate things, that is a deal derisker. So, that is really important to me as I’m looking to every step of the way, make this deal less risky. So, I love that and I love investing in things that I have some sort of knowledge and expertise in. Brilliant.
Hey, Scott, we could talk about so many things. This has been so much fun. I mean, we didn’t even get to the fact that you’re a New York Times bestselling author with three different books out. But what I would love to do is have you share where people can learn more about you because this has just been such a fun episode.
Scott Ford: Yeah, thank you, Justin. I enjoyed it as well, and hopefully, there was some value I was able to share. I had fun, either way. I would say go to The Way2Wealth, it’s the number 2, TheWay2Wealth.com. There’ll be links on there to my podcast, books. That’s probably the best way to find out more about me is TheWay2Wealth.com. You can look at more. I had mentioned sharing the All Seasons Investing white paper. Happy to do that, to share with your audience. It’ll show you exactly how I think, how I invest, and why. And if they find that useful, I’m happy to share that as well.
Justin Donald: Oh, that’s incredible. Well, I appreciate you being willing to share your time, your gifts, your resources, white papers. We’ll take whatever we can get. This is awesome. And I just love to end every episode asking my listeners and my audience a simple question, which is this, what’s the one step that you can take today to move towards financial freedom and really to living a life that is truly by design and on your terms, not a life by default, but a life that is according to your desires and your specific design. Thanks. And we’ll catch you next week.