Shannon Lee Simmons: How To Stop Feeling Broke | #415

20:11You've put too many rules on yourself. You can loosen that a little bit so that you can still live within your means without hating your life. So I hate the word budget and I hate traditional budgeting, but obviously people need to know what they can and can't afford and they have to know their limits or else we will overspend.

20:25Ben Felix:You did mention limits earlier. Can you talk more about that? Like what should people be doing that is not budgeting to still be responsible? That is the crux of worry-free money, which is the very first book I wrote. And I still stand by it today. I still do this every single day with myself and others. Essentially, you need to move your money into four different ways. So there's like your fixed expenses, the money that's going to improve your net worth, your short-term savings, which is like, you know, the money that keeps you out of debt, emergencies, a big purchase, that kind of thing. And then you're spending money and that's it.

20:52You categorize it into two different piles, money you can spend, money you cannot spend. Guess what? the money you can spend is not the fixed expenses like your rent or your mortgage or all that stuff. It's not your savings going to your long-term retirement accounts or going to debt repayment or paying down the mortgage. It's not the money that's saving for emergencies or going towards the future vacation. It's literally everything else. But that is as far as you need to go as far as setting that limit. I call it your hard limit. It is the physical line in the sand between the money you can and can't spend every pay period.

21:22I even go so far to say separate it into a separate checking account. Because once you know that dollar amount per paycheck, you just drop it in there, blow it to zero on life between now and the next payday. And as long as that account is a physical representation of what is yours to spend, who cares if how it breaks down between miscellaneous shopping and groceries and gas and pants and coffee and kid's birthday party, a personal vendetta of mine, who cares? As long as you're fed and having fun. What I also think is if we are spending on credit cards, fine. Just move the money from that spending account onto it.

21:57So that is always sort of a reflection. It's sort of like how you can stay within your limit without over budgeting, without doing the daily back and forth and the guilt and the shame around the specific categories. But that's worked for me forever. It has been, I mean, that book is a bestseller. It's very powerful. And I feel like it works for most people when that micro budgeting only works for like 5 % of the population who are typically engineers.

22:22Ben Felix:So you're a fan of using the envelope in totality for spending and not get too fussed about spending on a specific thing? Or is there something people should do when they determine whether or not they can afford that thing? I'm not a fan of envelopes in the sense of cashless, or I think it should be done in debit and you just have to move money around in a checking account. So I don't think it needs to be like actually physical cash in an envelope. Although back to my grocery store example, maybe every now and then as a good reminder for all of us about decision making. You're right. I'm not fussed about what the micro categories on.

22:54I think I'm only fussed about people making those decisions of can we afford this or not. If it's for daily life and it's within the spending account, like go for it. I think when it becomes a pondering moment, can I afford this is when it would be something that would rob your spending money. It's like a huge expense that would be like, oh, this is all of my money that would be in the account. So those would be like those big expenses. And so my rule of thumb or my guideline there would be like, if you're buying concert tickets, let's say, and it's like 500 bucks or more these days, if you're paying for multiple tickets, that would be something that if you're like, this is probably not something that I can spend in my day-to-day life.

23:34So I'm going to put it on my credit card. So then my sort of rule of thumb around affordability is like, okay, well, if it's not a day-to-day spending, then do you have money set aside in your short-term savings account for these kinds of larger expenses. If you do then like pay it off from that. If you don't, then okay, then it'll sit on a credit card and can you pay it off within three to six months, three being ideal. And that's typically my red flag. So if you have to make huge massive reductions in spending in order to get this thing hammered down over three months, it might be in the realm of not affordable.

24:04Because if you do that, then you're going to have less income or less cash flow every month. And then you're going to do it again. it almost seems like a buy now pay later wheel that could get out of control so i typically say three to six months on a credit card the interest is not going to make or break your retirement probably but it's just whether or not you're diligent enough to actually pay it off and if you're going to keep doing stuff like that so there's room for the day-to-day life and then there's room for like this could sit on a credit card this is a big enough expense to do that but am i reasonably going to be able to pay it back yeah it's interesting like you said those could

24:34Ben Felix:compound if you did that twice all of a sudden it's going to take longer if you keep doing it then you're seriously in debt and in trouble. And so that person's not actually living within their means of their hate in their life. That's a different problem. So every now and then, I mean, we're going to have expenses that are bigger than what we can. And so as long as you're being mindful of those, that's not a spending problem. How do you think people should make sure that their spending is aligned with the things that are actually going to make them happy and improve their life? I think it's an exercise in mindfulness and planning, again, coming down to the financial plan, but I think that it's a financial plan around your spending money.

25:08So I have a theory or like a thing that I do with people sometimes when they need to reduce spending or they need to make cuts somewhere because this is a normal thing that we have to do, especially as things get more expensive and it's painful. And often we'll do things like you'll look at your credit card spending, you'll download your transactions and look at them. And most people immediately go to take out coffee and lunch and they're like, okay, I'll never do that again. Those are the things. Oh, why do I do that? That might be that person's values. But what if it's not the client's values?

25:39Or what if it's not my values? I put it back on them. And I'm like, let's go through line by line here and rate these things at a five for your emotional return on investment for these various things. And you'd be shocked when you put it back on the client, what they're willing to reduce. You don't have to do the work for them. I get them to go through and I have two clients. This is a great example. This is something that just recently, one client spent hundreds of dollars on Uber every month. And in my brain, my inner monologue is like, holy moly, that's a lot on Uber. Like, do you know what I mean?

26:09Like, whoa. And I said, nothing, zip it immediately. That would have been somewhere that I would have suggested reducing like immediately. There's so many solutions. And they rated it a five out of five. I was like, I'm curious. Tell me more. He was like, I have a big job and this is the only way that I can like see my kids and get to their practice on time and dah, dah, dah, dah, dah. And it's cheaper than parking and this, that, and the other. And then like, well, okay, that's so mindful. He had ones around stuff that I was like, oh my God, I would not like, who cares about that? Like I couldn't care less about that.

26:37Or I would never have looked at that. So he was willing to reduce other places in order to keep that. And I thought, okay, that's way more powerful. He's going to stay to that now because he doesn't have me just being like, don't take Ubers. And then he's going to take them anyways, and then feel like a giant failure. That exercise of going through puts it back on a client and a person and then they get to decide which one spark join, which not, not for their own value system, which I think is really powerful. And it helps with mindfulness around, wow, I'm spending money on stuff that really makes me not happy at all.

27:08And this is why I say the kids' birthdays. It's not like I don't want to celebrate children in my neighborhood. It's just that there are so many birthday parties and the cost of it is so wild. And it is a one out of for me. That knowledge came when I did this exercise with myself. And I was like, oh, I'm really spending a lot here on things. I'm like resentful of it. So I solved that in my neighborhood. I talked to a lot of the neighborhood moms and was like, can we do 10 bucks all together? And then the kid gets money and they can go buy something awesome. And then they were like, yes, I don't need more stuff in my house.

27:39I'm like, great. So this is a perfect solution for that. That mindfulness is what that took. It was not a happy spend for me. I think that that's how we do that. I think we make sure that with the money that we do have left over, we're very mindfully picking things that are important to us and actively taking out the things that are not, or the things that we don't remember, which is also on the rise because of frictionless spending.

28:03Ben Felix:So take that dynamic to couples when you're working with couples instead of an individual. How do you manage that dynamic? It can be spicy. I'm known for my like emotional EQ on financial planning. So I think that I get a lot of people who are like, this is going to get real. I have a lot of very interesting dynamics playing out in my office. Lots of people have different ways to think about money. There's two things that we're talking about here. So I think the emotional return on investment piece is more about your values. So if I had a couple that was not aligned on values, So one person wants to spend lots of money on vacations.

28:42This is a classic one. And the other person is like, no, we should invest in the house. These are two valid arguments. And one is, no, I don't see that as important. And I see this as important. So I think number one, sitting down with a financial advisor, a financial planner, you have a third party that's helping you navigate this tricky conversation because it is tricky. And I think to pretend that it's not is silly and naive. what often happens when we don't have a third party navigating with us is a I'm right and you're wrong when it's really just this is important to me and this is important to you and it's not important to you as it is to me so the ranking helps because we can actually physically see that there's a values misalignment which sometimes is just helps to break the ice around the fact that like oh it's not that someone's smart and someone's dumb or someone's right and someone's wrong or someone's financially responsible and someone's not we just have different values around this piece of money It feels like a different conversation than you're irresponsible and I'm not, which is hurtful and harmful.

29:38So I think third party ranking them together and then the actual what are we going to do about it is constant compromise. OK, we can't both win. So what can we do? Do we do a trip every couple of years and then save into the house fund here and extend that? Do we do this? Do we do that? What's the balance between both of them and like mapping that out together? This is the kind of work that is really in the weeds with clients for sure, but is so deeply impactful. And it does impact the overall portfolio because how they spend money is going to impact how much they can save for retirement as well.

30:12Really getting in the weeds with them, I think is quite important. And that's when you become that trusted ally too, where you're like, I actually am helping. It's not just about returns.

30:19Ben Felix:I like that. What about past decisions that people have made that they regret? How do you coach them through dealing with those feelings? I see this too. I'm sure you do as well. It comes in various ways. There's some that are dramatic. There are some that it's about a variable mortgage in 2020. There's varying degrees of regret and around it and the blame. I think, number one, the reason I care or the reason we should all care if we hear regretful words around decisions is that often if you feel like something financially didn't work out and it's your fault, you feel like you don't trust yourself to make financial decisions in the future.

30:56And I also think it makes people more skeptical of professionals as well. Like if they have a bad encounter with a previous person, that impacts our industry as well. So it behooves us to care about financial regrets. And you don't want to rob someone of that confidence going forward that the plan will work. It really comes back to that hope and that plan that will work and the faith that it's going to be okay and you should stay the course, that long game. How do you motivate someone to stay the long game? And so if you're regretful, then you risk not sticking it out. How do we deal with it? Oh my gosh.

31:26I think it depends on the situation, but let's even use the variable mortgage. Why did you make that decision in the first place? And I literally will say, like, if we could get in the delivery and go back in time, what are you doing when you're making that decision? It's like, well, I talked to my mortgage broker. Well, the fixed rate was 4 % versus 1.75%. Well, the Bank of Canada said that they weren't going to raise interest rate. Sounds like you made a great decision with a bad outcome. And people are like, what? That's a thing? And I'm like, yeah, there are lots of good decisions that have bad outcomes.

31:54Sounds like that's what happened to you. And the relief that that can offer somebody, especially if they've had a bad stock experience. I heard this a lot. If you invested just before a huge shakedown in the markets, you might be like kicking yourself. And it's like, was it a bad decision to invest? No, you're not psychic. What did you think? That you could control the stock market? This is not a conspiracy situation. So no, going back in time and sort of saying, what was the information you were using? Was it good? and number two is what values were you upholding when you made that decision probably something and often that will get people really excited about yeah you know what I was trying to like for example I had a client who went through a separation and the big decision that she had to make was like around where to live and am I going to rent unaffordably in this neighborhood that I'm not gonna be able to save anything or am I going to move far away we were like what's the value that you're going to hang your hat on in this decision.

32:49So let's say you rent unaffordably, but you keep your kids in the same community. 20 years from now, you don't have as much for retirement as you should have and you have to work longer. Are you going to regret that decision? She's like, no, because I was like really upheld my decision for my family versus another person might arrive 20 years from now and be like, I regret it so much. Why did I do that? Maybe it was the wrong value at the time. Something about the information and the value that you use when you made that decision. Yeah.

33:12Ben Felix:Just that concept of separating decision quality from outcome is so important in finance and in personal finance. Literally, portfolio management, number one. Sticking your asset mix and rebalancing long-term and all of that stuff, because the good decision-making, again, you don't often get to see the outcome and for a long, long time. And so there's a lot of times there's short-run bad outcomes, but the long run is still fine. And I think, again, that's something that financial advisors and financial planners can help with that perspective. In your financial planning practice, What kinds of decision crises do you often see people having to work through?

33:47Lots. First and foremost, what I consider a decision crisis is not should I lock into my mortgage. I would say we're talking about high financial stakes and high emotional stakes with a lot of uncertainty. So separation and divorce is a huge one. Where to live after? How do I regain financial stability after my life has just changed? And how do I do that? Those are big decisions that need to be made. I would also say that I get pulled in a lot. if I haven't heard from someone or if I'm hearing from someone for the first time, maybe there's like a critical illness that's happening and now they can't work.

34:16So we're going through something like that. Something that's blown up the plan or someone's rage quit and they're like, oh my God, oh my God. I would even argue that retiring can be a bit of a long, slow decision crisis because the emotional stakes are high and the financial stakes are high. So I find a lot of my retirement planning meetings that I'm having with people who are retiring within or they want to retire within three to five years. It has the same play bug. It may not be an emergency, but it has the same high stakes feeling. And there's a lot of anxiety that can be quelled in that meeting as well.

34:52I get a smattering of those big dramatic things, but I would also say in a positive way, like buying your first home, I don't get as many of those as I'm aging, but I used to. My clients are aging with me like a fine wine. I used to get a lot of those. And I would say buying your first home, it's also a decision crisis. There's huge financial stakes and huge emotional stakes with a ton of uncertainty.

35:10Ben Felix:At what stage of a decision crisis are people reaching out to you for financial planning advice? I think it depends on the crisis. If it's an emergency, like something's actually happened, I get emails at like three in the morning. So that might be like the critical illness ones. That might be like the separation, divorce ones. That might be like the, I got fired ones. Those are not necessarily the fun ones. Those are the ones where I'm glad that I'm here to help, but that's not a fun one to financial plan. We're in a sort of damage control mode. I do something called like micro timelines. So scrap the long term for five seconds.

35:40Let's ignore it. Who cares what's happening in the next 10 years? Let's focus on the next 10 days. The next 10 months is even unclear for you at this point. That's what happens when there's an emergency. Often I'll say like, cool, we're going to make a series of micro financial plans between now and the next 10 months. And we'll get you through that crisis. Like that way COVID was one. I had so many people that just got totally disrupted out of nowhere. And then it was like, cool, let's not make a plan for 10 years from now. Who cares? Let's do it in the next 10 days. that kind of almost damage control emergency response.

36:08And then there's the bigger ones, which I was talking about, like maybe it is about buy my first house and what that would look like. Can I retire? Can I leave my job and retrain? This is another big decision crisis that it's a slow burn. There's no emergency. And so the planning that can take place there for financial planning is a lot more calm, cool and collected because we're really just working out different scenarios and making sure that it is a no regret decision in the sense that you might make these great decisions, but it may not work out. You wanna go back to school, you might not get a great job.

36:41You might quit this wonderful financial job that you hate, retrain, go here and you might hate it or maybe you don't get it. Are you gonna look back and regret that you did this? And what can we do to safeguard yourself from that? And the safeguarding comes down to mapping out pivot points where this isn't working, what else am I changing? How am I going to change my plans? And then guardrails, which is like, how much money are you willing to spend to chase this dream before it's actually dangerous? That's something that from a financial planning point of view, I'll map that out. So you see it coming a mile away.

37:14And when you reach, unfortunately, if you, I hope no one ever does, but if you reach a guardrail where you spent the money, that was the limit. A classic example, like bidding on a house for the first time. Okay, this is the ideal. Here's the higher price point you could go, but you'd have to change things about your life. And then here's the guardrail. Like, no, that's a hard no. If you reach the hard no, then if you saw it coming a mile away, it doesn't feel abrupt and it doesn't feel scary and it doesn't feel upsetting. You already knew it was coming and then you can say no and back away from whatever that first ideal plan was.

37:42Ben Felix:What do you see as the phases of a decision crisis? Well, if there is an emergency component to it, I would say the first part is that damage control. Like, let's make sure we're not making panic-based decisions or irrational decisions. Sometimes when the carpet gets pulled out from underneath you, you can make decisions that are not logical. And I have found that talking to people over 20 plus years, those who have deep financial regrets will say things like they got in the DeLorean, they go back in time and they're like, nope, I hate that decision. I made it out of anger. I was super mad. I was super afraid or I was overwhelmed and I just did the first thing.

38:16It's a decision that was made in a moment of crisis or in a moment of heated emotions and didn't work out. And now they blame themselves for that. That first phase is making sure that we're not making panic-based decisions if there's been an emergency. The second phase, or maybe the first phase, if it's not an emergency, I would say it's something I call the messy middle, which is just like, you're over it. You don't want to be making decisions anymore, but you still have to. Like a separation or a divorce is a really good example of this. It just goes on. There's so many decisions and you're just like, I'm over this.

38:46I just want the outcome, but you have to stay the course. And this is really when you need to figure out what are those deciding values that you're going to hang your hat on so that even if it doesn't work out, you're good. What are those pivot points? What are those guardrails? This is when the financial planning nitty gritty happens. How far you're going to go or how far can you push in order to get what you want before you let yourself on fire financially? That's our job is to like map that out. So that's where that happens. And then the last phase is basically just, I call it your next normal, which is, I hate the term new normal, but I think it was overused in the pandemic.

39:16But like whatever your next version of your life looks like. So if you retired on Wednesday, your life on Thursday looks drastically different than it did before. This is your next normal. It's like, it's going to become your normal life, but it won't feel normal at first. If you quit your job on Monday, Tuesday, it looks different. And eventually it'll feel normal, but it won't at first. So what does that look like? And if it didn't work out for you, how are you going to make peace with that? If everything worked out, you retire and it's beautiful, then who cares? Great. Good decision-making.

39:44If you went back to school and you got the dream job, great. Good for you. But what if, what if it doesn't work out? Then how are you going to square that with yourself? And that really comes back to all that planning that we can help people make and navigate with them so that they can look back proud, even if the outcome is not ideal.

40:01Ben Felix:I'd love to hear, particularly in a crisis, like you mentioned people making rushed decisions that they regret later. How do you coach people to make those difficult decisions in difficult times that they don't look back on and regret later? I use financial planning as my wizarding wand. So I have to call it my own bias here. I think someone that's coming to see me and paying money out of pocket is probably not going to make a abrupt, deep emotional decision because that person's already decided to seek advice and pay for it. So I probably have a slew of people, like a sampling of the population who is feeling emotional, but knows they shouldn't make a decision right now.

40:41The people that I have met over the years who made the decisions that they regret, they didn't come see me. They made those decisions in the moment and they didn't seek help. They just were overwhelmed. I think it would be something like, I would hope that everyone would seek out their financial advisor in those moments of crisis that they don't make decisions like that. But you're probably, if you have somebody who's already reaching out, you're already in a position to support them because they already know. So I think it's just more a broader conversation around if something's happened and it's going to impact your long-term finances in a big way.

41:17Get support. Get support. Call your financial advisor. Call a fee-only financial planner. Call somebody. Don't just do brash decisions when the stakes are high. We're not talking about ordering a pizza. We're talking about big decisions. I think everyone needs to get some financial support that isn't necessarily a chatbot.

41:33Ben Felix:Okay, let's shift to talking about retirement. How do household financial management dynamics change in retirement? This is something that's so interesting for me. I've worked with lots of clients over the year, getting them ready for retirement. And they're like a team, you know, everyone's rowing the boat together. We got a plan. In the last five to seven years, just before the pandemic, I started to see the new thing as my clients, as I'm aging, they're aging, retired. And then they come in for their checkups with me, or they reach out because something's gone awry. Being more this emotional part of it, you can see a little bit of it in the financial planning meeting just before they retire, where they are not on the same page all of a sudden.

42:12So that can happen in two ways. So they might have had the same dreams for their housing, how they wanted to plan for the kids' school, how they wanted to work, what they wanted to do, and they've never had to come to blows or they thought they had it. Then they get to retirement and turning off the income tap, massive, scary thing, right? Like if you spent a lifetime building, now all of a sudden you stop building and now you have to use those assets. People have different responses to that, very much so. And so I've really seen that some people are like, great, time to party. Like, let's go.

42:45We have a plan. We got our money. It's all working. Our planner said it was fine. Let's do this. And the other person is crippled with fear and cannot enjoy it. I don't know. You know, you hear the news and it's like, I don't know. There's a war right now. I don't know. We shouldn't do that. We shouldn't do that. And the other person's like, yo, we have permission. Like our financial plan is set and we have permission to do this. Like, what are you doing. And I think that that dynamic of somebody that's unable to spend the money when they retire is something that I don't think I'll have that problem.

43:12I was like, oh, well. And another partner who doesn't have that problem, that's a real dynamic. And I've also seen conflicts in a similar way of let's spend money while we're younger in retirement in our 60s and early 70s, because we may not later. And the other person being like, no, no, no, no, no. We might both need a lot of care. We are on lockdown mode. No, it's very scary on both ends. And so even though there's money, there's resources, and there's been a plan, we still end up in a place where as soon as the income tap gets turned off, these deep fears rear their ugly heads and we have to kind of navigate through it.

43:48Ben Felix:How do you think it happens that couples are on the same page? Like you said, they're a team rowing the same direction and are unaware of each other's different relationships with money. It's a new fear. It's like a couple who's so happily married, then they have kids, and then all these values come out of nowhere, and you have to figure that out. And you're like, well, like, I didn't know you were annoying like that. And like, I didn't know you were either. And like all those things. And then you either work through it or you don't. I think retirement is one of those major life transitions where it's a new fear that's introduced into your relationship unless you've had a lifetime of ups and downs.

44:24I suspect if you had two people who were like entrepreneurs, they probably wouldn't have that beef in retirement because they've probably been through economic roller coasters before. There's a higher risk tolerance and a long lens that can happen there. But if you've got two people who have just been doing the thing and they didn't have a lot of ups and downs economically, and now all of a sudden there's a tap turned off, it's a new anxiety that's introduced into the family and into the relationship, the stakes are higher. So you have to kind of refigure it out. And what people have been waiting for.

44:54This is supposed to be the golden years of you're done, of a life worked well and now your spouse is telling you you can't spend it? Are you kidding me right now? Like I get both sides.

45:04Ben Felix:You mentioned turning off the income tab and I totally get how that changes things. On I guess sort of the other side of that coin, how much do you think having to actually go and actively make decisions about selling assets plays into those difficult dynamics? I think it's a huge piece of it. So I don't see this with my clients who have pensions. I just don't see it because it mimics a paycheck and it's guaranteed income for life. If you have pensions or even one person with a solid pension and the money in the portfolio is adding to life, if the money in the portfolio is not for like housing and groceries and bills and daily life, then people are way less upset about it.

45:43It feels celebratory. It feels fun to take it. Let's go. That's because that income is still coming in. If you have a person or a couple whose sole retirement relies on an investment portfolio, which is more and more people, right, as pensions are less and less, then that is where I really see these dynamics cropping up. Again, not everybody, but I'm just saying it's happening. And I think it's because we've also had a lot of uncertainty in the world in the last few years, too. Since the pandemic, it's been a roller coaster. People feeling like when in doubt, do nothing, button down the hatches.

46:19Even as stock market returns soar, there's this sense of dread. It's all going to crash. It's all going to crash. That. And so I think it's impacting the behavior of people for sure.

46:30Ben Felix:Interesting. We don't use annuities as much as academic literature suggests we should, but we almost don't use them at all, honestly. But do you think annuities help to solve this problem? I'm not anti-annuity. How I work around this with people is I typically will suggest, and I would love to hear your thoughts on this. Maybe this is a little old school of me, but one or two years of whatever your planned RIF withdrawals are in GICs. If you're supposed to take$25 ,000 a year, then you'd have 25K in a one-year GIC and 25K for the next two-year GIC. And then the GIC comes up and it's like, hello, I'm mature.

47:04Do you need me? And then if stock markets are good, like, nope. And then you send it back under for two years and then you take your 25 from a rebalance and you send it off on its merry way. This way, what you can tell people in those moments of the stock market crash piece is you're good for at least two years. And I have even done this for three years with really anxious people. Like you could have an economic meltdown and you could lose half the value of your portfolio and you don't have to change a damn thing about your life for three years. And if we look historically at what's happened, that should be enough time.

47:39That has been a huge way to get people to say yes to still investing, yes to not moving everything to like a GIC or an annuity, and to have that like port in the storm. It is a drag on return. So I definitely adjust what I'm using in returns when I do a retirement plan. And I think that's important. I also show people how reliant on investment returns they are. So for example, if we moved everything to 2 % to just keep pace with inflation, how much could you spend then? Versus if we used 5%, 6%, which is 4 % above inflation and whatever, and they'll see the difference in the life. So you're still good, even if it's here.

48:20So be calm, okay? You're calm, but look how much more fun you could have probably, or look at the difference between here and here. It's worth it for you to take a little bit of that risk as long as we sort of lock down and then I'll navigate it somewhere in the middle and be like, cool, you have this cash wedge. That's for anxiety. And I think it's just good financial planning. And then you're invested over here. And then so we'll meet somewhere in the middle and I'll run that. And then people feel very calm. Oh, I could definitely get like three and a half to 4 % after fees. I'm like, see, it doesn't have to be 12%.

48:50It doesn't need to be 10%. That's a bonus. And I think that when we do those realistic plans, it helps people to take the money and spend it. And again, having a financial plan with cashflow projections, I show people, look how you can check in to see that you're on track year by year. And that gives them a sense of decision-making, puts the control back in their hands. Like, oh, that's a guardrail. So if it's below this, then maybe I wouldn't go on a vacation that year. It's just about giving permission.

49:18Ben Felix:Totally. We don't use the cash wedge as a rule, but we for sure use it for clients who are in the situation that you described, where if they're anxious about spending money or if they're really nervous about all that kind of stuff, then our financial planners will do basically what you described for the exact same reason. It's important. 100%. What effect does one person having been the primary saver have on retiree household dynamics? So sometimes no impact, and this is an ideal scenario. It has no impact. Lots of couples I see share the load. You do that. It is like in my household, I obviously run the money.

49:53My husband runs the tech and that's that. I have no idea how to even turn on the thing. what can happen and maybe what I think the worries are or what we would watch out for in a meeting is when there's a power dynamic that's behind that too so if someone's been the primary saver not even earner because it's not even about the earned money I'm talking about the person who sees themselves as more fiscally responsible there is an easy power dynamic that can exist which is borderline righteous, which can be like, I'm the saver, you're the spender. And it can be flirty and fun at first between a couple, but it can also lead to a deep resentment on both sides.

50:33So someone who's a saver can be like, what my goals are, are not important to you because you will not save with me. And the person who's the spender is like, you're insufferable. That dynamic exists throughout, not just in retirement. What I think the interesting part about that dynamic in retirement specifically that I have seen play out negatively, which is not most people, but something that I would say happens, is if there's a sense of, well, I got us here, I know what's best, I'm right. Because now that you have to take money out of the portfolio, again, going back to what we were just talking about, it's like a new fear in the relationship.

51:14This is a new thing, like having a kid. And so we're learning about each other as a couple and you're like, oh, I don't think I knew that about you. And there can be the sense that the person who built the portfolio gets the say in how it's spent. So if that person who built the portfolio wants to spend all the money in the next 10 years or a lot of it on travel, they're probably gonna think that they are due that and that that is their decision to make. And the other person just has to deal with it because they got them here. or vice versa, that person doesn't want to spend any money. And then the other person feels like, well, what have we been saving for?

51:49It comes down to the scenario planning that we can do as advisors to show all the different ways that it can go right and all the different ways that even if you do this, then it's okay. So there's that permission piece. And I think also sometimes just calling it out with a third party, just be like, wow, you two are not on the same page there. I'll say it. Wow, you really think you're right about that. What makes you feel like spending it is not the right answer. And often I'll get pushback. Well, isn't saving money good? Isn't it better that we take as little as possible? I don't know. You've been saving for 25, 30 years on your deathbed.

52:21Are you going to be stoked about that extra 40 bucks in interest that month? You tell me. It's your money. Having a financial planner and an advisor can help in those sticky conversations too, so it doesn't just get stuck in that rut.

52:32Ben Felix:The thing about the differences in spending being kind of flirty, it's a real thing. There's a paper called Fatal Fiscal Attraction that shows that people are more likely to end up with someone that has opposite spending tendencies of themselves. I mean, it plays out of my household. The joke went happily married. If I didn't have Shannon, I'd be like in a gutter covered in rubies. And I'm like, it's probably true. Like he loves to spend. In a gutter covered with rubies. Rubies. I know it's such a visual. He's a good time. In your financial planning practice, what questions do people most often want answered when they come to you?

53:11Fundamentally, probably the same as you. Am I okay? That shows up in so many ways. I'll get questions like, how do I make my money work for me? Are we on track? Can I afford this? But ultimately what we're asking is, am I okay in the end? And that's why I think that sort of long-term planning is paramount and critical for anyone over the age of 40. It's like a map across, if you went to do like a drive across Canada from Newfoundland to Victoria, if you do this many clicks a day, this many days, it'll take you this long and you'll get there by here is like, that's the plan that you need. And then obviously then the day-to-day stuff, like, well, we ran out of gas in Manitoba.

53:48I'm like, great, let's figure that out. Or like, oh, we decided to stay extra here. Like that is all the details of the road trip that will help on that micro timeline piece. but I think ultimately everyone wants to know if they're gonna be okay or are they gonna make it to the other side? Like, are you gonna be okay? And what do I need to do to get there is that next piece. Am I okay with where I'm at right now? And if not, what do I need to do to get there? And that's the piece that I think most people are scared to ask. What if what they need to do to get there is so big, they have to change so much about what their life is right now.

54:23And I don't know that so many people are willing to do that trade-off or they're scared of what that trade-off is going to be. Per our conversation at the very beginning, it's not actually that scary at all, especially if time is on your side.

54:36Ben Felix:What questions do your clients not ask that they should? Where I'm annoying them by bringing it up, even though they haven't asked me about it, is often their side investment account, their DIY investment account. They don't want my opinion on it because they're like, leave me alone. the diy investment account has been something that i have noticed i'm asking about now where i'm like do you invest on your own like do you have any brokerage stuff that because they'll send in you know their statements or whatever and i'll just ask the question and they're like well yeah i do and then i'm like okay i don't care is there a reason you didn't want to disclose and often it's because the nature of what is happening in that account is for entertainment purposes or fun stuff.

55:24So they've taken some big bets, or they have huge losses, or there's like crypto that they didn't want to share with their partner. There's a lot going on in those accounts. Not always. I have lots of DIY investors who like have an anchor portfolio and some ETFs and it's all good. I'm talking about specifically to answer your question, like what are some of the things that people aren't sharing? If someone has a DIY account that they have not disclosed to me, it's typically because they don't see it as part of the financial plan. And it's this little thing over here that they play with. Now, I have no problem with that.

55:53But I also think that it's interesting that they didn't want to bring it up. And I think that I always get curious about why that is. It's often because there's been like some losses in there that they're a little embarrassed of. And I think they don't want me to think that they're losing money for the family or anything like that. We'll just have a conversation about it. But I do find that's interesting and new.

56:13Ben Felix:That is interesting. You mentioned people with big losses. How often is it that they have like massive gains that they don't want to talk about. That happens too. Recently, the mag seven gains have been hard to contend with. As in with me saying, you should probably diversify some of that. People are like, no, I don't want to. And I'm like, okay, for the record, here's what I said. You do you. Just like I, for the record, here's what, that's not my advice is not to stay where you're at. I do think that people get emotionally attached to these gains. And I think a lot of people are confusing luck with financial savvy and skill.

56:47And that makes me nervous for some people, for sure, especially if it's heading into retirement in a DIY investment portfolio. That is worrisome. So I think when we start to see big numbers in that and there's an emotional attachment to returns that have happened without proper diversification, that can be troublesome.

57:04Ben Felix:So clients come in mostly wanting to know that they're okay. And like you said, same for us, like that's exactly what people want to hear. What advice or feedback have you found to be the most impactful for clients to hear? What we talked about, the dollar amount that they can spend if they make not a lot of money in the stock market and if they make a sort of more normalized amount in the stock market, knowing that bandwidth and how reliant they are on stock market returns and how much volatility they need to accept in their portfolio in order to get what they want. And that piece is so calming, I think, to know within today's Azure Tax dollars what your life will look like one day.

57:43I think it's so important. And then I think the second piece is the to-do list. This is interesting because I'm the only or advice only. So I am often like Gandalf and I'm like, go. And then I send someone else into Mordor. I don't go with them. They have to do it. So I make these amazing to-do lists for people that's like next week, next month, three, like all that kind of stuff. And it's like a checklist. And I think that's also, it takes this massive problem and it deduces it down into like very manageable steps where you're like, oh, oh, that's easy to do. I can implement that. So those two pieces, I think, are like the most important parts of financial plan.

58:20Ben Felix:How frequently does a typical household need to update that financial plan? That's interesting. I think the long-term big retirement plan, if you're retiring in five years, you need to be updating and meeting a lot leading up to it. But I think if you're between 45 to 60 and you're not retiring anytime soon, that plan would hold, I think you should update it every like five years just to make sure things are still like where they are. That doesn't mean you don't talk to someone in those five years, but I mean the actual act of revisiting the cashflow projections, if nothing monumental in your life has changed, then nothing's going to really be different about the assumptions you're making, right?

59:00Like if everything's going along, but I do think that meetings about smaller, more focused stuff, If we use our car analogy, like what am I going to do in Nova Scotia? Like that kind of thing, I think is really important. And I think I have a weird lens on it. I don't have assets under management. So I tend to hear from people when they need me versus like a super proactive where I'm like, I have to reach out and be like, this is happening in your portfolio. But I often will follow up with people on their action items and say like, hey, did you do that? Or like, has that happened yet? This kind of thing.

59:31when something monumental changes, they should be reaching out immediately, I think. So if anything changes, that long-term plan and inheritance, or there's been a job disruption and savings are disrupted, that's when I think we need to rebuild the plan.

59:43Ben Felix:How do you generally observe the frequency of planning, required planning updates change with increasing wealth or complexity? Like if someone has, I don't know, a very large taxable account or a corporation, does that change how frequently the plan needs to be updated? Yeah, I do. I think that the more complicated things get, the more frequently, more high touch you would be with somebody because there's just going to be more things that come up. So every tax season is going to be a thing. And especially if you're assets under management, oh my goodness, there's going to be so much more stuff going on with a non-registered or a hold co or something like that.

1:00:15So I think that that's a much more complicated situation that you'd have a lot more contact. Assets under management has more contact, just period, full stop. And then I also think even in my world, the more complicated someone is, whether it's emotionally complicated or there's something going on in the financial planning realm complicated, I definitely see more high touch. Mine tends to go like this with people. So there's a frenzy of activity around something and then it dies down and then there's a frenzy of activity around something and then it dies down again. And I would say the busiest, most frequently I meet with people is the three years leading up to retirement.

1:00:50We're besties because there's so many pieces going on and then also the year or two into it. So there's like a five-year period where it's like a lot of handholding.

1:00:59Ben Felix:In your experience, are there people who are not well suited to getting fee-only financial planning advice and then implementing things on their own? Yeah, I don't think it's for everybody. I think everybody in the world should have a fee-only or an advice-only financial plan at least once in their life, at least once just to make sure that you're on track. And that's not compared to AUM. If you're a DIY person, I think that you should at least have one advice-only plan that you're kind of working off. And if you're comparing it to working with an advisor that has AUM, I think that's a nice sleep at night factor to be like, oh, my people said the exact same think like great because there's a lot of questions around the bias sometimes right with aum when people reach out to me they i love my advisor i just want to make sure you know what i mean this i just want to make sure that we're all on the same page that can be a one-time thing for everybody but an ongoing relationship with a fee-only or an advice-only financial planner combined with either robo advising or diy which is the typical mashup for a long ongoing relationship i don't think it's for everyone.

1:02:00And I think it's dictated by the service level that they want with their investments. So for example, if you have somebody who has high complex investment needs, they might not want to be DIYing a hold code. They might not want to do that. They may not want to DIY or even do a robo at that point. They might want the more complicated service level. They want the administrative support. They want the go-to person, a one-on-one relationship. They want it and it behooves them because yes, there's fees, but you can see the fees in action for the services that you're getting. And if they have the big non-registered account too, it's tax deductible.

1:02:33So like there's all kinds of wins for it. So it's not that I would say that they shouldn't do fee only and DIY. It's that they probably could really benefit from having an asset under management situation because there's so many more touch points that are happening there. So I think that there's definitely a swath of the population. And I'm very open about that because I don't make money off someone, whether they do that or not. And a lot of people expect me to just push the like DIY agenda. And I do not. I really liken it to home renovation. There are always going to be people who want to DIY their own floors and they're going to talk to you about it at a dinner party, let me tell you.

1:03:10And they're going to mock you for not doing it yourself. And that's fine. Don't do that. I'll see you at Home Depot on a Saturday. There's also a bunch of people who are like, I don't want to watch YouTube videos and do my floors. I would just like to hire someone to do that. So if you hire a contractor that you know what you're asking, so you're not being bamboozled, you're getting good quality service, and you respect the person and enjoy the work that they're doing, and you trust them, like, are you a chump? No. Why wouldn't we look at financial services in the exact same way? That is just the level of service that I prefer.

1:03:48And we don't need to feel silly or sheepish about it. I don't understand this race to the bottom of DIY. Like I really love DIY investing, but I do not think that everybody wants to. I know that not everybody wants to. So many conversations I'm having with my clients, they're like, I don't want to do that. And I'm like, you don't have to. But there's this rhetoric about like paying fees and somehow that is shameful. But I think that that context is coming from like so many decades of the industry being hidden fees and very expensive and all that. And we're pivoting and shifting and not everybody's like that.

1:04:20So I think that it's a lot of just awareness around what those different options are for people. And then often too, when you get into assets under management, there's a swath of the population that can't be included in that because they don't meet the investment management minimums. I often see the journey as maybe you DIY and robo. And then when you get us to a certain point, you decide at that point, if you still want to do that, or if you want to go into the sort of assets under management, because now you qualify for it. It's a journey and you don't have to choose one for life.

1:04:48Ben Felix:You mentioned DIY and robo being the common ways that fee-only clients are managing their investments. Is that mostly what you see? With the ongoing, like Shannon's my girl for life. Yeah, they're probably DIYing it. But I have people who have an advisor. They are in the traditional financial advisor model, but they are not high net worth and they do not have a dedicated relationship where they feel very cared for. So they see that as like the person they send money to that their brother knew because they only have a few hundred thousand dollars. I don't mean that to be so glib. I just mean they don't qualify for the hundred thousand.

1:05:24So I have a lot of that. So, so many people that still work with an advisor, but they see me consistently. That's because they don't feel like they're getting this advice. They don't feel like they're getting the planning and they are aware that firms that do more tailored financial planning and all those services exist, but they do not qualify for them yet. So I am doing that for them in their forties and fifties and into 60. And then I'm like, hey, are you ready at this point? And I think that what we might see in the next generations coming up is like a big shift from people who have done DIY or robo their whole life, getting up to 60 and wanting that real handholding.

1:06:01And now they qualify and they come from that service that they were never able to get to before. And that might be a really interesting shift that's about to come because it takes longer for people to get there now, unless they inherit the wealth from the wealth transfer, which is also happening as we speak.

1:06:16Ben Felix:Your perspective on this stuff is very sober, I think is the best way I can describe it because there's a ton of really strong opinions. You kind of mentioned it of how if you go on Reddit or in the RationalMinder community, which is full of people who are like hardcore personal finance nerds and you ask, should I have a financial advisor? They're all going to say, no, you're an idiot. You should go to a fee-only financial planner. It's the only thing you could possibly do. I think that that's not always the right thing for everybody. No, I think there's a time and place for all the service levels.

1:06:44I think there's a place for all of us. And I genuinely believe that. I mean, obviously, I dig the fee-only vibe, but I also have no resentment. The only thing I resent is high retail fees with zero service. That is not all assets under management. And I think that's the missing piece here. And maybe that's because I came from the assets under management, high net worth world where I saw reasonable fees that were transparent and beautiful with lots of service and financial planning, like right out the gate, that I knew that this always existed. But I don't think that's the experience of the average person.

1:07:21I agree that the high MERs and the fees and all that stuff for no service, thumbs down. But if we're talking about high net worth, assets under management, where you get a lot of service for that, that's great.

1:07:33Ben Felix:For the right person. And And DIY and fee only is great with the right person too. Exactly. Think about your floors. Are you going to do them yourself? You want to hire a professional? It's up to you. We had one of our financial planners use a cooking analogy. Like, do you want to buy a cookbook or do you want to have a personal chef? Exactly. Same idea. And so what we're talking about here though, which is interesting, chef, the contractor, we're not talking about performance. And that has been a big shift in the way that working with advisors has shifted and pivoted in the last little bit of time, which I think is a crucial pivot because it used to be invest with us, pay us fees and we'll get you performance.

1:08:11And that is just not in your control, my friend. And I think that's also what made people angry about the financial industry because it's like you're promising returns that you can't guarantee that. So you're just charging these fees and I'm doing the same performance over here. And then you get into that comparison of performance game. It's not really about that, is it? So I think that that's why the industry needs to shift to like high touch client service for a fee that's asset center management. You have fee only and all the DIY robo or like middle stuff there. And then there's going to be DIY financial planning at some point too.

1:08:43That's already here.

1:08:44Ben Felix:If that is true though, why is our industry so slow to embrace the power of indexing? Don't know. I think that number one, there's just been a lot of investment time into analysts and where it's been and where it's going. I don't know that it's slow to changes and like there's always a good compliance aspect to it. I believe that there is opportunity at some point. I think it depends on what we're talking about. So are we talking about active management in a product or are we talking about active management like in selling mutual funds? Are we talking about like actively managing an asset mix for someone?

1:09:18Ben Felix:You're proposing the value prop is not necessarily about performance. Now that is true. and why not capture the market returns? But Canada has been notoriously slow to embrace the power of indexing. Yeah, it's true. If I knew, I'd probably run the world, Cameron. I don't know why. It's such an interesting question though. It's the question. Is it a legacy issue, lack of awareness? And you could have a whole swath of clients who are in that active world, not even seeking out performance. They might just not even be aware of indexing or the power of indexing. My view on this is informed by the fact that even in the US where indexing has gone up in public markets, traditional active has gone down, but we've instead seen a whole bunch of new quant products and a whole bunch of private assets products.

1:10:04Ben Felix:And I think a lot of the money that left traditional active has gone into these other, in some cases, even more expensive asset classes. So there's just misaligned incentives in asset management. But Shannon, when your clients are DIY investing, are they just buying index funds or are they doing all kinds of other funky stuff? Both, but mostly index funds. So I usually help to really promote the idea, like if you're going to DIY, like have an anchor portfolio of like boring, well-diversified, low-fee ETFs. And then if you want to have your fund side account, go get it. Here, do this. Don't do it with more than this much money, basically.

1:10:40Here it is. Hive it off. and that works really well for people because they feel like I haven't just made it all boring and not exciting, but at the same time promoting that, here's the anchor piece and here's that side piece. But yeah, I would say ETFs and especially with all-in-one ETFs, it's really made it so easy.

1:10:56Ben Felix:Sure has. You mentioned the rise of DIY financial planning and I think that's happening a couple of different ways. I think there are increasingly available online financial planning tools that are available to DIY investors, which historically has not really been the case. And AI is just getting, I mean, it's still pretty error prone in a lot of cases, but it's getting pretty good at answering financial planning questions. So you take those two things together. I'm curious, what aspects of the financial planning process do you think cannot be replaced by technology tools? The human emotional impact of it and the curation of conversation.

1:11:31The AI is going to feed off of the data that you give it, but it may not ask some of the hidden questions that we were talking about. I think that it may not be able to like read the room. And when you're really doing deep financial planning work with people and not just spitting out cashflow projections, that's been possible for years. Cashflow projections spat out by the internet has been around for years. Now it's just in a nicer package, right? So you don't have to be as much of a financial nerd to know how to access those things. I think that there's still an aspect of the emotional connection with people that will be there.

1:12:07So here's how I think it will impact me, if not already, is maybe the frequency in which I see clients would go down. So, for example, somebody might still come to me for the big plan and they might still reach out to me and they're in a crisis and they might still reach out when something big has happened. But on the should I go variable, should I do this? Can I afford the lease on the car? Like maybe those things will go down. And as a fee-only advisor, that's billable time. As an asset center management, everybody's like, phew, thank God. As a fee-only person, that's billable time that's going to go down.

1:12:41So I could see that happening. But I also think in the same way that I believe that there's something for everyone, I'm not sure that people who would want to use a chatbot for financial planning were ever the people that might have come and paid me big money for a financial plan. I think that there is an appeal to working with financial planner as a service level that will still appeal to people who have complicated, complex needs, both emotionally and financially, in the same way that assets under management didn't die just because robo-advisors existed, right? There's still an appetite for it.

1:13:17And now we just have people that can slot themselves in somewhere accordingly. There were so many people when the TDE series came out and everyone was like, DIY, when that all started, there were so many people who didn't want to DIY, but they just were so sick of how expensive the MERs were. And then they feel like they got forced into this place because there wasn't another service model that could support. And now we're just seeing the dawn of all kinds of different service models. So I do believe that this isn't the end for any of them, except for maybe high expensive retail products that don't offer service, which like, good.

1:13:52Everyone can just slot themselves in accordingly on what they prefer. And it may be a lifelong journey in the sense that for a few years, you do it this way. Then a few years in your life, you do it this way. And then these decades are marked by this. And we might just interchange those service levels throughout your life instead of it being like, I work with this person for life. Like, it's like, maybe it just changes as you change.

1:14:16Ben Felix:Was it a hypothetical that people will start reaching out less frequently? Or do you think that's actually happening? Right now we're so busy, so I can't tell, which is like a blessing. I'm not complaining. but I do feel like how I think that or why I think that is I've already seen it in conversations I'm having. Someone will say to me like, is this something I could have asked AI about? And I'll say like, maybe, totally. And I'm okay with that if that is what you need to do. Or I'm having people that have said, hey, I asked AI already, but I wanna hear what you said. That's already happening.

1:14:49So I may not have seen a dip in those sort of micro planning sessions yet. might come to be. But I hope I'm not naive about this. I want you to be destitute and bankrupt in like a year. It's like, whoops. Yes, I was. Yeah, but like, I would like to think that there's enough business forever. Like we already are so busy. We have like a wait list. So if I lose some of those little meetings that maybe it makes room for other things for clients who are new, who can get in sooner, for existing clients who have bigger lives. I'd like to think that maybe it would just mean that we're all just a little bit less busy instead of it being this absolute total disruption of our industry.

1:15:33Ben Felix:Where my mind goes is busier with higher value things. You're not having those micro conversations about which mortgage to take, but you're talking to somebody else with some bigger problem that they couldn't solve with AI. Yeah, exactly. That's what I like to think about it too. And 3am, Shannon can have different thoughts. Day to day, Shannon, And she's pretty chill about it. All right. Our final question for you, Shannon. How do you define success in your life? I think that the success in my life is how much time that I get with my family. I know that that sounds so trite, but I enjoy my job a lot.

1:16:06And it also, I run my own business. So I get to be flexible on like when and how things happen for myself. And that to me has been such a gift to feel like I like my job. very passionate about it still after 20 years. That's a lot. That's so cool. I am the pizza lady at pizza lunch. That's awesome. And then I also am so busy and work my butt off when I want to, like when I say it's time to, not that kind of flexibility. So for me, the success of my life has been that this business has given me purpose and meaning and wisdom in ways I cannot even fully grasp yet and the freedom and the flexibility to like balance it with being a mom as well.

1:16:51And that to me is like such a gift.

1:16:52Ben Felix:Great answer. This conversation has been a total blast, Shannon. Thanks so much. I've had a total blast myself. Yeah, it's great. Thanks so much, Shannon.

1:17:04Hey, everyone. It's producer Matt. Thank you so much for tuning in to this week's episode. Before we sign off, here's the disclaimer you've been waiting for. Portfolio management and brokerage services in Canada are offered exclusively by PWL Capital, which is regulated by the Canadian Investment Regulatory Organization and is a member of the Canadian Investor Protection Fund. Investment advisory services in the United States of America are offered exclusively by One Digital Investment Advisors, LLC. One Digital and PWL Capital are affiliated entities, and they mostly get on really well with each other.

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