Q&A: Should My Teen Go to College?

29:00And often a capital gain strategy where you're going to just be in stuff that's meant to grow is historically a way to get there over long periods of time that can work much better. But if you're in a spot where you're taking the money, there is no downside to this. I can't think of a single downside. But assuming that, assuming that everything is lined up the way that it should be, and he just either reinvests the dividend or he takes it and uses it or uses it to fill in more appropriately because of the fact that he needs to lower his, you know, in my brain, I use the million dollar word standard deviation.

29:42He needs to lower the volatility of his portfolio. So it's easier for him to grab money when he needs it. He doesn't have to, he gets freedom from worry because of that. Then hell yeah. And with regard to rebalancing a taxable brokerage account, and Brandon, I'm saying this not just for you, but for everyone listening, The way that I like to approach that, because we want to minimize selling off assets in a taxable brokerage account, particularly for the people who are listening to this who are not trying to harvest some of their taxable brokerage money, who want to keep it in that account and let it grow.

30:15In order to minimize selling off assets in a taxable brokerage, what I like to do is not reinvest dividends. So those dividends flow to cash, and then that cash gets used to buy underperforming asset classes that you want to shore up. My rebalancing strategy inside of a taxable brokerage account is no reinvestment of dividends, and then that money gets used to buy whatever asset class I want to build. And in your case, you're also doing the no reinvestment of dividends. But rather than use that money to build a shrinking asset class, you're just harvesting the money. So asset allocation, if you need to do that, is the only thing to manage around.

31:02Wonderful. Absolutely love it. Great work. Wow, that was the opposite of Blanca's question. We spent like 40 minutes on Blanca's question and like four minutes on Brandon's. I know. So, Brandon, the answer is yes. Next question. I feel bad going to another ad break right after this. Man, we're really stacking them together there. I know. I hope you forgive us if we really stack these two close. But Brandon, I think we've just answered your second question. Congratulations. So don't reinvest those dividends unless you need to buy an asset class. And if you do need to buy that asset class, then sell off the asset class outperformer.

31:44Okay, I guess we're going to another ad break, Joe. Oh boy. Well, this will be the last one of the show. So thank you for supporting our sponsors. When we return, we're going to hear from a caller who is wondering how to choose a financial planner and specifically has some questions about the assets under management model versus the flat fee model or hourly model.

32:35Welcome back and thank you for listening to two breaks that were so close together. But we've got something great on the other side. We have a question and it comes from Anonymous. In some of your past podcasts, I've heard you say for a financial advisor that you recommend a fiduciary. I've also heard you say that you do not like the AUM or assets under management model. Can you elaborate on this? Are there certain companies that you know of that the rest of us can check out without advertising for them? Love to hear your thoughts. Thank you. Anonymous, I love the question. Before we answer, we've got to give you a name.

33:18We do. What's a good name, Paula? Are there any movies that feature financial advisors? Oh, he's trying to avoid crooked financial advisors. So I think the biggest movie about financial crooks that comes to mind immediately is, of course, Wolf of Wall Street. Leonardo DiCaprio plays Jordan Belfort. We could call him Leonardo. All right. Anonymous, your name is Leonardo. Wow. You're like a teenage mutant ninja turtle. I mean, sorry, Leonardo. The first thing that I'd like to dive into is why I recommend that a financial advisor be a fiduciary, what it means if they're not, and then why I'm not a huge fan of the assets under management model.

34:03And after that, we'll go into where to find some. There are two different types of standards that a financial advisor might have to reach. One is something that's called the suitability standard. A person who is only required to reach the suitability standard, that means that they have to give you advice that's meh, it's suitable, it's fine, but it's not necessarily in your best interest. And they might steer you towards things that will lead to bigger commissions for themselves, even if those things lead to much worse outcomes for you. A person who only has to meet what's called the suitability standard, they can't completely steer you off course in a way that is just wildly inappropriate.

34:54but as long as something is minimum viable, suitable, it doesn't have to be any better. That's the suitability standard. Now, by contrast, there's a different standard that's called the fiduciary standard. And if a person has to meet the fiduciary standard, they are legally and ethically required, but more importantly, legally required to give you advice that is in your best interest. Even if, especially if that advice doesn't result in any payout for themselves, that's a requirement for them to maintain their status as a fiduciary. And that is critical to making sure that you're getting advice from someone who by law must give you the best possible advice.

35:43So should we talk about fiduciary a little bit? Should we dig in there before we move to the asset center management model, Paula? Sure. Here's the frustrating thing, Leonardo. And we talk about this on Stacking Benjamins quite a bit because the one thing that OG, my partner on that show and I have in common is that he is a current CFP and I worked in the industry for a long time. Talking about being a fiduciary is super important and I'm glad you brought it up. I'm glad, Paula, that you explained it. Making that happen and making sure that you're working with a fiduciary is super, super hard because of the fact, and this is the part that's going to make everybody groan, the enforcement agencies do not enforce at all talking about whether you're a fiduciary or not.

36:36So there are a lot of people out there and colloquially, we'll just call them liars who will look you in the eye and will say, I'm a fiduciary when even based on what they do, they can't be a fiduciary. They're accepting commissions from you. They're clearly working off of this suitability standard, which Paula, you did a great job of talking about. So it is very frustrating to ask somebody if they're a fiduciary because when they answer you, when it comes to financial quote professionals, I see it all the time on social media platforms where people who are not fiduciaries are calling themselves fiduciaries.

37:24It is systemic. It's frustrating as all get out. There's no enforcement. So because of that, beware. So I think you have to look more through breadcrumbs. The first question has to be around commissions. It just has to be around commissions. The better question, I think, than are you a fiduciary to start with is, if I buy stuff from you, will you get a commission? If the answer is yes, the fiduciary standard goes right out the window. Now, somebody can be a fiduciary and have assets under management, which people that think the fiduciary standard needs to be stronger will still argue, are they a fiduciary?

38:12If they're going to bend you towards stuff where they get assets under management, we can debate that for a long time. but directly having assets under management is not the same definitionally as getting a commission. The person knows exactly what you're talking about. When I buy a product from you, do I get a commission? How do you make money specifically? Tell me how you make money. By the way, if they say that everything I do is free to you, this is the one that kills me. Everything I do is free to you. There's no additional cost to you. When I have products that have commissions built into them, that means I'm paying a lot more for the product than I would pay for a very similar product, very similar product that doesn't have all this commission structure built into it.

39:05Another question that you should ask is, and word it exactly like this, do you have a fiduciary duty to me at all times? And the reason that you want to include the words at all times is because, and this will, when you learn this, this will cause your head to explode. It is legally acceptable for a person in the same person in the same meeting to be a fiduciary for a portion of the meeting, be a non-fiduciary for a different portion of the meeting, and then be a fiduciary again. So it is legally permissible for somebody to be a fiduciary sometimes, but not at all times. See, that doesn't drive me crazy as much because they can lie about it.

39:59There's no teeth in the enforcement. I feel like if they're going to lie about the other question, I think the more direct question is, is just, do you accept commissions? Because the dual hat registration people, which is the name of what you're talking about, will have to answer that. Yes, I get a commission. So you can also ask the question, are you duly registered? Yeah. Do you have a fiduciary duty to meet at all times? And then the follow-up question, are you duly registered? Well, and there's a paper trail. There is a paper trail, which is legally enforceable. And that is that if you're signing into a financial planning relationship, they're required to give you a document called the ADV.

40:39And so when they give you the ADV, it outlines how they're paid. It outlines in writing, in legal terminology, how they are paid. And you can take that document and you will see inside the document, no matter what they tell you, they will tell you how they are paid. I would want to see that. Yeah. So fiduciary standard, that is number one. And in my view, that is the most important thing. As a second issue that we will discuss next is how they are compensated. That's where the conversation around the assets under management model comes in. But in my view, and Joe, I don't want to put words in your mouth, but I assume in yours too, the most important thing is that you are a fiduciary.

41:24Although people lie and say they are. Yes. All right. So do you want to move on to talk about how they're compensated? Oh, God, yes. You know me. This is not my favorite topic, but we cover it a lot. So let's do it. This topic, I think, is secondary to the fiduciary question. Joe, I think you and I disagree here. I am personally not a fan of the assets under management model. I believe that it is far better to find somebody who either charges at an hourly rate or charges a flat fee, but whom you pay for their time and their expertise, not for the amount of assets that they are controlling and investing on your behalf.

42:10Because the drag on your performance by virtue of paying that assets under management fee can be substantial. And the phrase drag on performance makes me laugh. Yeah, this is where Joe and I disagree. Well, and the reason it makes me laugh is as a guy who's done this for 16 years and who had some clients who trusted me with assets under management and some who we just had a fee only model, there were so many people who nothing, and by nothing, I mean, zero would have gotten done had they not had me be the person who's doing it. And I think this has a lot more to do with know yourself. It has a lot more to do with know yourself than the common don't hire this type of person.

43:01I think you've got to know who you are because I'll tell you, there were so many stories where people would walk into my office and we We would design this beautiful financial plan over four meetings together, Paula, just these gorgeous plans. Fantastic. I would send them home to do the stuff because we agreed that I was going to be paid on an hourly rate or on an annual rate, depending on the relationship. And then we would get back together about a month later. And the number of times a month later, I had to go get a bunch of paperwork for them to sign it over to me. Because during that month, they did zip.

43:38They did nothing and money sat in the wrong place going against everything we had talked about against all of their dreams, against all of their aspirations. It didn't get done. And instead they're like, you know what? Yeah. The quote drag on returns was the only reason they got a return was because they paid that fee. so i think the whole drag on returns thing is overplayed especially when i have the service that i do now is a non-registered person just called get joe's take and i have a few people every year that that pay me for an hour of my time to look at their stuff and i will tell you it still happens today people who are so they've heard in the media do not have somebody do it for you, they have so much money that's in the wrong place and they know it's in the wrong place.

44:30And it's been in the wrong place for three, four, five years, and they've done nothing about it because they are avoiding a 1 % fee that would have looking at the market the past four years, they would have had all this upside. It drives me crazy. And so what I want to caution against is that we in the financial media push people away from much more predictable, great financial outcomes by saying, continue to do nothing because you need to fear this fee. So I'm not pushing people to do the fee. I'm just saying the fee isn't your enemy. Getting nowhere is your enemy. As an example. I love fired up Joe.

45:18This is great. Well, it just drives me crazy. No, no. Come on. As an example. I go to this gym and I pay, I pay extra to have a trainer and to work out with a couple other people. Right. So I have this group of people that I work out with. I pay extra for that. And I look around the gym and 85 % of the people, I see the same people there all the time, Paula. I see them there all the time. They don't have a trainer. They're doing the right workout. And I'm like, why the F am I paying this extra fee for this person when I don't need the damn person? I'm looking at all these other people. They're physically fit.

46:01They show up at the same time I show up. They're not in my class with the other people. They're doing the thing. I'm like, why not? You know why not, Paula? Because I know me. And I know the only reason I show up at the damn gym is because the trainer's waiting on me and it's going to give me hell. And also the people in my class who I've gotten to know, those people also are going to beat me up when I don't show up. If I don't have that class, I don't go. So I could say, you know what, let's avoid the fee of the trainer. And you know what happens? Joe is going to be eating donuts five days a week, living it up, being a lard ass because I avoided that fee.

46:45But because I paid the fee, I get an outcome that works better for me and I pay the fee because I know me. So I think the judgment of nobody should pay the fee is overblown, is entirely overblown. Joe's position is AUM is valuable for the purposes of accountability and follow through. Yeah. And by the way, the advisors that I know who are good at AUM are that type of advisor. They built their whole practice around working with people like me at the gym. So stop doing the ROI on them and how much money they're making and think about what you would do in the absence of this person and their wonderful system and the fact that you're actually getting stuff done.

47:36I think that's what you really need to be thinking about. Joe and I disagree, but also Joe is not wrong. Joe, I totally see what you're saying. You're not wrong. I definitely see in many other facets of life, I see the same pattern play out where people get so caught up in not wanting somebody else to make money that they themselves hold themselves back from making money. So for example, in entrepreneurship, you see this where somebody doesn't want to hire an assistant, doesn't want to hire a copywriter, doesn't want to hire a website designer, they're like, no, no, I can do this myself. They end up not building a team.

48:17And by virtue of not building a team, they end up stagnating or even shrinking because you need people in order to grow. The other place I see this, and I don't hear this as much anymore, but pre-pandemic, I used to hear this a lot. People would not want to buy a rental property because they didn't want to pay a property manager. It was bananas. I heard that time and time again. They were like, no, managing a property is too much work. And I'm like, well, yeah, you get a property manager. They'll handle it. Literally, as we've been recording, I got a text message. One of my property managers was like, oh, there's an emergency.

49:03We need to do this emergency roof repair. It'll be$1 ,800. Is it approved? And I just texted back, yes, approved. Literally, this happened while we were recording this episode. This happened during Blanca's question. You know how much work it was for me? I glanced at my phone. I typed in, yes, approved. Done. Literally, that's all I had to do. And I was in the middle of answering Blanca's question at the time that I was doing it. That's the value in having a property manager. They're taking care of it. And I'd hear all of these people, especially pre-pandemic who were like, no, no, no, no. You know, I just, I don't like the idea of paying them 10%.

49:42That's so much. I just don't think I'm going to buy a rental property. It's just not for me, you know? And now fast forward eight years. All the appreciation on that property. Right? Exactly. So Joe, I totally get what you're saying in that regard. I can understand being distrustful. And actually this goes back to Blanca as well, which is, you know, I do this with my career and you do this. I have a lot of trouble hiring outside help for my company. I have a ton of trouble with that. I'm very distrustful. Do these people actually know the stuff that they say that they're going to know? Right. Do they, and I can see this if I'm going to work with an asset-based manager, Are they really going to do anything?

50:30Is there going to be, how do I extricate myself from this? It's almost like signing up for a four-year degree from college. And is there really any ROI? Is it truly going to pay? And I actually remember a guest on Stacking Benjamins who made so much logical sense. And I still fight with myself all the time on this. When I think about paying for coaching, I'm like, no, I should be able to read books and listen to podcasts and do this myself without an outside coach. He said, it's amazing that we will pay 50, 80, a hundred,$150 ,000 to go to a school with questionable ROI and never think about it.

51:11But if the right person says it's 10 grand to get in the room, we won't pay it. When the ROI is nearly certain what the difference is going to be if I pay the person the 10 ,000 bucks. So to directly answer Leonardo's question, I don't think it's about the firm. You asked, are there firms that I should investigate? I think if you go to Nectarine and you looked at the different financial advisors, there's some you're going to love and there's some you're going to hate. I think it's far more individual because of the fact that you're looking for somebody who you truly want to be on your board of directors.

51:50Me pointing you toward a company might help you narrow the field some, but I don't like it when people say X company is good and X company is bad. From the inside, having worked at a company, I know there's people at the company I was with where I go, I would hire that person. I would hire that one a million years. I would hire that one. Maybe that one, maybe not. You know what I mean? There's different levels of people. And often, Paula, it depended on who the person was. Oh, you're a single woman in her 60s. Here are the people I would hire. You're a person with seven kids all looking to go to college in the next three years.

52:31This is the person I would work with who's very good at that. It was situational as well. So good person and bad person also depended on that. I think there's an interview process that you really have to go through. to see how much are they like me. Linking this back to your point, Joe, there is value in spending your time trying to find the best people, the wisest, the sharpest, the most forward thinking to be on your personal board of directors and to give you the type of advice that will accelerate your life with orders of magnitude. Now, does that necessarily mean you're going to find those people?

53:14no, again, this goes back to variance. This goes back to what we were talking about with Blanca's question. There's variance, there's fat tail distribution in the people that you're around. Most people are not going to have that big of an impact. Finding the right people is a high variance activity. Yeah. By the way, I know this is a frustrating answer because you just feel like you should be able to go, well, just give me the company and, you know. Yeah. I mean, I'll give you a couple of places to start looking. So Nectarine, like Joe mentioned, is one. The XY Planning Network. XY Planning Network.

53:50Yeah, exactly. The XY Planning Network is another one. And then Facet, they're a former sponsor of mine. They are also a vehicle through which you can find a fiduciary fee-only advisor. And I will say, because Joe, I've acknowledged that you're not wrong, but I will say the reason that I have a take where I don't like the assets under management model is because what we encourage is passive investing in which you're really not making big money moves. You're doing the initial work of setting it up once. And then beyond that, you're rebalancing once a year, but for the most part, you're forgetting about it.

54:29It's hands off. In that regard, in my view, it is not comparable to working out, which you have to do all the time, or using a property management company for a rental property, which is very active and very hands-on and you're dealing with things constantly. Exercise, property management, those are active endeavors, whereas investing is such a passive endeavor, or at least it should be, that I believe if you are really executing a passive strategy, then there's nothing to do. It seems like it should be easy. And, you know, I feel like Maury Povich, looking at the relationships that I had in the past, history will tell me that it's not, that it isn't.

55:15And people don't even get themselves on the right path. It blows me away. If people did what they knew was in their best interest and just put the money in the spot to do the thing, then I'd say there's no reason to pay that fee. but it exists for a reason because people, people don't even do that. I think a great vetting ground for people, you know, we at Stacky Benjamins don't endorse different advisors. Like we don't say, Hey, Paula pants, a financial planner. You're not, but let's say that you were Paul pants, financial planner. We endorse her, but there are people that we have been around that we trust a ton.

55:59And so if you listen to some of your favorite podcasts like Afford Anything and you hear people that are financial planners who make the cut, right, to be on Paula's show. Or you listen to our Friday roundtable, which often has people that I have known for a long time and I've trusted. And I know that even though there isn't an explicit endorsement, them actually getting to a microphone where I'm letting them speak to our audience is an implicit endorsement. And I have to be okay with that. I think you can also begin not only whittling down toward people who are, we think, people who are very close to this think are trustworthy, but I think you can also hear them on the microphone to see if the important part for me then is, are they still a fit for you?

56:54They might be completely trustworthy, completely competent, and you just don't get along with them. It's going to be this horrible, horrible relationship. If you listen to them on different podcasts, you can also get a feel for, is this somebody that I would work well with? Or at the very least that I could write to and say, hey, I don't think you and I are a fit, but this is me. Who do you think I should talk to? And they might be a great referral source. One thing I learned through strategic coach Paula was ask who, not how. Don't ask how to do things. Ask who is the person who I should talk to about this?

57:34Who knows where I should go to look for the help that I really need? I think that's a great way to begin finding your who, who can solve your how. So in summary, Nectarine, XY Planning Network, FASET, or listen to your favorite podcasts and take note of who's on there. Yeah. Yeah. And listen to how they talk about money. Might be a fit, might not be a fit, but you can learn a lot about people through those experiences. All right. Well, Leonardo, you got a classic Joe and Paula disagree on this issue. And as always, why I love it when we disagree, Joe, is we present the arguments, you decide. You decide.

58:13Yes. And I think it has more to do with your point of view and who you are. than whether I'm right, which I truly am. You're not wrong. And you're not wrong. Somebody left a review on this show once where they said that one of the things they enjoyed about it, it's not just the finance piece, it's hearing two people who disagree who do it well. That's something that we don't really hear that much in today's society. So we are a model of how to disagree with one another, Joe. We can disagree without wanting to choke each other. Yeah, exactly. Without the mudslinging. Well, thank you to everyone who is part of the Afford Anything community.

58:57Joe, we've done it again. Where can the Afforders find you if they want to know more? Well, how about they find you and me on a really fun episode of Stacking Benjamins that is February 13th episode. and that episode, we are playing a game. And Paula, you know how much I love on a round table episodes, playing our games. We actually played a game a week earlier with our mutual friends, Sarah Catherine Gutierrez and Jesse Kramer, where you try to guess horrible advice that's on this list. And oh my God, this advice was so bad. It was so bad. But this is a different game. This is a Valentine's Day weekend game that even is great for non-Valentine's Day weekend, which is love it or leave it.

59:44I will make a salacious, salacious financial statement. And you have to tell me on Valentine's day weekend, if Paula pant, you love it, or if you want to leave it, this salacious financial statement, you want to hear one as a warmup that I'm going to ask. I'll give you a little preview. Love it or leave it. paying off a low interest mortgage early is just an emotional decision pretending to be a financial one. Do you love it or do you leave it? Loaded question. Tune in for the answer. Yes. And not only the answers, you know, if you've ever heard any of these games we play, the suggestions that you give, that Jesse gives, that OG gives, the way they talk about their feelings about whether they'll love it or leave it is the whole battle.

1:00:41Like we played the game with the dumb financial things people say and people do like, who cares if it's on the list or not? The stuff you guys brought to the table was, was truly the fun and a surprise to even me as the host, which makes it really fun. So you can do one of two things, by the way, you can hang out with us on Monday afternoons and watch us make it live with Paula on Mondays or tune in to the episode on Friday. I love the game episodes. Those are the most fun. I think this will be our best game ever. Love it or leave it. And especially for Valentine's Day. Yeah, it's a nice one. Well, thank you, Joe.

1:01:23And thanks to all of you for being part of the Afford Anything community. If you enjoyed today's episode, please do three things. First, subscribe to our newsletter, affordanything.com slash newsletter. We send updates there every now and again, every sometimes. We will send out things. But what we do send out is stuff that you won't find anywhere else. It's not on social media. It's not here on the podcast. So new newsletter every sometimes. And you can get it only at the newsletter, and it's completely free. affordanything.com slash newsletter. And as you say, Joe, completely free and worth every penny.

1:02:03Worth everybody. All right. So that's number one. Number two, please share this with your friends, your family, your neighbors, your colleagues. Share it with your phlebotomist, your real estate agent, your vet tech, your HVAC guy, your makeup artist, your electrician. Your plumber. Your nuclear submarine plumber. Right. Your Navy recruiter. Yeah. Your property manager. Your suitability standard financial planner and your fiduciary financial planner. Your gym workout coach. Share this with all those people and more because that is how you spread the message of F-I-I-R-E. Finally, open up your favorite podcast playing app and leave us a review.

1:02:50Tell us what you enjoy about the show. Like the person who left the review who said that he loves it when Joe and I disagree because we're a model of how to disagree without mudslinging. That was wonderful to hear. Tell us what you enjoy about the show and say it in your favorite podcast playing app. While you're there, please leave us up to a five-star review. I thought you were going to say, say it in your favorite podcast playing voice. You could do that too. Hey. Thank you so much for being part of the Afford Anything community. I'm Paula Pant. I'm Joe Salci. Hi. And we'll meet you in the next episode.

1:03:30Welcome back. And thank you for listening to two breaks that were so close together. I thought that was off. I was turning it up for the thing. That was the box stops, everybody. All right.

1:03:46I got a call from potential spam. Who is spam? Oh, the, uh, canned meat company. Yum. Delicious. Hello, spam. I've been waiting my whole life for this call. Wow. Are you calling from Hawaii? I was calling out to you in my dreams last night.