Afford Anything - Ask Paula: Do I really need a Financial Advisor?

Episode Date: February 16, 2023

#428: Jamie currently lives at home and dreams of reaching financial freedom by her early 30s. How can she take advantage of her low expenses to accelerate her wealth building? An anonymous caller has enough to retire in 5 years. Does she still need her financial advisor or is it time to do it on her own? Meghan is a personal finance enthusiast who wants to start a coaching side hustle. What’s the best way to get started?  Former financial planner Joe Saul-Sehy and I tackle these five questions in today’s episode. Enjoy! P.S. Got a question? Leave it here. For more information, visit the show notes at https://affordanything.com/episode428 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every choice that you make is a trade-off against something else. And that doesn't just apply to your money. That applies to any limited resource that you need to manage. Like your time, your focus, your energy, your attention. And that opens up two questions. First, what matters most? Second, how do you make decisions accordingly?

Answering these two questions is a lifetime practice, and that's what this podcast is here for. My name is Paula Pant. I'm the host of the Afford Anything podcast. We're here to answer your questions. I'm here with former financial advisor Joe Sal C-high. What's up, Joe? We're going to answer questions.

That is our plan for today. We do that. That's really cool. So we've got some fantastic ones. We're going to start with a question from Jamie, who lives at home. Her expenses are rock bottom. She wants to hit financial freedom, and she's wondering, given her low expenses, what should she do? How do you direct money when you've got, say,

but you want to translate those savings into investments so that those investments can turn into freedom. After that, we'll hear from an anonymous caller who is five years away from retirement. She has $2 million saved with an advisor, and she's wondering, should she invest that money on her own? We'll answer that question, and then we will hear from Megan, a personal finance enthusiast who wants to start a side hustle. That is an action-packed agenda, Paula. All right. Well, let's get started. We're going to kick off with this question from Jamie.

Hi, Paula. I love the show and the advice that you give. My name is Jamie. I'm 28 years old. I'm 100% debt-free. My salary is $74,000. I'm temporarily living at home with my family. The only bills that I pay right now are my phone bill and a gym membership.

So far, my emergency. Fund is at $4,500. I'm still contributing to that to build it. I also invest into my 401k. My dream is to reach financial freedom sooner than later, hopefully by age 32. My question is, how can I build wealth and reach financial freedom? Should I start investing in mutual funds? Any advice on the next steps for me? Thank you. Jamie, huge congratulations. You're debt-free. Your bills are rock bottom, a phone and a gym membership, and you are living temporarily in a way that most people either can't or won't, either don't have the ability to or don't want to. You're doing that intentionally so that you can turbocharge your investments. How should you invest all of this money that you're saving?

Well, you're debt-free, which is fantastic. You're investing in your 401K. My question to you is, are you maxing it out? In 2023, you can funnel a total of $22,500 into your 401K. That is the contribution limit for employees who are age 49 or younger. The first thing I would do is put the full 22,500 into your 401k. Max that out. your emergency fund relative to your current spending is fantastic.

In the future, when your lifestyle changes, you're going to want to beef that up, but that's not something that you need to worry about right now. So instead, right now, your order of operations are max out the full 22,500 in your 401k, max out your contributions to an IRA, either a traditional or a Roth, whichever you prefer. And if your health insurance is HSA compatible, which it may or may not be, you can check the policy docs to find out, max out your contributions to an HSA. That takes advantage of the low-hanging fruit of tax-advantaged accounts. Now, given that you make $74,000 a year and you have basically no bills and also no debt, even after you do all three of those things, you're still going to be. to have money left over. Then the question becomes, what do you want financial freedom to look like when you are 32? So you're 28, you want to reach financial freedom in four years at age 32.

What does that mean to you? Does that mean that you have moved out? And if so, do you want to own a home? Which you don't have to own a home. You can absolutely be financially free without one. But if that's part of your goal, keep a chunk of that aside for a down payment. If that's not necessarily part of your goal, but you want flexibility, then after you've maxed out all of your tax-advantaged accounts, put the rest of it into a taxable brokerage account and fill that taxable brokerage account with passively managed index funds. You know what excites me about Jamie's goal? Paula is how aggressive it is. and I think it was Michelangelo who said that the greater danger for most of us lies not in setting our aim too high and falling short, but in setting it too low and achieving the mark, right? She's got big, big, big goals.

And I think it makes sense to have big goals. And I think that too often when we miss the mark, we get down, which by the way is a prelude into saying this is a massive. massive goal. And if she doesn't make it by age 32, I would not get down. Like, don't get down. To achieve 70 years of financial independence in the next four years is going to take a lot. So just a few things. I like the idea of passive funds. I like the idea of indexes to spread your risk. But I think that when you set incredibly aggressive goals, you have to use aggressive investments to go with those goals. You can't invest conservatively and make great stuff happen because your enemy is inflation. We look at how huge inflation has been lately. We just look at inflation even

over time. You can't sit money in savings and reach the goal. In fact, the S&P 500, if we take a number like 10% that it's done over time, that only gives us, if inflation we say over long periods of time is going to be three, well, that only gives us a real rate of return of, you know, seven. So we need to really, really, really, really save a lot of money to fuel this long period of time. So I would look at investments on that continuum of passive indexes that are on the more aggressive side to help her get there. When she starts living that dream, when she gets closer to it, then I would back down the risk and lock in that lifestyle. But I'm afraid that she's going to look at a four-year goal and look at the huge numbers she's going to need to save for that and get

down. And I wouldn't get down. I would remember that Michelangelo quote, set that bar high, go for that bar, do the thing, accept the risk. But I think she's got to use some investments that have high what's called standard deviation to get there. So Joe, what would be some examples? So to be clear, you're still talking about passively managed index funds, correct? Absolutely. But just the more aggressive side of the asset allocation? Yeah. So if we look at some of the investments where you haven't bet heavily on making a lot of money versus losing a lot of money, what I mean by that is when you get really esoteric and you start doing things like investing just in oil, I read a story just earlier today about an investor that sued their advisor because they lost half a million dollars

in an oil ETF that was a derivative oil to ETF. It was a mess. The whole thing was a mess. I wouldn't go that way, Paula, because it's betting. But if you look at as an example at mid-sized companies and small companies like the small cap index as an example, small cap value index would be one, you've high volatility. But historically, you have been in a big collection of diversified companies. You're not betting on just one sector. If you skew more towards smaller companies, you're going to see bigger ups.

Now, you're also going to see bigger downs. But man, over the short run, while things aren't going as well as they did during that huge run-up, you know, the last decade,

Paula, hopefully she can shovel a bunch of money into small cap value, we call it, small company value. And into maybe mid-sized companies, which goes, more toward tech and what's happening in tech right now. We're hearing about that sector laying lots

of people off, right? About having some downsizing. This is a great time to tech isn't going away. Microsoft isn't going by-bye tomorrow. Amazon's going to be around. But while they're experiencing right sizing, I think it's a great time to get a little bit of a value on these more aggressive companies. So I think she can't shy away from volatility. I think she has to take on some responsible volatility to try to get this aggressive goal. So your recommendation then is that she invest in passively managed index funds, but she pick asset classes that are a little bit more volatile, such as small caps, maybe some sector specific bets like tech. I don't know that I would go sector specific. Okay. Because I think you're going to run into, you can,

invest in the NASDAQ, you'll get a bunch of tech, but you'll also get other things. I mean, I would stay diversified. So if you invest in mid-cap companies, you're going to get a bunch of tech. If you invest in the NASDAQ, you're going to get a bunch of tech, but you're also going to get some medical devices. You're going to get some biotech. You're going to get some financial firms that are aggressively growing, more aggressively growing. I like that approach much better than just picking a sector and hoping for the best. That's why this investor, by the way, sued their advisor was because the advisor recommended a sector and it went south. What's funny is, by the way, as an aha to that story or a second piece of that story, the investor then sold

after they lost half a million dollars. Guess what happened after the investor got out, Paula? Oh, I know where this is going. The index is up like 150% since then. Index is up huge since they got out. We don't need that type of volatility. We don't need that type of betting. What we do need, though. So I would still buy some large companies. I might do three things. You know, usually I look at the hall of the average investor ship is large companies, like the S&P 500 type thing. And then we'll have midsize with a little bit. But then if to use a sailboat analogy, when the winds are strong, I'll put out the Spinnaker sale, which is the sail sailors use when the wind's blowing to get them moving faster. I would have more in the spinnaker. Meaning normally I would say 10 to 20 percent. Small cap is a good idea. Small company is a good idea. For Jamie, knowing the risk, she may want to go 40%. Which the average, by the way, CFP in a controlled environment will tell you is way too volatile. Right. Certified financial planner. Yeah. CFP. Yeah, you don't hear a lot of financial planners recommending 40% small cap.

I wouldn't do that, but I wouldn't tell most people to do that. I would tell Jamie to accept that risk. What about international markets, emerging markets? Again, a good number for developing markets, which I love. I love Southeast Asia. I love Eastern Europe. Give me some Africa. Like just the stories coming out of some of these economies are so exciting. And again, very volatile.

So I got to know what my downside's going to be going in. However, where I'd usually say maybe 5% into, developing markets, maybe we go 10 to 15, Paula. The cool thing about that versus just regular small cap value is pairing those two risks together will also decrease the overall portfolio volatility while at the same time increasing your chance of winning because you're taking two bets instead of one. So this is a hard concept for people to see. But if you take several different indexes that are volatile that do different things, you can actually create a portfolio that has a reasonable risk expectation, meaning we can create a portfolio that might be less

risky than one that's concentrated just on a few large company stocks, just because we're taking so many different risks with smaller or international or, quote, riskier companies. Right. So by fueling a few different ones, we can control portfolio volatility but still keep some upside. Right. So it's almost counterintuitive by adding in additional asset classes, even if each asset class is risky, the aggregate portfolio then actually is a little bit less risky or less volatile. It's amazing. I'll give you an example. Backtesting gold.

Gold's an investment I don't like. Gold's an investment I'm generally biased against. I hear somebody's buying gold. And I apologize to gold fans. I roll my eyes. I'm like, really? But when you back test putting four or five percent natural resources or gold in a portfolio, it lowers the volatility in portfolio a lot.

But by the same token, as you know, gold has these periods, Paula, where it just takes off, right? On a daily basis, gold is eight times more volatile than the stock market. And who the hell knows why? People generally don't know why or when it's going to hit. So we can take something like gold and put it in a portfolio, natural resources put it in a portfolio, and we can actually lower the volatility. It's like how just a little extra pepper makes the chili better. You know, you don't need a lot, just a little bit. You know what's interesting to me, Joe?

This is the last comment that I'll make on this, but it's kind of stepping back. It's a meta comment. The answer that I gave was about asset location and the answer that you gave. is about asset allocation. And so I want to take a moment to define those two terms. Asset location is where you hold your investments. And so the answer I gave was start with your 401k, then go to an IRA, whether it's Roth or traditional, then go to an HSA. And when you've exhausted all of those, then put your money in a taxable brokerage account. That's like the waterfall of priorities in terms of where you put this money, right? And also, if you're If you plan to buy a house, set some aside for the down payment for that, right? That's the location priority list. The answer that you gave is about the composition of what should be inside of each of those locations. The way that I like to describe it is asset location is like having a bunch of different vessels.

If you think of a kitchen or a bar, you've got your pint glass, your coffee mug, your martini glass, your champagne flute, your plastic red solo cup, right? These are all different vessels that can hold liquids inside of them. That's the location. But then the asset allocation are the actual liquids that fill those vessels. The asset allocation is the recipe behind the mojito, the latte, the sangria that you, you put inside of each of these different types of glassware. And both very important. I mean, how often have you and I heard from investors that opened up a

401k, but they forgot to invest it? Right. Yeah. People often conflate the vessel with the investment. Right. The pint glass with the beer, right? Yeah, exactly. Yes. Imagine a beer glass and it's empty. That is horrible unless I finished it. If I finished it, and then I need an encore. Well, that's fine. That's good. However, just showing up and somebody putting a empty glass in front of me is bad. So I want the vessel right and then I want to fill it.

But on the flip side, I'm thinking, too, how often have we heard from people that were using the wrong tax strategy, the wrong vessel? And they needed to fix that. They found out too late. So having the right vessel to get you to the goal. And then number two, filling it. Right. Both important. That's cool.

Well, Jamie, thank you for your question and congratulations on being so aggressive about your quest for financial freedom. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments. for businesses of any size. But they also have the fintech hustle that got them named one of America's most innovative companies by Fortune Magazine.

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Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-A-I-R-com. Sale ends December 7th. Our next question comes from an anonymous caller, and Joe, you and I give a nickname to every anonymous caller, and there's one documentary that I would like to honor. Now, Joe, you've known me for a long time, yes? Yes. How many movies do you think I watch per year?

Less than one, Your Honor. Yes. I mean, like, maybe one or two. I don't watch movies. It's a well-established fact. It's a long-running joke on stacking Benjamin's your podcast show that I don't watch movies. But guess what I did? No, well, and let me say to the court before we even get to this, the movies you generally pick, where Paula Pantt generally has this phenomenal methodology about how and why she chooses to do things.

the methodology by which she chooses which film she's going to watch each year is shrouded in complete mystery because I can't I can't usually figure it out when Paula tells me that she's seen a movie it usually not just as a surprise that she saw a movie but the films she saw I'm like out of all the films to see why choose that one but it sounds like you found a great one well I found an important one it is a two-part document released by the BBC in January, it was not only banned in India, but the Indian government went so far

as to demand that Twitter and YouTube block posts that link to the documentary on their platforms. And there were many colleges in India that tried to screen the movie, but at one such college, electricity and internet access to the room where the screening was supposed to take place was cut off by the university authorities. So this documentary, which is about the Indian Prime Minister, Narendra Modi,

has been outright banned. And very much, to their credit, Columbia University, the Columbia Journalism School, decided that they would show it. The dean was there. He made opening remarks. the showing almost didn't go through because Columbia received threats. They received security threats. There was a big, especially on the morning of, a big to-do about whether or not the showing would even take place.

But we saw it. It's a BBC documentary. I mean, it's not supposed to be. Big controversial. Exactly. So I want to name this anonymous caller. In honor of the people at the BBC who have made the documentary, as well as all of the students who have tried to get this shown on campuses. At Columbia, one of the students, she was a journalist from the Indian Express.

Her name is Anisha Duta. She worked with Columbia to get it aired here. And so this next anonymous caller will be named Anisha. Hi, Paula and Joe. I listen to your program and really enjoy listening to all the advice you give. I wanted to ask a question about my situation. I'll be 60 in a week and I have $2 million in my retirement account, a little over $2 million in my retirement account. And I have like $100,000 in Roth and traditional investment. accounts, and I use Janice, Vanguard, and Fidelity. And I have a mortgage of 300,000. My kids are grown and away from home. My question is this, and particularly about the $2 million, you know, I like my

advisor. But I just wondered, if I were to take that $2 million and just put it in a regular Fidelity, S&P 500, would it not be worth it to do that? I would like to. I would like to to retire in five years, why could I not do that instead of having an investment advisor and the heavy fees that I pay every year for that advisor? I just wondered why wouldn't someone like myself just put it in a Fidelity S&P 500 and let it grow? So that's a really serious question. And I just wanted to know what your thoughts are. And I really, really, really enjoy you guys. show. I really have never paid that much attention to money until I started watching your show because my husband, who usually takes care of it, he passed on. So I'll listen for your response.

Thank you. Keep doing the good work you do for us. Thank you. Anisha, thank you for your question. I'm sorry to hear about your husband's passing. And congratulations to you for managing your financial present and future for or being proactive about how to best watch over this $2 million portfolio. What I hear you ask are two questions. One is the question of should I work with an advisor or not? And the other, because in your message you said Fidelity S&P 500, the other is a question of if I do not work with an advisor, then how should

should I invest this money? So when you say Fidelity S&P 500, it assumes the answer to that, when in fact these are really two separate questions. First, whether or not this portfolio should be managed by an advisor, and if the answer is no, where it should be held and what investments it should be held in. So let's tackle these one by one. And Joe, you're a former financial advisor. So I'd like to kick off with your thoughts on the pros and cons of working with an advisor. The first element of Anisha's question is whether or not she should work with an advisor. And one thing that I notice is that Anisha has mentioned that she's paying hefty fees. I'm assuming that these fees are for assets under management,

meaning that I'm assuming that these fees are related to the adjudy fees. advisor being an investment manager rather than the advisor simply receiving an hourly fee to review your accounts and offer advice. And I'm making that distinction because, and Joe, you can talk about this from your own professional background. When you work with an advisor, there are many different ways in which you can do it. You could work with an advisor whom you pay hourly for their advice, or you can work with an advisor who manages your investments for a fee. or you can work with an advisor who does both. I haven't been an advisor in a long time first before I answer this question.

By the way, I love this question, Paula, especially from someone who is really just beginning her journey of managing investments because we see often in the popular media that the dragon that we're fighting, the biggest thing that we're fighting is fees. and if we control our fees, we control our destiny. But what's interesting is, is that while that is an important thing to face, and I love that we get to talk about this from time to time, it's been a while, Paula, since we've actually tackled this question. So the timing is really good for people that are new to the Ford Anything family,

is that fees are not the number one demon that you face. It's a demon. Don't get me wrong. and you have to make sure you pay attention to your fees. But the first thing we have to know is what are you paying fees for? That is the very first thing. That's because the biggest demon that we fight is ourselves. When you look at all the top thinkers in personal finance,

or people I consider to be some of the top thinkers, Richard Thaler, who won the Nobel Prize, is a behavioral economist. This was a huge move a few years ago when he won the Nobel Prize because he was focusing on the reason we lose the financial gain is ourselves. We get in our own way. The S&P 500 does a nice number over long periods of time. And we don't because we second guess the S&P 500.

We cannot keep our fingers out of the cookie jar. Dr. Daniel Crosby, who I know you've had on the show, Morgan Housel talks about the same thing. The problem is behavior. All those people, by the way, also talk about fees. But way before fees is behavior. Gene Chatsky, Jill Schlesinger, two big names, one on NBC, one on CBS. Also, big commentators talk about behavior. Behavior is the number one thing.

And so the reason why top investors surround themselves with smart people, no matter what the capacity, is because we know that we will do the wrong thing left to our own. vices because we do it over and over and over. So the first concept that I always want new people to stacking Benjamins or afford anything to know is, is that this lie, and by the way, I know that's a tough term, but the lie that we hear that you don't need an advisor because you're smart enough to do it yourself is a lie. And not because that statement is wrong. that statement is absolutely correct. The things that your advisor does for you,

the things that people around you tell you that you should be doing or mistakes that you're making. I mean, how many times, Paula, when somebody says, you know what, Paul,

he shouldn't have done that because of this. And you go, duh, oh, that was right in front of me the whole time. It isn't that they're giving you these out of the box, wild concepts. They're showing you stuff that's right in front of you that you missed.

That's what surrounding yourself with good people looks like. of course you're smart enough to do this yourself. You're smart enough to make great financial decisions. But having these people that have your back around you is a great way to go forward. Going it alone in a vacuum by yourself is absolutely horrible. Now, that doesn't mean, just to finish my rant, that doesn't mean she shouldn't fire advisor. If she has no idea what she's paying for, she doesn't know what this advisor does for her. And the advisor doesn't have her back.

She said she likes the person. I love this line from Wall Street. this is business if you want a friend by a dog. Your advisor shouldn't be here for that. That's so coarse. But it's true. I don't hire advisors to be my friends or for me to like them. I hire advisors to tell me,

to challenge me, to show me what I'm doing to make me better off every day with my decision making when it comes to me and my money. If you're not getting that, then certainly you should fire your advisor. I still don't think you should put the money in the S&P 500. However, I think you have to surround yourself with smart people.

So I think that's where we've got to begin, Joe, there's a distinction between an advisor and an asset manager. And the way that she describes the services that she's receiving, it sounds as though this person who may also be an advisor is largely charging her for asset management. The question is, and I don't know because I'm not there, and often people would describe me as that as I was when I was in a buyer. I'd your clients of mine tell me that. And I go, wait a minute, we just spent two full meetings working on your budget. we walk through all of your insurances and your risk management plan. Remember that meeting where we set up your estate plan and then we reviewed it? Oh yeah, yeah, yeah. But generally, because we hear all the time, advisor equals investment manager that maybe she's not looking at,

oh yeah, we did all these things. So I don't want to assume that. But you're correct. An investment picker is a commodity. It's a commodity. I love a phrase that our friend Roger Whitney, the retirement answer man, uses, so I don't want to take credit for this, but I absolutely love it. He said, if you have an

advisor that begins with product, right, like picking investments or investments that might be good for you, you need to run quickly. If you've an advisor that starts with process about how you need to think critically about your money, and here's how to do a better job of that, those are the people I want on my team. Right. Starting with product assumes the solution. Starting with process refines the question. Yes. And as an example, let's talk about process. Two million dollars, five years away from retirement. There is no piece of that equation to me. And I said that my best Susie Orman, so I apologize. There is no piece of that equation to me, though, very seriously. That says S&P 500. There is zero. None. I would not do that. I might fire the advisor.

But the S&P 500, imagine that she retires five years from now, Paula. But it was. last year and she's in the S&P 500 and how much did the S&P 500 go down? Like, what are you going to do then? Not a great place to have all of your money, especially when you're trying to create an income stream five years from now. Right. And this goes back to our earlier conversation about asset allocation. She's going to want a mix of investments. The S&P 500 can certainly be a piece of that mix, but it needs to be diversified. It needs to be. be balanced with other asset classes. Yeah, and a great way to look at it. So let's talk about us being her advisor for a moment, being the smart people on her team, because I hope we are that. A great initial way to look at this to make it not complicated is you have buckets. She is a short-term bucket of money. She's going to need five years from now to start living on. How much is

that? How much is she going to need per month per year? And then for those earlier years, put those in very conservative investments so she knows that that money's not down when she needs it. So it all starts with when am I going to need the dollar, which means then we start talking about what other streams of income does she have? What type of lifestyle does she want to have? What is she going to do? Are there any big expenses that are going to happen these first few years? Because for a lot of people, there's a lot of change in their life the first few years of retirement. So are there some big expenses that are going to happen then? That money maybe goes in a short term bucket. And then there's a middle term of bucket that we know we might need during those first 10 years, we probably won't.

But I want to back down the risk a little bit, but still have them in a place where they can grow. And then I've got the majority of my money in a long-term bucket. And that certainly might be partially the S&P 500 because the S&P 500 over long periods of time, like 10 years plus, is a good place for that money. So instead of thinking of one bucket S&P 500, think short, term, think middle term, think long term, and at the very least established three buckets. So I think a first question, though, to get back to your question, Paula, first question for her advisor is this, what am I paying for?

That's a great question. What exactly am I paying for? Right. And if it's just asset management, probably not. Right. my inclination is that typically people are served well by financial advisors who are paid on an hourly basis for their time, for their consultation, but who do not directly manage your investments. They help guide the process, they help show you what to do, but you yourself are the person who manages your investments so you don't have to pay for that asset management fee.

So if it were you or me or most of the afford anything community, I would say you are correct. I'll say this about the larger population having worked with hundreds of people over my career. There's a huge number of people, Paula, and this is horrible, and maybe it's an indictment, maybe not, that nothing will get done if the advisor doesn't manage the money. Nothing will get done. They will look me in the eye. they will tell me they're going to make the move and three months will go by. They won't call me. They won't tell me they didn't make the move.

Three months will go by and they'll go, yeah, I didn't do it. Yeah, I didn't do anything. There are people that I know that hired me to have me actually push the button, manage the money because crap got done because it actually did happen. And for them, the fee was worth doing it because they knew that between procrastination, getting in their own head, worried about what the implication would be when they press the button, I might press the wrong button, that they didn't trust themselves to babysit the money. They were still the parent of the money, but they truly needed a full-time babysitter on staff.

So I'll say, for the vast majority people, I agree, but these schemes are not rip-offs the way different people get paid. They work better for different types of people. Hmm. And Joe, are you in agreement with the notion that all financial advisors, whether they manage your assets or not, ought to have a fiduciary duty to you or expressed a different way? If you, if Anisha is managing, is looking for a financial advisor, that she should lead with the question, do you have a fiduciary duty to me at all times? and are you willing to put that in writing? The quick answer is yes. The problem is this has become muddy, Paula.

The term fiduciary has little to no teeth anymore. And the oversight of those terms has been grossly negligent. So sadly, I used to say to people five years ago, make sure you ask that question, whether a fiduciary. I'll tell you today, the number of, of times I've heard people, and not even colloquially, like people telling me just in large numbers, they will look somebody in the eye who's not a fiduciary, has no fiduciary responsibility, and the person will go, absolutely, I'm a fiduciary, knowing there is zero, zero oversight,

zero consequence of out and outlying. And that's frustrating for all of us. So I think we have to go even deeper than fiduciary, which means I've got to have some serious meetings and I've got to know what I'm looking for. I've got to know that I'm looking to be a smarter investor and I am going to over the short run, I have to do a great job of not just asking a few questions, but knowing why I'm there. I really have to be my own CEO. I can't be the person early on as an example when we were talking earlier about the investor that sued their advisor because they put them in this oil ETF. I got to know when my advisor says oil ETF, Paula, that that's a crappy recommendation. That doesn't make any sense to me. Why would I put that much money in that position that I could

lose half a million dollars like this particular investor did? That means, by the way, they put more than a million dollars into this oil fund. Now, I don't know how much money they started with. Certainly, if they had a billion dollars, losing half a million dollars is no big deal. But reportedly, the reason they sued the firm and the advisor was because of the fact that this was a small business person in Kansas City that couldn't afford to lose that much money. While I do agree that the advisor was culpable, and certainly the arbitrators came down and they got a six-figure award for doing the wrong thing, I still don't absolve the Kansas City business person for accepting that advice. You have to be the CEO of your company.

So Anisha, the answer for you in terms of next actionable steps are reach out to your current advisor and ask to clarify what they're offering. What are you paying for? Is it advice? Is it assets under management? What are you getting for your fees? And then, and Joe, let me know if you disagree with this, shop around, talk to other advisors, even if you end up sticking with this current one, there's no harm in shopping around and there's no harm in talking to a few others to see what else is out there. And you can then make the decision as to whether or not you want to manage your own assets, but it's probably a good idea to at a minimum always have an advisor, even if it's not the same one who gives you advice, who double-checks your work.

Yeah, I love all that. And she's got the perfect, she has the perfect time because she has just taken over this wonderful portfolio that she and her husband built. Now that she's in charge, it's a great time to ask these questions. Just to make sure the advisor isn't put on the defensive immediately. I would just say, you know, I'm getting my arms around all this. and I just, I see these fees, what do these fees mean? What are they for?

What do they do? What can I expect from you? How often do we get together? How often should I, how many times are you going to make proactive calls to me versus me calling you? Those types of questions. Well, thank you, Anisha, for your question. Best of luck with everything that you manage from here, including the retirement that you are leading into. We'll return to the show in just a moment.

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style you ported to the new new Annes. Our next question comes

from Megan. Hi, Paula and Joe. This is Megan. I have a question about becoming a personal finance coach. I have a lot of friends and family and coworkers who like to reach out to me with specific questions about personal finance because they know I'm super into it. And it's just got me thinking about if I could start some sort of small side business to help people and maybe legitimize myself a little bit more. And the reason why I'm asking you guys about this is because when I do an initial Google search on how to get started, which courses I should take, things like that. I want to make sure that I'm following the philosophies that I like. I want to make sure that I'm tackling any childhood money trauma. I want to make sure that I am overcoming any weaknesses on my end when it comes to like listening and really hearing a person's problem and not listening from my point of view. So you two are some of the main people I trust when it comes to philosophies like this. So I wondered if you knew of any, any courses or places I could start or

ways that I could do this that you think are best. And yeah, we'd love your opinion. Thank you. Megan, thank you so much for that question. And Paula, I love this question. I love it when people want to enter the industry. We talk about surrounding yourself with smart people, right? Let's have more people. And by the way, we need more women as an advice. We need more people of color as advisors. Frankly, we just need more advisors. You look at the population in general versus the advisory population. Lots of studies showing we need a ton more advisors. So man, if you're thinking about it, this is the perfect question. I think there's a two-part answer, Paula, to this question. Let's see if you agree. The first part is, I love the fact that you want to make sure that you cover things in a way that aligns with your values and the way that you think questions should be. be answered. I love that. I mean, that is, that means you're going to be a true advisor for people because I'll tell you what. When I began as an advisor at the beginning, I was worried about getting new clients. So I would just kind of, oh, Paula, I love you. Oh, that looks great on you. Oh,

you're fantastic. You're amazing. Later on, I realize that a real advisor goes, Paula, what's all you thinking? You know, I love you, but you screwed that up. You know what I mean? My job was to make sure, and you were paying me to make sure that not in our meetings, but when you went outside of our meetings that you were the best version of Paula Pant, you could possibly be. So my job during that meeting was to say, okay, I think this is where Paula could be being a better Pala.

So I think there's actually two pieces to this question. The first one is, as any type of a counselor, as a coach, as an advisor, there is a process that you need to get your hands around. And none of these processes, by the way, are going to discourage you from answering questions the way you want to answer, listening as much as you want to listen,

having an open mind as much as you want to have an open mind. None of these will. And by the way, all of the curriculums that I know of from AFC, which we'll get into it in a second to CFP, you'll see the amount of behavioral training they've added to the curriculum over the last 10 years has been amazing, has been fantastic. It is still woefully inadequate, but it's way more than I got back in the day showing that what the average person is looking for is that sounding board that you're referring to. They're looking for somebody to be on their team. It isn't just

the six areas of financial planning and how these things work. However, if you're going to bake a cake, you do still need to know those things. You need to know those pillars. You need to know what they are. You need to know the facts, the terms. And I think that going and getting those designations first, getting the right designation or a designation is going to help. But then number two, then I think designing your own curriculum like I have, like Paula has, like anybody has that talks to people about their money is hugely important as a second step. I think the accreditation you're looking for is called AFC. And what does that stand for, Joe? Accredited financial counselor. And the group is the AFCPE. AFCPE is the group that you are looking for for more on that. Now, you could be

looking for a certified financial planner. You could be looking for all kinds of things. But I think based on the nature of your question, you want to be close to people. You want to help them set up budgets. you want to help people that maybe you're beginning their journey. That's what an accredited financial counselor does. I would do that first. And then when you finish that training and you know what the different pillars are and the way that you just operate, then your differentiating factor is I'm somebody who also has a degree in psychology, in philosophy, in whatever it might be.

I've taken this course curriculum or become accredited in this other way, I think you add those on afterwards. But I think it also is going to make you much more attractive to people if you do both pieces of that. The AFCPE that you're talking about, Joe, that's the Association for Financial Counseling and Planning Education. A great organization, and a lot of our friends, Paula, who are great, financial counselors are, have that accreditation. You know, I'm struck by, Megan, the part of your question where you ask about developing your philosophy on money, I think, Joe, what I like about your answer is that it has the two parts. It's build the foundation by virtue of taking the courses, getting the requisite education, getting the requisite certification, getting the requisite certifications. That's step one.

But once you've done that, then it's up to you. and Joe, this was the second part of your answer when you talked about quote-unquote building your own curriculum. It's then up to you to contribute to that body of knowledge by virtue of having your own take, your own angle, your own framework. And that largely comes from being in this every day. Megan, you asked how do you develop your philosophy on money. the more you're in this world, the more that philosophy will naturally develop, because you will be spending so much of your time reading about it, writing about it, talking about it, thinking about it.

And especially if you read broadly, then you will ideally be reading a lot of dissenting opinions, which then invites you to be able to add your own layers of synthesis and analysis to the discourse. Which makes it a lot more exciting. The fact that these organizations will certify you and you have the room to still lay a foundation that's different than the person down the street

is fantastic. And by the way, I've also heard and a huge part, by the way, of being an advisor of any type is marketing. It has to be. Getting clients is difficult. Maybe she already has. And if she does this,

a fantastic roster of people that want to work with are coming in the front door. But effective marketing is not saying that you are an AFC because I think that that's kind of the barrier to entry pull. It's almost like if you go into a Michelin Star restaurant, you're fairly certain the chef knows how to cook, right? Right. Yeah. You're not thinking about food quality as much as you're thinking about the quality of the service, the ambiance, all the other things. And that's where a chef will distinguish themselves is with the surround sound. And that's the cool thing. Once you get that AFC, then telling people, you know what, I'm a proponent of Vicky Robin and the way that she talks about not trading hours for money and I teach people how to do that.

And I'm a FC. That's a winning combination versus just, yeah, I'm an accredited financial counselor. Okay, I roll. So it's a person down the street. Joe, what you're talking about almost sounds like the distinction between the commodity of it, the conveyor belt. versus the unique differentiator, the brand. And that's where it gets exciting. I mean, that truly is where it gets exciting.

And I'm hoping that while we didn't exactly answer Megan's question, the fact that that is wide open makes it more exciting for her. Because Megan, Megan can feel free to dive into that as much as she wants to, but certainly also get the accreditation. Right. I mean, I think we did answer. answer her question. She wanted to know how to weed out the noise, how to develop her philosophy on money, whether or not she should take a course or acquire a license, how to legitimize herself.

I think the only piece that we haven't really addressed is how to overcome her own childhood money trauma, which is such a good question because it's all about conquering your own internal biases, some of which you may not even know you have. My recommendation would be if you have the money to do so to work with a financial therapist. We've had Dr. Brad Klontz on this podcast. He's been on the podcast a few times as a guest. He is a financial therapist. And there are plenty of people like him who are therapists who specialize in childhood money trauma. Joe, do you have any other recommendations? I don't have another one, but let me tell you how strongly I feel about Dr. Brad Klontz. I liked him so much. I agree with you so much, Paula, that he's in my book

stacked. We talk about that when we talk about where you show up and what your money scripts look like because knowing that money script ahead of time and showing that to your advisors around you, hey, this is what we're fighting with. For me, I'm a guy that spends money freely. And for me, then I had to set up my money in a way that stuff automatically goes where it needs to go. And until I did that, Paula, I was walking down the wrong avenue all the time, with my money. Things were going horribly. Once I set up my automated system and I never have money on me, I don't have any money on me right now. If I don't have any money on me, I don't make mistakes. And then it became a game and I got so good at it at challenging myself

that then it became fun. Like at the start, it was horrible. But now it's, it's so fun to try to not spend money every day. And a lot of that is you'll find in Dr. Brad Clantz's work. He is a fantastic TikTok presence, by the way. Very good. If you're on TikTok, follow up Dr. Brad Klontz. You know, I'll also say, Megan, working with a financial coach yourself, if you can't work with a financial therapist, working with someone who is doing the same work that you want to do as their client, that could be another way that you could address some of those childhood

money traumas. I'm also a big proponent of journaling. because it's a practice of self-reflection. The distinction, though, is journaling, while very valuable, is private only to you, whereas working with a therapist or a coach allows you to have feedback from someone else. And often that feedback, you know, there's the expression that's hard to read the label when you're inside the jar, right? Someone can give you that informed, knowledgeable outside third-party perspective on your own life. Well, Joe, I think we've done it. I think we did. It's amazing because between colors, we had hit pause for just a second and you said,

we've already been talking that long, like it felt like two minutes. Yeah, it flew by. Such good questions. Yeah. Well, Joe, thank you for joining us once again. Where can people find you if they'd like to hear more of you? You will find me on the Stacking Benjamin show. And Paula, I have to brag. You've been a part of the show for a long time of Stacking Benjamin's and Bank Rate just called Stacking Benjamin's, top personal finance podcast in the United States for 2023. Wow, congratulations. Back in 2017, Kiplinger did the same. Of course, you and I have won lots of awards for our shows, but that one was fantastic. So I'm very excited that our little Stacky Benjamin's family. And as people that haven't heard our show don't know, it's a lot different than afford anything. It is, it is a lot different. We have segments and parody and fun, and our goal is to just get people in a very

light way into some of these serious topics that you cover here at Afford Anything. So Monday, Wednesday, Friday, the Stacking Benjamin Show. Well, thank you, Joe. Thank you so much for tuning in. If you enjoyed today's episode, please subscribe to the show notes. We will also link to our episodes with Dr. Brad Clantz in the show notes. You can subscribe for free at Afford Anything.com slash show notes. Thank you again for tuning in. My name is Paula Pant. This is the Afford Anything Podcast. You can hang out with other members of the community at Affordainthing.com slash community. I'm so happy you're here. I hope that you're learning. I hope that you're

growing from this. Don't forget to subscribe to this show in your favorite podcast playing app so that you can catch all of our amazing future episodes. Thank you again for being part of this journey. And I will catch you in the next episode. Here is an important disclaimer. There's a between financial media and financial advice. Financial media includes everything that you read on the internet, hear on a podcast, see on social media that relates to finance. All of this is financial media. That includes the Afford Anything podcast, this podcast, as well as everything Afford Anything produces. And financial media is not a regulated industry. There are no licensure requirements. There are no mandatory credentials. There's no oversight board or review board.

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