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Today we had the privilege of sitting down with Frank B. Hanna, Jr., ChFC®, Private Wealth Advisor, who brought a wealth of knowledge and experience to the table. Frank is a leading specialist in Estate Planning, Business Succession Planning, and Wealth Management, catering to a select group of individuals, executives, and privately held business owners.
With over 15 years of experience in the restaurant/hospitality industry, operating family-owned establishments in Fenwick Island, Delaware, Ocean City, and Salisbury, Maryland, he transitioned into the financial world in 2007. Launching a financial consulting firm within his family business, Frank began providing invaluable guidance in real estate development, tax management, and private investment.
In today’s episode, Dave and Frank delved into crucial topics, including the importance of having a succession plan in place. Frank shared his current market perspective, providing insights on real estate, and discussed key aspects of tax planning and considerations.
What sets Frank apart is his ability to draw on his entrepreneurial background. Having successfully run his own companies, he applies his business acumen and the lessons learned to address the challenges and concerns his clients face. This unique perspective distinguishes him from other financial advisors. The conversation was not only informative but also offered practical advice that our listeners can apply to their own financial strategies.
In This Episode
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Frank’s unique perspective, derived from over 15 years in the restaurant/hospitality industry and successfully running his own businesses
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Key aspects of tax planning, providing practical considerations and strategies for optimizing tax management in financial planning.
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The importance of having a succession plan in place for individuals, executives, and privately held business owners
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His current market perspective, his insights and analysis to navigate the complexities of the financial landscape
Welcome to another episode on Wealth Strategy Secrets. Today we had the privilege of sitting down with Frank Hanna Jr., who brought a wealth of knowledge and experience to the table. Frank, is a leading specialist in estate planning, business succession planning, and wealth management, catering to a select group of individual executives and privately held business owners.
In this episode, we’ll discuss Frank’s unique entrepreneurial perspective derived from over 15 years in the restaurant industry and successfully running his businesses. We’ll also cover key aspects of tax planning, providing practical considerations and strategies for optimizing tax management and financial planning and also the importance of having a succession plan in place for individual executives, and privately held business owners. And finally, we’ll talk about Frank’s current market perspective.
Frank, welcome to the show.
Thank you. Thanks, Dave. Appreciate it. Looking forward to talking to you.
You bet. I know this is going to be an excellent discussion and the audience is going to get some pearls of wisdom out of this one for sure. So as we kick off for folks, who might not know you, how did it all start for you? Tell us about your background.
I grew up in the restaurant hospitality industry and my father had done that for several years at a point in time. We had 20 restaurants, so at an early age, I was told that was what I was going to do for the rest of my life. And there were a lot of good lessons learned doing that for several years. But as I got through my 20s, I realized that I didn’t have the passion for that. And I reluctantly exited the business with no game plan in place.
And I got into real estate and got into kind of holistic financial planning and started in a kind of hybrid company or offering in that space to be able to create value for the high net worth individual or entrepreneur that was moving at a fast pace to give them comprehensive objective independent advice. So since about 2010, we’ve built a business serving those kinds of high-end clients in a variety of different occupations and skill sets. We do everything from a high-end estate tax trust planning. We do traditional and alternative money management. And I think passionately, we have something unique in this space, which we know is ultra-competitive. So that’s where we are.
Interesting. So let’s just unpack that transition that you made in your business growing up, being in the restaurant and hospitality business, and then seeing an opportunity to kind of transition into some of these advanced planning types of tactics and strategies and everything.
Was there a particular opportunity you saw that you were trying to go after? Was there a gap that kind of struck you?
So I had kind of been on the sidelines. My father had a lot of success in the restaurant business. He had taken those wins and translated them into real estate, He reinvested some of the capital He had in those businesses into real estate. So I got a front-row seat to see some of those deals, and how he was doing that. I also had a little bit of exposure to his overall estate planning.
But ultimately when I realized that I wanted to get out of the day-to-day grind of managing our restaurants I didn’t have a game plan. I had limited knowledge in that space, but what I did know from the council and people we had kind of interviewed to help support our family business and our entrepreneurial planning, I did feel that there was a gap and I felt like there was more than were pushing products versus processes. And they weren’t giving proactive advice. It was at the 11th hour, we would come to them with an idea and they’d say, hey, you know what? That sounds good. We should pursue that, so I kind of said, hey, you know why are people like that, bringing them those ideas to us? So I was used to working 100 hours a week in the restaurant business. So I said, hey, you know what?
I can focus on a particular type of client, and I think I can build a business model that serves a variety of needs. And I used to joke that I’m good at tackling. And so for those fast-moving entrepreneurs, I was persistent. And I like to say politely persistent, some people call me a pain in the, you know what, but I was able to track those people down and bring proactive planning ideas to them that could create value and ultimately save them money.
“I can focus on a particular type of client, and I think I can build a business model that serves a variety of needs.”
So being in the financial services industry for quite some time now and then kind of going on what you saw as the opportunity in that space. What did you think was wrong with traditional financial planning from your perspective as you saw it?
I think there were a lot of people who were there that had solutions or products but didn’t give you the why behind where they fit into your plan. And I felt like the people we were coming across, they didn’t ask, they didn’t do the due diligence or the discovery of I felt to understand our situation. So when I got on the other side of the table, I think that made me unique too.
So if you’re dealing with an entrepreneurial client, they’ve got a high-stress situation, they’ve got employees, they’ve got family members, every decision is very emotional for them. And I felt like for me, with my experience of the day-to-day operations of a dozen restaurants and my head constantly spinning, I could kind of sit on their side of the table and understand how they made decisions and I think that’s how we’ve been able to grow our business where people say, hey, you know what, ultimately at the end of the day, what would you do? What would you do in this situation? Here’s my situation and I think people respect my opinion because I’ve been in their shoes, so to speak, with some of that.
It’s a unique perspective to see how a family business is running. And especially for entrepreneurs, The way they set up their life, they set up their business, just so many different complexities. And when I was introduced to traditional financial planning, I became frustrated, Because they started talking about how their tax strategy was to do, tax loss harvesting or to defer taxes in a 401k.
I mean, that was kind of the extent of their tax strategy. They weren’t talking about, hey, you should be looking at ways to offset your taxes with different investment vehicles like real estate or the 1031 exchange, some of these more advanced kinds of strategies.
And I think to your point, the industry is driven. It’s very productized. So people are selling you a basket of products that they represent versus seeing the thing holistically and what you need as an investor, as an individual who’s trying to grow and protect your wealth.
Sure. It makes a lot of sense. I agree with you 100%. I think those kinds of next-level ideas, even though they’re not ultra-complicated, for whatever reason, most advisors don’t want to give you that type of next-level planning advice. It’s more, hey, let me give you this vanilla tax planning strategy. Let’s make it easy. Then we’ll just invest your money after you pay a boatload of taxes.
And I think like most money managers are following the kind of same playbook and it’s super vanilla, super boring. And at the end of the day, the clients or entrepreneurs are missing opportunities by not getting that advanced kind of guidance.
100%. So were you able to develop an overall wealth strategy or do you have a particular investment thesis that you follow, Frank?
I don’t think we have an overall blueprint or playbook of our own, but I think it all lies in diversification. I think tax planning drives a lot of it, but I’m big into real estate. We do a lot of privatized private equity and private real estate deals. And I think our fathers and our older clients lived in a time where that 60, 40, model of investing proved productive. So you got bonds, they went through a historically high interest rate environment. Those interest rates came down and those bonds, if they were quality, yielded high returns and the market went up over time. I do think that there deserves consideration for market or equity investments, but I think you’ve gotta get more creative.
And I think your firm and firms like ours that have kind of done the heavy lifting and the due diligence on putting together some of these sophisticated real estate deals that provide favorable tax treatment, deductions, appreciation, and strong predictable income are attractive for the right type of investor. Those tangible assets that they can see and understand what they own are attractive and I think what makes us unique and probably you guys as well is you can take some of the lessons learned in different real estate deals that we put together and package that to the smaller investor to get them access to sophisticated deals where we know as a traditional real estate investor there’s a lot of risk there if you don’t know what you’re doing.
For sure. How are you feeling about real estate right now in this current timeframe that we’re in?
I still love it. I mean, different asset classes are going to perform better than others and that’s going to constantly change. But we just kind of went through COVID and a hyperinflationary environment. So, real estate assets that performed well were short-term lease-type deals, multifamily, self-storage, and hospitality kind of came back into favor.
And you see the primary assets that have struggled a little bit are the ones that are more affected by those high interest rates, long-term, triple net lease type stuff. So again, I think diversification is probably an overused term, but I love diversifying into several different asset classes. So I am still bullish on real estate in general. I would say it just depends on the asset class and geographic area that you’re kind of valuing.
And do you have from a portfolio allocation standpoint, do you have any high-level allocation parameters to create much more of a, let’s call it an all-weather type portfolio?
I think we do. I mean, we have kind of incorporated that holistically into some traditional investments. So any client that comes across, I tell them, hey, you know what, you may love real estate. I don’t think that you should put every dollar into a handful of real estate deals. You know, there is a market or an argument for equities. Interest rates have come up now. See if you can find some high-quality individual bonds that might deserve some consideration. But we’ve got a pretty sophisticated offering in several different portfolios that can give you a variety of exposure to all those different asset classes.
Are there specific criteria that you guys are looking at? Like outside of just yield, cash flow, tax efficiency, and such?
So we look at all those factors. I mean, I’d say the majority of the deals that we’re looking at are, are kind of in that Sunbelt Region. So we’re looking at states that are pro-growth, pro-business, tax-favored states. So most of the deals I’d say we’re putting together are Texas, Florida, Arizona, cities like Nashville, Richmond, those kinds of space. We do a lot of deals in Charleston. So I think we do a lot of due diligence on, where people are moving, where jobs are being created, and try to build a storyline where we think there’s a high probability for success. But ultimately at the end of the day, the financials matter. And we are looking at yield, appreciation, all those different things, taxes as well.
So do you think that, I mean, are you guys using an institutional, like when you are purchasing these assets, are you guys the direct buyer or are you going in on an institutional asset or is it like a private syndication?
So it’s a little bit of both. So we participate in all of our deals as a firm, as a family. So some of those are with a private institutional buyer. We’ll take a piece of the deal ourselves and then we’ll go out to our clients and partners and ask, is anybody interested in this? We are partnering with an institutional buyer to bring a deal to market or will the deal already be to market and we’ll take a sliver of equity to kind of help them divest to move on to the next deal?
But then we’ll do the due diligence, go through some heavy vetting process, and then go to clients that we think this would appeal to and see if they want to participate as well.
Makes sense. How about on the tax side, Frank? It’s almost the middle of November. I know this is first and foremost on basically every investor’s mind right now, looking at different strategies to offset any key ones that kind of come to mind or also considerations that we should be thinking about in this current environment.
I think there are a few. We touched on the kind of vanilla or first-level planning and everybody that’s, perhaps a business owner or a high-paid executive wants to look at, hey, let’s look at the qualified plans that are available to us. Does it make sense to put dollars in those plans and lower your taxable income there? If you own a business, there are all the different types of evaluations on purchases and different things that you could write off into year-end.
But I’d say, there are different deals that we would put together that provide tax deductions. So, we’ve got a couple of different deals that are convenience store gas stations and the tax laws are changing and part of Trump’s Tax and Jobs Act of 2017.
There’s a phase-out of that accelerated depreciation. So most high-level real estate people can buy an asset themselves, do some cost segregation studies to be able to take that depreciation that you would typically take over a long period, and fast forward that into year one or the first few years. So we’ve had got some opportunities like that for investors that they may already be doing that, but if they still have some income tax exposure. They can participate in a deal like this and get an immediate loss to offset that taxable income.
So we’ve got some opportunities there where I’m telling a lot of our clients, hey, this is the last year of 80% bonus depreciation. It’s supposed to phase out and go from 80 to 60 to 40 to 20 to zero unless Congress acts on that. But they can’t agree on anything. So I’m not optimistic that that’s going to happen.
So for somebody who’s either a real estate professional, it can be any involvement in the real estate field or somebody who has enough passive income, which could be dividends, rent, or a variety of different things. These are opportunities that we’re bringing to clients’ attention and say, hey, look, this is something that could be impactful. It’s probably not going to look as good as it does this year or next year. So you may want to swing the bat, take an opportunity, and look at this.
So that’s probably two out of three conversations I’m having all day long regarding that. Above and beyond that, we do a lot of 1031 exchange consulting. So, people who are looking or considering selling real estate right now, because we’re still in a fairly hot market, depending on where you are, and you can still get a premium on that real estate, people are considering selling that.
And they may have the reluctance to pay the taxes or reinvest in something that’s not kind of in their sweet spot. So we have a lot of passive real estate deals that meet the 1031 exchange criteria where they could sell the asset, defer the taxes, and reinvest in an attractive, passive, diversified deal that we might put together.
Are you also helping folks out with setting up DSTs?
Yes, so DSTs are probably the only passive real estate opportunity that meets the 1031 exchange criteria. So the 1031 exchange has been around for 100 years, the DST has been around for many decades, and it’s evolved, but we have our proprietary platform of Delaware Statutory Trust or DST programs that people can do 100% tax-deferred exchange and reinvest in one or several of our deals that accomplish a lot of the same things that we both enjoy about real estate now. You get an attractive, favorable monthly income that’s predictable. You get favorable tax treatment and can participate in pass-through depreciation and amortization on loans if there are, different value add components.
And I think for the right type of client, these types of deals are attractive, I think the statistic is, I think 10,000 people in the US are turning 65 every day. So the transition of wealth from those baby boomers now down to the kind of next generation is a monumental movement. So we’re trying to get ahead of a lot of those people and educate them on their options because there’s a lot of misconceptions on, do I have to pay the taxes? What are the taxes? What happens if I never sell, step up in basis? How that involves in overall estate planning. So the Delaware Statute of Trust or DSTs are one of the more popular things that we’re doing right now.
No, it is a massive shift that’s happening not only in real estate right now from boomers transitioning, but also in businesses, And you come from family businesses too. So I think that creates some major opportunities for other investors to come in and purchase these assets at a favorable price.
Interesting. And how about from a succession planning standpoint? I know that’s kind of one of your focus areas as well as advanced planning. Any particular strategies that you like that you focus on?
I think it ultimately comes down to education. So having a succession plan in place is critical, your succession plan is never going to be perfect. So you might have kids in the business, You might have some key employees, and You might want to sell to an outside buyer. Ultimately, that could evolve or change hand over fist.
But our goal again is to get some type of plan in place where all your blood, sweat, and tears that have been put into the business is one, prepared if God forbid something were to happen to the client in the short term, but ultimately to provide them with like flexibility, down the road, should they get to the point where they, they do want to sell the business or gift the business or whatever they choose.
But I think the big thing is protecting against the unforeseen that something bad could happen tomorrow, buy-sell agreements, insurance, whatever the case may be. And then ultimately look at how that factors into your estate planning. You probably have a lot of clients and we do too that there’s never been a more favorable estate planning environment than we’ve seen right now.
And the way the Tax laws are currently written, a husband and spouse can pass roughly 25 million to the next generation before they trigger a federal estate tax. And starting on January 1st of 2026, that law is set to sunset unless Congress agrees on something, and it’s going to go back down to somewhere between five and seven million per spouse.
So there’s an opportunity on the table for your high net worth clients to look at this opportunity because there’s a good chance it’s not going to look this good for a long period, depending on who has control of the House and Senate and the next administration to look at that over the next two years and say, hey, listen, do we want to gift sell transfer assets out of our taxable estate? And ensure that they’re not subject to this new tax, exemption status that’ll be coming. So that’s a lot of our conversations with clients are around that right now too.
Great insight, Frank. And I think, advanced planning, estate planning is often overlooked component for people, And the more you can be proactive about this kind of taking control early on, even if you’re healthy, you’re young and things like that, but just start thinking about the future proactively can pay big dividends for sure.
Absolutely. And I don’t think there’s too young an age to start considering that. I think if you’ve got a successful business or assets that you think have a high degree of appreciation, it’s important to get ahead of that and look at the different planning opportunities that you could utilize to accomplish everything you’re looking to accomplish today. But if that asset grows to substantial figures down the road, you’re not subject to tens of millions and unnecessary estate taxes.
Sure. Frank, let’s transition to the market, how do you see next year shaping up? Is there going to be you thinking there’s going to be an impending recession? What is the potential impact of that? What should investors be cognizant of right now?
I get that question a lot and I wish I had a crystal ball to give you the perfect answer there. I think that where these interest rates are and the fact that they’ve kind of paused them for a couple of spots in a row, I think if they give us the message they’re going to keep interest rates at that level or close to that level without substantial more heights, I think there’s a good opportunity where the market will respond to that favorably.
Now, that doesn’t mean that there couldn’t be some other recessionary components to what’s going on in this country. It seems like every bit of news we see is negative. But I do think there could and will be an opportunity to reap the benefits of that.
But again, I would fall back on and say, wherever your dollars are, do not allow fear or panic to dictate your decisions. And if you’ve got a diversified plan and a relatively long-term timeline, I think it’s important to stick to your guns, look at favorable tax planning, and diversify your dollars and a variety of different asset classes. And I think at the end of the day, it’s going to be hard to go wrong with that strategy long term. But I would say, I think if we can avoid World War III, I think there’s some degree of optimism for what the market’s going to do next year.
Wherever your dollars are, do not allow fear or panic to dictate your decisions. If you’ve got a diversified plan in a relatively long term timeline, it’s important to stick to your guns.
That is such a great point, Frank, It’s not being controlled by fears and listening to what’s going on in the media, And it’s fascinating because I spent a lot of time in family office circles and private equity groups. And that was why one of the early questions I asked you was, do you have a specific, wealth strategy, or investment thesis that you follow, because the folks that do can weather the ups and downs, they’ve thought through their capital allocation strategy and they are well diversified, across different assets, and different return profiles.
It’s correlated to their investor DNA their risk tolerance, and what makes sense for them. So there’s no need to react to all the things that are going on. I think you should be cognizant of different changes and different sectors, And we might need to adjust some allocations kind of here or there, but just, the key thing is having that strategy in place is what’s going to get you through in the long haul.
Absolutely. And every plan’s a little different because your clients are different. And that’s why I think it’s important to have those conversations on the front end to understand them and build that game plan. You’re going to tweak and modify that as things change, but I think it’s important to lay that out. And then when things get a little rough, you can re-remind the client and say, hey, listen, here’s the game plan. This is why we did it. We’ve got your risk profile laid out. We’ve got the allocation set to where we think there’s a strong probability we’re going to hit our goals or objectives, so don’t worry about it. You’re going to be fine and I think if you explain to the clients why and re-remind them of that kind of game plan, it puts their minds to ease pretty quickly.
And also, trusting, the data sources that you’re checking, It’s always key to trying to get these non-biased, data sources where you can make objective decisions that fall into your thesis versus some of the stuff that can be very controversial. And let’s face it, I mean, the media’s job is to sell headlines and get you to click and go in, So, the more shocking they can create the news that’s what they’re looking for.
But as an investor, you need to stay the course and be very steady. And it’s about making linear gains over a long period is how you’re going to win
Absolutely. And look at those, when everybody’s going one way, typically people go the other, I think that’s Warren Buffett’s line, but I think, I feel guilty, but when the market pulls back, my nature is to look at it as a buying opportunity, and I get excited to put money to work.
I’m not excited for my clients because I know they’ll get a little nervous, but I think if you have that methodology You stay calm. And if you’ve got a little bit of dry powder on the sidelines, when you get those types of pullbacks, that’s where your big-time returns are going to be.
For sure. Frank, if you could give the audience just one piece of advice about how they could accelerate their wealth trajectory, what would it be?
I would say just defer the taxes. Do everything you can above board to find competent tax counsel and or advisors who know what they’re talking about. Do everything you can, because it’s not about what you make, it’s what you keep. And I think if you reinvest in real estate and other vehicles to be able to soften that tax burden today, whether it be accelerated depreciation on real estate, 1031 exchange planning, or maxing out your qualified plans if you have access to them. All those different things are going to be ultra impactful over 10, 20, 30, 40 years. So I think, taxes drive everything, I believe. And then whatever’s left over after you do those proactive tax planning, like how we allocate those dollars is critical.
“It’s not about what you make—it’s about what you keep.”
But I would say that’s probably the thing we focus on most is, hey, let’s figure out what proactive tax plan can we evaluate, and let’s not wait till December, 30th to start talking about that, bring ideas to the forefront, be proactive, evaluate those advantages, disadvantages, and then wherever we stand after that, we can guide them into some attractive avenues for investments.
That’s spot on. I think it should be part of everyone’s wealth strategy, targeting tax mitigation Because we’re all always programmed to be thinking about yield and what can we get based on our assets. But let’s focus on reducing our number one biggest expense. If you can reduce your taxes by 10%, that’s 10% more you have towards asset allocation which is going to boost your returns even more. Some of these strategies go indefinitely, Once you get them figured out.
And a lot of times we introduce a strategy and the client’s reluctant to throw dollars at it, but yet they’ll pay a hefty income tax bill. And then only to come find out they’ve got dollars stockpiled and then another account that they’re doing nothing with. So a lot of times it’s just, that you gotta educate the client and, show them or illustrate the impact of some of those options for them.
For sure. Frank, appreciate you coming on the show today. It’s been an insightful discussion. I know the audience is going to enjoy this. And if they would like to connect with you and your team, what is the best place?
So our website is www.revxwealth.com, so revxwealth.com. And my email is [email protected]. Happy to talk, no strings attached, answer questions, and guide you, and confident we can help you out.
Awesome. Thanks so much for coming on the show, Frank. Appreciate it. All right.
Thanks, Dave. Appreciate it. Thank you.