Money Rehab with Nicole Lapin - Why You Need a Financial Planner— and No, You Don’t Need To Be Rich To Have One!

Episode Date: April 4, 2024

A financial planner is like a money coach that can help you meet your money goals. Let's be honest: we all could use that. Historically, financial planners have gotten a bad rap as inaccessible to the 99% and just plain intimidating— but, it doesn’t have to be that way. Today, Nicole will prove it. Nicole calls up Brent Weiss, a CFP®-certified financial planner and Head of Financial Wellness at Facet— a financial planning company that is truly changing the game. Nicole and Brent do a little client-financial planner role play to make your first conversation with a financial planner easier. Then, they dig into which questions you should ask a financial planner to make sure they're legit, what goals you should set, and how to measure success. Claim Facet’s offer for Money Rehabbers, and the list of questions Brent recommends you ask a prospective financial planner here: https://facet.com/moneyrehab 

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That's b-o-f-a dot com slash n-E-W pros P-R-O-S media. B of A dot com slash new pros media. This episode is sponsored by Facet. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Money rehabbers, I know why you're here. You're here because you love doing better with your money. And I love helping you on that journey. But you know what would level up your money moves? Having your very own Nicole Lappin to give you one-on-one personalized advice, to ask all of your money questions to even the ones you're embarrassed about,

and to make sure that you know everything you don't know. And that's what a financial planner is for. And I know when you hear financial planner, you might be picturing someone really stiff in a suit who only works with trust fund babies. And some financial planners are like that, but they're not all like that. Brent Weiss, for example, is not like that. Brent is a financial planner and the head of financial wellness at Facet, a financial planning company that is truly changing the game. Brent is not like that. Brent is a financial planner and the head of financial wellness at Facet, a financial planning company that is truly changing the game. Brent is not stuffy at all. Brent is like the cool older sibling who's going to help you out when your parents catch you sneaking in after curfew. And the financial planner version of that is helping you catch up on your retirement savings, even if you're feeling behind or totally lost. But again,

the financial planning world has a track record of being intimidating and exclusionary that I call Brent up today to break down all of those barriers. And to make sure the first conversation with a financial planner is easier, Brent and I do a little role playing around what your first conversation with a financial planner should sound like, what questions you should ask, and what goals you should set. One bias that is historically true about financial planners is that they have a whole lot of fees. And I am the fee police around here. But unfortunately, in this space, you will see a whole lot of them. But Facet is legit different. And I love this so much that I wanted to team up with Facet in their mission to make wealth accessible for everyone. And the best news

ever, Facet is hooking it up with an awesome limited time deal just for my money rehabbers, which I'll tell you about in just a few. But for now, let's do some role play. Brent Weiss, welcome to Money Rehab. Nicole, it is great to be here. Thanks for having me. Let's start at the very beginning of your alphabet soup game. How did you start as a financial advisor? So this is a funny story. Back in college, and it speaks to the fact that we're never taught this stuff in school, by the way. So as a senior

at the University of Notre Dame, I'm about to graduate. Everyone's telling me, go get a job. And I'm starting to think to myself, okay, I get a job and I make money. What do I do with it? Notre Dame offered a class just called Personal Finance for seniors. I ran over and signed up immediately. A week later, I got a notice that the class was canceled. Three people were on the list, Nicole. Myself, the teacher, and the teacher's assistant. That was it. So like, well, we can't have a class with one student. But a light bulb went off in my head. I'm like, wait, wait, wait, wait. All these, in theory, really smart kids graduating from school have no idea how to do this thing called managing money. And that literally led me down

the Googling path of... Did Google exist back then? Was that 21 years ago? I don't know. Maybe it did. You were at Microfilm in the library. I think Facebook had just come out, for crying out loud. So I'm dating myself a little bit here. But I somehow found information. I started doing financial planning. And I came across the CFP designation. You can actually teach yourself essentially how to master your money in your own life and also get paid to help people do it in theirs. This is the thing that I'm going to do. And so that was back in 2005. As soon as I graduated, I took a job at a wealth management, air quoting that one, firm in Baltimore and started studying for my CFP.

Why are they in air quotes? Because wealth management is a jargon term, right? Nobody wants a wealth manager. There's a stigma around working with a financial advisor or a wealth manager. You have to be wealthy to get it kind of thing. It's almost just like a money coach. Remove some of the emotional barrier to talking to somebody about this stuff. Amen. And so wealth management feels like so 1985. this stuff. And so wealth management feels like so 1985. Okay, so who should have a wealth manager or a financial advisor or who should have a money coach? So I think about this a little differently.

I'm going to ask you a question, but I promise you it's one of the easiest questions you're ever going to answer. If there was something in our lives, by the way, that is the number one cause of stress for most Americans, point number one, point number two, that is the number one cause of stress for most Americans. Point number one. Point number two. That is either number one or number two on the list of New Year's resolutions every single year. And point number three is it touches everything in our life. Do you think this is something important to all of us? Abso-freaking-lutely. Okay. Question number two.

Really easy. I promise you. What do you think that thing is, Nicole? Question number two, really easy, I promise you. What do you think that thing is, Nicole? Is it something that's the first word of the title of the show? Bingo. You're brilliant.

See, this is why you have your own show. You're not just fun and entertaining. You're also very smart. You're right. It's money. Ding, ding, ding. Exactly. You win the prize.

And so when I think about this and I go, who should have a money coach? The short answer is everybody. Everybody should have access to a money coach, a financial advisor, a financial planner, whatever you want to call it. Everyone should have access. And then it's your choice if you want to make the decision to work with one. Now, what I will share with you is the financial services industry has done a horrible job for decades letting people know that they need a financial advisor or money coach from day one. It's expensive, it's exclusive, and it's been elitist for, I don't know, 60, 70 years. And so we're here to change that. You and me, my company, whatever it is,

we're going to change that so everyone has access to it. So it's affordable, it's personalized, it's dynamic, and it can change your life. That's just my take on it. Yes. I think that it's really important to also debunk the different terminology used for financial advisors, wealth managers, because not all of them are fiduciaries, which is really important because some that are like VP of blah, blah, blah

at blah, blah, blah bank, that's not a person who's working for you. That's a person that's working for the bank. Amen. You also bring up something. So first of all, we'll start with fiduciaries because I can go down rabbit holes and we're not here to do that today. A fiduciary kind of jargon for just someone who has to do what's right for you. The fact that there isn't a fiduciary standard across the industry is shocking to me, but we can take advantage of that. You should always, always, always work with a fiduciary. They can either be a certified

financial planner, they are held to the fiduciary standard, or they have to be, this is a jargon, a registered investment advisory firm. You can ask a financial advisor this before you do it, but they should 100% always be a financial advisor. And look for their credentials as well, because fiduciaries like table stakes in the industry today when you're working with a financial advisor. If they're not a fiduciary, run far, run fast. And the final thing is, you mentioned this, if they're working at a bank, they probably have some incentives that aren't aligned with your best interests because they're there to sell you products. If you tell me how someone's paid, I will tell you what kind of advice they're going to give you. So be careful in terms of

how people are paid. And if you have any one of the many alphabet soup designations that you have, such as CFP, CHFC, CLC, CBDA, is that person automatically a fiduciary or do you have to ask? If they are a CFP professional, yes. As part of your oath, if you will, to be a CFP professional, you have to be a fiduciary. Now, the interesting thing, a CFP is actually a higher level of fiduciary. So they follow the fiduciary standard. But then because you're a CFP professional, there's actually higher levels of education, ethical standards.

You have to hold yourself to. To me, the CFP professional designation is the gold standard in the industry. The rest of the stuff I have, the CHFC, Chartered Financial Consultant, it's like CFP Lite. So I don't think it's the gold standard. The rest of these, I think, Nicole, we were talking about, I got them because number one, I always want to be an expert. A personal finance expert should actually be an expert. And number two, they also give me really good continuing education hours to maintain my CFP. So I'm going to show it off to the world anyways that I have all of these things. And the CLC is actually a life coach certification because I'm trying to round out the services or really the advice that I'm trying to round out the services

or really the advice that I can bring to my members that it's not just about money. It's about how money can be a tool to help you live a better life. And which qualifications beyond that should you look for in a financial advisor? Are there any red flags to look out for? I think the first and foremost thing you should make sure of is if somebody is a registered investment advisor, so an RIA. Right. And by the way, you can do a background check on your advisor. But if you type in RIA or SEC RIA search, you'll actually find a website where you can plug in either the financial

advisor or the company's name. And you get to do a background check on your own financial advisor. It'll tell you who they are, how their company runs, services, how they charge, and any dings or demerits they have against their certification. So don't just listen to somebody, go to your homework. So if you're going to talk to a financial advisor, there's things you want to look for. Number one is the quality of the advice they're going to give you. Historically, it's been around investing and retirement planning. We talked about incentives a minute ago. Why are investments the number one thing? Well, that's how they get paid. Percentage of assets. That means every dollar you invest with them, they get about 1%. They get paid more,

so they're going to give you advice on it. And then retirement planning, but it's 30 years off. I want to live well today. So you want to make sure that the advice they're actually going to give to you looks at everything that money touches in your life, period. There's a lot more that we do than just invest and save for retirement. Number two is the quality of the financial advisor. This is where credentials come in, experience, expertise, and ethical standards. CFP, in my opinion, covers it all. But you also want to make sure, and this is something most people miss, ask your advisor who they work with. There are plenty of financial advisors out there that will work with a 65-year-old getting ready to retire. But let's say you're like me and you're 41,

you're getting married and having your first kid. That's a very different level of expertise. Going through what I'm going through, which a lot of people go through in their 30s and 40s, you want somebody who's done it before, who understand it, who can give you very clear advice on the things you're going through, not someone who's 65. If you're 65, find someone who does retirement planning. These are really, really important things. And the final piece, just to bring it home, is how they're paid. I am not a fan. And by the way, I'm a recovering assets under management charging financial advisor. I even sold commissionable products at one point. Gasp. I feel terrible. But I learned, I saw the light, and I came around to it.

You're reformed. You're throwing some holy water at me via Zoom here, right? Totally. And I think that in theory, we all know that we should have a financial advisor and we should get our financial life together. But the actual discussions that go into it, I think oftentimes stand in your way.

So I'd love to do a little role playing as I've done in all my books. I think that having a script that you can follow almost to hear what a conversation would be like. So it's not so intimidating because you're like, okay, I'm into it. Brett, Nicole, it's time to call. But then I think that's the last hurdle. What do I say? So I'd love to do a little role play with you where you help somebody that's going to go to a financial advisor and just talk through what it would sound like. Cool. Let's do it. I love it. I think it's a great idea. By the way, you're always going to get cold feet and that's going to go to a financial advisor and just talk through what it would sound like. Cool?

Let's do it. I love it. I think it's a great idea. By the way, you're always going to get cold feet. And that's okay. Or sweaty armpits, in my case. Yes, right. Walk down the aisle, make sure you say I do. And this is a good decision for you. All right. So how about this? I just turned 40. Say I came into your office for a first meeting, and I said that I wanted to work on retiring ASAP. What would you say to me would be my next steps as my financial advisor? Well, first of all, I would say, Nicole, it's nice to meet you. Good to see you today. Big decision by the way. I'm very proud of you for doing this. Let me ask you a question, though. You want to retire as soon as possible.

Have you ever done any kind of retirement planning before? Am I going to be like a fake Nicole or am I going to be real Nicole? If we're going to role play, you tell me what kind of Nicole you want to play, right? I'll just be myself. Easiest person to be. Sometimes it's the hardest person to be. I was going to say that's the best person to be. Yes, I've done retirement planning. Excellent. Well, good for you. By the way, most people haven't. Thank you. I'm amazing. Should I be asking you stuff like, how does your comp structure work? Are you taking fees for buying mutual funds? Do you take any commissions? What are the key baseline questions I should be asking you?

Yeah, great point. So we'll do the advisor Q&A piece, and then I'll walk you through high level. Here's what financial planning should look like as an experience or process. And if you're not getting it, then you probably want to find something else. There's essentially three buckets you want to think about. The quality of the advice. So what advice are they actually going to give you? Now, in this case, you're saying, I want to retire. They should be pretty darn good at retirement planning. So you might want to ask them, have you helped people retire before? And if you said no, there's only so far expertise can take you, not actually helping people navigate the transition to retirement. Because we want to talk about an emotional thing, not just a financial thing.

That's retirement. So what advice are they going to render? Number two, quality of the advisor. Do they have certifications? Are they a fiduciary? Experience, expertise, these types of things. Ask them those questions. The only question I ever ask is like, are you a certified financial planner? And in my opinion, and I'm biased because I am one, but I think it's the gold standard. It's like the MD designation in the medical field. You want to make sure someone's a doctor before they're operating on you and doing some serious stuff. So I said, hey, Mr. Wealth Manager, Financial Advisor, Money Coach, before we chat any further, can you please confirm with me that you are registered with the state or with the SEC,

that you're a registered investment advisor? Yeah. It's a perfectly fine question to ask, by the way. There is not a single dumb question that you can ask a financial advisor before you work with them. You know why? Because they're your questions. You have to be comfortable picking that financial advisor. And if that financial advisor can't give you a short, very clear answer to your questions, there's probably something they're hiding there. Or it might be a really weird question too that also can come out when you're having those conversations. And by the way, I put together a list of 10 questions you should ask a financial advisor on our website. I'm happy to share a link if you want. And by the way, they're not just a list of questions. We actually then help explain

why that question matters to you and walk you through all of it. I love that. I think that's a great cheat sheet. I have a cheat sheet in Miss Independent too, asking about what your comp structure is. Do you take fees on different purchases? And also, do they sell other products? Do they get paid for insurance? You have to remember the incentive and compensation models can drive how people think about giving you advice. So asking those questions about how the advisor gets paid, really, really important before you sign on the dotted line with a financial advisor. Yeah, for sure. I think of it like a stylist versus the person at Macy's or Bloomy's that works off commission, right? So you're paying a stylist a flat fee, likely,

they're working in your best interest, they want you to look good, no matter what brand or whatever you're going to put on, the person at the department store is going to make money by selling you a thing. That to me is the difference. That happens in financial advising too. So the financial advisor fiduciary would be the stylist in this analogy. That's good. I like it. I love to put you to work for one of our lovely, devoted listeners. She wrote in and asked this question. I am currently working at a tech company and was granted $15,000 in stock.

I do believe in the company, but have always invested in real estate. I have four rentals. I do also have quite a bit of debt. I get financial ADHD where I tackle one thing and accumulate another and then tackle that and then accumulate more debt? Should I just hold on to the stock, sell it to pay off some of the debt, do 50-50?

What would you say? Or what would you ask? Well, first of all, I'd want to ask more about the debt. What kind of debt do we have? I'm not sure if that's mortgage debt. It sounds like it might be a consumer debt credit card kind of thing. If it's credit card debt, get rid of that stuff. That's costing you 20% plus potentially. I would share that the fact that this person is aware of the financial ADHD feeling is a huge step. I'm sure it doesn't feel like it. By the way, in all of my studies for this accredited behavioral financial professional thing, there's literally one takeaway, and it's simply awareness of the things that are driving your decision. So knowing this ADHD is there and being aware of it, home run. So good job,

first of all, for doing this. Now, second of all, what do you do with the stock? I think to not get too technical, because I have questions around, I'd say, well, first of all, the stock was granted to you. Is the stock yours yet? Because most stock, when it's granted, has what's called a vesting period. So you may not be able to touch it for the next year, at least potentially over four years when you vest in that stock. So it may not be yours yet. So I'd ask, first of all, what kind of stock is it? Could be a restricted stock, a stock option. And then what is the vesting period? So we know...

Or cliff. Right. So at 12 months, usually it cliffs a little bit. And then you have this every month, you get a little bit more. But I'd want to know what is the vesting period so we know when that becomes available. When does it unlock for you? And then we can start thinking about what do we do with that money? Question number two would be, what are we trying to achieve? And what I mean by that is when I see this, I see this idea of, okay, there's four rental properties. First of all, great job on four rental properties. But what is the goal? Do we want to own five? And frankly, what is the goal of owning the

rental properties? Is it to achieve financial freedom? And if so, how many rental properties do you need to reach that freedom number? Or even what is that freedom number? That's such a good point because it's this idea that it's never enough and you keep changing the goalpost on yourself. And what does financial freedom actually mean to you? What is that number? I have a number. Do you have a number? Oh, I have a number. Yeah. The FU money number. Everybody should have a number. Well, so I have two numbers. The FU number is, of course, higher than the other one. But I have a very clear number that I know the day that I no longer need to work or generate

any more income. And that's just to get by. I'm free. I can make my own decisions. But to me, I always say financial freedom sometimes is just the launching pad for really cool stuff. Because then once you're free, this entirely new universe opens up. So first of all, yes, what is the number? Because let's say this in the situation. Let's just make up an example. What if that fifth rental property creates the cash flow that hits that number for you? But one of the most important things that I see, Nicole, in all of this is getting absolute clarity about what you want to achieve. And then number two is, how are you going to achieve it?

Generally speaking, it's that financial freedom thing. There's a number there. By the way, one of the greatest financial minds ever, George Foreman, the boxer, has one of the most brilliant quotes. He goes, it's not about at what age you want to retire, it's at what income. That's the key. In this situation, first of all, I'd say, let's get organized. Let's look at your sources of income. Let's look at the things you own, your savings accounts, your investments, your real estate, and let's look at the things you owe. That savings accounts, your investments, your real estate, and let's look at the things you owe. That's your debt, that's your mortgage, maybe a student loan, a credit card, whatever. It's your personal balance sheet.

I always say cash flows and balance sheet. Cash flow is your income and your expenses, money in, money out, and your balance sheet, what you own and what you owe. Two most important things you want to have absolute clarity over when you're building a financial plan and trying to achieve, more importantly, financial freedom. That's where I'd want to go with this situation first. Hey, let's take a look at everything. And then it's like a doctor, right? Prescription without diagnosis is cause for malpractice. If I don't know what's going on with you, I can give you a diagnosis, but it's probably wrong. So let's look at the entire financial landscape, cashflow, income, and expenses, and the balance sheet, what you own, what you owe. And then we'll say, hey, what's the goal? What do you want to achieve? What really matters to you?

Not anybody else out there, not everybody on TikTok or social media. What matters to you? And then how do we make intentional decisions towards that goal? That will give you clarity and that'll give you purpose with your money. I think that's really smart. So the takeaways here are clarity around stock options is so important. So many people get screwed by options or equity and they don't ask the right questions. And it's even happened to me. It's a tricky, tricky one. And I think that you're asking the right questions of restricted stock options. What's the vesting schedule? Is there a cliff? All of these types of things. Anything else that I missed there? I think that's good high level. There are some other things to look for. There's also called a strike price. So when someone gives

you $15,000 of stock, you might actually have to buy it for five,,000 and it might be worth $15,000 today. And so you might only actually end up with $15,000. So make sure you understand how your stock options work and know what kind of money could really come from these things and not just think, oh, I got $15,000, but you may not be able to touch it for two years and it might not actually be the full $15,000. Totally. I would love to even do a whole other episode with you about this because it is something that just boils my blood. And if it's a private company,

you want to know liquidation preferences. You want to know all the things because when you see that you get equity in a company, whew, I'm rich. No, there's a whole bunch of stuff that you should be asking and no one does. No one. I did a masterclass on this because this is so complicated. And to your point, by the way, private, if you get stock options in a private company, here's the weird thing.

When they vest and you exercise them, you have to bring money to the table to buy them. You have to buy them unless it's cashless. But if it's private, it can't be because there's no liquid market. So a public company, 100%, you can do cashless. But a private company, you have to bring money to the table to buy the stock. And then number two, in many cases, you're going to pay taxes on the stock option, and you can't even sell the stock. So you're making a big bet.

You're not just buying it. You're going to pay taxes on it and still hope that one day there's a liquidity event, an IPO, and to your point, that someone doesn't come in and buy you out or take you over with liquidation preferences. Publicly traded companies are much easier to plan for. There's still a lot to know. And the final thing I'll share here is in 20 years, Nicole, I've met one person that didn't think their company stock was very good. And that one person, even they still couldn't sell the stock when it was down 25%. It's like, it's going to come back. It's going to come back.

The point is, there is a very big emotional connection to our company stock. Be aware of that. But the most important thing is intentionality around what you are trying to achieve. I tell my members all the time, if you're going to sell something, make sure you know where that money is going to go. It makes the decision much easier. So if you sell this, you're like, I kind of like my company. But you go, you know, if I sell that stock, it's a down payment on my fifth rental. That creates the cash flow and I'm free. That's an easy decision. But going, I don't know what it means. I'm not really sure what my number is. It's very hard to make a decision, an informed decision from that state of mind. What is your why?

My why? I mean, sure, tell me your why. But I was more saying to this person. You know, I was like deep in this roleplay. Correct. 100%. When you find your why, you'll find your way. So what would be the cadence that you would say? Sometimes when I call to during tax time, they're so overwhelmed. And so that's maybe not the best time to have a 360 check-in. Yes. I would probably say that around tax time, depending what your advisor does, because

most of my members have a CPA that helps them with that. So they're calling me for check-ins. I might link up with their CPA last minute to help them make some decisions. But yeah, I think finding... I always call it the rhythm of the business. And I'm very clear with my members, by the way. I say, look, January, February, good times we can meet. March, April, going to be a little harder.

And then I also know that nobody wants to meet in June, July, or August in the middle of summer. So then we typically come back together in September and have a check-in around workplace benefits, make sure you're proactively making those decisions. And then we'll do a quick check-in around year-end. And then if they have something else that happens in their life, I'm on call. I always want to say, we're building a CFP in your pocket or financial advisor in your pocket. On-demand financial advice when you need it for those quick decisions. And then when there's a bigger life event,

you have the ability to schedule and spend some more, I'll say, intimate time with your advisor and make sure you're getting the right advice and updating your plan for that next chapter. time with your advisor and make sure you're getting the right advice and updating your plan for that next chapter. Yeah. When life and stuff happens, I got in a car accident, I called, I tried to figure out what would be the best strategy around a car, when to buy it, how to buy it, all of those things. And that was definitely not planned. We mentioned, and one of the things that you touched on, the tax component and corresponding with the CPA is really important. But one of the things financial advisors can help with is tax loss harvesting. Can you explain what that is? Think about it this way. Here's an easy way to explain it.

When you invest over the long term, things usually go up in value. And when your money goes up in value and you sell it, you create a capital gain. You're in theory, harvesting a gain. You're just taking a gain. That's all it is. You're taking it. Now, the flip side of that is investments, because there is risk, they do go down in value. And when they go down in value, what most people miss in all of this is if you take a loss, that loss can actually offset other capital gains to lower your tax bill. And it can also offset up to $3,000 of ordinary income a year if you have a loss. And so all you're doing is you're selling an investment at a loss. You are taking the loss to offset it against the gain.

And they just happen to call it harvesting. I guess it comes from farmers when they're harvesting their goods or harvesting their fruits and their labor or whatever it is. It comes from you're harvesting it, taking it, and storing it for either use against capital gains or income, or even carry it forward. But you're just taking a loss. That's all. Yeah. So you can use it to offset. This happens with gambling too. If you lost, you can offset your gains, essentially. 100%. And now the key is, in taxable targeting too, most of the time, you're not selling and going to cash. You're selling it because you want to capture that loss for tax purposes.

And then you want to reinvest that money back into some other investment so that you remain invested. The goal isn't to sell it and leave the markets or investments, unless there's a very good reason to do that. But usually, you're taking the loss, you can offset other gains or income, and then reinvesting that money to another investment. So you're still fully invested in your strategy. Hold on to your wallets. Money Rehab will be right back. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves.

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Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Orp Bank NA or Stride Bank NA. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. Before we get back into my convo with Brent, I wanted to tell you about that sweet deal from Facet.

Facet is waiving their $250 enrollment fee for new members, and they have an awesome offer just for money rehabbers. Head to facet.com slash money rehab to learn more. That's F-A-C-E-T dot com slash money rehab to learn more or check out the link in the show notes. Okay, back to Brent. And now for some more money rehab. Okay, there's two common models, a commission model and a flat rate model. We know that you're a fan of the flat rate model. Can you explain, though, the models a little bit more? Why are you such a proponent of that flat rate model?

And if you're going or if you're already in a commission model, what are some of the percentages that you should keep that commission within? Because they all look like small percentages, but they really matter. So on one end, you have commissions. If an advisor only charges a commission, you should probably run far and run fast, period. But I'll come back and explain commission because there's a sliding scale of commissions. On the other end is your flat fee. Think of it like a subscription fee. And in between, you have everything from the percentage of investments you have with an advisor and hourly fees, project-based fees, et cetera. When it comes to commissions, here's the scary thing. And I know this because I used to do it. Commissions can range anywhere from 1% up to almost

7% depending on the product that you buy. That is scary. Imagine paying 5%, 6%, or 7% of your money for a product. Do not do that, please. If an advisor comes to you with a product that's at 5%, 6%, or 7% commissions, you have to understand who's getting paid and why are they actually recommending this. Now, the more typical model, because this is just the way it's been done, is charging you 1% based upon how much money you invest. And by the way, 1% is the average. It can be anywhere from 0.5% if you have a whole bunch of money with your advisor, anywhere to 2% for some financial advisors if you're just getting started with your investments. And that's a lot of money. It may not feel like it today, but I promise you over 30 years, I've done the math on this, a 1% fee can cost you almost 25% of your wealth over that 30-year period.

It's huge. So that's the assets under management model. And 1% sounds really small. 2% sounds really small. But yes, over time, it's a you-know-what ton of money. Yes. So ideally, keep it under 1%. In my opinion, and I'm biased in my opinion,

but I think it's a better way, is you want to look for a flat fee because it removes all the conflicts of interest. It's direct alignment between the services you want or need and what a financial advisor is going to provide. The investing, paying 1% of how much money you invest, there's no direct relationship between the amount of advice you're getting from a financial advisor and how much you were paying. Because as you save more and your accounts go up in value, you pay your advisor more even if you don't get more from them. This is really important stuff to know when you're looking for a financial advisor. Well, yeah. I mean, so I don't like the model, period. But I'm putting it out there. You can work with whatever advisor you want. The AUM model doesn't make sense. By the way, I saw this for a while because let's just say, I'm going to pick a big number to give

you an example. Let's say you have a million dollars with a financial advisor and they're charging you 1%. That's $10,000 per year. And you can go to that advisor and say, well, what are you providing me for $10,000 per year? But what happens if you do a rollover of a prior employer plan, and now you have $1.5 million with that advisor? Now that advisor is making $15,000, for what? Why are you paying someone more money if they're not giving you more advice? They're not doing any more work. Why are you paying them more money? The only thing it's doing is padding the financial advisor's pocket. It's not helping you. That's more money going away. I've worked with many members in the last seven and a half years since I started my company who come over who have $1 dollars or $1.5 million and say, look, we charge a flat fee,

anywhere from $2,000 a year up to $6,000 a year. We personalize and tailor it to you based upon your needs, your wants, your life situation. I go, how'd you like to pay $4,000 or $5,000 a year instead of $15,000? And in many cases, for more advice, an easier relationship via virtual relationship with your advisor, it's a game changer, period, across the board. It puts more money back in your pocket. Because my take is I want you to make more money and I want you to keep it, Nicole. And the flat fee aligns that perfectly. And by the way, it's a really cool thing as a financial advisor, cool being the technical term, when I can go to my members and say, I have one incentive,

and that's to take wildly good care of you. I have no product to sell. The only thing I'm here to do is help you. That's a cool place to be as a financial advisor. And by the way, an even better place to be as the consumer, if you will, on the other end of that relationship. But how can you tell if that's working out? In other words, how should you define success with a financial advisor? Well, the first thing is goals. What do you want to achieve? What matters most to you?

And actually putting them down on paper or putting them in the financial planning software, whatever it is that you're using. And then your planner should be there with you. They should help you build the strategy. They should check in periodically, frankly, proactively to help you reach these goals. And by the way, if after six months or 12 months, if you're not really feeling it with the advisor, because the relationship matters, by the way, it's really important. When you talk to your financial advisor, you kind of want to like talking to him or her. It's not the most important thing necessarily, but I promise you it pays off over time having a good relationship. I mean, you want to be able to be honest with them.

If you are going through a divorce, that's a huge financial issue. a divorce, that's a huge financial issue. And so if you don't feel comfortable telling them that something's funky in your marriage, then that's not a financial advisor for you. I think you made the point better than I did. So thank you. 100%. The relationship matters. But here's the thing. Most of the things you do with your financial advisor, because how you feel about your advisor is kind of hard to quantify or measure. That's a personal feeling thing, which is really important. Because to your point, if you're not comfortable, if you feel stressed or anxious every time you're meeting with your financial advisor, that's not an indicator of a good relationship. And you're probably not making the right decisions.

Or to your point, sharing everything you need to share with that advisor so they can do a great job for you. Outside of that, what you really want to make sure is, are you making progress towards the things that matter most to you in your life? So if you sit down anywhere from, hey, I want to build an emergency fund to pay down some high interest debt or pay off my student loans, or I want to start a family or save for my dream home or save for retirement, whatever it is, whatever these goals are, if your advisor, A, isn't tracking them for you and helping you with this, or B, you can't tell after a year of working with a financial advisor, it's probably time to sit down and go, should I make a change? Everything with your advisor should be measured, managed, and frankly, proactively adjusted when life changes. Not

because markets change and all that kind of craziness that we can't control, but when your life changes or your goals changes or you finally get married or have a kid, those are big life changing events that could mean, hey, let's go review the plan. Let's make sure we're updating our strategy because it should be ongoing and dynamic and not some static 400-page document they give you and your estate plans on page 25, your investment strategy on page 75, and you walk away and go, I'm not sure what to do. Yeah, I think it's the same reluctance that you might feel switching psychologists or a shrink, right? They already know my whole life story and all my issues and all my traumas.

How am I going to change to somebody else? There's a whole life that I have to explain, but really it happens a lot. If you don't like them, you can move and you should. You can and you should. And that is very, very hard. In my 20-year career, I've seen it many times where I start talking to somebody who's a potential new member and they go, do I have to tell my other advisor? And I go, no, you don't have to. Because the good news is we can transfer accounts, we can set up the relationships, like you can call them if you want. But that is a very hard thing. Breaking up is hard to do. And it's hard to break up with a financial advisor. Whether or not it's a good relationship or not, it's still hard to do.

But the new advisor will break up for you. Yes, the new advisor can. Here's the cool part about it. If you work with a new advisor and you set up a new account, that advisor essentially can transfer the money on your behalf, which means you don't have to call anybody. You don't have to tell anybody. They will do it for you. It's not even as bad as breaking up via text. You don't even have to send a text. You just stop

talking to them. And when it comes to your money, it is critically important. So if you're not happy with your relationship, break up, find a new one, and put yourself back in control. Well, I am a staunch advocate for the flat fee. I don't want the fee to override what I think are the two primary important things in the relationship. I don't want the fee to override what I think are the two primary important things in the relationship. And number one is the advice that you're going to receive, because why are you going to the advisor? That's based upon what you're looking for. You want to find that in your advisor. And number two is making sure the advisor has the experience, expertise, and is held to the ethical standards. Those are the first two things.

Then the fee should actually make it better for you. Yeah. Or is it possible to think of it in the same way as you would personal training and not necessarily go all the time or if you can't afford it all the time, but go and get the moves or get the program and then do it on your own? It's interesting you mentioned that because I actually did that with a personal trainer back in the day. I've had personal trainers my entire life because I played sports up until I came out of college.

And the personal trainer is like, well, my program's $10,000 a year and you're going to meet me every week. And I was like, timeout. I only want to see you once a month because I know this stuff. I've been training my entire life. And we actually negotiated a fee of $3,000 a year because I went less frequently. There are different options out there for you. There are financial advisors that'll do a one-time review of your plan. So that might be a better option for you if you just, I don't have a ton of money right now. I just want to get started. It's always good to get that second opinion. They're advisors that charge hourly. So if you want to go in and just call them when you want, they'll charge you hourly to build the fee and when you call. The reason I'm an

advocate for the flat fee is that it's not just about building the plan because your advisor should meet with you a couple of times upfront to get to know you to put the strategy together. It's also about checking in periodically, proactively planning. Evolving your strategy as life changes. You shouldn't feel like you have to call your advisor. Your advisor should be calling you periodically. Now, don't meet with them just to meet with them. Meet with them when there's something that changes. Meet with them around tax season or at the end of the year when you should be doing tax planning before December 31st comes around. And your advisor, by the way, should proactively be reaching out to you to check in on you. If they're not, ask them the question, why aren't you calling me?

But they should be proactively reaching out when these periods or times of the year come around because that's part of the advisor's job is to make sure that they're staying on top of things so you don't have to. And can you tell me more about the dream team that you alluded to? Because some will have estate planning people that they deal with or tax people or other professionals that they'll outsource more of your overall plan to, but some won't. The dream team is really what's right for you. Not everybody needs a CPA necessarily to do their taxes every year. Some people do. But think about it this way. The analogy I like to use is that your financial advisor should be

the primary care physician for you or your family's finances. So they're the expert that's helping to really build the relationship, understand everything. But if you need somebody to look at your heart, they shouldn't be doing heart surgery for you. They're going to find an expert and a professional for you, right? So I'm a financial advisor. I guide my members when they want to buy a home, but I'm not a realtor. I'm not going to help them buy the home. I help them understand the finances of it, but then I'll coordinate everything.

So when they find a realtor or they're talking to their mortgage loan officer, I want my members to ping me as the quarterback here to say, hey, is this right? What should I be doing? And then I can help navigate the pieces. But everything from, there are transactional dream team members when you're doing something. And then there are the core pieces of this, which are generally financial advisor. Unfortunately, taxes touch everything in our lives. So if you need somebody to give you an account in the CPA, you should have an estate planning attorney because those documents are critical to protecting you and your family. Those are the three core team members. If you're investing and your financial advisor has an investment team, you want to look for this

thing called a CFA, Chartered Financial Analyst. It's like the CFP of the investing world. Those are the things you want to start looking for to make sure that you have the right people with the experience and expertise to do a great job for your money. And that's different than a broker because people will say, oh, I have a guy at XYZ Investment Bank or my parents always used a guy. We have a guy. I think 10, 20 years ago, everybody had the guy. A broker is just transactional. And that's the way the industry used to be. I'll spare you the history lesson here. But going back 30, 40, 50 years, you had to call a stock broker to buy or sell a stock, to buy or sell a mutual fund. That was their job. And they would charge a commission for it. Over time, it went from a

commission to a percentage of investments. And now we're seeing this third generation of advisor evolve into the hourly fee or flat rate fee that, again, I believe is more fair for you as the consumer or the client in these situations because more money goes back into your pocket than the advisors. I want to continue on with your doctor analogy because I really like it. I think people feel tempted to lie to financial advisors in the same way that they're tempted to lie to doctors about how much they really exercise. I rediscovered the show House. I don't know if you've seen that. But part of the premise of that show is that patients lie to doctors. And so we want to do the right thing. Sometimes we'll be aspirational in our answers when financial advisors ask us how much we can save or invest or how much we make.

But just like a doctor, it's so important to be honest with your financial advisor because you're only cheating yourself. You're only hurting yourself. So how would you recommend people get over the anxiety of being honest, even if they're not necessarily where they want to be now financially? Step number one is find the right financial advisor. When you find the right advisor, I think that barrier becomes easier to get over. I'm never going to tell you the barrier's gone, but the right financial advisor will be able to build that relationship with you

where you can trust him or her to do it. And second of all, if you're feeling stress or anxiety or guilt or shame or any of this stuff around money, please know this. You're normal. We all go through it. We are never taught this stuff in school. Really, no one ever tells us as an adult. We are set free to go learn this stuff on our own. And the world's only getting more and more complicated every single day. This stuff can be stressful. So please know this. If you're feeling stressed, either talk to your friends, start the conversation, find an advisor, educate yourself. This is a normal thing. Even I'm stressed sometimes about money. Yeah, I'm stressed too. And I have alphabet soup too. And also the language continues to

change, right? The jargon, when you and I were in these CFP classes, we didn't talk about NFTs in that class. Once you learn the jargon, the language continues to evolve. 100%. So that's also one of the reasons when you look at sort of my alphabet soup in that class. Once you learn the jargon, the language continues to evolve. 100%. So that's also one of the reasons when you look at sort of my alphabet soup is one of the things I've always committed to, frankly, for myself, but also for the members that I represent, is that I'm going to stay on top of train. So the CBDA, which sounds like a very different designation, is actually a Certified Blockchain and Digital Asset Advisor. So I thought, hmm, you know what? Blockchain, crypto, it's becoming a thing. I'm not saying I'm the foremost expert in it, but I thought, I need to be educated so if my

members have questions, I can help them navigate this field. And it's like, should I invest in it? What are NFTs? How does crypto work? Should I buy Bitcoin? These are questions that come up every single day, by the way. And the ABFP is an accredited behavioral finance professional. I thought, hmm, you know what? I want to help my members better understand their mindset around money. How do you build a rich mindset? I mean, money rehab, right? We all have things we did in the past that we need to recover from. And sometimes it's hard to have that conversation with people. So I'm always trying to stay at the cutting edge of what do people need to know to really master their mindset, master their money, and take their life and their money to the next level. And it's hard, by the way, even as an advisor to stay on top of this stuff.

I have a whole team around me and it's still hard. And if you're out there on your own trying to navigate this while you're also trying to build a career, start a business, run an awesome podcast, raise kids, how do you find time to do it? People always ask, what are you selling as a financial advisor? And I go, look, there's freedom from worry and stress. There's making every decision with clarity and confidence. There's feeling and control of your money. And frankly, it's getting your time back. So you can spend it doing all the fun stuff you want to do and not worrying at 9 o'clock

at night about the news that came out or Bitcoin hitting $70,000. Should I be doing it? All of these things are reasons that an advisor isn't just about money. It's about helping you feel better about money and the decisions you make every day. Oh, yeah, because we figured out much harder things in life than how to buy a stock or how to create an estate plan or how to tax harvest, which we can talk about in a second. But it's the emotional, it's the mental part. That's the real blocker. Yogi Berra once said baseball is 90% physical. The other half is mental. I always say money is 90% physical, the other half is mental. I always say

money is 90% logical, the other half is emotional. 90%? Well, that's the joke on all of this, right? So he's like, hey, baseball is 90% physical, but then there's this mental game. And by the way, what you'll learn about professional baseball players, first of all, yes, they're tremendous athletes. But there's a lot of really good athletes out there that can hit a baseball 500 feet. There's a mental game that puts you in the big leagues that allows you to compete at a higher level. The same thing goes for your money. What we like to do with money is think we understand, be really logical about it. 90% plus of the decisions we made are driven by our subconscious thoughts. It's like an iceberg. What we think is the 10% above the water. What's really driving are the

belief, the values, the attitudes, the emotions, the shame, the guilt, the pride. These are the things that motivate a lot of our decisions and being aware of them can truly take your money game to the next level. All right, Brent. With that, we end all of our episodes by asking guests for one tip listeners can take straight to the bank. You have given us so many already. But what is one final thing on finding a financial advisor? Questions to ask? Red flags? Green flags?

Yellow flags? Ooh, green flags. All right. I'm going to give you two, but I promise they're quick. Okay? Because I was thinking mindset and money. Mindset and money. Okay.

First of all, I love it when people find mental freedom. So what I want you to do in this year, 2024, is I want you to pick one thing in your life that is causing stress. One thing. Not five, not 10. One thing when it comes to your money and make that your goal and tackle it. I've seen it for 20 years. If you find that one thing and you tackle it, the freedom that will create,

that mental freedom it will create is one of the most liberating things you'll ever... And by the way, I'm not sensationalizing this. That is true. But pick one thing. If you have five, it's going to be hard. Pick one, tackle it, get over the hump, enjoy your mental freedom. Straight to the bank. Here's the thing that I know that maybe not today and maybe not in two or three years, but over the next 10, 20, or 30 years, if you go down the road of working with a financial advisor, and by the way, I think everybody should. Top professional athletes, top executives, top performers, have coaches. Don't have to be a wealth manager. It could be a financial advisor, money coach. Always make sure you understand the fees. Those fees, you may not think in a year are going to hurt. I'm mainly talking about 1% of how much you invest. I've done the math on this many,

many times. That 1% can cost you almost 25%, a quarter of your wealth over time. And by the way, go look at your 401k because there are investment fees that aren't advisor fees. They're embedded in your funds. They're called loads and stuff. They have other terminology. Go look at all of your investment accounts. If you find something you're investing in with a very, very high fee, I am 95% sure that high fee isn't worth it. Because it just means you're paying someone else and that money is coming out of your account. I want the money back in your pocket. But high fee is above 1%. So it depends. Financial advisor, yes, over 1% high fee. If it's an investment, I'm a boglehead. I'm a Vanguard, over 1%, high fee. If it's an investment,

I'm a Bogle head. I'm a Vanguard, low cost, broadly diversified. That's what I own, by the way. Just to tease that out, Jack Bogle is the founder of Vanguard, right? Correct. He democratized low cost, broad diversified investing. That's my approach when it comes to investing. Those fees are 0.05 to 0.1%. If there's a fund at like a 0.2 or 0.3, that's not bad. When they start getting a 0.5 or 1% in the fund itself, the thing you own in your 401k or an investment account, I have seen this and done the research on it. Most of the time, that fee is not to your benefit. It's just costing you money. And that will kill your wealth over time. That'll put a lot more money in your bank over time.

Because of compounding. That's right. By the way, if you're paying that 1%, that's 1% every single year that isn't growing for you. So let's put some fee fertilizer. I think that's what I called it in one of my books. I like that. I mean, look, if financial advisors

that charge 1% are investment companies that charge high fees, I just call them fee factories. They're just cranking out higher fees left and right. And most people don't know about it because they're trying to hide it from you. We're demystifying this for people, Nicole, because I want you to make more money and I want you to keep it. That's the most important part. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.

Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.