Not About The Money

Not About The Money

By Not About The Money
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Not About The Money episodes

  • Ep. 27 – Interview with Shina Culberson – Maximize the Value of Your Small Business Today

    Welcome to Real Financial Planning





    Opening notes:



    Shina has worked in business valuation for over 20 years, and yes, she boxes too.



    Our conversation covers common mistakes in small business valuation; a tragic story of how a business owner was blind sighted by the reality that she didn't plan her exit well, and how a firm that took a proactive approach to exit planning really cashed in.



    Start planning your exit today before it's too late.







    Quotes:


    "Most business owners do not have an exit plan. For many, the thought of leaving or selling their business is akin to death – something they don't want to contemplate and therefore ignore."

    "Think about your exit first, so you know how to run your business."

    "The average business owner grossly underestimates the value of a business. It should be appraised every few years."

    "Investing in marketing and sales has a 5x to 10x greater return then investing in fixed assets."

    "My perspective is...80% of the problems we face taste like chicken...It does not change business-to-business, size-to-size, industry-to-industry."

    "Without knowing the deal structure, it's really hard to know if a 10X transaction multiple is really a 10X transaction multiple."

    "You may think it's always about getting the highest price, but the highest price may come with consequences."

    "That's why you need a team. I don't think a business owner could do it on their own, and I couldn't either."

    "80% of an owner's wealth is tied up in their company, and 78% of Baby Boomer owners do not have plans on how they are going to exit their business."




    Show Notes



  • Introduction [00:00 – 03:59]

  • Think about your exit first, outside third-party versus key employees over time. [04:00 - 05:51] 

  • Part of this is about what type of business you run.

  • What is your timeframe? This dictates how you run your business.

  • What is your ratio of "in the business" versus "on the business?"





  • Question I get a lot: is revenue growth or profitability more important? [05:52 - 08:17]

  • I all depends on the industry, exit, and what you want out of your own business and lifestyle



  • Most small business owners don't calculate their small business into their net worth [08:18 - 09:02] 

  • How much is a business really worth?



  • How a business owner overvalued their business [09:03 - 16:49]

  • Most often what happens...Owners get emotionally tired.

  • A client was certain she could sell for $2M.

  • After valuing the company at half that value, and 40% out for taxes, you're left with a lot less.

  • What drove the value down?

  • The employees underpaid themselves to reinvest into the company.

  • Buisness owners either don't take enough income out, or business owners take all the money out to limit their tax liability.

  • It's hardly ever right.





  • Contract issues, some had been let to lapse; they were delivering a product more in good faith.

  • Contract workers, transient workers also contributed.
    • 1 hr 23 min
  • Ep. 26 – Interview with Jack Lipski – How to raise your kids so you never have to financially cut them off

    Welcome to Real Financial Planning 





    How to raise your kids so you never have to financially cut them off, or for adult children, how to cut them off today.



    Jack Lipski is a dad, and 40 year+ child and family therapist. He's been teaching Love and Logic classes for over 20 years. I took his class 5 years ago.





    Opening notes:



    Jack is 64, and he's in 30 year-old shape.



    When I asked him how he stays trim, he replied, low stress from a loving wife, and great kids...



    Not only will you learn about how to have the hard conversations with your kids, but also what not to do to get yourself "there."



    Jack's been an educator, and a counselor for over 40 years.



    We missed it...



    He wishes we would of covered the optimism he sees in new dads. "My generation" (as he calls it) has not regulated themselves to a "don't bother dad" he's had a "long-day at work" way of life. Kids in his era were taught: Dad's work. Don't bother them. That's it.



    A new generation of engaged, contributing, nurturing members of the family team have emerged, and he loves that trend.



    I ask him right before we hit play what his parents taught him about sex...



    Listen to his response...




    Quotes:


    "Equipping kids is better than protecting; we're not saying you leave a two year-old out in the street, and see what happens, but we want them to be equipped...We want them to recognize the real world, and not be scared of it."

    "More than half of all entering college freshman are on an anti-depression, anti-anxiety, or sleep aid…a lot of young adults are emotionally fragile."

    "A lot of kids are so rescued, so coddled…So often told they can do anything, be anything, and their special in everyway; it hampers them from seeing reality."

    "Responsibility should be given to a kid as soon as they are able to handle it."

    "You might want to give them a task they may not succeed at because failures and mistakes are really positive learning tools."

    "It would just be easier if I just do it…Of course it would be easier. I assume it would be easier: you're an adult."

    "We don't give her praise for breathing; we give her praise for actually doing something."

    "In the name of love, often times we do things supposedly for our kids that are really more for us, so we can feel good about our parenting."

    "There is a peer pressure for parents around what they do for them...Often instead of what opportunities they give there kids."

    "When kids are used to instant gratification, we have robbed them of appreciation."

    "It doesn't matter what you can afford. You've missed it. The point is, will they appreciate it?"

    "I want my kids to learn about sex from me and my wife mostly, before they learn it from Hollywood, or from the internet, or from their peers."

    "You hope and pray that they have some failures with money when the consequences are small."

    "The agony, the ecstasy of parenting. They transform us, hopefully we can transform them."

    Show Notes:



    1 hr 30 min
  • Ep. 25 – Interview with Ernie Zelinski – Getting fired can turn you into a international bestselling author

    Welcome to Real Financial Planning 





    Ernie Zelinski, international bestselling author of How to Retire Happy, Wild, and Free and The Joy of Not Working. 



    He's sold over 1,000,000 books internationally. In this episode, we cover his early days, philosophy about life, and writing process; most importantly, we cover how a firing can turn into a huge blessing.



    How to Retire, Happy, Wild, and Free is #1 on the U.S. NEWS list of 10 of retirement books. AARP acknowledges it as one of the six retirement books you should read.


    This summer the Wall Street Journal selected How to Retire Happy, Wild, and Free as one of three financial books that should be on your summer reading list.



  • Ernie explains the three most important basic human needs working or not

  • How to create a new purpose and identity

  • His classic "get a life tree"

  • His "easy rule of life"


    • If your identity is your work; you struggle to construct any worthy pursuits outside work, and you rank everybody you know by their job and title this episode is for you.






    Interviewing Ernie was fun.


    He's full of creativity with so many unique mental models and funny sayings.


    He helped me break the mindset of work, work, work, retirement, death.



    Thank you again Ernie.




    Conversation highlights: 


     "The best thing that ever happen to me was getting fired; it was traumatic at the time, but now that I reflect on it, it was the best thing that ever happened to me." 

    "Who am I to write a book; I failed English four times in engineering."

    "Some people read the Joy of Not Working, and they quit their job right there."

    "I've never been a fan of hard work; I'm also not a fan of teamwork by the way."

    "It's much more valuable to put in subpar work on the right project, than excellent work on the wrong project. That's the problem with many hard workers; they are working on the wrong projects; they ain't going to get any payoff."

    "You can't have any errors…that's…that's garbage. (In the first version of) The Joy of Not Working, I realized two or three years later, I had 150 spelling errors in it. If you have great content, people will overlook that."

    "Don't listen to people in the industry particularly people that have been in it a long time…There in it because they aren't smart enough to go onto something else."

    "Easy rule of life: if we do the easy and comfortable, life is difficult and uncomfortable. If we do the difficult and uncomfortable, life is easy and comfortable."

    "You have to have the ability to make commitments, and stick to those commitments no matter what, and don't let your mind make-up excuses."

    "I drive a 1995 Camry that's looking ratty; I like to drive a car that doubles in value every time I fill it up with gas."

     
    1 hr 5 min
  • Ep. 24 – (303) Series: Sell a Home for $2,500 – Interview with TRELORA CEO and Founder Joshua Hunt
    Welcome to Real Financial Planning 

    This series is for the (303) area code

     

     



     

    Everything you wanted to know about TRELORA selling your home for $2,500, the real estate brokerage market, and... 

    How to DISRUPT YOURSELF to pursue who you really are. Even when everyone assumes you have everything THEY could ever want. 



    Interviewing Joshua Hunt with TRELORA Real Estate was a blast.

    I learned so much from Joshua about the real estate industry, how to buy or sell a home for $2,500, and most importantly, about living a REAL authentic life.

    Joshua has an amazing personal story!

     

    TRELORA has saved home owners $43,374,824 as of July 30, 2018, and with a second location in Seattle, they are hyper-focused on saving you money.

    Thank you again Joshua.

     

    Conversation highlights: 
    "Or...Maybe...Your son is on the lacrosse team, and wanting to be the goalie, and the coach's wife is an agent, and you know full-well that if you don't use his wife, your son will not be the goalie...It is absolutely a true story."  

    "Every time we put buyers and sellers together our workload goes down, and their satisfaction goes way up."

    "Number one complaint from buyers and sellers for years: I can't get ahold of my agent, and I don't know what's going on."

    "This industry is poisoned with obscene margins; an agent can see a 30% to 40% profit margin; their franchise owner can see a 30% profit margin; their regional owner can see a 30% profit margin, and international can see a 30% profit margin."

    "The human connection is far superior than people give credit to."

    "Warren Buffett says investment managers take too much in fees, when asked about real estate agents taking 5% to 6% of a home sale, he says, 'That's different.' Think it's because Berkshire owns a big real estate company."

    "I lived in a 10-bedroom house, I had 6 kids, two dogs, a fish, a turtle, and a beautiful wife. I sang in the church, and I had what every man was trying to get, and I was miserable."

    "Rest assured, when some of these larger brands go bankrupt, I'll be in the front row of their bankruptcy hearings, but that will be out of kindness to support them in their next endeavors."

    "In order for life to move forward...something is dying...it's life, right?"

    "Happiness is wherever you go, and if you can't find it here, it's certainly not there, because no matter where you go, there you are." 

     
    What you'll learn and hear in this episode:

  • Joshua's early days and getting started in the real estate business [05:10 - 06:55]

  • There's a lot of companies trying to do real estate, but not too many disruptors are real estate guys doing technology [06:56 - 07:50]

  • Joshua's persistence to get Monty Moran (the ex-CEO of Chipotle) to meet with him and join TRELORA; he tried for almost three years to meet Monty [08:08 - 11:44] 

  • Buyers pay everyone; friendship does not equal a fiduciary [12:10 - 14:50]

  • A buyer agent is not free; the more I pay for the house; the more my representative gets…



  • WHY It's against the law to post real estate commissions on MLS; lobbying through the National Real Estate Association [14:58 - 19:21]

  • How the fragmentation of the industry will bring it down



  • If we know people are overpaying in real estate transactions,
    • 1 hr 6 min
  • Colorado 529 Plan – CollegeInvest – Podcast Interview with Brennan Hannon

     

    Everything you wanted to know about the Colorado 529 Savings Plan (but didn’t know, or were too afraid to ask)

    Please join me with Brennan Hannon, Advisor Relations Manager at CollegeInvest, as we talk about all things Colorado 529, and 529s in general.

     

     

    This was very fun, and Brennan was an amazing first guest.

    We’d talked about shooting this since January (originally doing a YouTube video), and he still pulled the trigger, and held his breath for our first episode as a guest on our podcast.

    If you are a CPA, or another advisor, call Brennan if you need any help with our Colorado 529 plan.

     

    Conversation highlight(s): 

    “It costs about half as much to save for college, then it does to borrow for college.”

    “All you need to open a Colorado 529 plan is a name, a social security number, and $15.”

    “About 70% of people expect a merit scholarship, and about 11% end up with one. When they do it’s about $6k on average.”

    “Athletic scholarships pay more, but only about 2% of all students end up with them.”

    “There are no student loans for retirement, if you don’t save, you’re in trouble.”

    “If you had an infant today, and you wanted to pay for all their college education…At a public in-state school you’d have to put away $650 a month….If a kid is 10, it goes up to a 1,000 per month.”

     

    Before we get rolling, three things:

    (1) Brennan and I tip-toe across things that could be interpreted as advice. We are only providing education.

    Advice is personal.

    Ask a qualified professional about your personal situation please don’t get yourself into trouble, and then blame us.

    Please.

    Thank you.

    Please.

    (2) I know we have out of state listeners. Though we are going to talk about the Colorado 529 plan, we also cover the basic structures of all 529 plans; be sure to research your own states plan with a professional before looking outside the state.

    (3) Also, I provide a teaser in the episode about free money, and then Brennan and I get so excited, I skip right over it.

    Let’s knock that out now:

    Grants: https://www.collegeinvest.org/matching-grant-program/

    Please check this out!

    Dollar-Dollar matching up to $500 dollars!

    • You must be a Colorado resident.
    • Your Beneficiary (child, grandchild, etc.) must be 12 years old or younger at the time of the initial application.
    • You can get the grant for 5 years per child.
    • You must be able to claim the Beneficiary as a dependent for federal income tax purposes.
    • Your 2017 Family Adjusted Gross Income (AGI) from your tax return, as described in CollegeInvest Matching Grant Program TERMS & CONDITIONS, needs to be at or below the figures in the income eligibility chart below:

      • Scholarships: https://www.collegeinvest.org/collegeinvest-529-scholarship-colorado/

       

      UPDATE, fees for the Direct Plan:

       

      What you’ll learn in this episode:

      • What’s a 529 plan: how’s it work; who can contribute; how much they can contribute; what are tax benefits, and who can own it [intro minutes and throughout the episode]
      • Specifics for Colorado: history, investment options; taxes, and cost [intro minutes and throughout the episode]
      • State tax deduction for Colorado residents, and how that works [18:45 – 19:40]
      • What you can and can’t use the money for? [19:57 – 29:20]
      • What qualifies as a institution, according to FASFA? [21:51 – 23:10; 27:00 – 29:20]
      • Can you use a 529 withdrawal to pay the rent for your family member if they live in your rental, and are enrolled in a qualified education institution? [24:15 – 26:52]
      • What to do with leftover balances if there is any. How to build an quasi-education trust through a 529. Can you keep the balance forever? [29:00 – 30:59; 32:30 – 33:39]
      • What if your child or grandchild gets a scholarship? [29:20 – 34:20]
      • What certain situations avoid the 10% non-qualified withdrawal penalty [29:90 – 34:20; 55:20 – 58:10]
      • What you can do if you get a windfall [34:20 – 37:30]
      • Can my kids blow the money? [37:05 – 37:30]
      • Other college savings alternatives people think about [37:30 – 43:54]
        • UTMA/UGMA
        • Real estate
        • Roth IRAs
        • Permanent life insurance
        • How contributions could affect future financial aid considerations, and strategies! [45:00 – 46:30; 50:07 – 55:20]
        • What qualifies as a family member, according to the IRS? [44:24 – 46:56]
        • How soon can you start saving for an unborn child? Start after daycare! [46:57 – 49:47]
        • ABLE accounts for children with disabilities? [57:04 – 59:23]
        • Update on the K-12 law change for using funds for private school [59:25 -1:05:04]
        • How you can benefit if your kids are going to college now (like today!) [1:05:05 – 1:08:59]
        • Company tax breaks with credits (even for a business of one, but, check with your CPA!)  [1:09:01 – 1:14:15]
        • Changes to the Direct (Vanguard choice) asset allocation [1:14:16 – 1:19:27]

          •  

          Show Notes:

          (1) Colorado 529 grants: https://www.collegeinvest.org/matching-grant-program/

          (2) Colorado 529 scholarships: https://www.collegeinvest.org/collegeinvest-529-scholarship-colorado/

          (3) Colorado 529 business tax credits:  https://www.collegeinvest.org/workingfamilies/

          (4) Changes in asset allocation within the Direct Plan: https://www.dailycamera.com/boulder-business/ci_31740506/changes-afoot-college-savings-plans

          (5) Updates for the K-12 ruling: https://www.collegeinvest.org/register/

          (6) Investment/savings options for Colorado 529: https://www.collegeinvest.org/529-savings-plans/

          (7) ABLE accounts for children with disabilities: https://www.coloradoable.org/

          (8) Active managers blowing up 529 plans: https://www.wsj.com/articles/SB101192982010000000?ns=prod/accounts-wsj

          (9) Who is a “qualified” family member, according to the IRS:  https://www.irs.gov/pub/irs-pdf/p970.pdf

          (10) What is a “qualified” institution, according to FASFA (search): https://fafsa.ed.gov/FAFSA/app/schoolSearch

          (11) 529 data sheet: https://www.collegesavings.org/wp-content/uploads/2015/09/0518_CSPN_EOY17_Embargoed.pdf

          (12) 529 state balances: https://www.collegesavings.org/wp-content/uploads/2015/09/December-2017-529-plan-data-5.14.18.pdf

          (13) States are in limbo with whether funds can be allowed for K-12 expenses: https://www.wsj.com/articles/states-worry-you-may-claim-529-tax-exemption-for-k-12-school-tuition-1518780605

          The post Colorado 529 Plan – CollegeInvest – Podcast Interview with Brennan Hannon appeared first on MARGIN.

          1 hr 21 min
        • Ep. 22 – 21 Questions (Series) – 21. What do you value most in client relationships?
          Welcome to the Real Retirement Financial Planning Podcast.

          This series covers the 21 Questions to Ask Your Financial Advisor.

           

          The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

          Responses to Jason's questions I read from other advisor websites lacked depth.

          "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

          The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.

           





           

          21 Questions to Ask Your Financial Advisor

          21. What do you value most in client relationships?



          This is my last question:


          AT MARGIN, client relationships are THE most important thing, but they need to be mutually beneficial: margin (value) needs to be added to both parties. 

          Yes, you get rigorous financial planning.

          Yes, I earn a fixed fee.

          But it's not enough.



          Our clients get it. What I really value about relationships

          Customer relationship managment software to remember your birthday, and BS with you, that's not a relationship.


          A boardroom where suits are as fake as the table you rest your arms on is not a relationship.


          When clients tell me about their life, and offer wisdom about their journey, and share something about marriage, family, or legacy, that's a relationship.

          I've cried with some, laughed so hard my face hurt with a few, thought deeply about life with others when they share loss, and confided about my insecurities, and asked for advice at times.

          That's a great relationship.

          Vulnerability.

          Trust.

          Doing great work for an honest margin.



          Goodbye for now

          Thank you so much for being a part of this series.


          I hope this 21-part series answers a lot of the questions you have around how to find the right financial advisor.

          And.

          Not only what questions to ask, but the context, color, and essence behind all the "yes" and "no" responses.




          Are you thinking?

          How much can I take out of my portfolio without running out of money?


          How much and where do I really need  to save for retirement, or when can I say, "I'm outta here!"?


          How soon can I leave this "corporate" job I hate to do work I love, and can I financially afford it?


          I'm making a lot of money, but I miss my kids, and I'm worried they'll grow up entitled, how do I work less, and educate them about money?


          I want more harmony in my marriage about money, I wish we were on the same page.


          What about now? I might be dead in 10 years, how can we start designing my life with my finances today?


          I really should get a second opinion on my portfolio and financial plan.


          Our parents need help, and I'm worried they're paying too much in fees, or not working with a fiduciary that does rigorous planning at a fair price.


          I have a 100 page "financial plan" but no spec...

          7 min
        • 21 Questions (Series) – 20. What is your professional background?
          21 Questions to Ask Your Financial Advisor: 20. What is your professional background?
           

          This is my question. Not one of Jason's questions.

          I didn't come from a "traditional" background working as an advisor for my entire career though I've always worked in finance.

          I've worked as both analyst in valuation and product development, and traditional wealth managment role at a Private Bank as an advisor.

           



           

          Yin and Yang

          Being an analyst and advisor require skill sets that contrast each other. Once is very technical, and one is deeply personal. It's a harmony of those skills, and getting just the right blend in each situation that is key.

           



          Working in valuation

          My training as an analyst began in healthcare valuation. Valuing physician practices, ambulatory surgical centers, and valuing joint ventures.

          I learned to be (extremely) paranoid of everything—including my own work. Mistakes. Errors. Footnotes. God, I'm getting cold sweats typing this. Every number is sensitive. Some variables drive a valuation more than others. You are constantly asking yourself which ones are important? Adjusting a working capital assumption. A discount rate. A growth rate of revenue. What has the most impact? Sometimes you start feeling like a God. But then quickly learn you just don't know. Your work, ya, it's inheritably going to be wrong. So, it just needs to be reasonable. Plus, it won't transact at your price either. Take it easy, put away the Oscar speech.

          The most important thing I learned is that you need to know ALL the assumptions. All of 'em. Where they came from, and why you believe them. Especially when you let a physician, attorney, and a hospital executive tear your analysis a part trying to get the value they want. In front of a board room, if you don't have an explanation, you're dead, and so is your valuation.
          "You guys better sharpen your pencils."
          Ultimately, being tied to a desk, and using excel shortcuts to build financial models for 50+ hours a week was not something that was highest best use for me. I wasn't the best at it. I longed for deal making. People. Humans. Not spreadsheets. I need some of that, but not all day every day. It was amazing discipline though, and I learned an immense amount of both practical and conceptional information on the how's and why's of a companies value. Seeing cash move through a discounted cash flow model changes you. It's a religions experience building one from scratch. Amen, I never will never have to do that again.

           



           

          Working in product development

          I'm not sure how or why, but at Transamerica in my late twenties I helped start conversations, and lay the groundwork with all department for them to launch ETFs. Within three months, I knew the heads of every department in Denver. Ask people I worked with, I was always getting into trouble.
          "Eric is too proactive, please tell him to stop meeting with people."
          So they prompted me fast to work in a team right under the CFO. I was in way over my head over day. Great white shark water. Everyday. Every conversation. You learn what everyone sees. Trying not to get eaten. Strategy doesn't begin to explain it. Decades of depth and expertise in all departments where I got to ask dumb questions.

          Lens for all the stakeholders: sales, marketing, accounting, compliance, actuaries, investor relations, and the executives. Everyone has a lens. Then you have the external stakeholders: competitors, investors, other executives, and the media. It's constantly understanding who sees what, whether it is important or not.  When I worked in competitive research, everyday was like a stand up comedian getting boed,
          4 min
        • Ep. 20 – 21 Questions (Series) – 19. Who manages your money?
          Welcome to the Real Retirement Financial Planning Podcast.

          This series covers the 21 Questions to Ask Your Financial Advisor.

          The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

          Responses to Jason's questions I read from other advisor websites lacked depth.

          "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

          The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.









          21 Questions to Ask Your Financial Advisor


          19. Who manages your money?


          Jason says you should listen for: "I do, and I invest in the same assets I recommend to clients."


          At MARGIN, we use passive investing with light factor exposure (risk premiums) systematically just like I recommend to clients. 

          No, I don't "time" my own money, or get cute looking for angles. 

          I eat my own cooking.

          But.

          I'm in my 30s, so my asset allocation is different from most of our clients due to our respective time horizons. 




          Will passive investing loose it's superiority?


          If you're a diehard Vanguarder, and/or efficient markets believer, you may feel it's a high "impossibility" for passive to loose ground.

          Ever...

          You're thinking: It's all marketing. He's trying to get my money into higher fee investments; those "wall street guys" are at it again.

          Nope...So...Please...

          Don't see this inquiry into a possibility as an attempt to overcomplicate, confuse, or sell you active management, so I can create a problem to solve.

          That's not the goal.

          Evolution takes no prisoners, and either does capital markets.

          Things change.

          This was summarized by the Grossman-Stiglitz Paradox: If everyone accepts the market is "efficient," the market will become "inefficient" because their is nobody to price the securities.

          Active managers will eventually pick off the mispriced securities, and make a profit.

          Ya, they were decades early on the theory, and it still hasn't come to fruition, but...

           

          If the father of Efficient Markets doesn't know, you don't either...

          At a recent Dimensional Fund Advisors conference, we had the distinct pleasure to ask Eugene Fama questions.

          Who better than one of the fathers of finance and the efficient market hypothesis, who's theory provides the proof passive managment rests on, to ask "the" question we all are thinking...

           
          "At what percentage will passive break"?

          Said another way, "How much of the market needs to be passive, for active to have enough inefficiencies to earn a return for clients above their fees?"

           

          Mr. Fama thought about it, and then looked at me:

          "I don't know."

           
          I'm still a passive advocate


          It may be awhile with about 20% of overall global equity assets in passive management.

          Based on much research, it's still
          2 min
        • Ep. 19 – 21 Questions (Series) – 18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?
          Welcome to the Real Retirement Financial Planning Podcast.

          This series covers the 21 Questions to Ask Your Financial Advisor.

           

          The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

          Responses to Jason's questions I read from other advisor websites lacked depth.

          "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

          The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.

           





           

          21 Questions to Ask Your Financial Advisor

           

          18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?



          Jason is looking for: "If I told you anything over 3% to 4% annually, I'd be either naïve or deceptive."


           

          My thoughts: it's hard to lock-in an exact forward looking return, but Jason's return range for a moderate portfolio is close (after inflation, taxes and fees over the long-term!).

          Knowing this (hopefully) helps you avoid working with someone promising high returns in the hopes of winning your business.

          This risk is in addition to advisors who use aggressive rates of return in your planning assumptions.

          They could potentially mislead you with higher returns, and lead to you running out of money at the worst possible times.

           

          Why lower returns ahead

          Capital market assumptions involve expected returns for each distinct asset class based on many variables.

          It's terrifying to contemplate that financial planning software gives the average advisor so much leeway to either be blindly defaulted into past returns, or possess a magic wand of sorcery to jack-up return assumptions.

          They might say:

           
          "See 'we' just take more risk (stocks), and everything is okay..."

          "Historically, since 1930 stocks have earned..."
           

          In my view, one thing is for sure: you cannot expect rates of return we've generously experienced in the past will persist over the next two decades.

          Interest rates can only fall so far to drive capital gains in fixed income returns, in addition, to the low yield your currently earning...Bonds have a uphill climb if we look to history:




          Also, credit spreads (in the U.S.) are thin right now in case you were thinking of  taking on more credit risk to get higher returns in bonds.



           

          Finally, at home in the U.S., we have elevated equity multiples: people are paying more and more for one dollar of earnings (P/E), cash-flow (P/CF), and book value (P/B).



          If not the past, than what?

          We review multiple capital market forecasts to comprise our planning assumptions on a yearly basis.

          In the hopes our planning doesn't drift too far from reality.

           
          4 min
        • Ep. 18 – 21 Questions (Series) – 17. Which professional credentials do you have, and what are their requirements?
          Welcome to the Real Retirement Financial Planning Podcast.

          This series covers the 21 Questions to Ask Your Financial Advisor.

          The list of questions was inspired by Jason Zweig of the Wall Street Journal, and his blog post: The 19 Questions to Ask Your Financial Adviser.

          Responses to Jason's questions I read from other advisor websites lacked depth.

          "Yes," or "no," sometimes needs more context and a greater explanation into the whys.

          The goal of this series is to target the essence of what I think Jason is trying to protect you from, and help you make a better educated decision.









          21 Questions to Ask Your Financial Advisor


          17. Which professional credentials do you have, and what are their requirements?



          Jason says: "Among the best are CFA [Chartered Financial Analyst], CPA [Certified Public Accountant] and CFP [Certified Financial Planner], which all require rigorous study, continuing education and adherence to high ethical standards. Many other financial certifications are marketing tools masquerading as fancy diplomas on an adviser's wall. [Emphasis mine]"


          AT MARGIN, I'm a Chartered Financial Analyst (CFA®), a Certified Financial Planner (CFP®), and Chartered Alternative Investment Analyst (CAIA).

          According to FINRA, a regulatory body governing many advisors, there are...ready for it...184 financial designations.

          Of course you're confused!


          FINRA doesn't "endorse" a credential, but they do exempt some from securities exams

          Five designations exempt you from the FINRA Series 65; passing the exam allows the advisor to provide investment advice for a fee.

          (1) Chartered Financial Analyst (CFA®)


          (2) Certified Financial Planner (CFP®)


          (3) Personal Financial Specialist (PFS) - A CPA license is needed prior to earning this designation.


          (4) Chartered Financial Consultant (ChFC®) - (Mostly an insurance salesman's route into financial planning from what I've seen.)


          (5)

          10 min

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