First Friday Feedback: August 2025

In this month's episode of First Friday Feedback, Phil is joined by Daniel Smith, Dean of Faculty at Cannon, to explore how financial advisors can communicate effectively during times of legislative and market uncertainty. With the recent passage of the “Big Beautiful Bill,” Daniel shares how to break down complex tax law changes into clear, client-friendly insights.

The conversation covers proactive outreach, avoiding overreliance on AI, and the importance of understanding policy intent, not just the law. Advisors will gain practical strategies to build trust and clarity with clients navigating today’s evolving financial landscape.

Resources:

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Daniel Smith: LinkedIn

Transcript

Hi, I am Phil Buchanan with Cannon Financial Institute. We produce the podcast series Monday Morning Mojo, the Cannon Curve, and Cannon Connect. Each of these podcasts invites listeners to email or text their feedback, comments and questions. They are all answered right here on First Friday feedback. If you're new to our podcast, go ahead and subscribe to all four and get engaged by sharing your perspective. Life is about the journey, so let's go for the ride.

Greetings Cannon Nation. It is Phil here with First Friday Feedback for August 2025. So, we're seven months down, we've got five to go in 2025. And the changes, they just keep on coming, or at least the noise of changes keeps on coming. Uh, we have had, uh. Quite the year when it comes to financial proposals that are put forward.

Think about all the tariff news and information that's been out there. We've, uh, recently had the signing on July 4th. The Big Beautiful Bill, uh, President Trump's signature, uh, item for 2025. And today I've got a longtime colleague and dean of faculty at Cannon Financial Institute, Daniel Smith, uh, joining me to talk about, uh, what has been somewhat of a, a chaotic news year, uh, when it comes to financial services.

And we wanna talk a little bit about, uh, effective communication that advisors can and should be having with their clients. That's, that's one of the top things that we hear, uh, from you, our listeners, and from our students, is. How do you synthesize this information down and put it in digestible chunks?

Uh, that not only serves our clients by providing them with requisite information, but does so in a way that, uh, that has that professional calming effect. And there is nobody that is better at, uh, synthesizing deep data and putting it into, uh, those, those bite-sized chunks. Uh, then Daniel Smith. Daniel, welcome back to First Friday feedback.

Thank you, Phil. Glad to be here, as always.

So, Daniel, you've got, uh, you, you actually have an advanced issues and updates program that is, uh, coming up at, uh, uh, Nashville, Tennessee at, uh, the Cannon Schools, uh, later in the month of August. I know a lot of the topics we're gonna talk about today that you'll be, uh, you'll be, uh, covering in great detail, uh, at at, at that program. But before we unpack some of that. Talk to me a little bit about, uh, your perspectives on effective client communication in chaotic times. Hey, the market's up. The market's been doing fine. Uh, we had expected perhaps another rate cut by now. Didn't get that, uh, uh, with the news this past week. Uh, but what, what do advisors need to be doing with their clients right now in this kind of environment?

Number one, communicating proactively. If your client's calling you, it's because they're already panicked about something. So, uh, you wanna sort of identify the clients that when changes like this take place the clients that are most affected by that and make sure that we're reaching out and touching those people. You can also do it in a mass way with an email or something like that. With automation these days, uh, we can reach out to a whole bunch of people if you've got a regular. Service that you use, whether electronically, like the forums that you use or, uh, just through a newsletter or a mass email to clients.

Uh, you can put something simple together that will reach out and touch them and then have people, uh, make appointments, uh, if they wanna speak. It's also important to understand with lots of clients on the books, you might wanna trench things off so that you have top clients you're speaking to one on one.

And you might have, uh, a mass call for many of the clients who are in your book, uh, that are affected in more broad way. And that's a way to touch more people in a, uh, shorter period of time. Uh, electronic services like Zoom are an easy way to just have. Uh, a meeting that you can have with all of your clients live and answer questions, but they also record that and make that available, let's say on your website so that people are, uh, calm in the, uh, periods of chaos.

There's a lot of misinformation out there, and I think part of our job is to help people to have good information. They can keep them calm through those, those tough times. Well, I, I, I love your thoughts right there. I I want you to help me unpack something. And this was a, uh, an email that, uh, that I received, and it's been in the last three weeks, and it was from a, a very seasoned wealth advisor.

And it, it wasn't that he was complaining, but here was the situation, and I want you to, to, to react to it. He said with all the, the, the chaos and noise that's out there, um, he doesn't want to try to overly communicate with clients because he doesn't want to raise their anxiety level, but he's noticing that when he is having his, his one-on-one meetings and he is having.

Conversations that, uh, there, there are a lot of questions to unpack. Um, how do you, again, oftentimes we as professionals we're like, well, that information's really not that important. But you said something earlier, clients are hearing a lot of information in the back of their minds, they're thinking, how does this impact me?

And if we're not proactively addressing it, are we putting ourselves at risk? Yeah. Well, this is a, a big bill. So, there's almost 900 pages of legislation in this bill, and as a result of that, there are a lot of different things that people can talk about. I've, uh, attended webinars by other people who are, uh, talking about these kinds of things.

Most people are doing it a little one hour, uh, uh, bits, which is, you know, in effect, uh, soundbite of looking at, uh, some of the changes that are taking place with this bill. And granted, when you get. Significant changes, new things, for instance, that we haven't been familiar with in the past. That's gonna take a little unpacking and honestly, regulations are gonna have to be written.

We don't know exactly how some of those things work. Um, and whether you agree that them, policy wise or not, understanding the parts of the bill that affect us, uh, is the part that's important to us. And so, uh, again, uh, how exactly those little bits and pieces work, what they've been promised over time, what they ended up with in the final bill.

Uh, I even had, uh, interestingly enough, one of our other instructors was doing something, was gonna put together a little lay, uh, section on, uh, I think it was the charitable giving, uh, components of the bill. Went out to several different law firms, websites that he regularly utilized and on there found that, uh, he, uh, downloaded, uh, four different articles from these four different big law firms.

So we started reading through it and processing the information that was there. And what he realized was, uh, well he, the first thing he did was say, uh, well, lemme, lemme just see what the other guys said about this. So it goes down to a second website. Uh, they had contrary information. They went to the third, uh, website.

They had contrary information. They went to the fourth website. They had contrary information. And, and what he realized and started picking up signs of, uh, is that people were just having AI analyze this stuff and because it was called the one Big beautiful bill or something along those lines in both the house and in the Senate and in the final version.

All of which are different, right? In some of those sections, uh, that's where the contrary information was coming from. So, we just need to be careful in times of change like that and make sure that we're being, uh, uh, aware of what's going on and being effective in communicating that part of our job. Is to make sure, to make your life easier and smoother, right?

These things don't take place, uh, immediately. Most of them, there's a few things that do occur for this year, uh, but most of 'em will start as of the end of next year, which is the end of the personal provisions of, uh, the tax Cuts and Jobs Act, right? The previous iteration, uh, that Trump had in there. And so I, I think like with many things that are influx or in change.

What they want to know is that somebody that would be you as their advisor right, is watching out for those things and will communicate the important pieces of information to them, uh, as they need to, to, uh, help them get to the right advisors to do that. Outstanding. Well, um, you know, one thing that you said in there, I don't want to, uh, uh, I don't wanna gloss over, is, uh, an over reliance on technology IE ai, uh, can lead you down a series of unintended consequences.

Uh, with regard to information, I've got actually, uh, my, uh, my podcast Monday Morning Mojo, which is gonna come out, uh, this coming Monday. Actually, uh, addresses the circumstance that, uh, that I was recently in where, uh, people had relied a little bit too much on just getting answers to information without digging deep.

And, uh, that can, that can not only produce the wrong information, but it also has, uh, has empower to, to quell our curiosity. And that's one of the things we always need to do is, is stay highly curious about the changes that are occurring. And that being said, AI does lots of wonderful things. Oh yeah.

Criticism in general, but but like any tool, it can be used, right? And it can be used badly. And so it is providing some information. You're also getting a lot of people who aren't experts in these areas talking about this stuff in news programs. So if that's my job, but I'm not a tax expert, it's very easy to misunderstand some of the information that is coming across.

And of course, there's, you know, great political divisions on one side or the other, and people can be super positive about it over here, really negative about it, uh, over there. Uh, you'll see the same provisions sort of analyzed in two different ways. And so all I really want to know is, uh, how does that, uh, actually work and how does that affect me?

And my, my big recommendation is to go to number one sources that you trust. So for most advisors, they're not giving tax or legal advice. And so ultimately they're gonna get them to their tax or legal advisor, uh, for the final product in there. But, but as their, their, their primary, uh, trusted advisor sitting in front of them, uh, they want me to have.

Conversational competence around the key provisions that are being put in place. And part of what I'm really trying to do in our upcoming class, I've never had a tax law change this big, this close doing classes coming in. So, I just can imagine we're, we're doing a lot of flying around. Uh, trying to figure out all that stuff is, but going to original source documents to do that, and that's really important I think in a lot of our news these days, uh, whether it happens to be, in this case, the tax bills or other provisions that might, uh, might affect us.

Got it. Well, um, help us tease us out just a little bit on, uh, maybe three key themes that, uh, that you see are important coming out of, uh, the, the tax law changes that occurred, uh, was signed into law on the 4th of July. Um, what are the kind of the, your, your big three for, uh, wealthy clients? Yeah, well, uh, since this is estate and gift tax is one of the big areas that we operate in, uh, one of the things that we're, uh, excited about, it has been a long time since we've had permanence associated with what's going on in the estate and gift tax area.

And so they've basically taken what was in the, uh, original Tax Cuts and Jobs Act. We took it to, uh, under Obama administration to $5 million in the Trump administration. They doubled that to $10 million; all index for inflation. Now Trump's taken it to 15, which is about where it was, but a slight rise off of that also index for inflation.

But the big difference is it's permanent. So now we have a real good idea that we're not running for this fiscal cliff that's coming at the end of the year. And so in many ways, the estate tax rules will continue to work in the same way that they have clients who are affected in the. Sort of half that number, say $7 million and above, uh, level, uh, are, are safe, uh, under current legislation.

I say permanence carefully of course, because a future Congress could change this as well. So, every election makes a difference in terms of the, uh, primarily the split in the House and Senate because they're the ones who actually create the legislation, right? The president can say what they want to have happen, but that doesn't really matter.

Uh, they have to have legislation to back, to back that stuff up. So that's a, that's a really key thing for people and what that's driving is. A lot of different strategies depending on the situation of the individual client. But let's just say from a trust perspective, if I can afford to give away the tax-exempt amount, then that continues to be a beautiful thing.

It has been for a long time. There's been an urgency associated with that. That urgency arguably has gone away and, uh, it, it is gonna cause a big. Surge, I believe in non-grant tour trusts. Grantor trusts have been a huge tool in the estate planning community. Intentionally effective grantor trusts, you're getting assets outta your estate, but you're getting income tax on that stuff.

Uh, I think because of the way some of the provisions are structured, uh, there will be a big surge in non-grant tour trusts do the same kinds of things. We've seen some resurgence of that in recent years with things like slats, but a slats are usually a grantor trust. Uh, so there's a version of some people call a slant that is a, uh, uh, uh, spousal limited access trust, but with a non-grantor trust feature rather than grantor trust feature.

Uh, and so depending on the, the situations the client's in, that's probably the second piece. Uh, so number two, if we talk about estate tax stability being number one, and what kinds of gifting techniques, uh, might make sense? The biggest thing dollar wise, from a tax. Cut perspective in the bill is extending the, uh, existing tax brackets, which are much broader than they would've been if they had, uh, retired to the previous version of the tax brackets, uh, and keep us at a lower top rate of 37%.

So, in general, that, uh, keeps taxes lower on everybody. This is one of the important things that I believe economically about getting the bill through because this is what affects everybody across the board. They talk about, oh, this is helping the rich well. Uh, you know, only 46% of people don't pay income taxes.

It's hard, hard to save income taxes for people who don't pay income taxes. So, understand that only the top 54%, uh, of Americans actually pay income tax. So certainly you're weighted up in there. But if you look at where that effect is, it really is very much. Uh, in the middle, uh, workings because that's where the stretching out of the tax brackets can be really, really important to those people, as well as provisions that only affect granted, uh, certain segments of the population, uh, like no tax on tips and no tax on overtime.

Those can be really important features to blue collar Americans. I, I, you know. I don't know too many, uh, CEOs or executives who are getting tips or working overtime that they get paid extra for, right? That's all built into the salary. So that's clearly a, uh, sort of blue collar and middle of the road, uh, tax cut that's there.

And there's phase outs even at the high level. So, if I'm a mare d at a very, uh, high, uh, fluent restaurant and I make a big six figure income, uh, and much of that might be through tips. In fact, I'm gonna get phased out of those kinds of things. So it's not even for the high-end people in there, it's really a common man, uh, element.

And so, uh, with a lot of those phase outs, uh, it, it will affect the, uh. Overall calculation of income for the individuals. Your CPA is gonna be a very, very integral, uh, part of this process. Being able to, as you know, uh, you can go to your CPA, and they've got a spreadsheet that basically lays out all of your last year's stuffs and they can model next year's stuff.

Uh, this is gonna be critically important to people. One of the related provisions that I would say, uh, does affect people, uh, on the higher end, but again, is phased out. For the very wealthy is things like the salt tax. That was a big controversial provision in that bill. It's part of the income tax section of the bill.

Uh, and it basically four folds that from $10,000 up to $40,000. But again, with the phase outs at income above five to 600,000, they're back down to the 10,000 level again. So it's not the millionaires and billionaire kind of people that are getting that, uh, arrangement. But the, the people who are, you know, the very wealthy, probably top 5%, uh, into the top, lower half of the top 1%, uh, individuals, hard work professionals who live in places where their taxes are very high.

And this is again, where a non-grant or trust can also carry some of the burden, uh, perhaps own properties like that and get, uh, an additional, uh, assault exemption there. And so these, uh, entities that can receive that, they did not take that, um. Not loophole, but tool, let's say out of the, uh, out of the hands of individuals.

And so that was a critical, uh, element, I think that's associated with the bill as well. Uh, and so that just gives you some insight into the different, uh, areas that the bill delves into. And that with, from a pure dollar perspective, uh, that is the number one tax saver inside of that arrangement is dealing with the income tax rates of, uh, the various, uh, exemptions that are available.

Um, uh, referring back to our and estate tax, uh, reference before, uh, keep in mind the applicable credit amount, the GST exemption are all the same as they were before. Uh, there are some special exemptions, uh, also from a business perspective. Uh, and so let's, uh, call this category three. Uh, and that is when you're dealing with things, uh, and there's a bunch of stuff that can fall into this area, but extending the I99, uh, exemptions for businesses.

So certain businesses not including ours, uh, can, uh, pass through and, and get a 20%, uh, tax savings basically on, on. Pass through entity, uh, taxation. There's some stuff around, uh, qualified opportunity zones that can be very exciting. That'll be starting sort of in 2026 going forward, uh, for the groups of people who are affected by it.

Some of these things are very, very specialized areas. The 1202 QSBS, uh, stock exemptions. Uh, it can be, uh, were massively expanded, about 50% expanded and made so that you could, uh, sell earlier. So, this is really to ignite. Uh, and a lot of, uh, other elements, spending elements in the bill and special tax incentives in the bill were to sort of, uh, bring manufacturing back to the US and bring.

Entrepreneurial startup businesses, uh, to be anchored in the US So, sort of drives more of the economy that, that those really, there's a lot of, uh, miscellaneous provisions that, that drive individual elements like that in the bill. So I, I would say probably those are the three biggest areas that I think we'll see.

Action. All right. Well, um, great insight, and I know that you're gonna be, uh, you're gonna be delving a lot deeper. Uh, you unpack that exceptionally well, uh, not just from, again, that technical proficiency, uh, but the context, uh, that, that you brought around that. And I think that's also a key learning for our listeners is it is not just a.

Uh, uh, regurgitation of the information, but it's providing that context, that background, that applicability of the information that, uh, really clients need, uh, not only to be well informed, but have that comfort level that they're, they're making the right decisions. Right? Right. And, you know, you, you gotta ask the question, why is this in the bill?

And, and. For me, it's not politics, it's policy, right? What is the policy? I might agree or disagree with the policy, but I wanna understand why is that being done? Why was that one of the provisions that they've put into that bill? That's the incentive side of it, and that can help drive my behaviors and feedback that I give on those things.

I certainly understand the law and how it affects me, uh, side thing, but from a functional standpoint, I wanna understand why people make the policy decisions that they do and, uh, speak up on the things that I agree and disagree with. Yeah, well, uh, you did that, uh, incredibly well. We appreciate it. Uh, looking forward to, uh, to seeing you in Nashville and for those of you that, uh, uh, still have time and flexibility in your, uh, schedule.

Uh, Daniel will be there later, uh, this month. Information available on that, on the website. And if you can't be there, uh, there's additional information how you could tap into, uh, to those resources as well. Uh, Daniel, it is always a pleasure to be with you, my friend, indeed, Phil, thank you very much. Enjoyed being here.

First Friday Feedback is the production of Cannon Financial Institute, executive producer of First Friday Feedback is Sarah Jones. Editing and mixing is done by Danny Brunner. So, until next month, I'm Phil Buchanan thanking each of you for being part of the Cannon Nation.