514 | The More I Tinker, The Worse it Gets | Jeremy Schneider

23:26like we're trying to extract profit from the market. But I think those same people would also probably quote Warren Buffett. And I think that they would see him as an active manager who is making smart moves like they are. And there's like this big contradiction there, which is Warren Buffett's company, Berkshire Hathaway, has never paid a dividend. And I feel like, how do you rectify that? And Warren Buffett's never written a book, but I actually read all his... They've kind of compiled his letters to investors into a bookish thing. And it's extraordinarily boring, but there's definitely some nuggets in there.

23:58And he explains that thought process at some point. And he's basically like, the way dividends work is if I pay out the dividend, the share price drops by that much, right? And so you're still full either way. But now you're just forced to take money out of our coffers in a way that maybe we didn't think was best. And he's like, I'm pretty good at running Berkshire Hathaway. And so I'm going to keep that money in the coffers indefinitely. And we're just going to keep buying more stocks or buying businesses or doing whatever Berkshire Hathaway does. If you want a dividend, here's what you do. Sell 4 % of your stock every year and take your cash and go do whatever you want with it.

24:30Berkshire Hathaway has been averaging 16 % per year. So you're still getting a 12 % share price gain, plus you get your 4 % dividend. That's exactly what a dividend does, except you're in control now instead of the company forcing it upon you and creating that taxable event. And I was like, ah, that kind of made the light bulb go off for me, which is, your dividends are just kind of making it less flexible for the consumer about when they realize those taxes about how much they take and just kind of forcing the cash on you. Like you said, it has a nice psychological benefit. I like them. It's like, ooh, cash.

25:02But you have to realize the share price drops by the exact number of pennies or dollars you get. And so you're not getting free money. You're just pulling it. It's like a transfer, not a income. Yeah. It's interesting when you have these light bulb moments. A long time ago, So I don't remember precisely. I don't want to say that it was definitely a read because somebody is going to listen to this and say, oh, you're an idiot. Of course, it can't be that. But let's assume it was something like that where they were paying a 10 % dividend. And I was thrilled. Again, at that point, I thought it was free money.

25:32But basically, they just took 10 % of the cash that they had and just handed it back to us. And what happened in that case? After that, the stock price dropped by the exact same amount. and my total value, even though I got this magical free money dividend, my total value was the exact same to the penny. And then sure, I was able to then do what I wanted with that. I could reinvest it. I could pull it out and bring it back to my bank account. But like you said, you lose flexibility, right? Because in that case, it's a taxable event. It's a forced taxable event. And I think those of us in the financial independence community should be avoiding forced taxable events when we can, because we want to do the fun stuff, right?

26:13Like we want to do Roth IRA conversion ladders or manage our income up or down for ACA subsidies and all these other kind of fun, complex things. And to have bought an investment that locks me into, oh man, that's like a guaranteed taxable event. It just, it doesn't make any sense. And then also Mr. Buffett's the perfect example. Like I would rather him, he could do so many things with that money, right? He could invest in existing operations. He could buy new companies, which they do all the time. He can buy new shares of Apple or whomever that Todd and Ted decide make the most sense. You can pay down debt if they have any.

26:50You can repurchase shares, which he's done when he feels that the share value is less than the book value of the company. Last case is, hey, guys, essentially, we throw up our hands, we give up, and we're going to issue it back as a dividend. I look at it as like, essentially, hey, we're giving up. we can't do anything better with this. We'll give it back to you. Yeah. And I think for some companies, it makes sense. AT &T is like, we kind of have hit a level where we're not going to grow much more. We're not that innovative. We're just a cash machine at this point. And so here's your cash because we're not Warren Buffett.

27:23And so that makes sense. But being a dividend investor and seeking out those companies, it's like investing only in companies at that point in their company lifecycle where they're kind of like dinosaurs dying and you're missing out on the next thing. You're missing out. If you're a dividend investor, you didn't hold NVIDIA. I didn't either as an individual stock, but as an index fund, I certainly did. So yeah, that's why I don't chase dividends. It's just a different way of speculation that doesn't serve the investor. Yeah, totally agree. Thanks for listening to Chooseify and for all your support of our mission here.

27:58The absolute best way to support Chooseify is when you sign up for your next rewards credit card to use our cards page at chooseabout.com slash cards. I keep this page constantly updated so it should always be the top resource for you. Thanks for being part of our community and for your support. I wanted to go back to that moment that essentially, I guess you sold your business for 5 million. You said after taxes and after whatever, after everything, $2 million essentially hits your bank account. Immediately prior to that, you said you were making$36 ,000. And that has to be a wild moment when you log into whatever bank and you see multiple seven figures sitting there.

28:38I don't even know how to say this other than take me back to that moment. What does that feel like to go from, we've got something, we think we can build it. I'm not taking very much money out of this company. And then this hits and my life is forever changed. Yeah, it was exciting. It was a fun few months for sure, because building the company was a grind. And it's kind of like, I don't know, I was about to say winning the Super Bowl. And I guess I will, because I'm already like committed. But what I did was not winning the Super Bowl. But I think there's a similarity in that when you see a player win the Super Bowl, you're seeing them like at their best moment, you're not seeing the grind, like, there's no cameras in the weight rooms, there's no cameras, like in the early morning workouts, there's no cameras in the physical therapy sessions, like there's so much work that goes in.

29:21And there's no guarantee of winning a Super Bowl either. And so in my case, I was making$36 ,000 a year. That's what I was pulling out of the company. We had seven people on the team, including me. And so I was making payroll, but just working every day, long hours. I wasn't pulling 100-hour weeks. I'm still trying to live my life and stuff like that. But what was definitely true is I had no idea if there was going to be an exit at all. I just was trying to live my life and had this barely profitable company. I was trying to grow and grow bootstrapped. So the day that the acquiring company showed interest and we shook hands on the deal.

29:53And then eventually the wire came through with the money. It was all kind of like validation of that 10 years of work that was not being filmed. And it was very surreal. I actually filmed that moment. A week before the close, I did the first ever wire transfer of my life where I transferred the cash from my company to my bank account. Actually, I own 70 % of the company. My mom owned 30%. And so we basically split the cash in the bank account 7030 because our sale at company was was like no cash no debt so they just buy the entity or whatever and so i saw how wire transfer worked and apparently with fidelity when you get a wire they email you and say hey you got a wire i was like oh that's a good email and so then the day that the close was going to happen and this was like far before i had any i didn't even think i had an instagram account i wasn't a social media guy i wasn't a youtube or anything like that i was like i should film this i just like film this thing happening and so i like opened up fidelity and had the website just sitting there.

30:45And every 10 minutes, I'd click refresh or something because I knew in the next hour that this wire was supposed to come through. And then sure enough, the email came through and said, you got a wire. And so I pulled out my phone and started recording my screen. And it kind of narrated. I was like, it's April 1st, 2015. And I clicked refresh. And then sure enough, it went from$100 ,000, which was like all the cash from the business to$2.1 million just in a refresh. And so I was like, you know. But as silly and wild as it was, for that moment, it still took, honestly, years for it to sink in how much money that really was, like how long that would last.

31:20Am I wealthy now? Am I not wealthy? It's certainly like, it's not a billion. You can waste$2 million if you want to. So I still was kind of getting used to it for a long time. Yeah. Well, right. I mean, especially living in San Diego, you could very easily buy a modest middle-class home, right? And a significant portion of it, poof, if you just decided, hey, I'm going to buy a house in cash. I'm curious. So it took years for it to sink in. That's an interesting way of putting it. And it actually speaks to your mindset, which is great, because I think, frankly, a lot of people at that point would go out and buy something fancy or multiple fancy things, etc.

31:53But it sounds like you took a much more measured approach. And I have to assume there was a real learning process in those years. Did you have a financial background in 2015 when you sold the company or did that only come after? I think a lot of it goes back to childhood. I think we all kind of learn a lot of our money lessons in childhood. And some people learn whoever drives the nicest car is the most wealthy, which is not true, I've learned as an adult. Usually whoever drives the nicest car is borrowing money to buy that car and can't even afford it. And they have to go to a job they hate. And my family is extremely frugal.

32:29From elementary school, I remember learning lessons. This is a choose FI exclusive. I don't think I've ever told this story. But I remember in elementary school fifth grade my parents said like you can buy new shoes but your limit is i think it was like 30 or something like that and like air jordans had just come out this was like i don't know it's probably 88 or something so it's like kind of like peak early air jordan era and like air jordan's were like 80 like now i'm at close but this is like one pair of like pink discount like pink and green neon discount bin super ugly shoes they weren't even jordans they're just nike Air.

33:04And they're like 30 bucks or whatever. So I was like, all right, I'm getting those. I got them at my warmest going and everyone made fun of me because they're so ugly. I was like, oh, but I got Nike Airs. I thought that's what they're supposed to. But I mean, that's just like an example of how I feel like all these decisions that I made throughout childhood or that I was forced upon me, whatever, were about limiting money. And then into my 20s, up until the age of when I was 34 and I sold my company, I was living at$36 ,000 a year. So I was like this extreme frugality childhood typical broke college kid experience and then like basically broke college could extend until i sold my company and 34 years old boom two million dollars in the bank i don't know like it's just not in my personality or it's in my you know fiber from growing up that i just was still continue that frugality even just recently like in the last few months i was flossing with this little tiny piece of floss that was like eight inches long and it kept slipping on my fingers and i hate flossing so much because of this because the floss is so short and like Literally, as a 43-year-old man, I stopped for a second and thought, why is this floss so short?

34:07The answer was, so I don't waste floss. I was like, why am I worried about wasting floss? Is it an environmental thing? Is floss is scarce in the world? The answer that I gave was financial reasons. I don't want to waste money. I'm like, wait a minute. I can afford infinite floss at this point. I can floss with yards and yards of floss wrapped around my whole body 10 times a day, and it will never even be like rounding error in my bank account. And so like those types of habits still kind of exist. Yeah. It's tough to shake those things. It really is, especially if it's ingrained in you from childhood.

34:39But I think as silly as obviously that's a cute little example, right? And like, I'm sure you'd describe it as kind of as a silly example, but I think it's deeper than that because I think it's having the awareness. I think that's what we all have to strive for is like, find these areas of your life, whatever they may be, where you're just actually unaware of points of friction or things that you're doing that it's just some script that you've been running in your head, maybe in your case for 35 plus years, right? Since you're a little kid and really take a hard look at it, right? And scrutinize like, is this serving me anymore?

35:15Where did this come from? Where did this little eight inches of flossing is really good for you. And maybe if you took a foot and a half piece of floss, you might floss every night. But if you're going to do this stupid eight inches thing, and you're going to be miserable, then it's probably a once a week endeavor. So as silly as that sounds, I think it probably opened your aperture for, okay, where are these other points of friction? And maybe where else am I being pennywise pound foolish? And I think as you, I mean, you and I are, it sounds like both right around the same age. And we're not getting any younger, even though I'm sure we both think of ourselves as pretty young and fit.

35:53Let's be fair here. The numbers don't lie. And there are different stages of life. And I think we're both in the financial position where, all right, it's time to rethink some of these things that really served us well in parts of our lives and make changes. Yeah. No, it's an interesting transition because my fiber is live below your means as much as possible. Every penny wasted is like a sin essentially for the long-term vision. But like you said, I'm turning 44 this year. When's the long-term vision starting? But just like you said, it's hard to be reflective. It's like when I'm flying, should I be buying first-class tickets when I'm going to the restaurant?

36:34Should I be taking a limo? I don't know. And I think some the answers are yes some of them are no i think you have to decide based on your financial position how big an impact is going to be and is it going to actually make you happier i've like bought a first class ticket a couple of times and i just don't like it for some reason it feels like too fancy for me i just don't like i don't know just don't like the vibe i don't know why but i'm i'm six four and so like the legrooms are nice but for me where i land on that is i just buy the exit row and then it's like i don't need it any wider it's even longer than first class and it's like 80 bucks instead of 600 bucks more.

37:08That's my solution. Well, that's cool though. The answer doesn't always have to be okay. Just because I have the money, I can spend it and I should spend it. I think people that are listening to the show are many of us are kind of valuous, right? Like, what do I value? And you're trying to find a sweet spot. You're still trying to optimize to some degree, but I think it allows you a little more latitude, right? And for me, it's, it is hard. I don't want anybody to walk away from this saying, this is easy. Or, oh, just because you have a couple of million dollars in the bank that you can just start spending freely.

37:41Because I think at heart, we're still those frugal people that you and I have a lot of similarities. How we grew up and in our 20s and 30s, we're frugal people. And it doesn't just change on a dime. But I had two instances this week that actually show both where I've grown and where I still struggle. So I went out to lunch with a couple of neighbors, just a local place. And I ordered this steak. It's like a steak dinner in essence for random lunch. And it wasn't expensive. It was like 20 bucks. But I didn't even think twice about it. But I have to tell you, Brad circa 20 years ago would have never even looked at that because, oh, you don't spend$20 on lunch when there are $11 sandwiches.

38:26You just don't. So I would have just mentally thrown that part of the menu out. So I know it's a little thing, but again, the little things are the big things, right? And it's like, that was a nice step for me. And the lunch was fantastic. And every single time I go there, I order the steak. And then the other thing was talking about flights. I'm going to the Five Freedom Retreat event in Bali, Indonesia in early November. And that is a long way away. So I mean, pretty much from anywhere in the US, but East Coast, you're looking at a significant 30 plus hours of travel. I'm like, I have all these rewards points that I've earned over years and years and years from all my credit cards.

39:01And even though I want to get the optimal thing, I want to get the round trip for 80 ,000 points in economy or 100, whatever it is. I mean, Jeremy, I bought two of the best business class rewards tickets I've ever gotten. And they weren't even like saver. The one wasn't even a saver award. I spent like 140 ,000 points on a Singapore Airlines business class, it's going to be amazing. It's like one of the longest flights in the world from Singapore to JFK in New York. But I got to tell you, I hemmed and hawed about this for weeks. I kid you not weeks. I must have logged in. If Singapore has my IP address or my login history, they would see a lunatic signing in probably a hundred times.

39:42And I'm just like, this is crazy. This makes sense for you. It's not even cash. It was just points. But you still struggle. So it's, I don't want anybody to walk away thinking this is easy, right? This is something we're both working on. Yeah. No, it's weird how I think we're both pretty like logical, pragmatic people, but there's just like feelings involved. You're like, Ooh, that's a lot of my points. You know, it's like these, these like fictitious and like, you know, I don't know exactly what you're paying out is, but I feel like I could probably just delete that amount of money from one of your investment accounts and you wouldn't notice.

40:13Right. Yeah. And so it's not like this is empirically like a really big issue it's just an emotional issue and and on the same way like i've had the exact same experience so where like for so many decades of my life you just look at the bottom 10 of items on the menu and like anything about like don't even conclude and still today i do i'm like maybe because numbers are easy to pay i'm like okay what are the prices here but i am getting better just like you i'm getting better i'm like all right food's important and it's not that expensive in terms of like other things i'm gonna buy whatever I want.

40:43All right, Jeremy. So I wanted to kind of finish up the episode here with something really, really important. I know you've dove into this like really significantly. So the kind of wild and wacky world of financial advisors and whatever terms and definitions that takes on, obviously, you did co-found a company, Nectarine. And I think personally, and I have no financial relationship with Nectarine, let's be 100 % clear, we're not an affiliate. But from what I've seen and the people that I've sent. I've mentioned you guys multiple times now in the newsletter, and I've gotten a lot of positive feedback.

41:17It's something that needed to exist in the world. And I'm just, frankly, just really glad that you made it. So let's take a couple of steps back and just talk about, again, this wild and wacky world of financial advisors, because I think you have some interesting takeaways. Yeah. Thank you, first of all, for the kind words. And also, for the last five years, I've kind of been getting the same question as you, which is like, how do I find a good financial advisor. And it's like sheepishly was an answer that I didn't have. I was like, I don't know. It's a messy world. If you and I go sit together and talk to a financial advisor for a couple hours and I review your portfolio, I can probably give you a pretty good sense, but it's hard to just give an answer.

41:52And I think there's basically two main reasons why the world of financial advice is so messy. One is the labels. And there's labels like financial advisor, financial planner, wealth manager, broker, CFP, CFA, fee only, flat fee, fee-based, advice only, fiduciary. And there's just like this stew of these words floating around. And I actually surveyed my audience and asked them like, what do you think this thing is called? And nobody knows what anything's called. No one knows what anything means. People think certain things mean other things. Some people think CFP is like the crown standard. And CFP to its credit is like the most well-known designation for financial advisors.

42:26But it's still just a series of steps that a private corporation has instilled. And so there's great people who are CFPs. There are great people who are not CFPs. There are not so great people who are CFPs. It correlates, but certainly isn't a catch-all or whatever. Fiduciary doesn't save any people. I think a lot of times, especially in this world, in the world of financial independence, people think, okay, you got to find a fiduciary. The problem with that term is, in my experience, if you ask any person, if you take a random survey of people in the financial services industry, 100 % will answer yes to the question, are you a fiduciary?

42:59100 % will answer yes. They all say they are. Because who's checking in? Who are you a fiduciary to? and what does it mean? And even if they're not, or even if they are a fiduciary, if they're selling a product, they might say, in my fiduciary opinion, I'm legally obligated to operate in your best interest. So in my opinion, you should be buying my product, right? That's not a very fiduciary business model, right? And so this problem with the labels is extremely confusing. There's no label that designates good versus bad. And a lot of them are misleading, fee-based versus fee-only. They kind of mean opposite things and it's unclear which is which.

43:32And so part of the reasons that like that's problem number is the labels. The problem number two is the business models. And 99%, actually, it's more like 99.9 % of financial advisors don't get paid for giving financial advice. About 90 % are commissioned salespeople either selling insurance or investment products, which is like, again, the anti fiduciary business model, they get paid for selling stuff of the remaining 10%. That's what we call fee only where they don't get paid commission. But then almost all of them want to do the assets under management model where they take custody of all your assets, manage them for you or invest them for you, and then just take a percent fee over the years, which to that model's credit is better than the commission-based models, but still has some big problems like they're compounding annual fees and also creates some weird incentives like their incentive is to not lose you as a client, which might change how they're investing because they're like, I know every market drop, I lose 10 % of my clients.

44:31So if I just invest much more conservatively, I'm not going to lose clients when it's really hurting the individual investors' long-term prospects. And those assets under management advisors generally have really high minimums. So if you don't have a quarter of a million or half a million to invest, which people who don't are the people who often need the help, then they won't even work with you. And so the remaining 0.1 % is what's called advice only. These are advisors who don't sell any products, don't earn any commissions, don't manage your money, simply per project or per hour, give you advice.

45:04And they can sit next to you. They can look at, instead of just investing your money like AUM manager does, they can give you any sort of advice. They can talk about budgeting or insurance review or savings or estate planning or taxes or investing or whatever it is without this little incentive in their ear, which is like, by the way, you only get paid if you sell insurance or whatever it is. Yeah, it's astonishing how incentives just rule the world in every aspect of life. It's like one of those just general rules that I've found. You always have to look for the incentives. And it's not even to argue that the people are bad.

45:40I think it would be ridiculous to say like, oh, 90 plus percent of advisors are bad people. No, they're not bad people. Most of them probably go to work thinking they're doing a real good service for their clients. I suspect really almost all of them. But the incentives of that industry are such that, like you said, it doesn't align with what's actually best for the client, regardless of whether they use that term fiduciary or not. And yeah, we've always tried to give shorthand advice of like, okay, here's what would give you a higher likelihood of success, right? So you ask them, are they fiduciary?

46:16But to your point, they can answer that essentially however they want. And they can also, I think as I understand it, there's multiple different areas that they could be fiduciary or not. You could kind of give an, oh, yes, for this, but they might be excluding the other 75 areas where they're not, right? Yeah. I mean, I think really nerds in this area will point out that some people are both brokers which get paid commission for selling stuff and investment advisors who don't. And they literally hold both designations at once. and so they can say, yes, I'm a fiduciary, but why don't you buy this for me also?

46:50But I mean, I think none of that matters because there's even legal scholars who are like, well, maybe brokers are fiduciaries, but to a consumer, it doesn't matter because what matters is the incentives, like you said. Actually, one of my favorite quotes on this is from Upton Sinclair, who's an American novelist. I don't know who it is. I just Googled it. But he says, it is difficult to get a man to understand something when his salary depends on his not understanding it. And I've never seen that more true than with these insurance salesmen who have the title of financial advisor because financial advisor is not a governed license term.

47:21It just words people put on a business card. And they think you should be buying life insurance. And I think most 20-somethings, when they go seek out a financial advisor for the first time and they sit down and they get financial advice, they're actually sitting across from an insurance salesman who listens to their questions about taxes and budgeting and debt. And then it always comes back to, you should buy life insurance. And it's just so wild. And like, you know, we're on the Choose FI podcast and we're like people listening to this are Choose FI listeners. But like in the real world out there who people who aren't kind of have found their way here yet, that's what's going on.

47:54Right. And so that's what's so scary about this space, which is they're just getting pushed life insurance products, which are horrific. You know, we're kind of like waxing poetic about like, oh, like a point one percent fee here, there. You know, life insurance is like 90 percent of your portfolio gets evascerated by fees and cost of insurance. And so it's horrific to young people get steered awry like that. Yeah, agreed. I can still vividly remember when we moved down to Richmond. So this is probably circa 2006. So I was still pretty young at that point. I was in my 20s. And I think we reached out to them about term life insurance.

48:28So I knew enough to get term life insurance then. But man, this guy, and he was probably our age too. He was in his mid-20s. And he went so hard on it. I think it was universal variable life insurance, something like that. And you could tell, I'm a reasonably intelligent and savvy guy in the scheme of things. And I could tell that he just went to a seminar on it. He was essentially just parroting what he learned. And I kept just peppering him with questions. And he just couldn't answer any of them. But man, the fees. Jeremy, the fees are crazy, right? So when I scroll through TikTok, when I'm wasting my time, I swear like half the TikToks I see are by these insurance salesmen who are just, in my opinion, straight up lying, just lying.

49:10They say, you can't lose money, beat your own bank, tax-free growth, all these buzzwords that they use to make it sound like this incredible deal. And again, to young people who don't know the world of investing and finance can be infinitely confusing. They're like, oh, I'll look at all those good things. And so actually ball from these policies, I was like, I'm curious. I'm just go click on this guy's, this is a random TikTok dude's profile, click buy. I got a 90-minute sales pitch. I didn't tell him that I'm a personal finance influencer. I just told him, honestly, I'm single. I have no kids.

49:40I have no earthly need for life insurance because I have a high net worth. And sure enough, he sold me this policy. I got the policy in the mail. It's 91 pages. I read every single page of the policy. And it was outrageous, the fees. I think of every dollar I put in the policy, like 56 cents immediately were lost to fees. 56 cents. Yeah, 56 cents. And it got worse over time because there is a monthly statement fee. There is the premium fee, which is just like the load that we would call insurance or the investing world. So there's like the per unit fee, which is like the higher your death benefit, the more you have to pay.

50:12And they always use this term max funded or properly structured, meaning that you want to minimize your death benefit. But the reason they say that is because the higher your death benefit, the more of these fees you pay. But the law requires that there has to be a high enough death benefit. So you're basically you can't put an investment into this like life insurance world without having there be a death benefit. So you're required to pay these fees, right? Even get through all the fees. Then there's the cost of insurance, which increases as you aid. And plus, they're being sold as investments, but then they're actually insurance policies.

50:42And if you miss payments, you risk the whole thing lapsing. I actually just heard from a guy named Brian who the exact same thing happened to him. He walked into a financial advisor's office. The financial advisor said, hey, you could invest in a Roth IRA and these actively managed mutual funds, which isn't what we do, but isn't terrible. Or you can invest in this whole life insurance policy. And then Brian, who is 20-something, no kids, he asked the financial advisor, who by the way, is a CFP. He asked the financial advisor, which one should I invest in? And I want to actually quote this because Brian wrote me this email.

51:14And he said, according to Brian, the financial advisor smiled confidently, nodded slowly as he tapped the sheet with the whole life insurance numbers, almost like a mob boss being like, this is where you want to be. It's so gross. And so then he put$5 ,000 a year into this, instead of a Roth IRA, into this whole life insurance policy for 13 years. And he literally said, the reason I know from it is because I made a post that said, if your financial advisor is recommending you invest in life insurance, you don't have a financial advisor, you have an insurance salesman. And the word insurance salesman is really big.

51:47And so when he saw that big insurance salesman, he's like, it clicked for him. And then he started doing the math and kind of like saw the light or whatever. So he paid$64 ,000 into this policy over the course of 13 years. Again, guaranteed returns, can't lose money, be your own bank tax withdrawals yada yada yada this is all the nonsense they tell you right this is all nonsense they tell you what do you think over 13 years you know how investments work how they grow and i think the years were especially if it was the last 13 years there would be it was i think it ended in 2020 or something so it might have been 2007 to 2020 i mean you'd expect it to be easily double that minimum yeah right it was 61 ,485 oh no so for for 13 years of this 20 something into 30 somethings early investing career, instead of doubling or tripling his investments, he lost money.

52:33It's just catastrophic, right? So yeah, this is why I get amped about the world of financial advisors, because this is what's out there. And this is what's happening. That is unbelievable. And the real frustrating thing that I find is like, most people who go to financial advisors, they're just they're so well meaning like they, they think they're at a point where they're stable enough, I want to invest, I've heard it's complex. Of course, I need somebody to help me, right? And like, you find the local financial advisor or somebody that you're friends with or your colleague or coworker or whatever gives you, hey, here's the person I use.

53:08And like, you think you're doing right. And then they do this, right? And it's like, again, going back to our thought of, like from an hour ago of like simplicity. And I hate that I have to keep caveating this, but like, again, it's not financial advice. But like, for me, like, it would be really easy to just say, get a term life insurance policy. I can't, for 99 % of people, I can't envision another option other than term life insurance and basically invest all your money in a total stock market index fund or S and P 500. If you just did that, you're going to outperform minimum 95, probably 99 plus percent of people.

53:42And like, you don't have to potentially lose, like you said, this person, I mean, the opportunity cost of that was more than 50 % of his net worth in that case. And he was doing right. He was saving the 5 ,000 bucks and this mob boss of a CFP just gave him advice that you know he was incentivized to give, right? Like that's what it comes down to. Totally. And even the Roth IRA version, the guy was making commission from that, but the commission on the insurance was bigger, right? And so like the fiduciary who is legally, I'm making air quotes. I know we don't use the video on this, but I'm making the fiduciary in air quotes who's legally obligated in air quotes to operate in the best interest of the consumer suddenly just really thinks that the life insurance policy is better.

54:22It's so bogus, right? And you're right. If Brian had just bought, he didn't need life insurance at all, but if he wanted to lock in a rate when he was younger or whatever, 50 bucks a month, whatever it is, he could have easily dumped it all into an S &P 500. Yeah, it cost him. He ended up with$61 ,000. If he had just put it into, like you said, a total stock market next fund, he'd have about$148 ,000. So that cost him$87 ,000 up until that point and compounding over time because he eventually caught it, luckily. Jeez. Yeah, that is crazy. And one of my kind of hot take financial things is, and I don't know that I've ever said this on the podcast before, but in my heart of hearts, I have a problem with the term fiduciary because for obviously all of the things that we're talking about, but just I think of the world and I'm not like some semi-pro poker player or anything, so don't get me wrong, but I think about the world in terms of poker and probabilistic outcomes.

55:12So what gives me the highest likelihood of success? And I think if we're honest with ourselves, if you find a fiduciary financial advisor and they're not telling you to go in low-cost ETFs or index funds, I don't think they're really being a fiduciary. Again, in the vast majority of cases, there's always edge cases, right? Like that's the way the world works. There are edge cases to everything. But I mean, goodness, if they're putting you in, even if they're giving you good advice, but then they're putting you in a mutual fund with a 1 % expense ratio. I mean, we've both run the numbers on how much that kills.

55:45How can that be a fiduciary? That's why that word is so wild because we fling it around as though it's some sort of guarantee that you'll get good advice and it's not. And that's why I think the business model is what matters. And that's why that 99.9 % is so scary because 99.9 % are either selling a product or doing the assets under management. And so I think the future is advice only. And it's such a simple model. It's like paying for the advice. But if you pay someone who's advice only and they say, hey, I'm not collecting a percent of your assets, I'm not getting a commission on the back end, I think you should go in the Fidelity Contra Fund because it has outperformed index funds over the last 20 years.

56:20I don't know. I don't actually agree with that. I think that going forward, it's probably not likely to outperform indexes. But at least I think they're operating as a fiduciary in the true sense. I think they're saying what they think is right regardless of their income. And as it turns out, if you sit down with advice on the financial advisors, they don't recommend actively managed funds. They don't recommend day trade because once the smoke clears up those commissions hanging over their head, they've done the math like you and me because it's not that difficult math that they can point you in the right direction.

56:50Yeah, indeed. And to the audience and to your great credit, you said before we started, like, hey, I just want to provide value here. I don't really even need to talk about Nectarine. but I think it's important that we do because I think you've created something good and important and necessary for our world. And let's talk just real quick. So obviously business models always change and pricing changes, but as the time we're recording this, which, you know, the end of May in 2024, it's$150 an hour, which is really pretty remarkable. Like I am blown away that, that you can offer it for that price per hour.

57:25And I still suspect there are people who look at that. And again, I've used this phrase a couple of times, penny wise, pound foolish, right? I suspect there are people who are like, oh,$150 an hour, I can't pay that. But let's be clear, as we've talked about for the last X number of minutes, if you're going to another type of advisor who charges, like AUM, I find asset center management is the most insidious because, Jeremy, you know this, you're not cutting the check, right? And like - You're never cutting the check except for advice only, right? When you ask these advisors, how do you get paid?

57:56That's like my favorite question. I ask them, how do you get paid? they say, oh, it's free, or my company pays me, or we can make money when you make money. It's so gross the way they talk about it. And most AUM advisors are better, in my opinion, better than the commission-based advisors. They'll say, hey, it's a percent. It goes up and out with yours. So at least they're more clear about it. But yeah, you're never cutting the check. You just think you're investing the money, and then it all is part of the magical world of investing and comes out in the wash. Right. The complex and magical world, right?

58:24Because that's what you're led to believe it. It doesn't have to be complex, which is great. So yeah, talk me through. So you guys, I know you, I guess you were kind of soft launched at the end of 2023 and really went live in 2024. What's been the feedback? Has it been more robust than you anticipated? Like the, in terms of the actual desire for the product, like, where are you? Like, what's the constraint ultimately? And for me, especially we're both entrepreneurs, right? Like, is it trying to find clients? Or is it, which is an equally big problem is, hey, do we just not have enough financial advisors?

58:57Because if you have too much demand, that can kill a business in equal order too. I'm curious, just like behind the scenes. Yeah. Well, first, what Nectarine is really is it's a marketplace. We're not trying to say like, we're the financial advisors that we know what's right. We want to just provide a way to find and compare financial advisors who are operating under this business model without the strings attached. And so every single advisor has their own reviews, you can choose which advisor you go with, you can stick with the same one if you want, you can change between them. And I think starting marketplace businesses is challenging, because if we got like 1000 advisors on day one, you know, we'd turn on the light switch and like, they all speak and they're doing nothing.

59:37And if we had one advisor, and I posted to my 600 ,000 followers on Instagram, then that'd be a very busy advisor. And we were, you know, during our sloth launch, we were kind of doing that math, like, you know, based on conversion rates, we've seen in the past when we introduce, you know, we've only ever sold one everything before, but on my audience, it's like, you know, if we had five advisors, we could potentially book them up for a year or something, which would be bad. And so right when we launched, we did have kind of a supply side problem, which is we had more bookings than we could do.

1:00:01And now I'd say we have more of like a demand side problem now, which is some advisors are still booked out three months, but some advisors wish they had more clients. We might introduce a variable pricing at some point to let advisors price themselves to where they need to be to get the clients that they want. But yeah, right now we've set the price at$150. And we've recently crossed over 1 ,000 individual engagements. And so we've had, I think, more than 1 ,100 meetings so far. And yeah, there's no upsell. There's no additional product. It's not a sales pitch. It's not a lead gen thing. So our advisors, if they said, hey, meet me off the Nectarine platform and I'll manage your assets, then we would kick them off the platform.

1:00:38And they know that. And they generally all really like that. So something you said earlier, sometimes when I speak about financial advice, I think some financial advisors hear me and they are insulted. They say, we're not bad people. But I really don't think they're bad. Some insurance salesmen excluded, but most of them, I think, are really, really good people. And I think that they're thirsting for this business model just the same. They just need a platform where they can make a living doing it and have the demand to do it. And so that's what we're trying to do is push people to this advice-only model so that the good advisors can make a great living doing this.

1:01:10And then the clients, the consumers, the individual investors can have a more aligned business model with their interests. Right. I know you said there are no upsells, but let's say somebody wanted a comprehensive financial plan. Can they just literally pay for X number of hours or does it really not work that way? Is it mostly just for very specific questions? As of right now, the entrepreneur in me, the answer is we're trying to be very specific to start. The way it works is you go to the site, you choose your advisor, you choose their time, you click buy, and then you have an hour, you have a Zoom meeting, you share your screen, you could submit an intake form and even documents that had time to have them reviewed, you know, within reason.

1:01:50And then you get a kind of a wrap up email after the hour. And so that's kind of the entire engagement. To do a financial plan like that would be a little bit weird, you know, to someone to book like eight of those sessions or whatever it would take. And so we're kind of in the middle of designing a second option. So you can do the hour, which is like a standalone thing, pop your questions, or you can kind of do more of a submit all my documents like insurance, statements, Social Security, whatever it is, and have them kind of present a plan. And that's probably going to come out. So I guess we're a little bit hesitant to release that because I don't want that to be an upsell.

1:02:23But I do think that our advisors all love doing the hours because they know that's what a lot of maybe even most people need. But then for the small percent who are like, okay, I really want to take a deep dive and figure out when can I retire or what moves should I be making here? They'll have an option. But as of today, they just don't. Yeah, that certainly makes sense. And I'm curious about the platform itself and how you, I guess, find and vet the advisors. So this is something behind the scenes at Choose a Fi. Like Jonathan always wanted us to do like some kind of marketplace for Fi accountants, because we've always had people just ask like, oh, where can we find?

1:03:01And like, my hesitation was always like, oh, that just sounds like such a headache to have to like vet people, find people like, and then we're like tacitly saying like, we support this person that just my kind of conservative financial brain was always just like, oh, that's a bridge too far for me. but obviously you've launched this you have financial advisors like how do you think about like is it just a marketplace where maybe you do some vetting on the front side but it ultimately washes out in the the reviews like talk me through how you think about that that's a really great question and we have discussed that internally and we've also kind of made arguments on both sides like maybe one argument is hey get everyone on there and then let the market decide if someone's getting bad reviews, then they won't book meetings.

1:03:44And we kind of landed on don't do it that way, especially at the beginning, because it's maybe a little bit too slow. And individual consumers maybe are putting up too much risk to like be our guinea pigs to vet the financial advisors. And so basically, we are individually vetting every financial advisor. And we currently are rejecting four to five. So only about 20 % of the advisors who have applied to be on the platform are, we have no designation requirement. Most happen to be CFPs, but a few aren't. A few have CFAs. A few have other designations. They're all licensed, registered, fiduciary, whatever that means, in context based on the rest of the show.

1:04:22So don't click that out of context. They are all licensed, registered. And basically, the bar we use is, would we refer our mom to this advisor? And if the answer is no, we just don't put them on the platform. And so every advisor, we have 20 right now, to say it in numbers. We have 20 advisors on the platform. Every advisor I would send my mom to happily. And I think she would get great advice. And there's still the reviews to check to see how they're doing. And with the consumer's permission, we record the video of the meeting. And so we can go back and look and see how the advisors are doing, at least spot check.

1:04:52And so there's some mechanisms to make sure that really good financial planning is happening in these meetings. But yeah, that's how we've had to make sure we've got great advisors and keep great advisors. I like that. I think that mom test, that's just a really awesome way to look at it, right? It's like, hey, are we doing the right thing here? Like, is this person doing the right thing? Would I refer the person closest to me in the world? And yeah, I mean, I think if, frankly, if more businesses operated that way, it'd be a slightly better world, right? So that's really impressive. So we've obviously said Nectarine, but the website is hellonectarine.com, just so everybody's clear.

1:05:29Thank you for that plug. I should probably be better at that. This is my business. Yeah, I am fanatical about URLs. Like Jonathan always used to make fun of me. Like you have to get one that's easy to spell and is easy to say out loud. So I always make clear, like, is it singular or plural? So this is very simple. HelloNectarine.com. And yeah, like we said, you have a fantastic Instagram account, Personal Finance Club. It's super easy to find. Is there anywhere else you want to send people? That's it. Thank you for the plugs. Yeah, and on the topic of reviews, we watch those reviews really carefully and our average review right now is 4.95 stars.

1:06:06And so we're like, you know, for our first 1100 meetings, we're really happy with what's happening. We're obviously in this 0.1 % of these advisors charging just for like the hourly flat fee advice only advice. But we're hoping that we're going to push the industry this way and help more people. You know, like Brian who lost$87 ,000 insurance salesman. I wish he had spent 300 bucks on a couple hours with an advice only financial advisor to be like, yo, Vanguard, Roth IRA, you know, Target Date or US Market Fund, don't stop. Yeah, well, you're doing great things, my friend. I really, really appreciate that you put this out in the world.

1:06:38And thanks for coming on. This is a ton of fun. Thank you so much, Brad. I know this has been such a pleasure. I'm honored to have an hour plus of your time to talk to you. Yeah, this is a good time. And until next time, thanks for being here. Thank you for listening to today's show and for being part of the Chooseify community. If you haven't already, the best ways to get involved are first subscribe to the podcast so you're listening to this on a podcast player just hit subscribe and then subscribe to my weekly newsletter i actually sit down every monday and write this by hand and i send it out tuesday morning so just head over to choosefi.com slash subscribe and it's really really easy to get on the the newsletter list right there and i would greatly appreciate it it's the best way to get in touch with me you can actually just hit reply to any of those emails and it comes directly to my inbox.

1:07:27So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsource personal finance show. And finally, if you're looking to join an in real life community, we have choose a buy local groups in 300 plus cities all around the world. So head to choose a buy.com slash local and you'll find a list of all of those cities in 20 plus countries all across the world. And if you're just getting started with FI or you have a family member or a friend who you think would be interested, two easy ways. Choose a FI episode 100 is kind of our welcome to the FI community. And even though it's a couple of years old at this point, it still stands up and it's a really great just starting point to get an understanding of what is financial independence?

1:08:10What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life. And then Choose a Vi created a Financial Independence 101 course that's entirely free. Just head to choosefi.com slash fi101. And again, thanks for listening.