April 2025 – Your Financial Pharmacist

YFP 404: 5 Key Questions to Ask Before Hiring a Financial Planner

Posted on by YFP Media

Tim Ulbrich, PharmD, and Tim Baker, CFP®, break down how to find the right financial planner—covering what planners really do, how they’re paid, and the questions to ask—so you can move forward with clarity and confidence.

This episode is brought to you by First Horizon.

Episode Summary

Not sure who to trust with your finances—or if you even need a financial planner? In this episode, Tim Ulbrich, PharmD and Tim Baker, CFP® dive into what a great financial planner does beyond providing investment advice, and how they can help you navigate life’s financial twists and turns.

Tim and Tim explain the different types of planners, how to spot someone working in your best interest, and the key questions to ask before hiring one. Plus, they break down common fee structures (like AUM, flat-fee, and hourly), the importance of the CFP® designation, and how to evaluate the return on your planning relationship.

Whether you’re hiring a planner for the first time, reevaluating your current setup, or just exploring what’s out there, this episode will give you the clarity and confidence to take the next step.

Key Points from the Episode

[00:00] Welcome Back, Tim Baker!
[00:39] Skepticism in the Financial Planning Industry
[02:18] Understanding Financial Advisor Compensation
[03:56] The Importance of Transparency
[06:37] Defining Financial Planning
[11:27] Comprehensive Financial Planning Process
[20:06] Evaluating Financial Advisors
[32:07] Second Opinion Analysis
[34:47] Licensing and Compensation Models
[37:00] Commission-Based vs. Fee-Only Advisors
[37:40] Understanding Advisor Models
[38:53] Identifying Advisor Compensation
[41:44] Transparency in Advisor Fees
[01:04:06] Conflicts of Interest in Financial Planning
[01:05:54] Investment Philosophy Alignment
[01:12:56] The Value of Long-Term Financial Planning

Episode Highlights

“ I think it’s 5% of financial advisors, financial planners, whatever you want to call us, are fee-only fiduciaries. That means the other 95% are not, which means that they can put their own interests, the advisor, the planner’s interest, ahead of their clients.

When I tell pharmacists that, they’re like, are you serious? That doesn’t sound like it would be legal or true, but it is.” – Tim Baker [7:39]

“We’re not going to lay on our deathbeds and say, ‘Oh man, I wish YFP, or I wish my advisor would’ve told me to put more money into our Roth IRA.’ We’re going to say, ‘I wish I would’ve got into horseback riding again because it was a passion of mine that I just put on the back burner.’” – Tim Baker [1:00:40]

“ When I started Script [Financial], the thing I heard from pharmacists that I started working with was, the advisor that they would work with or they would talk to would say, ‘Hey, don’t worry about your student loans. They’ll figure themselves out,’ which we know is terrible advice.” – Tim Baker [12:37]

Mentioned in Today’s Episode

Tim Baker on LinkedIn

Episode Transcript

Tim Ulbrich: Tim Baker, welcome back to the show.

Tim Baker: Good to be back. What’s what’s good, Tim?

Tim Ulbrich: Well, I’m excited. We’re, we’re gonna be talking about questions to ask when hiring a financial planner. A topic that we’ve dabbled on before we, we’ve woven in and outta this topic throughout the show in, in various episodes before. But we’re gonna directly cover five questions that should be asked.

Tim Ulbrich: Certainly not the only questions, but when you’re evaluating a financial planner and no need to take notes, we’ve got all this information and even some additional resources in our YFP Nuts and Bolts Guide to hire a financial planner. We’ll link to that in the show notes so individuals can go get that resource.

Tim Ulbrich: Tim, I wanna start with maybe what is top of mind for many people, especially [00:01:00] if they haven’t worked with a planner before, which is some of the skepticism that may be out there in terms of working with a financial planner, engaging with a financial advisor, entrusting them with something that is so important, uh, which is their own financial plan.

Tim Ulbrich: And admittedly, an industry that doesn’t necessarily have. The best reputation. So let, let’s start there in terms of, you know, that skepticism that may be there and where some of that may be coming from.

Tim Baker: Yeah, I think, um, you know, I think a lot of the, the, you know, the advisors that came up back in the day kind of came up through like the wirehouse model. So some of these big companies that we all know the names or even even the insurance world. And I think, I think in those models, and again, you know, this episode, you know, we may throw shade on other models.

Tim Baker: There’s no hate here. Like it’s just, there are diff, you know, different strokes for different folks types of things. And I’ve been in, you know, a few, you know, at least one different model be, you [00:02:00] know, before we got into the fee only. But I would say, you know, um, haven’t, haven’t been in other firms. It can be very transactional, Tim, right?

Tim Baker: Tim? So, like, you know, you, you look at the things that you have available to you as a financial advisor and you try to find the best way possible to help your clients, but also to put like food on the table. Sometimes that can mean, you know, squeezing clients into things that they shouldn’t be in and, and it kind of feeling like a, Hey, I’m being pitched a product, versus like, is this person truly in my best interest?

Tim Baker: I think the other thing that’s part of this is, um, like our industry is not transparent at all. When I come across prospective clients that have worked with an advisor or are currently working with an advisor, I’ll ask the question like, how do you, how do you pay your advisor? And they’ll say. I don’t know, or I don’t pay them anything.

Tim Baker: You know? And I, I remember [00:03:00] distinctly when I, when I became a, a financial planner, I was talking to my parents and I’m like, how do you pay your financial planner? And they’re like, my mom was like, well, let’s do your dad’s work. You know, they pay or it’s free, or something like that. And I’m like, that can’t be true.

Tim Baker: And when I uncovered how much they were paying, it was like heart attack city. It was just buried in a product somewhere and they had no idea. So to me, I think it’s that. And then I think it’s also like you, you hear stories about like Bernie Madoff or, you know, really bad apples that, you know, you’re, you’re, you’re entrusting your, your, you know, your life’s work, your, your money, you know, to, you know, a person and you know, they do something that, you know, is, is fraudulent.

Tim Baker: And, you know, that kind of makes the headline. So it, it, it is similar to like, I think, um. Medicine or, or pharmacy where you’re, you’re definitely in a position of trust, right? And I think if [00:04:00] you’re, if you’re a person that takes advantage of that or is pushing a product or things like that, I think that that’s where the public perception can be tainted.

Tim Baker: Um, so it’s, it’s, it’s definitely, I, it’s earned, right? It’s, it’s valid. But I would say the overwhelming majority of people that are out there, no matter what model they’re in, they’re trying to do their best to help their client. I just argue that there are different models that are better, um, that position, the advisor and the client better, you know, where there’s less conflict of interest, every model’s gonna have conflict.

Tim Baker: But that’s what I would say is that, you know, to that answer.

Tim Ulbrich: Yeah. And to my experience too is there’s a lot of overgeneralization. Based on your experience or maybe the experience of someone else that you then adopt that mindset or story. I’m thinking about my grandparents, who I remember growing up. They had a, a financial advisor that wasn’t necessarily a good fit, good situation, and in the eyes of my grandfather.

Tim Ulbrich: That person caused them a lot of pain and therefore, like all financial advisor, [00:05:00] right. So, you know, and, and that was fair. His, his concern, the harm that was caused in that moment, that was very fair. But as we’ll talk about during the show, there are a lot of different types and, and flavors of financial advisors, financial planners.

Tim Ulbrich: What does that term even actually mean? And when I think back to my own journey, starting this industry, before I had the opportunity to cross paths with you and learn more about the industry and what do terms like fee only and fiduciary mean. I remember very early on, after starting the blog back in 20 15, 20 16, I started to interview various financial advisors and inevitably conversation after conversation.

Tim Ulbrich: I often left with more confusion than I had answers. And I, I was trying to ask pointed questions, and I would leave with this kind of feeling of smoke and mirrors not clear on, you know, how are things being charged, what’s included, what’s not included, and, and then I was able to put terms of those things later after I would understand.

Tim Ulbrich: But the problem that I had, and I see a [00:06:00] lot of pharmacists falling into this trap in a similar way, is I applied my pharmacy training mindset. And I tried to use that as the lens in which I was understanding the financial services industry. Because in, in pharmacy, right, there are, there’s variability between one pharmacy program and another, or one residency program in another.

Tim Ulbrich: But at the end of the day, like we know what a pharm D means. We know what a PGY one or PGY two means. We know what board certification means. And while there are some differences between institutions. There’s accreditation and there’s some level of consistency between those. And so we’re able to adopt that understanding when we hear those terms.

Tim Ulbrich: And I think that what I did, and what I see minute pharmacists do, is we take that mindset and we try to apply that to financial services. And it really is on some level, the wild, wild west, you know, the term financial advisor in and of itself doesn’t really carry a whole lot of weight. And so that’s what this episode is about is how do we ask questions?

Tim Ulbrich: What questions should we be asking so that [00:07:00] we as a consumer understand what are we actually talking about in terms of who we’re working with, what the services include or don’t include, and, and ultimately, how do those individuals get paid,

Tim Baker: Yeah. And I’ll piggyback on that, Tim, like, um, I, I, I hearken back to when you and Tim Church were writing the Seven Figure Pharmacist book, and we had the chapter on this and like, I was getting confused. So like, if I’m in the industry and we’re kind of talking about different, you know, tranches of the industry and who does what, and I’m getting confused, being in the industry, how does that, how does a, a consumer, a lay person, a pharmacist that is not versed well in, in financial services or whatever, how are they supposed to navigate that?

Tim Baker: It’s super confusing. And you know, I think the other thing is, is like where pharmacists come from, you know, like I’ll say. Something along the lines and won’t get into this is like, and I think it’s 5%, 5% of financial [00:08:00] advisors, financial planners, whatever you wanna call us, are fee only fiduciaries. That means the other 95% are not, which means that they can put their own interests, the advisor, the planner’s interest ahead of their clients.

Tim Baker: When I tell pharmacists that, they’re like, are you serious? Like, like, like that doesn’t sound like it would be legal or true, but it is. Like that’s, that’s the way it is. And you know, the 95%, I’m not saying that they’re twisting their mustache and they’re trying to find ways to defraud their people, their clients, but they, they don’t have to necessarily put, you know, they can say, Hey, I, you know, I, I can sell this product, I can make a case.

Tim Baker: It is suitable for you, Tim, but it’s not in your best interest. And I think that is a shock in revelation through a lot of people. Um, I. And why we feel the fee only the fiduciary, you know, and when I left my last job, I was not a fee, I was not fee only, I was not fiduciary. And that was one of the reasons I, I broke away and, and started Script Financial, which is now YFP.[00:09:00]

Tim Baker: Um, and I remember having a conversation with, you know, my mentor at the time, and he is like, you know, he’s like, I get it, you know? Um, but he’s like, do you, would you, do you think that I would do anything to kind of, you know, it would not be in the best interest? And I’m like, no, I don’t. But early in your career or just, you know, if you get into a money pitch, I think it puts you in a tough spot to say, it was like, okay, I can pay off this debt or whatever, or I can make sure that my clients are, you know, kind of on the up and up.

Tim Baker: So I just, I, I think, think that there’s better models, you know, to, to reduce the conflict. There’s not, there’s never gonna be a model that there is no conflict of interest. And I think that’s important to know, but I think to me, a, a. A theme in this conversation will be transparency. Transparency in what you’re paying, the service that you’re getting, how you’re paying your advisor.

Tim Baker: Um, I think that’s, that’s huge, right? Because in an industry that’s, it’s very black box of like, okay, how does this actually work? Um, and again, I’ve been in that model, you know, when, when a client would ask me, Hey, how do [00:10:00] you get paid previously? I’m like, well, I can sell you an insurance product. I can charge you an, you know, hourly, you know, all the things that we’re gonna talk about.

Tim Baker: And it’s like, okay, what does this actually mean? Like, what, what does that mean to me? And it’s a little bit of a chicken and the egg, it’s a catch 22. ’cause like, until I start working with you, Tim, I don’t really know what insurance product you need or how much you need, or what’s that gonna cost, right?

Tim Baker: So it’s a little bit, it’s not all on the advisor. It’s, it is a little bit of, like, you, you, you don’t know until, you know, type of thing. But that just leads to a lot of like, you know, what the heck? You know, what does this actually look like? So, yeah.

Tim Ulbrich: Tim, before we jump into the five questions, you, your, uh, share just reminded me of the John Oliver piece, uh, last, last week, tonight. We’ll link it in the show notes if you haven’t seen it before. I just looked it up real quick. It was back in 2016. I can’t believe it’s almost 10, 10 years ago, which is wild.

Tim Ulbrich: But he has a great piece on retirement plans. Um, that really highlights well in an entertaining way, um, some of the fiduciary fee only [00:11:00] types of concepts that we’re talking about. So if you’re looking for some re reinforcement or seeing that from a different angle, make sure to check that out. We’ll, we’ll link to it in the show notes, Tim.

Tim Ulbrich: So we’re gonna walk through five questions to ask when hiring a financial planner, again, these aren’t meant to be all inclusive, of course there’s more than just five things we wanna be thinking about. Um, and some of these seem very obvious, which question one is the case, but these are things that we can over overlook as we’re in the decision making process of working with a planner.

Tim Ulbrich: And so I encourage people before they go out and determine what is or is not the best fit for them. Have these questions in, in your back pocket. Right? These become the framework in, in which you can use as you’re evaluating some of the different options that are out there. And that first question we have, Tim, is what’s your process for offering financial planning AKA what?

Tim Ulbrich: What does financial planning actually mean when working with you or working with your firm? Right. We talk about that term a lot, a financial plan, financial [00:12:00] planning, comprehensive financial planning. But this can look and be very much apples to oranges between one firm and another. So before you sign the dotted line and you pay any fees, what are we actually talking about?

Tim Ulbrich: Right? What’s included in here?

Tim Baker: Yeah, I think, I think most people, I think most advisors, this is gonna be super generalized, but I think it in, in most firms, it’s very investment centric. Poten. It could, so investments in retirement. I think it’s, it’s probably pretty product centric like insurance life, disability, um, and then probably some light financial planning if I had to paint a broad stroke of what the, what the industry offers.

Tim Baker: Um, and so it’s important to know, you know, like what, what it is. So like if you say, Hey, it’s financial planning, like what does that actually entail? I think when I started script the, the goin, you know, the goin I think, um, thing I heard from [00:13:00] pharmacists that I started working with was, you know, the advisor that they would work with or they would, they would talk to it would say, Hey, don’t worry about your student loans.

Tim Baker: Like, they’ll figure themselves out, um, which we know is terrible advice. Um, I’ll, I’ll, you know, I’ll set up a Roth IRA, I’ll invest that for you. I’ll sell you a crappy insurance product that you probably don’t need, and then I’ll talk to you every couple years until you have assets for me to manage. So that was the way for them to help you know them.

Tim Baker: And I looked at that and I’m like, there is a huge gap in the market because we know, you know, often, especially if you’re in your new practitioner years and maybe plus like the tail that wags the dog for your financial plan are the student loans. So as the, you know, if you, if if we have 106 figures worth of student loans, that’s the tail that wags the dog, right?

Tim Baker: So as the loans go, so does the rest of the plan. So I looked at that and I’m like, this is a super underserved, you know, community of people. And that’s what I really hung my hat on in terms of, in terms of the business model. So that would be the [00:14:00] question I would ask. It’s like what that actually looks like.

Tim Baker: You know, for us, the way that we do this, Tim, is, you know, we, I would say that we are very comprehensive, right? So we, we look at what we call delivering the financial roadmap over the first year of our engagement. So when you, once you become a client, um. We go through the onboarding process. We, um, you know, part of that is linking all the things to your client portal.

Tim Baker: So we have a client portal that, you know, you link your check in, your savings, your credit cards, your, your investments, the value of the house, the mortgage, the student loans, all that stuff. And for a lot of people, it’s the first time they see all of their stuff in one, one spot, right? Because we, we bank over here, we have investments over here.

Tim Baker: We have debt over here. If you have a, a, a spouse or a partner, sometimes like that’s a little bit of a black box if you can’t directly see. So it feeds all this information in a read-only fashion. And it, and when we deliver this financial roadmap over the first course or the first year, the first stop on that roadmap, Tim, we call [00:15:00] the get organized meeting.

Tim Baker: So that’s where we’re gonna go line by line through all the things. And what we’re really trying to establish here, which again, I think is overlooked, is what is your starting net worth? What’s the first data point? What’s the before picture, so to speak? So. That’s the first stop. The second stop, once we establish that is, okay, now that we know where we’re at, let’s talk about where we want to go.

Tim Baker: So we call this second meeting the script, your plan meeting. So this is, um, hey, I wanna retire at this age. I wanna make sure I’m take these, these trips. I want to pay for my kids’ education. I want to take care of my parents that are, you know, that are aging. I want to, you know, retire by 60 or 65. Um, I want to volunteer.

Tim Baker: Whatever those things are, we gotta know where we’re going. And I think sometimes, yeah, I think sometimes planners would, will do good at kind of the, Hey, what are the investments? What are they? But they don’t necessarily do a deep dive on like the why. So. FP drinking game. If you’ve ever heard me say, it depends, right?

Tim Baker: When [00:16:00] a pharmacist asks the question, it depends on what’s the balance sheet look like and what are your goals, which are gonna be unique to you, right? So this is where I kind of scoff a little bit at the water cooler talk of like, oh, my colleague’s doing this, my colleague, you know, my, my uncle’s doing this, my cousin’s doing this.

Tim Baker: You’re a unique snowflake, Tim. So your balance sheet and your goals are gonna be unique to you and Jess. So we have to tailor the plan to that. And I think those two foundational meetings, which, you know, in the beginning of where are we at, where are we going, changes the, it depends to, this is what I think you should do.

Tim Baker: This is in your best interest. So. To me, it’s important to take those steps. And then really meeting three and beyond is, uh, on the roadmap is getting to the meat of that. So everyone starts with fundamentals. So it’s, we look at cash flow and budgeting. We look at a savings plan that’s gonna be anchored by an emergency fund, but we, you know, if you’re like, Hey, I’m, I want to be a big, I’m a big traveler.

Tim Baker: I wanna see a travel bucket, I wanna see a home purchase bucket, a home maintenance bucket. Maybe it’s a kids’ bucket. [00:17:00] Uh, so the short, medium term goals, which are not necessarily suited for like longer term investments, we have buckets of, um, you know, for, for us to be able to fund those goals. So it’s a, it’s cashflow and budget in, it’s a savings plan, and then it’s a plan for the debt.

Tim Baker: So often that’s a student loan analysis. It’s like, Hey, I have credit card debt, I have car note, I have a mortgage, I have a line of credit. How are we efficiently, um, you know, what’s the optimal way to tackle that debt? So that’s kind of the, the foundation for which longer term planning can then sit on.

Tim Baker: So really we get into retirement planning investments. Um, how much do I need for retirement? You know, I used to, I tell the story that back in the day we would say, Hey, you need 2.6 million to retire. And then we were on to the next thing. How can we actually break that down into a number in 2025 that actually makes sense, or, Hey, I’m five years away from retirement.

Tim Baker: What does that look like? How do we then start? I think one of the things that the CFP does well, Tim, is they’ll, they’ll, they’re good about, about, hey, the accumulation phase. But [00:18:00] once we, once we get to retirement, what the heck do we do? How do we, how do we turn these big pots of money into a paycheck for time unknown.

Tim Baker: We don’t know how long we’re gonna live, so investment retirement A to Z, you know, we manage investments at YFP, so we have a. A custodian that, you know, we set up accounts, we move, we move accounts over from, uh, other custodians. We buy and sell all, all that stuff we do conversions. Um, and then really the last two meetings, Tim, is gonna be things like, um, wealth protection.

Tim Baker: So meeting five, we do insurance planning. So what’s, you know, do we have the right life, disability, professional liability? If you’re getting to be my age? You start talk, talk, thinking about long-term care insurance. You know, do we buy our own policies? Do we just get the policies through our employer? You know, the big difference between us and a lot of the other guys is, and gals is, you know, if we, if I say, Hey Tim, we think that you should get this life insurance policy, it’s not because we’re lining our pocket with additional commissions because we think it’s in your best interest.

Tim Baker: Um, [00:19:00] so you know, some of those open enrollment questions that you have with your employer, we, we work through. And then lastly, the big thing is. The estate plan. And I, I often joke, this is the redheaded stepchild of, of the financial plan. I can say that as a, as a ginger, but, um, often forgotten. But do you have the proper wills, living wills, power of attorneys, trusts, you know, if, if you, if someone depends on you or if you have a pulse, like these things are really important to have in place.

Tim Baker: Um, so we get those documents in place as part of our fee in the state that you live in. Or if you have those in place, we evaluate them and then make sure that they’re good. So that’s our, you know, that’s our, the meat of our financial plan. We, we also do things with like business planning at a high level sour negotiation, which kind of stem from, Hey Tim, I got a new job.

Tim Baker: And I would say, great. Like, what did you counter? And they’re like, ah, I didn’t, you know, just, I was just happy. So things that are kind of, you know, more tangential to the plan, we’ll, we’ll look at. Um, but I think it’s important to kind of go back to the root of the question to say, okay, [00:20:00] what does the service actually look like?

Tim Baker: What am I getting? Um, and, and, and be clear about that because I think often if you say, Hey, I do, I do financial planning a lot of the time it’s very investment centric, it’s very insurance product centric, and that’s it, you know, so, um, be, be it’s a question I would definitely put at the top of the list.

Tim Ulbrich: Yeah. One of the things I’ve heard you say many times before, Tim, as it relates to our services, is, Hey, at the end of the day, if it has a dollar sign on it, we wanna be a part of the

Tim Baker: Yeah. Or at least quarterback a solution.

Tim Ulbrich: that’s right. That’s right.

Tim Baker: And we’ve, we’ve had clients recently that are like, or prospects that are like, ah, I’ve been working with someone at x, y, Z firm and I have a quarter million dollars in student loans that I need to figure out, you know, 10 years after I, you know, I, I graduated. No, you know, no hate.

Tim Baker: And can you help me with that? And I’m like, well, if you’re paying your advisor thousands of dollars that you don’t know, you’re pa, like why are, why are they not helping? And they’re either saying, Hey, I have a guy or a gal that can help you, that I can outsource this [00:21:00] to you, or, um, I just can’t help you.

Tim Baker: And to me, that’s unfathomable. You know, like, you know, one of the things we have to be wary of about is like, you know, we, we can’t give advice on things that we don’t, are not, you know, we, we don’t have, um, education in, or we’re not certified to do. That’s important to, to, to remember, but I would never look at a client and be like, I can’t help you.

Tim Baker: I would at least try to find a resource for them. You know, if someone’s like, I, I really wanna invest in a franchise that’s not in my wheelhouse, but I would try to find a resource that would say like, okay, like how can we go about it? I would, I want to quarterback a solution. Um, so that’s, that’s one example.

Tim Ulbrich: Yeah. And I think the point that we’re trying to make here as we’re talking about this first question, right, what’s the process for offering financial planning? Is, is are you clear on what that term means as a part of the engagement? And is that in alignment with what you need and what you want? And as Tim kind of articulated our roadmap, right?

Tim Ulbrich: The idea is, is [00:22:00] we have clients coming to us that are looking for service and we’re trying to determine, hey, what’s going on in their situation? What do we offer and is there a good fit? That roadmap is a visual to say, this is the expectation of what you’re going to go through over the first year. So before we make, and it’s important, this is a joint decision, is it, is it a good fit on both sides?

Tim Ulbrich: Before we make that decision, are we clear on what’s included and is it in alignment with what you need? And then there’s some more granular questions here, right? Exactly. Are we clear on how, how many times we’re gonna be meeting, how we’re gonna be meeting. Is that virtual? Is it in person? Is it over the phone?

Tim Ulbrich: You know, what does that look like? What’s the technology and the software that we’re gonna be using? What do I have access to in terms of tools and resources? Hey, if I have a question in between meetings, who do I get in touch with and how will that be received? Right? All of these are important considerations that you wanna be clear on before you engage.

Tim Ulbrich: And as Tim mention, as we look at our service in particular, you know, compared to kind of what’s out there in the general population of financial services, uh, in the industry. And what [00:23:00] we’re referencing here is a, a study that’s done by Michael Kitsis annually who’s a, a leader in the financial services space, looking at what are the components of the financial plan, what do, what’s typically covered, and how often are you typically meeting with an advisor, Tim, what we, what we usually see is most advisors are looking at an annual engagement or thereabouts, correct?

Tim Baker: Yeah, I mean there are, there are, you know, some advisors that are just like hourly. So it’s more transactional in nature. Most, most, most advisors when you go to work with them, you work with them for, for life or for, for many years. Right. Um, it’s, it’s less. I think it’s less, um, where it’s more you’re in, you’re out, that type of thing.

Tim Baker: I mean, and that’s for us, from our perspective. Like we’re, we’re trying to build relationships with clients that we’re gonna work with for many, many years, for the long term. Um, so yeah. And, and, and look at that, you know, the graph that he has, I’m looking at it that we will, you know, I’m sure we’ll share in the notes or at least a link, you know, the, the things at the top, you know, components [00:24:00] included in the financial plan retirement.

Tim Baker: 98% of advisors, you know, help with retirement investments. 96, tax planning, 92%. Social security, 86, estate planning, 84, life insurance, 82%. So these are things that it’s, it’s almost like, you know, when you think about, when you ask the public what a financial advisor does, like that’s what, what it is. The, the analogies, like when you, when you ask the public, well, what does a pharmacist do?

Tim Baker: They think about someone, you know, counting pills standing by on the bench. We know there’s a lot more that pharmacists can do, but if you look at the bottom of the graph, you know, I, I look at things like held away 401k. Um, 45%. So what

Tim Ulbrich: would be like an employer 401k.

Tim Baker: yeah, so something that you’re currently contributing into, which this is, this is bonkers to me.

Tim Baker: And then oftentimes outside of the house, it’s the biggest, it’s the biggest asset that you own. So more than half of advisors. So Tim, you hire me, I’m going to sell you insurance. I’m gonna, I’m gonna set up your IRA at my, at my [00:25:00] custodian, a brokerage account. And then you’re gonna say, Hey Tim, thanks for a lot of that advice.

Tim Baker: Can you help me allocate my 401k at Vanguard or Fidelity that, you know, my, my, uh, employer’s contributing and I’m, you know, I’m getting a match. And they say, no, that’s nuts to me. Like, that is crazy.

Tim Ulbrich: Well, especially what we see, Tim, a lot of our clients, you know, Hey, I’ve been working with Kroger for 10 years, or I’ve been at this hospital for 12 years. I mean this easily. For some people it’s half a million dollars or more. Um, could be much more if they’re further along right. Until those might roll over to certain buckets.

Tim Ulbrich: So thi this is a big part of the plan.

Tim Baker: Yeah. Yeah. I mean, college fundings, I would say only 71%. So if you’re kind of a older millennial, younger, you know, maybe younger Gen X, like that’s kind of the world that I’m in is, is like, that’s a big part that I have to look, you know, we have to look at, um, employee benefits 50%. Again, I look at that as, that’s a major part of your comp.

Tim Baker: Like, you know, that that’s something [00:26:00] I would wanna look at and make sure that you’re optimized the one that’s a little bit higher to me, Tim Life Plan is that 49%

Tim Ulbrich: I saw that. Probably interpretation of what that is.

Tim Baker: Yeah. Like what, how you define life plan and, and we’re big proponents of, you know, you build out a life plan that’s supported by the financial plan, not the other way around.

Tim Baker: And I think if we look at like, transformation and impact, a lot of it is centered around like a life, life plan and story. Um.

Tim Ulbrich: Well, and Stu, I’m looking at looking at student loans too, to the point you just made of a couple prospects here in the last week. Right. 31% student loans, so that, that matches a lot of what we’re hearing of. Hey, I work with an advisor probably who’s helping with retirements, insurance, et cetera.

Tim Ulbrich: Most likely not in a fee only. We don’t know that for sure. And hey, they don’t know what to do with my student loans. That data, you know, only 31% of advisors, part of that is generational. They may not work with clients that have many student loans, but we also know from experience with people that come our way, that there are often advisors that just the borrower, the borrower still has that [00:27:00] debt.

Tim Ulbrich: They just aren’t, aren’t helping them. And for the reasons you’ve already mentioned, it’s really hard to advise on the rest of the plan if you have a couple hundred thousand dollars of debt.

Tim Baker: yeah, I mean, I, yeah, it like it if you have a couple hundred thousand dollars of debt, like who cares about your investments? And I, and I say that somewhat facetiously, but I. It is the tail that wags the dog. Right? Of your, of your, you have to figure out the, the strategy and the plan. And I kind of ach in the student loans a little bit to like digital assets.

Tim Baker: So back in the day, you know, again, when I got into the industry 10 plus years ago, the, the advice was, we either can’t help you with the student loans or don’t worry about the student loans. You make a great income. They’ll figure themselves out or pay the one with the highest interest rate or the lowest balance, which is the snowball and the avalanche method.

Tim Baker: Right? Which we know Tim is it’s crap advice for your, for your student loans. And I, I remember having this like debate with an advisor that was very like, investments, insurance, blah, blah blah. And they’re like, well, what’s [00:28:00] like, what’s the big deal? It’s just like paying off your house or anything. And I’m like, if you have a quarter million dollars in student loans, the, the.

Tim Baker: The, um, the impact on your wealth building could be anywhere where you pay 80 grand if you’re in A-P-S-L-F and you’re completely optimized. So think about that as like a negative interest rate. Two, you’re paying 500, $600,000, or you drag it out over 30 years. And he is like, oh, okay. Like, that’s the spectrum of outcomes.

Tim Baker: And to me it’s, it’s just really important. Right? And, you know, I don’t want to just harp on student loans, but like, yeah, 31% of advisors, they’re either saying, I can’t help you, or I have a person that I can direct you towards, um, you know, 6% career salary benchmarking. And I think like, if we weren’t as niche, like if we worked with pharmacists and attorneys, and we, we do work with everyone, but our, our niche, you know, I would say probably 90, 95% of the, the households that we work with, Tim, there’s a pharmacist in the household.

Tim Baker: Um, but we kind of like, [00:29:00] I, I just got to the point of. Again, a a a client would say, Hey, Tim, I’m, I’m, I’m changing jobs. I just accepted this offer. And I would say, did you counter? And they’re like, no. And I had a client recently, um, shout out to her who recently came on, and she’s like, I’m fixing to get a, a job offer.

Tim Baker: Can you help me with that? And we did, and we earned our fee that day. Like we, you know, she got more base, she got a bonus, she got some, some stock. Um, and she’s like, I would, I would never have thought, and I don’t have the confidence to do that. And I, to me it was just kind of like, you know, the, the, in the income is what feeds the financial plan, what sticks is your net worth and things like that.

Tim Baker: So to me, it’s important to at least advocate for yourself and have the tools and the ability to do that. So it’s kind of a tangential thing. And I personally still do it. I love doing it. That’s probably the one thing that I, you know, that and some of the business consultant stuff that 20% of the, um, advisors will do.

Tim Baker: But, you know, these are all things that I think. [00:30:00] I think to go back to the question of like, what’s included and then from a frequency perspective, you know, the overwhelming majority of of financial planners, you know, they’re gonna meet with you two or three times in the first year to kind of complete the plan.

Tim Baker: And then after that, it’s typically every year or every couple years. In terms of like maintaining the plan for us, like our delivery of our roadmap is typically six or seven meetings, um, over the first year, typically seven meetings, and then we go into a semi-annual kind of rhythm, which, which is about 10% of advisors will do that.

Tim Baker: Um, so high touch and we typically do like an annual review and then a plan checkup. The warm blanket though, that I think, and this, you know, when I talk, when I spoke about that sour negotiation, um, the warm blanket w with working with a company with YFE, and I think most people are, most firms are like this, but, um, is if there is something that’s super time sensitive.

Tim Baker: Like, Hey, I got a job offer. Or We’re buying our house. We’re selling our [00:31:00] house. You know,

Tim Ulbrich: Investment property. Yeah.

Tim Baker: property. Hey, guess what? I’m retiring. You know, I thought it was gonna be in three years. Now I’m retiring. Now, you know, you can meet with us PRN as needed. Right? And that’s, we used to not call ’em, we used to just call ’em, like, we call ’em PRN meetings now.

Tim Baker: Um, so as needed, we can, you can meet. And that to me is like, Hey, we want to be able, and I think sometimes if you’re paying an advisor like hourly, and I kind of always joke about. Remember, Tim, we, like, we’ve had attorneys in the past where I’m, it’s like we, we would pay them hourly and I

Tim Ulbrich: Keep the email short.

Tim Baker: I would spend the, yeah, the email.

Tim Baker: And then I would spend the first 45 minutes reminding the attorney of like, who I am, what I do, and then get this huge bill like I I, and again, no shades or hourly invest or hourly planners out there that they exist. But to me it’s super transactional that I don’t, I don’t, I don’t want people like counting hours or anything like that.

Tim Baker: So, um, yeah, I would say comparatively super high touch with regard to, um, the, you [00:32:00] know, the, the frequency.

Tim Ulbrich: So brass tacks on this first point, and we’re, we’re intentionally spending the most time here because thi this is the meat on the bone, right? In terms of, you know, are you, are you getting what you need? So, brass tacks here is, does what you need and what you’re looking for help with the financial plan, does it align with what they offer?

Tim Ulbrich: Does what they call financial planning advising, does that align with your needs for the plan? And I’m gonna put a plug here, Tim, for us, we, we are beta testing what we’re calling a second opinion analysis. Maybe we’ll change the name on that, maybe we won’t. But the idea is for those that are already working with an advisor and having this nagging feeling of, Hey, I’m, I’m not sure it’s the best fit, right?

Tim Ulbrich: Whether it be frequency of meeting or questions getting answered, or maybe a lack of transparency in the fee structure, or, Hey, they don’t know what to do with this part of the plan. There could be a myriad of reasons. Um, through the second opinion analysis. Our goal is that they have an opportunity to sit down with you.

Tim Ulbrich: We can learn a little bit more about what’s going on in their situation, do an analysis of the current [00:33:00] engagement, what fees are being assessed, whether that’s transparent or not to them now. And then of course we can talk more about our services and see whether or not it makes sense to move forward. So we’re looking for some people to help beta test that for, for us.

Tim Ulbrich: If nothing else, I think it would shed some insights on the current engagement to help us refine our processes a little bit further. So if you are currently working with an advisor, you have that feeling of, Hey, I’m not sure if it’s the best fit, and you’d be open to helping us out, do a second opinion analysis.

Tim Ulbrich: Uh, send us an email [email protected]. Just say second opinion and we’ll get back to you and get something scheduled from there.

Tim Baker: Yeah, I, I’d love to be able to do like three to five of these, Tim, um, just kind of beta test and see what this looks like. And I think the, the way that I’m looking at this is, you know, the analysis will, will kind of be, um, similar to like what we do. We do a portfolio, insights, insights for our clients, and it kind of looks at, you know, the, um.

Tim Baker: The account location, so like [00:34:00] what and where your accounts are. So like when we try to build a retirement paycheck in the future, we want pre-tax accounts, we want taxable accounts, and we also want like Roth, like after tax accounts. So account location is, is really important. Um, you know, the other thing is allocation.

Tim Baker: So you know, kind of evaluating, you know, what are your percentage to stocks and bonds. You know, we, we, another section we talk, we talk about is move money, which is if, if money is moving in or out of your account. So, so much about is, uh, of this as, as how much you’re invested, not what you’re invested in.

Tim Baker: Um, and then like expense, like what are you actually paying, um, for, for those investments and kind of, you know, put some, um, investment analysis reports with that and, and you know, you can kind of hear some my thoughts on, on your portfolio. So I would say look into three, three to five Guinea pigs to kind of, you know, pilot this and see what it looks like.

Tim Baker: Um, would love to, I would love to do that. So, um, yeah, just email us and we’ll, we’ll figure that out.

Tim Ulbrich: Again, [email protected]. Just note, second [00:35:00] opinion in the subject line or email, and we’ll we’ll get back to you so you can get on Tim’s schedule. Tim, second question here is, are you licensed, if at all, are you licensed as a stockbroker? Are you licensed as an insurance agent? Are you licensed as an investment advisor?

Tim Ulbrich: Why? Why is this question important?

Tim Baker: So I think this kind of shows you like the underlying way, like the underlying model that they’re in. So I would say the, the three main models that are out there are, um, fee only, which is what we are, which I think makes up about 5% of advisors out there. So this is where you essentially pay for advice.

Tim Baker: You don’t pay for an investment product or a, like an insurance product. So no commissions. Um, so if you’re working with a planner, if you’re looking at a planner and you see like, um. Securities license or, um, or insurance sales. Like that means that they, they are commissioned. Um, so you have fee only that is kind of, um, like we feel the best, the most pure in [00:36:00] terms of like, you know, less conflict of interest.

Tim Baker: And then on the other side of the, the spectrum, which I don’t know if these guys and gals, um, are, are around anymore, but it’s basically like a commission only. So this is like, you know, you, you, uh, you see on the movies where you call up your stockbroker and or they call you and they say, Hey, I wanna sell you, you know, a hundred shares of x, y, Z company.

Tim Baker: And they, it’s more transactional. They’re selling you a product, they get their commission, they move on. So a lot, a, a lot less in terms of advice, right? So that’s the two ends of the spectrum in the middle where most advisors live. It’s called fee and commission, or what’s, what’s we typically call it is fee based.

Tim Baker: So oftentimes, you know, um, you know, a prospect will come to me and says, yeah, I want to, I wanna work with you because you’re fee based, you’re fiduciaries. And that’s actually a, a misnomer. We’re fee only. We’re we’re, and they sound similar, which is part of the problem, but a fee base is [00:37:00] fee and commissions.

Tim Baker: So this goes back to like, you know, in, in my previous model, Tim, if you were my client, you would say, Hey Tim, how do you get paid? I’m like, pull up a chair, it’s gonna take me a while. I can charge you hourly. I can charge you a percentage of a UM assets under management. I could sell you a life insurance product and get a commission.

Tim Baker: I could sell you a disability policy and get a commission. I could sell you an annuity and get a commission. I could sell you, you know what, whatever. So it could be a flat fee. So it’s, it’s, it’s, uh, and again, I, there’s no shade because I think what, what, what those advisors are trying to do is, you know, we, what?

Tim Baker: I was in that model, Tim. I thought we were awesome because. We didn’t work for one of the big wirehouses that we had to sell their proprietary products. We were like, we could sell whatever we wanted. And then I found out about fee only and I’m like, oh, like that’s what I want to be like. I don’t want my advice to be kind of directed by a product.

Tim Baker: I want it to be directed by the advice, the plan that’s in the best interest of the client. So those are the three broad, broad [00:38:00] buckets. So it’s fee only, which is, you know, no commissions. Essentially you have commission only, which I don’t know if they exist anymore because now we have E-Trade and Rob, we have access to the markets, right?

Tim Baker: And then we have everything in between, which is typically fee based or fee and commission. So, you know, you can look at, uh, an advisor website. So sometimes, uh, I’ll talk to an advisor and be like, Hey, I’m working with this group, or whatever. They’re fee only, they’re fiduciary. And I look at the website, I’m like, respectfully, they’re not, because at the bottom there’s disclaimers about I.

Tim Baker: Know. So if they have like a series seven, which is one of the exam, one of the first exams I passed when I got in the industry, that means that you can sell securities and earning commission if they have insurance. Um, which I used to have also, if they have, if they have insurance licenses, that means I can sell you life insurance and earn a commission.

Tim Baker: I had to give those up, the series seven and the, and the insurance stuff when I, when I transition to fee only. So I think these are more important to kind of understand the model in which they’re in, because I think even people in those models [00:39:00] don’t know what model they’re in. They’ll say, they’ll say, Hey, I’m a fiduciary while you a fiduciary all the time, or when you’re just talking about this specific thing.

Tim Baker: And that’s the thing that gets super confusing.

Tim Ulbrich: Tim, if I’m someone listening, I, maybe I work with an advisor. I have worked with an advisor in the past, or I’m looking to work with an advisor and I’m trying to answer this question like, which of these three models do they fit in? Um, we know that most people are probably in that middle one. You described that, that fee, fee-based.

Tim Ulbrich: Um, how do they figure this out? Is it information on the website disclosures? Is this for the a DV form comes in? Tell us more about that. If that’s the case, what, how, how do they do their homework on this?

Tim Baker: Yeah, the first place that I would look at, like first, like really quick, like when someone says, Hey, I’m working with this, and I, and I’m trying to suss out like what they, what they, I look at their website and typically at the bottom there’ll be, you know, um, you know, we use this, um, broker dealer. If you see like the words broker dealer, that’s typically their, their fee base, their fee and commission.

Tim Baker: Um, if you see things about insurance things. So typically at the bottom of their [00:40:00] website, there’ll be some type of disclaimer. That says like who they’re affiliate with. Um, you can ask them and see like, you know, the, the circles they might talk, talk in. Um, and then I think the last place would be like, go to broker.

Tim Baker: I think it’s broker check, broker check.com, and you can, um, basically look at their A DV brochures. So the A DV, I’m not even sure what the A DV stands, A DV stands for, but it’s basically there’s, there’s different, there’s part one, part two a, part two B, two A is gonna basically say it’s like, you know, for us it’s like a 40 page document that show that, that that kind of says, this is who we are, this is the services that we provide, this is the, this is the fees that we charge.

Tim Baker: Um, and it kind of gives you more of the detail. So if you think, see things like insurance or, um, again, security sales, things like that, you’re gonna be working with probably a fee-based advisor. So it would be ask them, it would be look at the website and it would go, and I would say, I would go to broker check to look [00:41:00] for the A DB brochures.

Tim Ulbrich: We’ll link to that in the show notes is broker check.finra.org. Um, so you can enter in an individual or affirm. So we’ll link to that in the show notes, and then we’ll also link to the page where it has Y fps, uh, a DV forms if folks are curious at looking at those more carefully as well. So get out a cup of coffee.

Tim Ulbrich: Uh, it’s not, not always the most exciting read, uh, but it’s an, it’s an important one. Alright, good stuff. Let, let’s continue the conversation then as we move to the third question, we start to talk about. Not only how are individuals license or which of those three models they’re in, but how do they ultimately get compensated?

Tim Ulbrich: And again, sounds obvious, but we’ll talk with a lot of folks where, hey, you know, what’s the current engagement look like? Um, how are you paying for services? And it’s either, I’m not sure, or the one I’ve heard several times before is like, I don’t, right? It’s free financial planning. No such thing. So third question here is how are you compensated and what ultimately is included in that fee and how is that calculated?

Tim Ulbrich: Right? And is that fee transparent? Tell us more about this [00:42:00] one.

Tim Baker: Yeah, so, so I think that’s the big thing is transparency, right? So like, we’re a business, you know, we’re, we’re in the business to, you know, uh, build a profitable business, you know, make money, all that kind of stuff. So, like, it’s important to say that out loud. We’re not a, we’re not this, you know, we have YFB Gibb, which is a non-profit, our main business or financial pharmacist is a for-profit company.

Tim Baker: So transparently like, you know, we wanna make sure that’s out there. I think, you know, the way, the way planners get paid, you know, some of the things I talked about is like insurance and investment products. I have a memory, Tim, of, um. Uh, you know, I, I was working with my previous firm and they’re, you know, my, one of the guys in our office is like, Hey, you know, if you, if you have the opportunity to sell your products, like a non-traded reit, do that.

Tim Baker: And I’m like, well, why? Like, what’s the, what’s the benefit? It’s like it pays 8% commission.

Tim Ulbrich: geez.

Tim Baker: And I’m like, uh, like to, I need, I need to take a shower. Like, it just is like yuck, right? So [00:43:00] it’s the same thing with like, uh, like variable annuities. Like, Hey, why pay variable annuities? It’s because the commissions are, so, I often say it’s like, typically the, the products that are better for the planner, the advisor are not good for you.

Tim Baker: Um. So, you know, if, if you’re, so when, when you, when we work with us, the only like, like we basically set the table and say, Hey Tim, you need x, y, Z insurance policy. And then we hand you off to someone that’s gonna sell the policy and not try to upsell you. Like we have, you know, organization, insurance companies that, you know, work with the only that understand that.

Tim Baker: Um, so you pay for the advice, not the product. That person that we send you to, they, they get the commission. Right. So, so there’s a, there’s a arm’s length, you know, in, in that regard. Anytime that you mix the sale of a product with advice, I think again, where you have the most conflict of interest. So, you know, if you’re looking at a statement and you’re like, I don’t really know how my advisor gets paid.

Tim Baker: Often there’ll be like an advisor’s like fee that you should see as a litem, but [00:44:00] sometimes there’s not, um, a place that you could look at is like when you sign a client agreement to, you know, to begin your, your engagement with a, an advisor. It should lay out exactly like what you’re paying. A lot of people just don’t look at that, or they don’t know, you know, typically when we sign clients, we go through the agreement together.

Tim Baker: And I do that in the spirit of transparency, Tim, because I wanna know pe, I want people to understand like what they’re paying and, and I, and part of it’s to combat the lack of transparency in the industry. And I, I always kind of go back to like, when I bought my first house many, many years ago, Tim, I felt like I was signing a tree and I couldn’t ask questions.

Tim Baker: And I just hated that feel on. So I want clients to say, Hey Tim, what does this mean? What does that mean? And, and we go through it together. Same thing with the invoice. So, but if you’re looking at a statement, there should be said, said something like advisor, um, expense or fee or commission, A lot of the times.

Tim Baker: Like a, a mutual fund. It’ll say like, it’ll have like an A or a C next to it. And that indicates that it’s an [00:45:00] a share mutual fund or a C share mutual fund, which has commissions tied to it. You just can’t see what it is. So if you, if you have x, y, z mutual fund and it says a, you would look up that mutual fund and you could see the, it’s called a front, a front loaded fee or a front loaded commission.

Tim Baker: It says that, okay, you paid 5.75% when you made that initial, but it’s like, you have to know that to, to, to, to like look for that. So it could be fee, it could be commissions on products. Um, probably the prevailing, um, model that most advisors use is called a UM Assets under management. So this is, um, a percentage that the advisor is managing directly.

Tim Baker: So, uh, they’ll take, they’ll typically roll over your investible assets like an old 401k an IRA. A Roth IRA, uh, a brokerage account, they’ll move it to their custodian and then they’ll manage it directly, and then they’ll, they’ll charge a fee out of that. The problem with that model in its purest form [00:46:00] is what I found is that if you don’t have a half a million dollars or a million dollars, the advisor will say, Hey, Tim would love to work with you, but I can’t help you unless you have this money.

Tim Baker: Or they’ll say, the way that I can help you is sell you a crappy insurance product. I’ll invest what you have and then I’ll talk to you every couple years until you have assets for me to manage IE that where, where you can pay me. I think the other, the other con, you know, the, one of the main conflicts of interest is that the more dollars that they’re managing, the more fee that you’re gonna pay.

Tim Baker: Right? So, you know, they’re incentivized for you to move, you know, accounts over to them. Um, so that’s the prevailing one. Another one is called a UA Assets under advisement. So this would be what they’re managing as well as what they’re not managing directly. So a, a held away 401k. Some advisors will, will put all that into a, a bucket and they’ll say, oh, they’re gonna charge a percentage of that.

Tim Baker: Um, could be flat fee where it’s just, Hey, it’s this fee. Um, you know. [00:47:00] And that’s it. It’s a, a flat, $5,000 a year, $10,000 a year. Um, and you know, the problem with that fee typically is you, you often see major increases in the fee over time because there’s no mechanism to kind of account for inflation, salaries going up, things like that.

Tim Baker: Um, or they’re typically higher, like a lot of flat fees. It’s like, Hey, you know, our minimum fee, flat fee is $7,500 or 10 grand, or, or things like that. So flat fee is definitely, uh, one and then hourly, you know, an hourly fee. And then there can be combinations of all these things, Tim, but those are the, the prevailing, um, you know, some, some people do hourly plus a percentage of what they do, or, you know, it’s, it’s, you know, an A A UM or you know, plus a, you know, they might charge a UM and then they’ll charge a planning fee in some way.

Tim Baker: Um, so that’s the big thing to, to understand is that there’s lots of different models out there, lots of different ways to kind of. Skin the [00:48:00] cat, so to speak, and just understanding, you know, who, who you’re working with and, and how they charge.

Tim Ulbrich: Tim, since a UM is the prevailing model, you did a great job of talking about all the different buckets, right? They can get paid from commissions. Uh, and then from a planning perspective, typically we see it’s either a UM to a lesser degree, a UA, uh, assets under advisement, which as you mentioned, would, would include some of the held away.

Tim Ulbrich: So not only what they’re managing, but also hey dollars that you have, for example, inside of a 401k at your current employer. And then you mentioned the flat fee. It could be a lot of variations of that in terms of both amount and what that looks like. And then of course, something like an hourly, more of a project type of of work.

Tim Ulbrich: If we go back to the a UM for a moment, given that that’s the prevailing model gi give us for, uh, for instance, so you know, what is a typical a UM fee? Certainly not consistent across the board. And then let’s say we have a client who’s got $400,000, that would be managed by an advisor under an a UI model what, what that might look like in terms of fees.

Tim Baker: Yeah, [00:49:00] so, so typically I would say the prevailing model is typically something that for an a UM model, it’s like 1% that’s tiered down, right? So if you, you know, if you have half a million dollars, 1% of that, you know that, that the advisor are managing 1% of that, it’s five grand a year that they’re gonna build directly outta your investment accounts.

Tim Baker: Um, that’s typically the prevailing, I was talking to a guy that, um, Liam plays soccer with over the weekend. He works for a big company based in, um, based in Columbus, and their model is ultra high net worth. You know, you got that, you have to have a minimum of like one to 2 million and their, their fee starts at about, uh, 1.5% or something, something there.

Tim Baker: Um, so. You know, there, there, it’s all over the place, but typically the, the, the, the one that I see most is like 1% that’s tiered down. So the more that you invest, you know, the, the fee, the fee goes down or over, or the percentage that that’s charged over time, um, the way that we [00:50:00] do it. So we, I was admittedly pretty anti a UM when I, when I started script back in the day, Tim, and there’s probably hours of, of footage on our podcast, you know, me kind of ex exclaiming that point.

Tim Baker: Um, and I think the reason why I was anti a UM is, is because I, I actually think that the model is, is somewhat elitist. So it, it kind of, it kind of kept a lot of people, um, that needed advice. IE you know, a 20, 30, 40 something year old, uh, pharmacist, um, out of the market

Tim Ulbrich: Excluded them.

Tim Baker: excluded ’em, because again, the, the, the prevailing advice was don’t worry about the student loans.

Tim Baker: I’ll invest your Roth, I’ll sell you insurance product and that’s how I can help you. Or they’re like, Hey, I can’t help you until you have that money. Um, so there’s lots of different reasons. So, so we’ve essentially adapted over the [00:51:00] years kind of a hybrid flat fee, a UM model. The positives of the a UM model is like, it, it, because it’s the most prevalent, everyone understands it, and everyone from a compliance perspective, um, you know, they, they kind of understand like,

Tim Ulbrich: SEC likes it.

Tim Baker: the, yeah, exactly.

Tim Baker: SEC likes it. They, they, they understand it. Um, but I think. The, one of the big things that we’ve discovered over working with hundreds of pharmacists is the a UM model. Even though money is fundable, meaning your money is your money, whether it’s in a, in a brokerage account, an IRA in your checking account, what we’ve discovered is that the, the model that we would charge, especially early on in our business, would be, um, very much in the realm of, hey, like we don’t really care where the assets are, so if you wanna manage it or, or whatever, you know, we’re gonna charge you a flat fee and you’re gonna primarily pay that out of [00:52:00] cashflow, your checking account, your credit card, et cetera, either as, as, because you need to or because you don’t have assets, or just, or just because that’s your option. The problem with that is that. The paying out a cash flow is more disruptive to your life and your lifestyle. So if I’m billing you quarterly on a financial plan, eventually you get some fee fatigue. And if you believe like us, that the best results come from the longevity of the relationship and stacking years of very intentional financial planning that yields the best result.

Tim Baker: That’s, that’s a problem. So the, the a UM model, so for if I’m billing you, you know, X amount of dollars per quarter out of your checking account or your credit card, that’s very different. Even though it’s the same amount. If I’m billing it out of a couple hundred thousand dollars of, of assets, it’s a little bit of outta sight, outta mind, even though it is your money, right?

Tim Baker: I wanna make that clear. But it doesn’t disrupt your lifestyle, so to speak. So. Our [00:53:00] models kind of adapted to, um, essentially if you have less than half a million, we’re gonna charge you some type of like flat fee that’s based on complexity. Anything above that is just gonna be based on, you know, a per, you know, a percentage that’s tiered down, um, on the assets that we’re managing.

Tim Baker: And I think the other thing that we, we change is like, we used to be more, um, ag agnostic about who’s managing the assets. Now we’re not, you know, we, we’ve experimented with that where it’s like, you can manage it or we can manage it. It was too many cooks in the kitchen, you know, so this is what we do. We do it well.

Tim Baker: We do this as, you know, our, what we do for a living. Um, we’re looking for clients that are like, yeah, take, take the investments. Obviously they play a major role in how we’re constructing the portfolio, but we’re basically doing, you know, the lion’s share of the work. And it was to kind of eliminate the too many cooks in the kitchen.

Tim Baker: So we feel that this hybrid model allows us to work with clients that have zero assets to clients that have. Hundreds of thousands, if not millions of [00:54:00] dollars. Um, and, and do that over the, over the long term.

Tim Ulbrich: Great stuff, Tim. I think it’s a great summary of, of how we’ve evolved over what is gonna be 10 years this fall,

Tim Baker: Yeah. Wow. Crazy.

Tim Ulbrich: Um, and where we started and what we’ve learned and, and how we’ve pivoted. And as you said, I was actually thinking about this morning as we were prepping for this. It was way back on episodes 15, 16 and 17.

Tim Ulbrich: So this would’ve been back in 2017 that we talked about some of this topic and, and why we landed on what was income and net worth at the time, uh, which was revolutionary Tim Baker style, uh, of fee assessment and how that worked for a season. But we realized where that kind of broke, and I cannot emphasize enough that we really believe the ROI of the relationship. Not only is it beyond just the quantitative, it’s also the qualitative, which gets overlooked so much in this industry, and it’s harder to measure. But even on the quantitative side, it comes from the years as you [00:55:00] mentioned. Compounding these wins and having the accountability and stacking those. And if that’s an 18 month relationship because the free structure doesn’t align such that it can’t be continued on, then you reduce the ROI of that long term.

Tim Ulbrich: And so, you know that that’s in part how we’ve arrived to, to the point that we have today.

Tim Baker: Yeah, and I would just piggyback on this, like there was a study done, um, by our friends up north, the Investment Funds Institute of Canada. They did a, they did a study, Tim, from 93 to 2008, um, that basically looked at. What was the impact of, of net worth or assets? Um, you know, with, you know, a group that didn’t work with a, an advisor and then those that did, and, you know, the impact on net worth for advise individuals was greatest by the end of study period of the study period.

Tim Baker: Suggesting that the impact of a financial advisor grows over time, which is kind of like, no duh, right, but I say that

Tim Ulbrich: any other [00:56:00] coach,

Tim Baker: yeah, yeah. I say that because like in a microwave society. We want results yesterday, completely get that. But you know, they, they’re, they have a graph that’s basically like no advice compared to, you know, those that, you know, have advice for seven to 14 years.

Tim Baker: It’s typically like two x now, I think based on what we do, like our results are a lot better than that. Um, you know, no promise for future, you know, uh, you know, like, that’s not a promise, but like, I, I feel like the transformation that we show with clients, it’s, it’s, it’s necessarily more impactful. ’cause I think we just cover a lot more than the, than the traditional advisor.

Tim Baker: So, um, to me it’s important to, you know, you’re, what you’re saying is that just like, invest in the value of advice compound compounds over time, and it’s stacking, you know, months, quarters, years, decades of really intentional planning. And I often, I, I tell the story. You know, when I, you know, before I was in, um, you know, financial services I worked in, I was a logistician.

Tim Baker: I worked in [00:57:00] warehouse. And so I would drive to the office at five o’clock in the morning, you know, go into a warehouse with no windows. You work all day, you know, 12 hours, you know, uh, leave the office at five or six, drive back in the dark. And I wouldn’t remember those drives at all. I was just on autopilot.

Tim Baker: And I think part of that, like, that, that can be an analogy of life and part of working with a financial planner, I think a good financial planner that’s looking at the life plan is questioning, like, like, are we on track? Is this what we, is this the way we want to do? Like, let’s, let’s have some introspection.

Tim Baker: And sometimes it, it, it requires a third party to ask those pointed questions to me to say like, Hey, let’s get off of io, uh, like of autopilot, and let’s ask some pointed questions about, you know, is this, is this a wealthy life for you today? And are we on track for a wealthy life, you know, 10, 20, 30 years in the future?

Tim Ulbrich: Tim. And I’m even thinking about our weekly team meetings where when we talk about the impact of the team. Yeah. I mean, of course we love seeing the net worth numbers go up. You know, we love seeing the, the, the numbers in the right [00:58:00] trajectory, you know, long term. And, and we certainly, you know, have seen that, but it, but it’s those life type of wins where it’s like, oh man, this, this is when I feel like I could run through the brick wall.

Tim Ulbrich: Right? It’s someone who’s been talking about doing this life dream for five years and we’ve moved the needle. I think about some of the examples we’ve talked about lately of someone really pursuing a passion and hobby and, and, uh, around horses and the passion they have there. Uh, previously, you know, somebody who looking at their experience as a pilot and ultimately, you know, having a fraction of a plane.

Tim Ulbrich: Or, I think about Jess and I in our own journey and some of the decisions we’ve made as a part of our own life plan and like those are the things that individually when we think about significance, meaning, and impact, but also as we celebrate our clients as a firm, like that’s when the team lights up.

Tim Baker: Yeah, and I, and I, I just found out recently the, the, the, the pharmacist you’re talking about, um, you know, that huge amount of student loans, credit card debt, you know, and you fast [00:59:00] forward a couple years and, you know, she’s essentially flipped her net worth from negative 300 to positive 300 in a couple years.

Tim Baker: And that’s not what she’s talking about. You know, she’s talking about pickles, the horse, um, the big old diesel truck that she has moving from one part of Florida to another, to be closer to the National Equestrian Center. She actually just emailed me this week saying that she, she bought another house.

Tim Baker: Uh, so we’re working through that. But the other big thing for her, when we talked way back in the day, she’s like, I’ve always wanted to do an African safari. So earlier this year she told me she booked a trip with her mom to do an a African safari. So like, those are the things, Tim, where it’s, you know, a lot of pharmacists will say, get, you know, your guys are scientists.

Tim Baker: You wanna weigh the scales of like, Hey, if I pay this fee. Am I gonna get that back? You know, what’s the ROI? And I put that back on its head like, well, what is, what do you mean by ROI to me? You know, we need to be technically sound so we can make sure that, you know, a lot of financial advisors will say, and that would be a question I would ask.

Tim Baker: It’s like, how do you guys measure progress? A lot [01:00:00] of it, financial advisors will say, look at me. I got you a 10% return on your investments. But who cares if you’re like drowning in debt or you’re living a life that doesn’t necessarily line up with the, you know, your goals. Money’s a tool, right? So to me, quantitatively it’s net worth.

Tim Baker: And then what are the qualitative things that are important to you? And are we doing something about it? Part of our job is to hold the mirror up and say, you know, carrot and stick. Hey Tim, I’m talking to the my myself. Hey, Tim, nowhere in your financial plan does it say that you need to lead the league in bottles of whiskey in your collection, right?

Tim Ulbrich: Although, although you

Tim Baker: I do. Uh, but like, that’s not in my financial plan. So like, if I’m, if I, if I’m like in a pinch or if I’m not like doing the other things on my financial plan, my advisors to say, Hey, guy, like, how about we not spend this money toward, you know, the, um, the, the whiskey and like, let’s like this, this bucket that’s been sitting dormant that you want to do X, Y, and Z where, show me the money, right?

Tim Baker: Because at the end of the day, Tim, we’re not gonna, we’re not gonna lay on our deathbeds and say, [01:01:00] oh man, I wish YFP, or I wish my advisor would’ve said, I sh I, I would’ve told me to put more money into our Roth. IRA. We’re not, we’re gonna say, I wish I would’ve got into horseback riding again because it was a passion of mine that I just put on the back burner.

Tim Baker: ’cause I think I couldn’t afford it, or it wasn’t a priority or played in a band or changed careers or became a pilot. You know, you know, that was, you know, those are the things that are transformational, inspiring, and I could talk about this all day long. Um, but that’s what this is about. It’s not about.

Tim Baker: You know, the ones and zeros, it’s not, we need to do that to make sure we keep our job and we push this forward and we need to be technically sound and all that. But to me it’s about aligning the life plan with the financial plan and holding people accountable to that. And I think that’s a big thing is having a third party that knows your goals, knows your, your balance sheet, and, and, and has your best interest in mind.

Tim Baker: So, um, yeah, I [01:02:00] think that’s super important.

Tim Ulbrich: Yeah. As we say all the time, right? It’s, it’s, are we living a rich life today while we’re taking care of our future selves, right? That’s the quantitative and the qualitative and, and I get it, it’s an analytical audience, right? I am, I am an analytical pharmacist. Like the ROI is a good question. As we’re talking about, you know, the numbers and even as we’re we’re talking, I’ll link to it in the show notes.

Tim Ulbrich: I’m thinking about the, uh, the Vanguard study of putting a value on your value and what’s the actual potential. Quantitative, ROI of an advisor, and it’s, it’s really interesting because when, when they look at those numbers, it, it comes from several different things, you know, whether it be asset allocation, saving on expense rebalancing, but the behavioral coaching is a huge chunk of that, which people, I think, underestimate, uh, in, in part, maybe due to some overconfidence.

Tim Ulbrich: But what’s missing from this table altogether of the ROI is what, what is the qualitative side

Tim Baker: Yeah. Yeah. And I, and I think the Vanguard study that was done in 2001 [01:03:00] a, a value of advice advisor to Alpha. Um, it’s, it’s narrow in a sense. I think it looks, it looks at a hypothetical portfolio, half a million dollars over 25 years, you know, with an advisor. You know, that’s managing it. It grows 8% per year or to 3.4 million for a self-manage a di iyer.

Tim Baker: It’s 5% per year. So it grows from half a million to about 1.7. But again, I say that’s too narrow. Like if you wanna look at quantitative talking to about net worth, not investment returns. If you wanna look at the whole thing. I want quantitative, I want net worth, and I want the qualitative stuff. Are you living a wealthy life today?

Tim Baker: Like, are you doing the things that you’re passionate about? Um, so I think that to to, to your point, like, you know, pharmacists, what’s the ROI like, what’s, you know, what with ’em, what’s in it for me, Tim? Like, I get that. But I would, I would turn that question right back to, to you, the prospect, the listener, to say like, define that for me.

Tim Baker: Like, how do I know? You know, [01:04:00] we’re scratching that itch and I think it’s a little bit more, it’s a little bit more than I give you this fee and I get this back in some, some way.

Tim Ulbrich: Great stuff. So that’s our third question. How are you compensated? What’s included in the fee? How do you calculate your fee? Is it transparent? We, we broke down the different fees that are common in the industry. The fourth question, Tim, I’m gonna move past this one quickly because we’ve already addressed it in the areas we’ve talked about.

Tim Ulbrich: The fourth question is, what are your conflicts of interest when working with a typical client? And if we go back to the three different buckets you mentioned in terms of the commissions, the fee only, or the fee based, or the fee and commissions another term for that fee based, you can start to identify where those conflicts of interest may be.

Tim Ulbrich: And as you say, often there is no such thing as conflict free advice. Correct?

Tim Baker: Correct. I know, I think it’s Tony Robinson, one of his books, he call, he talks about conflict free advice, and there doesn’t, doesn’t exist. Um, it just doesn’t, you know, so, so to me, if it doesn’t exist, tell me what the conflicts are and, you know, let, like let’s talk about that. Let’s be upfront. Yeah. And I [01:05:00] think oftentimes, you know, you’re, you know, if you’re, if you’re dancing around that question as a planner.

Tim Baker: There’s, there’s problems. So, you know, you know, and that, and that’s I think one of the frustrating things sometimes is someone’s like, I wanna work with a fee, like a, a fee only person. And I think I’m working with them and I’m like, eh, you’re not, but then like, there’s some inertia to change,

Tim Ulbrich: Mm-hmm.

Tim Baker: you know, even if you know that they’re, you know, they’re not fee only or whatever, or that you don’t really know what you’re, they’re paying.

Tim Baker: And like, there’s a nurse there and I get that. So, you know, to me it’s, it’s having that conversation. And I think often those conversations are buried or it’s, you know, it’s, it’s, we talk in circles until we can get through the question and then we’re onto the next thing. And again, I just think tr be transparent, right?

Tim Baker: Like, like that’s, that’s huge. So, um, you know, are you obligated to act at as a fiduciary all the time? And I think that all the time is the operative word, because sometimes, you know, in some of these models, fee-based, you can say, I’m, I act as a fi fiduciary, but it’s only when I’m, when I’m working with.[01:06:00]

Tim Baker: ERISA type funds, like a 401k. ’cause that’s, that’s the, you know, department of Labor is trying to like really narrow that down. Not, you know, some of these other entities that I think should really be drawn a firm line.

Tim Ulbrich: Tim, our last question and five questions to ask when hiring a financial planner is, what is your investment philosophy? And, and I would argue Tim thi this is an important two-way conversation, um, because the, the investment philosophy of the firm is there alignment there with the investment philosophy or preference of the client, right?

Tim Ulbrich: So talk, talk to us about why this is important and I think this one gets overlooked a lot that someone may have a preference, but that doesn’t necessarily align with, with the firm and how they approach their investments.

Tim Baker: Yeah. So what one of the questions I asked a prospective client is like, you know, if you had to make a list of the things that you want in your financial planner and for, or in your team for you to say like, Hey, these are my people. Um, you know, the, one of the things I’m kind of looking for and, and I think very rarely it comes up.[01:07:00]

Tim Baker: But, you know, sometimes I’ll, I’ll see people that are like, I need you to beat the s and p 500. And I’m like, that’s not us, right? So we believe in more passive buy the market. Don’t try to beat the, don’t try to beat the market. If you’re more of an active, you know, um, investor, you think that there’s ways to kind of game the system and beat, you know, beat the market.

Tim Baker: And only one person I think can, can consistently do that. Warren Buffet, who can buy companies and basically extract return, you know, most of us can’t do

Tim Ulbrich: Mm-hmm.

Tim Baker: So it’s a, you know, it’s, is it, are you trying to beat the market or is it kind of more of a singles and doubles approach where you’re in the right asset allocation, you’re in the right asset location, we’re keeping expense low, those types of things.

Tim Baker: So, um, a lot of people are like, I don’t know what, what is your philosophy? And see if that that works for me. So I think if you, if you trust the market and you let it do its thing over the course of long periods of time, 10, 15, 20, 30 years plus. Market takes care of you, right? So you waste a lot of time and money trying to like, gain the system.

Tim Baker: But it [01:08:00] might be like, you know, in this day and age, like what’s your opinion on digital assets? Right? So for a long time there, it was kind of similar to student loans. It’s like, ah, like don’t worry about it. And now digital assets are, are, you know, it should be something that your advisors is at least talking to you about.

Tim Baker: You know, are you, do you like Vanguard funds? Is it ESG, which is like Sustaina sustainable, invest in, you know, are there, are there different strategies, you know, that make sense to you that, that fit more into your portfolio? So I think a conversation about this is super important. And I would say a lot of the time, you know, prospects will take the lead from their advisor, whether they’re active or passive.

Tim Baker: Um, and I, I grew up in a, you know, where I not grew up, but my, my previous firm, Tim, um, kind of helped mold me. I. Where my in investment philosophy is, and it was more of a case of like, what not to do. So, you know, when I was, when I was being mentored, you know, we, we basically [01:09:00] selected investments from the people.

Tim Baker: You know, they, they would, they would come to our office, you know, these wholesalers, these mutual fund wholesalers would come to our office in a fancy car wearing fancy suits, and they would take us out to a fancy lunch and they would f show us fancy glossies of like, why their funds were so great.

Tim Ulbrich: It’s like old school pharma,

Tim Baker: Yeah, exactly.

Tim Baker: And they would say, Hey Tim, you know, when Tim Ulbrich rolls over his money, like wink, wink, like in, you know, use our funds and, you know, to, to, to mobilize a sales force like that costs a lot of money. And who pays for that? The investor. And it’s typically in the, in the form of commissions or an expense ratio.

Tim Baker: So, you know. These, that was our criteria to pick, you know, um, you know, large cap, mid cap, small cap, like these different, you know, sleeves of investments. And they were often super expensive. The other, the other, um, mentor that I had was, [01:10:00] you know, it’s more of an active strategy. It’s like, Hey, client, we’re gonna buy x, y, Z ETFs at a hundred dollars per share, and then when it goes to a one 10, we’re gonna basically put a stop gap at 1 0 5 and then kind of lock in our gains.

Tim Baker: And if it goes at 1 0 5, we’ll sell out and then we’ll live to fight another day. And, you know, we’ll look at the VIX and all this kind of stuff. And we have core and we have explorer positions. And the, the problem with that model was like, there was a fla, I remember being in a conference and there was a flash crash where something happened in China and the, and the market went down and then went back up.

Tim Baker: So in this, in this scenario. Had a, let’s say we had a, a, a, a sell order at 1 0 5 by the time we actually got filled, because some of these ETFs were thinly traded, mean not a lot. It got filled at 80 and then the market’s back up and now we’re, we sold at 80 and we’re trying to buy at one 10 or 1, 1 0 2 or something like that.

Tim Baker: And I’m like, okay, mentor, what do we do next? And it’s like, I don’t know. [01:11:00] So, so that was more, you know, more of the active strategy. And I’m like, you know, there has to be a better way. So, um, I’ve read books like the Index Revolution, um, which is a quick read that is kind of like what I would say. It’s like, hey, trust the market.

Tim Baker: You know, if you read something in the Wall Street Journal about a biopharmaceutical stock that’s been priced in many, many weeks ago, like, you’re not, it’s not a hot stock tip. Um, so it’s kind of a, the more born investment is the better, you know, investment should be like. Paying down a debt or watching paint drive, typically the more sexy it is, the the more expensive it is.

Tim Baker: And, and the more I think risky it is. So it should be super boring singles and doubles. Don’t try to hit home runs, you know, and often you wanna do the opposite of how you feel. So, you know, if the market’s crashing, you want to take your investment ball and go home. Don’t. If you have more money to put in, do that.

Tim Baker: You know, not investment advice. If the market is flying high and people are like, I wanna buy, buy, buy. That’s, you have to be cautious. ’cause it [01:12:00] goes in cycles. Right. So, you know, you will often wanna do the exact opposite of how you feel. And, and you know, these are the behavioral things that a lot of people get in trouble that, you know, they’ll, they’ll sell, they’ll sell low, they’ll buy high.

Tim Baker: Right. And, you know, part of our job is to kind of, you know, establish a structure and a framework to potentially talk you off the cliff from doing things that are rash. You know, and I’ve done that in the past before, you know, getting into financial services. I’ve done silly things with my investments, which I, which I regret.

Tim Ulbrich: Tim, it reminded me of, uh, Daniel Crosby, who wrote the Behavioral Investor, had a chance to interview him on the show. I’m drawing a blank on what number it is. We’ll link to it in the, the show notes. But one of the quotes from the behavioral investor that he had was, humans are wired to act, markets tend to reward inaction.

Tim Ulbrich: Um, and I love his take because he, he brings a, a research-based psychology approach to how you think about your money and. A little bit of dose of, of humble pie, right? When you understand the, the limitations of what we can do and great recommendations. You beat me to it. I was gonna mention, uh, the index [01:13:00] revolution, but Charles Ellis, if folks are looking to read more on this, unshakeable by Tony Robbins is another good one, uh, that touches several of the things that we talked about during today’s show.

Tim Ulbrich: Um, but really good stuff. I know we covered a lot of ground. Uh, this is one of our longer episodes, but I, I, I really feel like one that we’re gonna be able to come back to on repeat of, Hey, what are the things that you should be thinking about looking at questions you should be asking when you’re thinking about hiring a financial planner.

Tim Ulbrich: And we’re really proud of what we have built, our team of CFPs, certified financial planners at YFP, the impact that we’re having. And we would love to have an opportunity to talk with you, whether you work with an advisor now or not, and this may be your first engagement. We’d love to have a conversation to learn more about, Hey, what’s going on in your financial plan?

Tim Ulbrich: You can learn more about our services and together we can determine whether or not it’s a good fit. You can go to your financial pharmacist.com and right at the top of the page you’ll see an option to book a discovery call. Uh, we’ll also link to that in the show notes.

Tim Baker: Yeah. And I would just say, Tim, to add to that, like [01:14:00] sometimes I get the question from prospective clients. They’re like, oh, do I, like, do I need an advisor or should I, you know, do I have enough money? Or things like that. And there’s always gonna be a population of, of people out there that are DIYers and whether that’s, you know, handling your money, um, mowing your lawn, cleaning your house, whatever, whatever that is, right?

Tim Baker: There’s always gonna be that. I would say for the most part though. If you’re a pharmacist and you’re making a six-figure income as a household, and we’re aspiring to be, you know, a seven-figure pharmacist to kind of take from the book, you need an advisor, right? Like pharmacists are pharmacists. You do what you do.

Tim Baker: I think with the amount of money that we’re talking about, and I think the intentionality that we’re really trying to focus on, like. You hire a financial planner. Right. And, and I think sometimes I speak with pharmacists and they’re like, oh, they’re not sure. Or to give themselves permission. Do I have enough?

Tim Baker: And, and like I said, we work with clients that. Are all over the map in terms of their, like, where they’re starting net worth, which is very, very negative or very, very positive. And I [01:15:00] think to me, this is about building in a foundation and intention with your money and letting you know, a professional, you know, do that versus, you know, kind of you doing it on the side.

Tim Baker: ’cause I think there’s a lot of, you know, positive aspects from obviously the technical, um, stuff, but then just like the optimization. And I think one of the things that, you know, the, one of the. Prevailing things that I talk about, that I talk to that’s missing is like, am I optimized? Am is the money that’s kind of flowing through my household, you know, direct it in the best way possible.

Tim Baker: And there’s a variety of ways to look at that. So I would just plug that, you know, if you’re listening to this, you probably do need a financial planner, obviously bias actor, right, Tim? But, um, I would just throw that in there.

Tim Ulbrich: So Tim, I.

Tim Baker: Yeah, thanks Tim. [01:16:00]

[END]

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YFP 403: Lessons from the Red: Navigating Big Market Dips

Posted on by YFP Media

Tim Ulbrich, PharmD, reflects on losing over $100,000 during recent market volatility and shares eight powerful, experience-driven lessons from two decades of investing to help listeners navigate the emotional and practical realities of building wealth.

This episode is brought to you by APhA.

Episode Summary

In this episode, Tim Ulbrich, PharmD gets personal and shares how he lost over $110,000 in just five days.

Despite his professional background in personal finance, Tim candidly shares how challenging it was to write those numbers down—highlighting just how emotional and disorienting the recent market volatility can feel, even for seasoned investors.

Drawing on two decades of investing experience, Tim unpacks eight key lessons that go beyond theory. These aren’t just ideas from a textbook or strategies he’s shared with clients—they’re principles shaped and reinforced by real-life experience. From understanding loss aversion and the importance of diversification to recognizing one’s own risk tolerance, this episode offers practical insights for navigating the highs and lows of investing with confidence and resilience.

Key Points from the Episode

[00:00] Introduction and Personal Story
[01:35] Sponsor Message: American Pharmacist Association
[02:30] The $110,000 Loss: A Detailed Breakdown
[04:12] Lesson 1: The Reality of Loss Aversion
[06:10] Lesson 2: Humility in Uncertain Markets
[07:15] Lesson 3: Importance of a Strong Financial Foundation
[08:55] Lesson 4: Risk Tolerance vs. Risk Capacity
[10:45] Lesson 5: Diversification Strategies
[13:05] Lesson 6: Market Fear and Volatility
[15:19] Lesson 7: Long-Term Horizons vs. Short-Term Volatility
[18:33] Lesson 8: The Importance of Time Horizon
[20:36] Developing a Resilient Financial Plan
[21:41] YFP Financial Planning Services
[24:47] Conclusion and Final Thoughts

Episode Highlights

“The challenge for today’s investor, for you, for I, is that we live in a time period where we have a 24/7 news cycle, social media algorithms, information is always in front of us, and that speed of information travels such that loss aversion, that feeling, can be amplified.”- Tim Ulbrich [5:28]

”A strong financial foundation is key, especially when we’re in periods of a volatile market.” – Tim Ulbrich [8:48]

“But to truly design an investing and retirement strategy that’s both effective and sustainable, it’s important that we consider and understand the difference between risk tolerance and risk capacity, because if we don’t account for both, our plan may unravel quickly the moment the market gets choppy.” – Tim Ulbrich [9:10]

Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Hey everybody. Tim Ulbrich here and welcome to this week’s episode of the YFP podcast where we strive to inspire and encourage you on your path towards achieving financial freedom. I’ve got a question for you as we get started this week. Have you ever logged in your investment account and felt your stomach drop?

Tim Ulbrich: Because in this episode I’m sharing something personal, how I lost over $110,000 in just five days. And if I zoom out to the peak of the portfolio back in December, 2024, the total losses across various accounts are well over $200,000. Now, even as someone who does this work for a living, I’ll be honest, saying that out loud makes me nauseous, but the recent [00:01:00] market volatility has also served as a powerful reminder of the emotional and behavioral side of investing because let’s face it, this stuff feels very different.

Tim Ulbrich: When you’re in the middle of it. So today I’m unpacking eight key lessons that I’ve learned over the last 20 years of investing. These aren’t just things I’ve read in a textbook or taught to various pharmacists and educational sessions. These are principles that I’ve lived and been reminded of through recent experience, from the realities of loss aversion to the importance of diversification and understanding your own risk tolerance.

Tim Ulbrich: We’re covering a lot of ground on today’s episode. Whether you’re feeling uneasy about the markets right now or just looking to build a more resilient financial plan. I hope this episode gives you perspective, encouragement, and some practical takeaways to study the ship. Before we dive in, let’s hear from today’s sponsor, the American Pharmacist Association.

Tim Ulbrich: A PHA is a paying sponsor of this episode of the or [00:02:00] Financial Pharmacist Podcast. A PHA has partnered with YFP to deliver personalized financial education benefits for A PHA members throughout the year, a PH a’s hosting a number of webinars, covering topics like student loan, debt payoff strategies, home buying, investing, insurance needs, and much more.

Tim Ulbrich: Join A PHA now to accelerate your professional journey and access these educational resources. A PHA has been my professional organization home for 20 years, and I hope you’ll consider joining as well. If you’re not already a member, you can join a PHA at a 25% discount by visiting pharmacist.com/join and using the coupon code yfp.

Tim Ulbrich: Again, that’s pharmacist.com/join using the coupon code yfp. All right, so here’s what’s happened. Over the last week. I lost $110,000 in a five day span, and as I mentioned at the top of the show, if you look back to the peak of December of [00:03:00] 2024, my IRA is down $170,000 alone. And when I add in other investment accounts such as a 401k, Roth IRAs, brokerage accounts, and even some of the 5 29 accounts, these losses total well over a couple hundred thousand dollars.

Tim Ulbrich: This can make anyone feel nauseous. Right? Especially when I think about the grind that it was in the first five to 10 years of investing to build up the beginning of the nest egg. And just like that in five days, more than 10% gone, or at least gone for now. And we’ve seen some of the markets continue to be volatile, but rebound on some level after even starting to prepare these notes.

Tim Ulbrich: By the time I publish this episode, who knows what The rest of the week, the rest of the month, the rest of the year is going to bring in the current volatile market that we’re in. Now, for some of you, I suspect your losses are much greater than mine, and for others, maybe much less. Regardless, it’s these moments of uncertainty and [00:04:00] volatility that present a real opportunity to remind ourselves of important points when it comes to long term investing.

Tim Ulbrich: If we allow this space as painful as it can be, if we allow this space, these moments can be a great teacher. So here are eight lessons that I’ve learned throughout my investing career that I’ve been reminded of over the last couple of weeks with the volatility that we’ve been experiencing. Number one is that loss aversion is real.

Tim Ulbrich: If you’re unfamiliar with that term, loss aversion tells us that we feel the pain of a loss more strongly than the pleasure of an equivalent gain. And this is true in many areas of our lives, and investments are no exception. And as I think about my own portfolio, the significant gains that were had throughout the fall and the early winter, they feel like a distant memory.

Tim Ulbrich: While the losses, I feel those at a much [00:05:00] deeper level. That’s what we’re talking about with loss aversion and sure there’s a recency bias, but when I think of other market dips that I’ve, I’ve experienced and lived through the 2008, 2009 recession, the COVID-19 pandemic, although that was short-lived, it was a significant dip.

Tim Ulbrich: I remember and feel those losses. More than I feel the wins, and as we’ll talk about here in just a moment, this does is despite the wins, outperforming the losses and lasting over a longer period of time. So the more we can acknowledge the reality of loss aversion, then the more systems we can put in place to mitigate decisions being made based out of our feelings, because that’s the risk with laws aversion.

Tim Ulbrich: So the challenge for today’s investor, for you, for I is that we live in a time period where the speed of information, right? We have a 24 hour seven news cycle, social media algorithms, information is always in front of us, and that speed of information travels such [00:06:00] that loss aversion, that feeling can be amplified.

Tim Ulbrich: So it’s hard to sift out what is noise and what is valuable information. If you’re looking for more information, not only on loss aversion, but on behavioral biases and how they impact how we approach our money, I highly recommend checking out the book, the Behavioral Investor, by Dr. Daniel Crosby. I.

Tim Ulbrich: That’s number one. Loss aversion is very real. Number two is we don’t know as much as we would like to think that we do, suddenly everyone and their brother is an expert on global trade and tariffs. And with all due respect, even if you have a PhD in economics, you can’t predict the future. Just look at all the varying opinions that are out there by economists right now, especially when the driving force of the volatility that we’re experiencing is inconsistent.

Tim Ulbrich: Tariffs have been on, tariffs have been off, tariffs have been on, tariffs have been off. And what we know, we’ll talk about this in a little bit, is that markets don’t like uncertainty. [00:07:00] So there’s humility and knowing what we don’t know, as Sam Rowe has a great newsletter, if you wanna check it out, Sam Rowe said in a recent, uh, version of his newsletter, given all the unknowns surrounding the tariffs causing the market volatility quote, if you know where things are heading, then you probably don’t know what you’re talking about.

Tim Ulbrich: So humility, not overconfidence is essential when we are navigating uncertain and volatile markets. That’s number two. We don’t know as much as we think we might know. Number three is that a strong foundation is key. Now, if you’ve been listening to the podcast for any amount of time, you’ve heard me talk extensively on repeat about the importance of a strong.

Tim Ulbrich: Financial foundation to our mindset and how we approach our financial plan and down markets and periods of recession. I know we’re not there in the moment, but down markets and periods of recession are yet another reminder of how important it is to have a [00:08:00] solid financial foundation. Because if you’re handcuffed with credit card debt, or if you find yourself without a fully funded emergency fund, two things that are critical to a strong financial foundation, a down market.

Tim Ulbrich: Puts a magnifying glass on any fears or anxieties or stress that we have related to our financial plan. Right? It heightens the emotional sense that we have, and this can certainly lead to or has the potential to lead to prematurely selling off investments, changing your asset allocations to be more conservative or even pulling back the amount that you’re saving, right?

Tim Ulbrich: The amount that you’re contributing to various investment accounts. And what we know, we just talked about this with loss aversion, is that we typically don’t wanna make those emotional decisions in the moment. So the stronger the financial foundation that we have, the stronger our mindset is to weather the storm.

Tim Ulbrich: And for some, to potentially use the down market as an opportunity to take calculated risk. As Warren Buffet once famously said, quote, be fearful when others are [00:09:00] greedy and be greedy when others are fearful. So that’s number three. A strong financial foundation is key, especially when we’re in periods of a volatile market.

Tim Ulbrich: Number four is that we wanna understand the difference between risk tolerance and risk capacity. Now if you’ve ever filled out an investment questionnaire. You’ve already scratched the surface on this topic, and maybe you didn’t even realize that you were. But to truly design an investing and retirement strategy that’s both effective and sustainable, it’s important that we consider and understand the difference between risk tolerance and risk capacity, because if we don’t account for both.

Tim Ulbrich: Our plan may unravel quickly the moment the market gets choppy. So what is risk tolerance? What is risk capacity and what’s the difference between the two? Risk tolerance? Think of this as the emotional side of investing. It’s about how you feel. I. It’s the gut check. [00:10:00] When the market drops 10, 15, 20%. It reflects your comfort or discomfort with uncertainty, with loss, with volatility.

Tim Ulbrich: So in short, it’s how much risk you can stomach. I. Right. It’s the emotional component here. We’re talking about risk capacity. On the other hand, measures how much risk that you should perhaps take based on your goals, based on your timeline, based on your savings rate, your income, and your overall financial picture.

Tim Ulbrich: One is emotional, that’s risk tolerance. One is more mathematical. That’s risk capacity. And if we don’t consider both of these. We’re gonna be in trouble, right? If we’re taking on more risks than we’re comfortable with, we’re in a down market. We’re in a period of volatility that might really challenge us and lead to decisions that we don’t want to make.

Tim Ulbrich: So we wanna consider both, and we wanna stress test both so that when the volatility occurs, not if, but when the volatility occurs, we’ve already thought through how we’re gonna handle those situations. So that’s number four, [00:11:00] understanding the difference between risk tolerance and risk capacity. Number five is diversification.

Tim Ulbrich: Now we all know we’ve, we’ve heard the importance of diversification and we often though, talk about this within an asset class, right? For example, the mixture between stocks and bonds within a 401k or within an IRA, or if we get maybe a little bit more granular, it could be the different types of stock, domestic stock, international stock, small companies, midsize company, big size companies, or even we might think about diversification as different sectors of investments, tech.

Tim Ulbrich: Energy, healthcare, utilities and so forth, and diversification in this manner, right? We’re talking about within an asset class, within stocks or within bonds. That’s important. It’s important that we do that, and we do that according to what we just talked about, our risk tolerance and risk capacity. But so is it also important to think about diversification across various asset classes?

Tim Ulbrich: So when I think about my [00:12:00] long-term investing plan. At a high level, it includes three main buckets. The first bucket is what I consider traditional investments. This would be things in the form of traditional and Roth IRAs, 4 0 1 Ks, brokerage accounts, and so forth, right? Probably where a, a majority of people have their investments stored.

Tim Ulbrich: The second bucket I think about is real estate. Our primary home as well as some commercial real estate investing. And the third one I think about is the equity, the value of business. So there’s traditional investments, there’s real estate, there’s business equity. I’ve talked about this before on the show as a three legged stool.

Tim Ulbrich: And that stool may or may not be appropriate for others, right? And it’s not that those legs of the stool are always equal, but they’re diversified. And while various sectors of the economy are certainly interconnected. The volatility that we’re seeing right now in April of 2025 is disproportionately impacting my traditional investment bucket, that bucket number [00:13:00] one.

Tim Ulbrich: But it’s not so much impacting, at least not yet the other two legs of the stool. Right. And that’s in part the value of considering diversification not only within an asset class, but between different asset classes. So that’s number five, diversification. As we think about eight lessons learned through the recent market volatility.

Tim Ulbrich: Number six is that fear in the market is real. It’s very real. One thing is certain, and that is that markets do not like uncertainty, right? That’s exactly what’s happening right now, and we have a lot of uncertainty. If we look at a week or so ago, within a single day, we had market swings as just one example.

Tim Ulbrich: Of how you might look at that and say, you just can’t predict this stuff. Right. This was a Sunday night going into a Monday. On Sunday night, Dow futures were down over a thousand points. Then the day began and we started to see the, the, the, the Dow actually rise because there was an unfounded [00:14:00] claim on a small X account that President Trump was considering a three month delay on tariffs.

Tim Ulbrich: That was determined that it wasn’t. A substantiated, uh, fact that was coming from the administration markets then reacted. This is all within the same day, markets declined, and then there was news that the treasury secretary was having ongoing negotiations with Japan and some other countries, and the markets started to react to that.

Tim Ulbrich: All within a day. And so the markets do not like uncertainty, and that’s just an example of one day in the back and forth and uncertainty that we’ve been having. So one gauge of fear or one gauge of volatility in the markets is measured by the VIX, which is the Chicago Board Options Exchange Volatility Index.

Tim Ulbrich: You can look up the VIX symbol. And just to give you a point of reference, the VIX was hovering in the mid-teens. Since the fall and jumped to over 50, uh, earlier this month. Now, the last comparable spike like this, or the last 10 [00:15:00] years was in March of 2020, which of course was the beginning of the pandemic where it briefly jumped above 80 and then it came back down.

Tim Ulbrich: So again, markets don’t like uncertainty, and this measure, this one gauge of uncertainty in markets. The VIX is certainly telling us that we’re in a period of uncertainty. So. Hold on tight, right? That’s the reality of where we’re at. And you can expect volatility as long as there’s this level of uncertainty, both when within a day, within a week, within a month, for as long as this may go on.

Tim Ulbrich: So that’s number six. Fear in the market is very real. Number seven is that long term horizons for investing can really give us a good amount of clarity, but short term, not so much. Not so much. So if you’re investing for the long term history tells us that the market will take care of us. Yes, past performance is not an indicator of what’s to come, but it is helpful [00:16:00] information.

Tim Ulbrich: And if we think about this in the context of what we already talked about, which is we don’t know as much as we think we might know. The past can be an anchor to steady our ship as we enter unchartered waters. So if we look at the s and p 500 index from the early 1940s to the early 2020s, we are reminded of two very important points.

Tim Ulbrich: Number one is that bull markets, these are up markets where we have market growth. Bull markets on average, lasts much longer than bear markets, which are the down markets. Lemme say that again. Bull markets or up markets last on average much longer than bear markets or down markets, but because of loss aversion, it does not feel like that, right?

Tim Ulbrich: So even though the, the historical data tells us that the, the markets doing well, those runs are longer. But in those down markets, in those bear markets, we [00:17:00] feel that more, right? So we kinda lose that perspective. The second important point we need to look at and consider is we look at the historical data of the s and p 500.

Tim Ulbrich: Just as one data point is that any one year span of the stock market can be quite volatile, right? And historically we see an annualized rate of return range, meaning if we look at the last 90 or so years, we see a range as low as 37 points down to a loss of 37% in the market to as high as a 50% gain within the market.

Tim Ulbrich: So in any one year, we could expect that there’s going to be some volatility, right? That’s why we, we think about this in terms of long-term horizons. If I, if I have funds that I need in the next year, I’m not thinking about investing those in the stock market because of the volatility might go up, might go down, might be somewhere in between.

Tim Ulbrich: But if we zoom out and look at any 20 year span, we see that it’s less volatile and usually is up into the right. With actually having a historical [00:18:00] annualized rate of return range from positive 0.5% to positive point 13.2%, right? So it starts to flatten out a little bit. So sure, those upsides may not be as high.

Tim Ulbrich: I, I gave you the range of negative 37 to 50% plus, but pretty much up into the right, when we look at historical 20 year rate of returns, and in fact we have yet to see. Over the last 90 years, we have yet to see a period of the market where there’s a 20 year span that had a negative rate of return. So if we’re in it for the long term, we can have some level of confidence.

Tim Ulbrich: Again, past performance may not be predictive of the future, but it certainly is helpful information. So that’s number seven. As we look at long-term horizons can give us some clarity and maybe a little bit of peace of mind. Short term, not so much. Number eight, as we continue to talk about time, is that time horizon, your time horizon of meeting these funds matters a lot, right?

Tim Ulbrich: I’m [00:19:00] 41 years old and assuming that I’m able to stay healthy, I plan on working for a long period of time. I love the work that I do because of that, my time horizon to needing the funds. That I have invested when I started at the top of the show, that couple hundred thousand loss, right? My timeline to needing the funds allows for room to take on risk knowing that there may be some big dips, such as the one that we’re experiencing now and, and in fact, historically.

Tim Ulbrich: The data tells us that we should expect these dips. This, the, the world markets and the events that are leading to these certainly are different or perhaps somewhat unique, but the fact that there’s a negative return and the markets are quite, quite volatile in the moment that that’s not unique, right to, to our generation in this time period.

Tim Ulbrich: Now that said, if you are listening and you’re much closer to retirement age, or you’re recently retired, the sequence of returns risk tells us that your portfolio. [00:20:00] And what my partner Tim Baker, calls the eye of the storm, right? Approximately five years before and five years after retirement. Your portfolio in the eye of the storm needs to be carefully constructed to minimize the impact of negative investment returns that can have long-term detrimental effect, right?

Tim Ulbrich: Because if we’re in that time period, we’re having to make our investments more conservative, or we’re actually pulling those funds out if we experience negative returns and we’re hit. In a significant way by them, then we’re gonna solidify those negative returns. We’re not gonna have the time span for the market to correct and to bring those back up.

Tim Ulbrich: So that’s our last point as we think about what is your time horizon to, in, to, to needing these funds to retirement? And is your risk tolerance, right? Is your risk capacity constructed in a way that aligns with that? So what do we do with all this information? Right? I believe that if we develop a plan, [00:21:00] if we develop a plan that accounts for our goals, our risk tolerance, our risk capacity, and the vision that we have for living a rich life today and tomorrow, we need to let that plan be our guiding star.

Tim Ulbrich: Sure we’re gonna adjust from time to time. Life happens, things change. But we don’t prematurely react in moments of crisis like we’re in right now, if you want to call it a moment of crisis, because we have a plan and we’ve thought about this in advance and we’ve stressed, tested these things in advance, and we’ve considered what we would do in these difficult seasons.

Tim Ulbrich: So once we have our plan, we let our plan do the work. As Daniel Crosby said, the author of the Behavioral Investor, humans are wired to act. Markets tend to reward inaction, and that is hard, right? Because as humans we wanna take action. So we have to be aware of that bias. Now, if you’re listening to this, say, Hey Tim, I could really use [00:22:00] some guidance with the financial plan.

Tim Ulbrich: Our team at YFP, our team of fee only certified financial planners, we are here. We are ready to help. So whether you’re managing finances on your own, if you’re DIYing it or you’re already working with another advisor and you’re thinking, Hey, I could use some extra help, our team of CFPs is ready to jump in and support you.

Tim Ulbrich: Here’s what sets us apart from the crowded wor world of financial advice that is out there. Number one, as you all know, we are pharmacy focused, so for nearly a decade we’ve worked with pharmacists at all stages of their careers. Whether you’re finalizing your plans for retirement, you’re in the middle of your career trying to balance the demands of today in preparing for the future, or you’re on the front end of your career, wading through student loan debt and big life changes.

Tim Ulbrich: We have experience working with pharmacists, clients throughout all stages of their career, and we understand the unique opportunities and challenges that pharmacists face. Number two is that we’re fee only. We don’t earn commissions or sell financial products, [00:23:00] which is very common in this industry. It’s a fee only firm.

Tim Ulbrich: We’re paid for the advice that is given. There’s no hidden agendas, really focused on recommendations that are in the best interests of the client. Number three is we have a fiduciary commitment. As a registered investment advisor, we’re legally and ethically required to act in the best interest of our clients all the time.

Tim Ulbrich: Now, that probably sounds like it should be a given, but not all financial professionals are held to the standard. The next thing that really sets us apart is I. Our team, every member of our planning team holds, holds the certified financial planner designation, which we believe is the gold standard in financial planning.

Tim Ulbrich: Earning it requires rigorous education. Passing a challenging exam. Think of something like the NPL with a lower pass rate. This past cycle, about 62%. It requires 6,000 hours of experience and a commitment to ongoing ethics and education. What also sets us [00:24:00] apart is we do everything virtually and we’re nationwide.

Tim Ulbrich: We serve pharmacists, households all across the country. We’re currently in 41 states and counting as of March, 2025, and we do this through virtual planning meetings, which really makes it easy for our clients to connect with our planning team. Finally, I think one of the most important things that often gets overlooked in the financial plan is we focus and plan beyond the numbers.

Tim Ulbrich: Financial planning isn’t just about investments. It’s about aligning your money with your life. And through our scripture plan process, we help you build a comprehensive plan that supports your vision for living a rich life today while preparing for the future. Covering everything from debt to retirement, budgeting, to estate planning, and much more.

Tim Ulbrich: So if you’re ready to take the next step, you can schedule a 60 minute discovery call with my partner, Tim Baker. You can go to your financial pharmacist.com. Top of the homepage, you’ll see an option to book a discovery call. And on that call we’ll learn. Learn more about your goals, we’ll walk you through our [00:25:00] services and ultimately see if it’s a good fit to work together.

Tim Ulbrich: All right. Well, that’s our show for today. I hope you took something away from those eight lessons learned in the market volatility that we’re experiencing right now. Hold on tight. I think we’re gonna be in this phase for a while. And before we wrap up the show, I wanna again, thank our sponsor of the American Pharmacist Association, A PHA Is every Pharmacist Ally advocating on your behalf for better working conditions?

Tim Ulbrich: Fair PBM practices and more opportunities for pharmacists to provide care. You join A PHA at a 25% discount by visiting pharmacists.com/join and using the coupon code YFP. Thanks again so much for listening to this week’s episode. If you like what you heard, do us a favor and leave us a rating and review on Apple Podcast, which will help other pharmacists find the show.

Tim Ulbrich: Finally, an important reminder that the content in this podcast is provided for inve informational purposes only, and is not intended to provide and should not be relying on for investment or any other advice. [00:26:00] Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products.

Tim Ulbrich: For more information on this, you can visit your financial pharmacist.com/disclaimer. Thanks so much for listening. Have a great rest of your week.

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YFP 402: Building a Legacy: The Family Constitution Blueprint with Julia Myers

Posted on by YFP Media

In this episode, Julia Myers, pharmacist and founder of Generational Wisdom, shares her Family Constitution Blueprint, a tool to help families define values, build traditions, and create a lasting legacy.

This episode is brought to you by First Horizon.

Episode Summary

In this episode, Tim Ulbrich is joined by Julia Myers, a pharmacist and the founder of Generational Wisdom, a business born out of her own powerful story of transformation. Julia shares her Family Constitution Blueprint, a thoughtful and deeply practical tool that helps families clarify their core values, establish meaningful traditions, and create a vision that lasts for generations.

Julia shares:

Why identifying your family’s values is a powerful first step toward legacy-building
How to translate your intentions into everyday actions, especially in the midst of busy professional and family life
And how pharmacists and healthcare professionals can use these principles to create more alignment, connection, and purpose at home

Whether you’re raising kids, managing a household, or just want to live with greater intention, this conversation will leave you inspired and equipped to take that next step.

About Today’s Guest

Dr. Julia Myers is an international speaker, founder of Generational Wisdom, and a leading authority on teaching families how to talk to kids about money. Julia received her PharmD from University of Wyoming and her MBA from University of Tennessee. She spent nearly two decades as a board-certified pharmacist and distinguished health care executive before a career-ending diagnosis changed the trajectory of her life. Today, she blends wisdom and common sense to help parents navigate the pressures of raising kids without entitlement. As a mom of five, she brings both insight and authenticity to every stage she steps on.

Key Points from the Episode

[00:00] Welcome Back, Julia Myers!
[00:40] The Importance of Financial Planning
[02:04] Julia’s Professional Journey
[04:27] The Genesis of Generational Wisdom
[04:41] Defining Generational Wisdom
[07:44] Creating a Shared Family Vision
[13:47] The Family Constitutional Framework
[20:55] Engaging Kids in Family Conversations
[22:05] Adapting Family Plans Over Time
[23:10] The Three Ps of a Family Constitution
[23:30] Aligning Actions with Beliefs
[24:45] The Importance of Vision in Decision-Making
[25:18] Addressing Financial and Emotional Stagnation
[29:14] Taking Responsibility for Change
[31:07] Practical Steps for Creating a Family Constitution
[36:27] Celebrating and Preserving Family Values
[39:48] Final Thoughts and Resources

Episode Highlights

“ What do kids want more than anything in the world? To be treated like a big kid or to be treated like an adult. And so by pulling them into these kinds of conversations, you’re establishing that that’s just part of what we do.” – Julia Myers [21:07]

“ The way we grew up with money, or the stress or the anxiety we feel aren’t our fault, yet it is our responsibility today to decide how do we want to look going forward, what do we want to focus on? I think there’s power in being able to decide where you focus.” – Julia Myers [26:20]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Julia, welcome back to the show.

Julia Myers: Hey, so excited to be here, Tim. Thank you again.

Tim Ulbrich: Well, I am thrilled to have you back. We, we had you on episode three 11 where we talked about kids and money, a topic that’s near and dear to both of our hearts, and we’re gonna continue this theme around personal finance and the family and having a vision around how we handle our money and some of the intentionality.

Tim Ulbrich: Uh, of which we adopt the financial plan in our family. So we’re, we’re not gonna spend as much time on the kids aspect, per se. We will hyperlink to that previous show in the show notes if folks wanna check that out. But I would say this is a continuation, uh, of that theme. And Julia, as I was prepping for this episode, [00:01:00] I couldn’t help but think that one of the things I say on repeat on this show is that a good financial plan has to be accounting for yes, our future sell.

Tim Ulbrich: All the objective things, making sure we have enough in in our retirement accounts and we’re saving for our goals. All the important things we tend to think about, but also prioritizing living a rich life today. It’s the math plus the emotions. And as we talk today, this topic to me is one of those that maybe some folks will, will hear and say, Hey, I don’t know if I can put my arms around this in the same way I can, my retirement account, but oh, so important, right?

Tim Ulbrich: When we think about the financial plan.

Julia Myers: Absolutely, absolutely. One of my, my favorite quotes as we dive in today is Wealth Without Wisdom

Tim Ulbrich: Hmm

Julia Myers: wasted.

Tim Ulbrich: mm-hmm.

Julia Myers: So that’s where we’re gonna dive in today to really help the listeners figure out, okay, we can wrap our arms around our, our 4 0 1 ks, our retirement accounts, but how do we wrap our arms around?

Julia Myers: What’s [00:02:00] that meaning? What’s that legacy? What are we leaving behind?

Tim Ulbrich: I love that, Julia, because I’m convinced. We’re all gonna look back someday. Uh, if we’re, if we’re blessed to live long enough and this type of conversation and what we’re gonna talk about today, these are the things that we’re gonna look back and say, ah, that’s what really mattered. That’s what really mattered.

Tim Ulbrich: Alright, so let, let’s talk about your professional journey briefly. It spans pharmacy leadership business. Now your work with generational wisdom. Remind our listeners for those that didn’t catch episode three 11, what inspired the transition from a traditional pharmacy career to the work that you’re doing now?

Julia Myers: So I joke that I used to read the fine print and now I live it. And so this moment when everything changed for me was when I was handed a consent form from a surgeon as I was waiting for emergency eye surgery to repair a detached retina. So two hours before I was sitting at my work table looking at patient charts, [00:03:00] and the screen faded to black.

Julia Myers: We as pharmacists, we know this, right? If you experience sudden blurriness or changes in vision, you call your doctor right away. I went up two floors, saw the eye clinic. They said, you’re next for emergency surgery, and it was that fine print that basically said. How, you know, like, ready are you to hand everything off?

Julia Myers: And I was like, well, I’ve spent my career. I went to the University of Wyoming for my doctorate pharmacy degree, got my MBA from University of Tennessee, spent 17 years in, um, retail and then academic medical center. Like none of that mattered as I was filling out these forms. And so that moment really pivoted me.

Julia Myers: Because as I was signing, it wasn’t signing that I was prepared ‘ cause I was, I had a financial plan. I had done all the things right as pharmacists. We checked the boxes. I was signing that my family was prepared with the plan of what would happen if an emergency [00:04:00] happened or my unexpected passing. And in that moment, everything changed for me because I was hit with signing these forms and reading the fine print, which.

Julia Myers: You know, we all live the commercials, right? We we’re tired of seeing the family walk across the screen with a happy dog and we’re like, we don’t ignore what happens in the fine print, but we all might have to face that someday. And what hit me and changed everything for me was, is my family prepared or just provided for? Just provided for. And it stuck with me and I’m like, okay, when I’m on the other side of this surgery, what am I gonna do differently? So that they’re not just provided for that, they’re prepared. So that’s the genesis of generational wisdom. ’cause I want that to be the household term. That’s what I want us to pass on.

Julia Myers: ’cause again, wealth without wisdom is wasted.

Tim Ulbrich: Let’s talk about that term, generational wisdom. That’s gonna be the thread of our [00:05:00] interview, our time together today. What does that phrase, generational wisdom, what does that mean to you?

Julia Myers: To me, it means not an amount, but a mindset. It means how do you take accountability? Ownership and responsibility for those gifts that you’ve been given. And so, you know, there are so many ways that we are blessed as pharmacists, and there are so many ways that we have head starts. Our kids are now having head starts, and why did we do all this in the first place?

Julia Myers: You know, I’m the first person in my family to get an advanced degree and my kids only know life. Like that. They don’t know what it was like for me growing up where I tell a story about my first memories of money were counting coins and rolling pennies and stacking them and putting them into sleeves and taking them to the bank.

Julia Myers: Those were my first memories of money, and to me, that’s wealth. That’s what I [00:06:00] learned was that money mattered. Counting money, quantifying money. But now that I’m reflecting on this journey to say I was able to rely on my plan to bridge this gap, but how did I do that? It’s that wisdom that then leads to discernment.

Julia Myers: So the behavior is discernment. How do you know what to buy when you can buy anything? ’cause you can’t buy everything.

Tim Ulbrich: Mm-hmm.

Julia Myers: So discernment, how do you make decisions to me is wisdom. It’s that, you know, quote that talks about the serenity prayer of, you know, the wisdom to know the difference. What can you change and what can you not change?

Julia Myers: And I’m misquoting it, but that has stuck with me and it really is what it all is about.

Tim Ulbrich: Yeah. And how do we then develop. That vision, that culture for our family, as we think about generational wisdom, right? Passing down that wisdom, what are the behaviors? What are the habits? What are the mindsets? What are the experiences? You and I have talked about several stories on. Previous podcast webinars that we’ve done of core [00:07:00] memories we have.

Tim Ulbrich: You just articulated one right there of rolling coins. You took me right back to doing the same thing at my kitchen table, or when my dad took me to the bank for the first time and I opened up a debit card and it was like, Hey, all of a sudden I’ve got this piece of plastic and it’s accessing money and what is going on here.

Tim Ulbrich: I mean, these experiences, whether they’re intentional or unintentional, very much shape our money mindset. And I think a key piece that you and I have discussed before, how important it is that we start to get more in tune if we’re not already with what those experiences were for us growing up. So we can understand our money mindset and maybe some of the, the good experiences or the baggage that we have growing up.

Tim Ulbrich: Because the more we’re in tune with our own money mindset, our own money scripts, money philosophies, whatever we wanna call it. That’s the mode in which we’re often operating. And then of course, if we’ve got children that are watching, whether we think they’re watching or not, they are watching. They are watching.

Julia Myers: [00:08:00] yes.

Tim Ulbrich: I want to talk about a shared family vision. Thi this really energizes me and I, I think especially in today’s day and age, you know, I think about the phase of life that I’m in, Julia right now, I’ve got four boys. Five to almost 14 every night of the week, we’re running around to different types of activities.

Tim Ulbrich: It feels like from a schedule standpoint, things are constantly in a hurry from a financial standpoint, whether it’s youth activity, sports, you name it, right? There’s always opportunity. We’re just getting thrown so many things at us at once, and in this fast-paced world, it’s so hard. I think for us to slow down as a family and really define.

Tim Ulbrich: What our vision is, where are we going and why are we going there? That’s hard work, right? It’s, it’s, it’s easier to just keep going in the hurry. So tell us about, from your perspective, before we get into the details around the blueprint, if you will, for how families can begin to think about this. Why is it so [00:09:00] important in today’s fast-paced world for families to pause, slow down and define that family shared vision.

Julia Myers: Awesome tee up there, and I think the main problem is the disconnection. So calling out the disconnection of. What we think we’re building by doing these activities with our kids, what we think we’re doing by being in that busy and that hustle or building this retirement account or hitting that net worth.

Julia Myers: The disconnect is what we think we’re building and what actually lasts is not the same. And that’s a gap and that’s a way that we have to close it. Um, came across a crazy statistic. $84 trillion with a T is going to change hands in the next 20 years.

Tim Ulbrich: Transfer. Yeah. Mm-hmm.

Julia Myers: trillion of that is going to millennials, but only 26% of parents feel confident their kids can handle it.

Julia Myers: So that illustrates and really [00:10:00] quantifies this disconnect is going to continue. We will be the statistic, we will be the fine print if we don’t create this vision. We all work for employers that have a shared vision. They have a mission, vision, and values, and it sits on the wall. Personally, we have those things that drive us, but what about when we come together as a family, and what if we say that is the most important reason of why we’re doing all this in the first place?

Julia Myers: It’s not to make your employer more money. It’s not to check your boxes to say, I lived a fulfilled life. It’s always in community, but those people around you, whatever your family unit looks like. That’s the hard work, but the easy work to skip over is creating that foundation, creating that like legacy that lives beyond you.

Julia Myers: What’s your family about? Who are you for? Um, I like to say when the founding fathers, we dust off the US History books. You’ve probably gone through it at least three times by now. Right. And we find [00:11:00] stories of how the constitution was built. It was not with this. Very specific moment in time created. It was actually like the three parts of, you know, the preamble.

Julia Myers: Why are we doing this? What are we doing and how do we keep it current? And when we look at that legacy that is the United States of America and all the things that come with that, almost 250 years later, it’s like that’s a legacy that lasts. We as families should want that too. We really should. And when I’m working with families, I find most of them when I’ll ask, you know, what are you doing to preserve your wealth?

Julia Myers: We know this wealth is shifting. We know we worked really hard and we don’t want it just to be squandered. What are you doing? Most commonly folks are saying, I have a trust. The trust is gonna take care of it. I have an estate plan and the quote that I use is that a trust [00:12:00] controls the money. A constitution controls the meaning, and you might be okay with just a trust, but it’s only as good as the people left to implement it.

Julia Myers: And so that’s, I think where we’re gonna really dive in today is say, what about is our family? Are we doing beyond those check boxes of the trust or beneficiaries? But what’s that vision? What’s that meaning? What’s the alignment that helps us say yes to the right things and no, to anything that doesn’t align with where we wanna go.

Tim Ulbrich: That’s a beautiful picture, Julia. And as we’ve talked about in the show before, those estate planning documents are, are incredibly important, but if they are missing the vision or the constitution as you’re describing it, we, we should really think about those estate planning documents as living underneath.

Tim Ulbrich: I. The vision, the constitution that we’ve defined, that’s the bigger vision. And the estate planning documents are, are an important piece of that. But it, it’s certainly not meant to be all encompassing. [00:13:00] And we, we talk about this at, at YFP as a part of our services, we do what’s called script your plan, which is the, the vision that we have, the torch that we’re gonna light for the financial plan because before we make any decision.

Tim Ulbrich: How much are we saving in our retirement account? Are we gonna pay down this debt or that debt? Are we gonna buy an investment property? Right? You, you name the, the list of decisions and choices we have before we make any one of those, which we often start there and go off and running without having a clear vision.

Tim Ulbrich: That’s where we find ourselves, I think 5, 10, 15, 20 years into the future. And we’ve been in this state of hurry and we’re like, time out. Where are we going and why are we going there? And sometimes we wake up to find out, hey, we’re on a different path than we really even wanna be on altogether. So just a word of encouragement for our folks that are listening.

Tim Ulbrich: You know, kids, no kids. As we talk about family, this idea of a constitution about a vision is such an instrumental part of the financial plan. And I’m gonna dig deeper [00:14:00] into what you have built called the Family Constitutional Framework. And we’re gonna spend a a decent amount of time here, and for folks that are just eager to jump in and kind of learn more, if you go to julia myers.com/constitution, you can learn all about this resource and what we’re gonna be discussing here.

Tim Ulbrich: Over the next several minutes, and we’ll of course link to that in the show notes. So, Julia, this family constitutional framework that you have, it begins with really identifying the core values.

Julia Myers: Exactly.

Tim Ulbrich: Why is this an important first step? And give us some examples. Help, help us understand what you mean by core values and, and maybe an example of what some of these are for your own family.

Julia Myers: Absolutely. And so when I think of values, I think of the foundation, the, the groundwork. So are we building a 4,000 square foot home or are we building a 400 square foot home? And the values you use to do one or the other, very literally need to be different.

Tim Ulbrich: Hmm.

Julia Myers: [00:15:00] When you combine, you know, parents, multi-generational family members, everybody together, different things are important to different people.

Julia Myers: And if we don’t know what we’re building and we’re not all united and on the same page, we’re gonna have, I don’t know what, who knows what it’ll look like? It’ll be abstract. How about that? It won’t be something that’s sustainable and that lasts, or that weathers the challenges that life throw at us. So two of the questions I like to kind of ask is.

Julia Myers: What matters the most to your family? And those are often emotions. And then also, what do you wanna be remembered for? Because do you wanna be remembered for the example of how hard you worked or how much overtime you did? Or do you wanna be remembered for being a coach on a sports team or being the person that you know volunteered in the parent room or the classroom?

Julia Myers: And so when we think about values. It’s really easy to say I want all of those things, but just like I tell my [00:16:00] kids, when you go to the library, you can’t check out all the books and you can’t check out the biggest book just because it says that it’s the biggest book, right? It’s gotta mean something to you.

Julia Myers: And so I, in our family, what we do as our values, and everybody can say this, so that’s the true litmus test, is not just writing it on the wall, but can everybody in your family articulate it? That’s the message of like, now it’s really working. Um, so we value, love, experiences and learning.

Tim Ulbrich: Hmm.

Julia Myers: So those are big buckets that love, meaning, love your neighbor, love your family, love your environment.

Julia Myers: Like love, right? And english means not as many things as it does in other languages, but it’s all encompassing experiences. For us experiences mean that we are prioritizing travel activities, events, um, and we’ll [00:17:00] spend money and time aligned with that and then learning always be learning. So it’s not necessarily just the formal education system, but it could be things that are continuously learning and continuously challenging and trying to find new things.

Julia Myers: So values for us, those are the three, but there are so many, you can pick from so many, like you could chat GPT, it. But in my resource, I’ve really kind of created some buckets to get you thinking of what are those words that you most identify with. Then individually, when you do those, you’ll find that sometimes you’re the same as your kids, but sometimes they’re so very different.

Julia Myers: And the value to me is having those conversations around, why did you pick this word and that word, there’s not a right or a wrong answer. It’s what best identifies our family. So what are your thoughts on kind of foundational values for family and maybe share some of your experiences or what you guys think.

Tim Ulbrich: Yeah, and I, I love how you built the [00:18:00] resources I was walking through. It. It, it gives some ideas, as you mentioned inside of the document, so people can come up with some of these words and it gives space. To allow each person in the family to come up with these words and then to have a conversation of, Hey, what are our family values?

Tim Ulbrich: And what I love about that is as we talk about where we started, generational wisdom, right? Generational wisdom implies that we’re beginning to build behaviors and habits that transcend just our family and are able to continue on to other generations. You’re role modeling. Whether the kid kids are five or 15, I know you’ve got kids that are a little bit older than mine, like you’re role modeling this behavior and activity that sure, maybe it looks a little bit different for their family in the future, but this is becoming a core foundation of how they think about money and the financial plan.

Tim Ulbrich: And I can see, as you’re describing, eventually your kids of leading their own families through a similar exercise. That’s what we’re talking about, right? Generational wisdom. Yeah. For, for our family, this, this is a, a [00:19:00] really powerful exercise and. Admittedly, we haven’t gone through, you know, the detailed level of what you recommended in the framework and how to think about it and come to an agreement and consensus on it.

Tim Ulbrich: But as you’re sharing here, I, we’ve talked about these at length before. In terms of the experiences, part is a, is a huge fundamental piece for our family. We love doing lots of things together, whether that’s going to watch one of our kids play soccer or baseball, you know, wherever we can. It’s not divide and conquer.

Tim Ulbrich: Which is a, which is a commitment. It’s, Hey, we are coming as a family to support one another, and we just love watching one another kind of enter into their unique gifts and their space. Um, so when you talk about like continuous learning and really optimizing, I. Your unique innate gifts. How do we as parents, help our kids identify what those are, and then how do we celebrate those as a family?

Tim Ulbrich: So those are some of the things that are really important, you know, to us. And admittedly, this is shifting as [00:20:00] well, right? Because when we talk about, talk about things like experiences and travel, well now that we have boys from five to nearly 14. This is a little bit more feasible than it was four years ago.

Tim Ulbrich: Right, and that was one of the questions I had had for you is when you’re working with families that are going through this exercise, thoughts on kind of the ages. Of the kids and what this might look like, right? I think about where your family’s at, phase of life versus my family, versus maybe others that have much younger kids.

Tim Ulbrich: And not only in that season, but also as that shifts over time. What? What are your thoughts on that?

Julia Myers: That’s actually a question I get a lot is like, how old do they have to be or should they be to participate in these conversations? And there’s a blend of an art and a science. There’s not an actual age, but if they’re little and they can understand sharing, I say that that’s at least a place where we can start.

Julia Myers: [00:21:00] Involving them in the conversation. But usually by the time they’re in elementary, they have passions. They have things they love doing. They have things they either wanna buy or things they wanna do. You ask a 2-year-old what they wanna do, and it’s probably a pretty limited scope, but by the time they’re in school and they’re about five, and maybe you see this with your youngest, it’s a new like developmental level that they can participate.

Julia Myers: And what do kids want more than anything in the world? To be treated like a big kid or to be treated like an adult. And so by pulling them into these kind of conversations, you’re establishing that that’s just part of what we do. Maybe we have a family meeting or maybe we have like a, you know, a family planning session.

Julia Myers: You know, those are things that they might roll their eyes out if they’re teenagers, but if you’re starting them young enough. They’re gonna be like, this is what we do. This is just normal culture. Um, so our youngest is third grade. She turns nine, her oldest turns 21 this month. And I would say that age appropriately, [00:22:00] they get more opinionated.

Tim Ulbrich: Mm-hmm.

Julia Myers: asking them, okay, what’s your opinion at five, it’s really easy to be like, oh, that was really sweet. But then at 15 you’re like, oh. That hits, or ooh, they have their own opinions. And so as parents, we’ve gotta be prepared to kind of pick something that lands for everybody in the season that they’re at.

Tim Ulbrich: Yeah, and this also, as you’re talking, Julia reminds me, just like we talk about in organizations, when you do a strategic planning exercise, it’s not a set it and forget, right? We’ve all, we’ve all been in organizations where you develop the strategic plan. It’s, it’s the beautiful three to five year plan.

Tim Ulbrich: Everyone’s super excited, the energy’s high, and then all of a sudden we check that box, it goes up on the, the shelf somewhere, it collects some dust. Then you have new leadership that comes in and three to five years later you reinvigorate the process and and continue on right with the cycles. And this is really an opportunity as we think about that similar approach in our families, especially as you [00:23:00] give the example of kind of a, the opinions and needs of a five-year-old versus a teenager.

Tim Ulbrich: If you develop something once, 10 years later, those opinions. Who’s under your roof, what that looks like as a family. This may shift over time, and sure, maybe there’s some core fundamental things that don’t change, but accounting for those needs, making sure that voices are heard, really to me, implies that, hey, we’ve gotta be looking at this as a living document on a regular basis.

Julia Myers: So I, I call it the, the three Ps that make up this constitution. So we talked preamble, articles and amendments is what kind of the government set up in the us. Um, so number one P. First P is principles. So we just talked about that. What do you stand for? That’s your strategic plan. Three to five. And then this second one second.

Julia Myers: P practices. What are your actions doing to match your beliefs? And that’s really where you get specific, you get granular. That’s where you go from, you know, [00:24:00] what are the systems that we use, how do we operate? You know, the parents do this or the kids do that. Or you know, every quarter we do some sort of a, you know, date night.

Julia Myers: With each of the kiddos. So what are those things and what’s the frequency that have those actions aligning with your beliefs? So that practices part absolutely needs to get changed because taking a five-year-old out is very different than maybe the 15-year-old or you know, college chores, whatever those expectations are.

Julia Myers: Or now that they’ve graduated, where do you decide to say, yes, this aligns with us. Both in money, both in our calendars, both in with our attention, and then where do we say no? Which I think as the kids get older, it’s that much harder because like what you said is there’s so many things we can do with our financial plan, but if we’re not bringing it back to what’s that end foundation, that end vision, it’s easy to get [00:25:00] off track or out of alignment.

Tim Ulbrich: Yeah, that vil, that vision is such an important piece. I think about it as a filter, as you’re talking about for making decisions, right? The yes, no decisions. Hey, if we agree on, on the vision, on the framework, you know, it’s often like I talk about with the individual budget, like don’t start with the budget, start with the vision.

Tim Ulbrich: What are the goals or the next one to two years, and then the budget is the way in which we’re going to achieve those goals. And the goals are, are ultimately the thing that we’re pointing towards. And as we’re going through that exercise, we need to have a filter to help us make some of those decisions.

Tim Ulbrich: So I love what you’re sharing there. What, what would you say, Julia, to a pharmacist listening who feels like their family is stuck and old patterns? Uh, you talked about mindset a little bit earlier or perhaps feels disconnected, kind of in that. You know, spinning wheel financially not progressing a whole lot.

Tim Ulbrich: It, it feels the dissonance, but maybe can’t put their thumb on exactly where, where that’s coming from. How, how can this [00:26:00] constitution, how can this framework really help them heal or, or realign in their efforts?

Julia Myers: Ooh, I love the vision pun. By the way, like I see what you’re doing. Um, you’re talking about vision and realignment, and I think it comes down to starting with you as the individual and realizing that what you’re building is bigger than you. And when we do things out of the service of others or out of that bigger vision, it sometimes puts things into context of the problems we’re having.

Julia Myers: Maybe weren’t our fault. The way we grew up with money, or the stress or the anxiety we feel aren’t our fault yet it is our responsibility today to decide how do we wanna look going forward, what do we wanna focus on? And I think there’s power in being able to decide where you focus. So the simple exercise that I do when I’m giving a keynote is, [00:27:00] you know, I say every time you blink.

Julia Myers: You get to decide what you’re focusing on. You have a glass, it’s half full or it’s half empty. Where do you, now that you know what you know, doesn’t change how full or how empty that glass is, but it does give you that power to be in the decision making chair. So able to then say, okay, I’m feeling disconnection, I’m feeling out of alignment, or I’m feeling just overwhelmed.

Julia Myers: What’s the next right step that you wanna try?

Tim Ulbrich: Mm-hmm.

Julia Myers: It could be checking out this resource. It could be telling your kids your very first money story, and it could be sitting with your partner or your spouse and kind of just saying, this is what I’m feeling and this is where I wanna go. What do you think?

Julia Myers: Because often, right, when we have employees that we work with or students or residents that are challenging, we’ll say, we always start with the shared vision. It’s like, where do we really wanna be? Any [00:28:00] problem that comes up is solvable or figureoutable, I think is a Mel Robbins

Tim Ulbrich: It is. Yep.

Julia Myers: that is, we’ve got this shared vision and we know that we wanna go somewhere.

Julia Myers: We wanna complete this residency, or we wanna land this job or finish this degree. Okay? Now that we’re on the same page, now we can take those next steps or those actions, and you don’t have to do it alone. It’s not meant to be done alone.

Tim Ulbrich: That is beautiful. Right, because as you were sharing that, I was thinking about, hey, where do we typically get stuck? Here, here we’re talking about relationally as it relates to the financial plan. But this can apply more broadly than that. And it’s when we’re, when we’re having different conversations and we don’t realize we’re having different conversations, right, because we’re missing that shared vision that we’re talking about.

Tim Ulbrich: And easier said than done. Uh, but, but I love. The vision that you’re casting here for, for why that is such an important place to start. The other thing I wanna go back to real quick to make sure our listeners don’t miss it, you said something really, really, really important from a [00:29:00] mindset perspective, which is, hey, once we can accept and understand that the approach that we take today, especially if I’m listening, I’m feeling stuck.

Tim Ulbrich: I’m not progressing financially. Hey, I’ve made a good income. I should be further along. The shame comes in, the guilt comes in, right? All the emotions, the fear with it, and it’s easy to get stuck in that space when we can recognize that often that comes from the experiences that we’ve had growing up.

Tim Ulbrich: Good, bad, and indifferent. take responsibility from that point going forward. To me, that is where everything changes. And it reminded me, um, one of the guys I file on on LinkedIn that I I like a lot is Sahil Bloom. And he, he just came out with a book called The Five Types of Wealth, and one of the things he posted this past week was, no one is coming to save you.

Tim Ulbrich: Your entire life will change the day you realize. It’s all on you. No one is coming to save you. No one will fix your problems. No one will change your mindsets. No one will hand you the things you want in life. It’s just you. It’s on you. There’s [00:30:00] power in that. And once that mindset shift happens, we’re, again, we’re talking about finance, but that is a much broader application.

Tim Ulbrich: There is such freedom in that and I think people can hear that. And there’s this for some maybe that that idea of freedom and I feel empowerment for others are like. Oh my gosh, that’s weighty. Right. But it’s so important, I think, just to sit with that and, uh, we would love to hear your reflections on that as well.

Julia Myers: I think it reminds us of when we’re a kid and we take the training wheels off the bike.

Tim Ulbrich: Hmm. That’s good. Mm-hmm.

Julia Myers: around you doing it, but until you actually do it yourself and you feel that discomfort and you break through to the other side, so like what you said, sit in that and feel that, that you are exactly where you’re supposed to be and you’re facing exactly what that challenge is.

Julia Myers: Because on the other side of that is gonna be that clarity. It’s gonna be another pun. Hindsight is always 2020. [00:31:00] If we look back in our careers, if we look back where we matched, if we look back at the mentors and people we’ve had in our life, they were all exactly there at the right point. And when did things change?

Julia Myers: When did you get unstuck? It’s when you stepped into that power that it’s you. It’s not what happens to you, it’s how you show up, and you can control that. Absolutely.

Tim Ulbrich: Julia, one of the questions I have is, is to get a step more practical and actually taking the time to sit down and do this and to develop this. Some folks might be thinking, Hey, this is just another thing to do. I. We’re a busy family. We’ve got lots of things going on and this really should, should be a sacred experience, but it, but it does take time.

Tim Ulbrich: There’s an initial commitment of time. There’s an ongoing commitment of time. What might this practically look like for families getting started in terms of that initial investment and, and any thoughts and re investment of time and any thoughts and recommendations you would have on the experience that is [00:32:00] created?

Tim Ulbrich: To develop this initial constitution, such as get outta the house right, and find somewhere else to do it.

Julia Myers: Yeah, I, you know, I’ve heard a range of options. I’ve heard the next time you’re in the car together on a road trip. Put your phones away, put your screens away. Might be hard to hear all the way in the back, but setting that expectation that, hey, we’re gonna spend some time and I just wanna talk and I just wanna hear you all share.

Julia Myers: It might be around a dinner table that maybe you hit at a restaurant and you kind of go in the back corner and you say, Hey, we’re gonna be here for 90 minutes. And usually having an end time to, it gives your teenagers permissions to roll their eyes and get it outta their system, and then they’re like, okay.

Julia Myers: I can do this for 90 minutes. ’cause that’s about as long as their longest period in high school.

Tim Ulbrich: It’s pro parenting right there, by

Julia Myers: yes. Yes. And so I’ve also seen it where a family wants to take a weekend to do it, or maybe Friday night they all go out and they eat and they talk about it and then they sleep on. [00:33:00] Does that still show up for me the next day?

Julia Myers: ’cause I mean, we’re humans, we have emotions, our priorities, you know, might feel really strong one day and then the next day you’re like, Ooh, I don’t know that. I wanna lean into that one. Um, one family I worked with, they put on that their values was fairness. I want everything to be fair and I want everything to be equal.

Julia Myers: And then the next day they kind of came back and were like, can we revisit that one? Because on the way home it wasn’t fair and nobody thought that that was a good idea anymore. And so I think it can be a commitment that you make, but also to yourself and to your family in the way that when you sign a job offer, you’re like.

Julia Myers: Other duties as assigned. This is gonna fall in one of those buckets that you didn’t know you needed. But at the same time, it is now that foundation that becomes more important than ever. So that would be that challenge, that limit or that belief, limiting belief that you don’t have the time to do it.

Julia Myers: You do have the time, you have to do it. And what are we gonna do [00:34:00] when we don’t have time? We’re gonna keep feeling stuck and we’re gonna stay where we are. And most parents listening to this show don’t wanna stay where they are. They’ve got visions, goals, aspirations, and this is one of those tools to help you get there.

Tim Ulbrich: Great point. We often look at an opportunity like this that there’s a cost to doing it, right? We, in our industry, it’s the same thing. There’s a, there’s a financial investment and a time investment to do the work. The question we don’t often ask, or at least not ask enough, is, what’s the cost of not doing it?

Julia Myers: Mm-hmm.

Tim Ulbrich: We have to look at both sides of this, and for me that that’s somewhat of a, I don’t know, maybe haunting, maybe liberating. I’m not sure which I feel, but when you think about things like this, the cost of not doing it, you know, again, I call it the rocking chair exercise. You wake up in 40 or 45 years, my kids are growing, they’re out of the house, hopefully grandkids, all those things.

Tim Ulbrich: Now, in theory, there’s more time, more money available than there perhaps ever has been. What are those things that while I’m in this [00:35:00] season in front of me, that are opportunities that we wanna make sure that we can take advantage of? Whether it be experiences, whether it be making sure we’re clear on the vision, the constitution of our family, the things that we’re talking about here today.

Julia Myers: I’ll also add that at stake is those statistics that 70% of your wealth that you’ve built is going to be gone by the second generation, and 90% statistically will be gone by the grandkids, the third generation. So that’s the cost of not taking action. That’s the cost of focusing only on the wealth and not the wisdom.

Julia Myers: And I’ve worked with a lot of families that still have kids on payroll at 24, 25, 26. What’s it costing you to have your kids still financially dependent upon you? And there are so many statistics, I can’t even keep up with them, about this middle generation that’s either financially supporting their parents and their kids, or that they don’t know that their kids will ever get off payroll. If that’s a value you [00:36:00] have, let’s do it. But if that’s an accident. Today’s the day. That’s your wake up call that you get to make a choice and you get to decide how do you want that to look?

Tim Ulbrich: Yeah. And those statistics highlight, well, the financial costs, there’s a whole nother layer of emotional costs, you know, that are involved in, in this as well. Julia, I’m, I’m curious to hear from your experience, whether it’s your family or others that you’ve, you’ve talked through with this. I. When it comes to completing the Constitution, to me there’s an important opportunity for celebration, uh, of, of that work.

Tim Ulbrich: What, what have you seen in terms of some of the rituals, traditions, celebrations that people have done that really marks the significance of, Hey, we’ve cast this vision that we have as a family and, and this is a commitment that we have ongoing.

Julia Myers: I think that goes to the third and final P of preservation. So how do you keep this alive? And in our house and in a few houses that I’ve worked with, they want a visual reminder. They want that framed on their wall [00:37:00] or put up kind of like a vision board where it’s subconsciously always there as a reminder.

Julia Myers: The goal is not to be interrogated by your in-laws when they come over because again, this is your family, not their family constitution. And so there’s different ways that people have done it. Some people have taken a vacation to basically say, Hey, we celebrate all of these things and we’re gonna do nothing but our values.

Julia Myers: I’ve seen people at the end of the year kind of reflect and look at it. So like that old practice of counting rolling coins, don’t make it sentimental, don’t make it that outdated practice. Make it something that is in the living, breathing, evolving document, and maybe ask and reflect. Sometimes at the end of the year, or for us with our teens, we do quarterly highlight reels.

Julia Myers: They pick the top five pictures from their quarter. And then we talk about it and we’ll say, are these aligned with what our values are? Or is this [00:38:00] out of alignment? And if so, what’s the gap? Because we all have seasons and we can’t always do everything exactly right, but we can say that from the lens of each of the kids’ perspectives, was that aligned or not?

Julia Myers: And having them be involved with the ownership of Take a Picture, what are your five favorite ones and why? How does that align with our values? You’re now reinforcing that behavior. You’re reinforcing those values. You’re also maybe shaking it up. So for us, we’ve done a lot of travel and we had a season where the kids were like, can we just chill more? And I’m like, I never thought about it that way. You know? And when we are traveling, just to always have something on the calendar that’s now missing the purpose of having experiences if we’re not getting that result. So did it get us to where we thought we wanted to be? Why or why not? Okay, let’s pivot.

Julia Myers: Let’s change, let’s do an amendment to say we’re not gonna do date nights every quarter. We’re gonna do them, you know, maybe every six months and they’ll be bigger or something. So just some level of [00:39:00] accountability to say, are we doing it? How often are we checking it? And what are those traditions we’re creating that are unique to us and meaningful to us?

Julia Myers: And giving yourself permission that just ’cause it’s a tradition doesn’t mean you always have to do it either.

Tim Ulbrich: Mm-hmm.

Julia Myers: ‘cause. There are lots of traditions that don’t serve us from our past. And splitting the holidays is maybe a good one that I think of is, you know, gone are the days of running around to 10 different places and you’re just present. You as a family get to decide that focus is power.

Tim Ulbrich: I think that message, Julia, is so important for, maybe I’m projecting a little bit here, but for, for pharmacists who, when we set a plan, by gosh, we’re gonna achieve every part of that plan to the detail we set out and there, and there’s value in that. But ultimately we have to ask the, the question, are we getting out of this what we thought we were going to get out of this?

Tim Ulbrich: And if not, are we willing to kind of pivot? Be flexible, review and, you know, look at some of these components in a different way. [00:40:00] So, great stuff that you shared there. As people think about this as a, as a living document, uh, that will be

Julia Myers: And the role model for the. Is important too, that the kids can see that you’re having conversations and you’re making pivots. We talk about we want our kids to be resilient. That’s a perfect way to teach it, is by amending that constitution and revisiting it for the reasons we just talked about.

Tim Ulbrich: So again, more information on this. You can go julia myers.com/constitution. We’ll link to that in the show notes. Julia, as we wrap up, uh, this has been incredible. I thought it would have, it’s delivered for me on, on every level, uh, as well. Love the work that you’re doing. Uh, where is the best place that our listeners can go to to learn more about you and the work that you’re doing?

Julia Myers: I would say my website, uh, Julia Myers, MYER s.com is where you can get plugged in. You can find those things that support you, that serve you. And if you’re on social, uh, LinkedIn is where I usually like to hang out, but I’m on all the other ones as well under Julia [00:41:00] Myers.

Tim Ulbrich: Awesome. Thank you so much, Julia, and I’m sure we’ll have you back on the show again. Take care.

Julia Myers: Thanks everybody.

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YFP REI 133: How Property Owners Can Leverage Energy-Efficient Financing

Posted on by YFP Media

Attorney Colin Kalvas discusses PACE (Property Assessed Clean Energy) financing, including its origins, mechanisms, and applications for residential and commercial property owners.

Episode Summary

In this episode, Colin Kalvas, a public finance and economic development attorney, joins Nate Hedrick, PharmD and David Bright, PharmD to explore the intricacies of PACE (Property Assessed Clean Energy) financing. They discuss its origins, mechanisms, and applications for both residential and commercial property owners.

About Today’s Guest

Colin Kalvas is a public finance and economic development attorney with Bricker Graydon in Columbus, Ohio. Colin serves political subdivisions, financial institutions, developers, and special purpose districts in many different capacities. He represents clients on economic development incentives, public-private partnerships, project financing, municipal bonds, federal income tax law, securities law, contracts, property development, and governmental revenues.

Colin has been at the forefront of developing property assessed clean energy (PACE) financing in Ohio. His PACE efforts include serving as counsel to PACE administrators and energy special improvement districts, as well as serving as bond counsel and capital provider’s counsel to entities that finance energy efficiency and clean energy projects through PACE.

He is well known within the national PACE community and regularly speaks at national PACE conferences. He has extensive experience negotiating, documenting and closing PACE transactions, including as part of complex capital stacks. Colin is frequently called upon to advise PACE capital providers of all kinds on transactional best practices and documentation.

Key Points from the Episode

[00:00] Welcome and Introduction
[00:37] Colin’s Background and Legal Disclaimer
[01:51] Understanding PACE Financing
[04:27] Residential vs. Commercial PACE
[08:35] Pros and Cons of PACE Financing
[13:52] Regulations and Safeguards
[16:22] Practical Considerations for PACE Financing
[32:24] Future of PACE Financing
[35:09] Conclusion and Contact Information

Episode Highlights

“ One of the things about PACE that always has to be kept in mind is that because it’s a public financing mechanism, and it’s using this special assessment mechanism, it’s going to be state law specific.” – Colin Kalvas [6:58]

“ PACE is going to be most effective in a situation where you can replace a significant amount of either cash or partnership equity or junior debt that you would be thinking about putting into a project. That’s when it’s going to be the most effective.” – Colin Kalvas [31:24]

“ It’s when you kind of have a gap where, you’ve got the amount of equity in that you need, you’ve got your senior lending, but you’re still trying to figure out how to pay for these other items. That’s where PACE is probably going to be the most effective.” – Colin Kalvas [32:07]

“It [PACE] was originally conceived of as advancing energy efficiency and alternative energy policy goals, but where it’s actually been really effective is in promoting investment in buildings – kind of the economic activity of that – and job creation.” – Colin Kalvas [33:58]

Links Mentioned in Today’s Episode

Episode Transcript

Nate Hedrick: Hey, Colin, welcome to the show.

Colin Kalvas: Hey, thanks Nate. Thanks so much for inviting me on.

Nate Hedrick: Absolutely, man. We, uh, this is a cool moment for me. I don’t often get to interview old time friends. We go way back to ninth grade. So this is cool to have you on the show. I was, I said before he hit record, like, it’s weird that our goofy friends grew up into like actual adults who know stuff. So really happy to have you on the show talking about real stuff.

Nate Hedrick: This is cool. Cool.

Colin Kalvas: It’s funny how that tends to happen, right? Yeah, we all grow up.

Nate Hedrick: Sometimes I feel like I’m waiting for the adults to show up in the room and, uh, we’re, we’re them. So I guess this is it.

Colin Kalvas: There we go. There we go.

Nate Hedrick: So why don’t we jump right in, give everybody a little bit of just background on yourself [00:08:00] and some of your training. Um, and we can, we can dive in from there.

Colin Kalvas: Sure. Well, my name is Colin Kalvas and, uh, I am a lawyer. And I guess, uh, because I went to law school and, uh, you know, the punishment that I have for that, I should say, as we get into this, uh, I am a lawyer, but I’m not anybody who’s listening to this is lawyer. And so, uh, none of what I say is legal advice.

Colin Kalvas: And if you need some legal advice, I would suggest that you find or talk to, you know, the lawyer that you trust, um, coming out of law school, I was fortunate enough to find a job with a law firm that has. What we call a public finance practice, and that, you know, mainly deals with public entities and how they either pay for their own assets or can help in public private partnerships with private parties, uh, to make development work.

Colin Kalvas: So, uh, in that context, I got involved with a number of different kinds of public private partnership [00:09:00] tools that are used for development, uh, and one of them is property assessed clean energy or PACE financing, which is, uh, we’re going to talk about today.

David Bright: Yeah. So let’s jump into that then. The property assessed clean energy, which I hear more often as PACE financing, uh, can you walk us through what that is? Big picture zooming out. What does that mean and what kind of things might that apply to for a real estate investor?

Colin Kalvas: Yeah, absolutely. Um, the biggest thing to keep in mind with PACE is ultimately it is a, a source of financing. So when you compare sources of financing, you might think about, you know, traditional mortgage lending. You might think about partnership equity. You might think about equipment, leasing or equipment financing pace is another type of financing and kind of always have to keep that in mind.

Colin Kalvas: Because when we start to get into the details, there’s a number of different players involved. It can get a little bit complicated, but at the end of the day, this is a way [00:10:00] for a property owner to access funds to do upgrades to their property. Um, and it’s, it’s again, it’s a little bit different than some of those other sources, but ultimately it’s a, it’s a financing source. So pace is a financing source that uses a public mechanism. To pay for typically private improvements and what happened back, uh, going on about 15 years ago now, our local governments around the country sort of perceived that there was a need to invest in upgrading our building stock. We had a lot of aging buildings that really could use energy efficiency upgrades.

Colin Kalvas: There was also a lot of momentum behind trying to incentivize folks to look at alternative energy improvements like rooftop solar or micro wind or geothermal. And what a lot of policy makers perceived was there’s an opportunity for us to use what has traditionally been a public financing mechanism to [00:11:00] incentivize this public policy that we want to achieve.

Colin Kalvas: Increasing the energy efficiency of buildings, incentivizing alternative energy. So, what a number of different state legislatures did was authorize. Local governments to put what are called special assessments. On property as a way to both secure and repay. Upfront financing that the property owner can get to pay for those eligible kinds of improvements.

Colin Kalvas: So you can see where it starts to then get a little bit complicated because you’ve got a government involved. You’ve got a property owner involved. You’ve got a lender involved. Um, but again, it’s really just a financing source and it’s using special assessments rather than some of the other kinds of things that other sources of financing might use.

David Bright: Yeah. And then what, what would be some other examples of, uh, the clean energy updates? That might play in for, you know, especially some of the, uh, smaller residential units. Or is that not really the typical focus? [00:12:00] Is this typically more of a larger commercial building kind of thing?

Colin Kalvas: Yeah, it’s a really good question. And actually, over the history of PACE, the answer has probably been a little bit different at different times.

David Bright: Okay.

Colin Kalvas: So Pace really started out as a residential effort, um, in California and Florida as kind of the tip of the spear, there was a lot of investment in residential Pace and what homeowners in those places were experiencing, uh, and using Pace for were kind of standard things like HVAC upgrades, you know, you have an air conditioner that goes out, you want to upgrade it, you think, I might as well go for the more energy efficient model.

Colin Kalvas: This is a way to help me pay for it. There was a lot of investment, um, done in that kind of mode, but also the rooftop solar, as you can imagine, in places like California and Florida. Um, very good environment for rooftop solar. Incentives available to try to help bring down the cost of those things and then pace was a source of financing that could help pay the [00:13:00] costs that you are.

Colin Kalvas: You know, obligated to pay so for a while. It was really heavy in the residential space. Um, I think once. Things sort of started to develop in that area folks perceived. Well, we could really use this for commercial as well. And the capital markets sort of started to see pace as something that, um, they could understand and underwrite and that they could put.

Colin Kalvas: Bigger dollar amounts behind, and because of that commercial pace has kind of taken off and because of the project sizes and scopes, you know, it’s now a larger segment of the market than the residential side. Um, there’s also been some bumps in the road on the residential side, unfortunately, and that’s caused some contractions and a little bit of a, um, stagnation in terms of the expansion of residential pace.

Colin Kalvas: Um, but, uh, it’s still something that is is done and available in in Florida and to a lesser degree in California. Still.

Nate Hedrick: And so when, when you’re getting this financing, I guess my understanding [00:14:00] of it was that it’s not a typical loan, right? It’s still money being paid up front, but in terms of the payback, it’s not a typical loan payback. This is actually being attached to your property taxes. Is that, is that typical for all these projects you’re talking about?

Nate Hedrick: Or is that, is that the norm?

Colin Kalvas: Yeah, and, you know, 1 of the things about pace that’s, uh, always has to be kept in mind is that. Because it’s a public financing mechanism, and it’s using this special assessment mechanism, um, it’s going to be state law specific. So, you know, I was mentioning, like, residential pace in California and Florida that, um.

Colin Kalvas: In those states, you know, those things were authorized and the special assessment mechanism sort of followed the way that their property tax system works in those states. It’s a little bit different in every state, how that actually works, uh, but the key sort of fundamental thing with pace is that it is going to be a property tax item.

Colin Kalvas: And that has some advantages, and it kind of makes [00:15:00] pace work. The way that it does,

Nate Hedrick: And so how did you first get injected into this? Is it like something that, uh, you know, you yourself are not a real estate developer going out and getting these loans, right? You’re assisting the, these public entities with, with doing so. Is that, is that right? Or how are you involved in the day to day with this?

Colin Kalvas: yeah, it’s a great question. Um, you know, again, kind of coming from the public private partnership. Background, we had a number of local government clients that were interested in this. And, uh, kind of came to it from that lens, but over time have worked in a number of different capacities. You know, yes, on the local government side, but also a little bit on the property on our side and also on the pace.

Colin Kalvas: We call them capital providers is kind of the terminology on the pace. Capital provider side, that’s the folks that are, you know, giving the upfront. Upfront funding.

David Bright: So let’s, let’s unpack some of the pros and cons of where this might be a good fit, uh, different types of projects or different [00:16:00] ways that an investor could really leverage this as an opportunity to, to enhance their investing. So, uh, let’s start off with, are there, are there project types that really stand out to you as if you’re doing this?

David Bright: In this type of building, think about pace financing.

Colin Kalvas: yeah, that’s a great question. I think I can speak a little bit from what we’ve actually seen happen as maybe a way to address that. So, I would say that, um, on the commercial side. And when we say commercial, we should probably be clear in most states, a commercial. Asset is going to be something that has.

Colin Kalvas: For or more residential units, if it’s, you know, used for residential purposes, or then, obviously, anything that has purely commercial purposes, like an office building or retail or things like that. Um, but on the commercial side of the equation, I would say that, uh, multifamily certainly has been an area of a lot of pace investment.

Colin Kalvas: Uh, hospitality as well, by their kind of [00:17:00] traditional hotels, or even sort of more boutique bed and breakfast, things like that. Uh, senior living has seen a lot of pace investing over the years and, uh, to a little bit of a lesser degree office. And that’s a little bit tracking the overall market trend for office space, um, where we see pace, uh, a little bit tougher on the commercial side is on really specialty assets.

Colin Kalvas: So if you think about a big data center somewhere that’s built specifically for a specific user, or if you think about indoor agriculture, um, other types of really specialty assets, those can be hard, mainly because of the credit underwriting that the PACE capital provider is going to do. It’s not a super fungible asset, and therefore, They are going to have a hard time finding a new buyer in the event that there’s ever a need to sell the property in a foreclosure situation, and it just makes the underwriting tougher.

Colin Kalvas: Um, so it’s certainly on the multifamily side and hospitality and senior living, [00:18:00] uh, pace is kind of an easy proposition. The farther you get away from that and into more specialty types of assets, the tougher it can get.

Nate Hedrick: I guess it begs the question, is there like a minimum or a maximum? We’ve been talking about everything from, you know, big commercial, like a hotel down to like putting solar panels on a roof. Is there a minimum or a maximum for these types of loans or is it all across the board?

Colin Kalvas: Yeah, um, I would say there’s certainly no maximum, um, and that’s been an interesting development, uh, you know, even over the past year or so we’ve seen, um, you know, hundreds of millions of dollar amounts in in pace financing. Um, so the, the large side of the market is growing and there doesn’t seem to really be a ceiling to that on the small side.

Colin Kalvas: There’s probably sort of 2 lenses to think about that question from 1 is from, um, kind of a underwriting perspective. And another 1 is from sort of a cost [00:19:00] effectiveness perspective. So, on the underwriting side. Most pace capital providers are only going to be able to provide pace at up to maybe around 35%.

Colin Kalvas: At a, at the, at the most of a property’s value. And so when you’re talking about, you know, sort of small dollar value assets, um, the pace amount that could go in there, you know, might not actually be that significant. It might not be enough to pay for all the things that a property owner would like to do.

Colin Kalvas: Depending on the value on a cost effectiveness side, traditionally pace has been a little bit higher on the fee load because it is kind of complicated. You’ve got the government involved. You’ve got a number of different. Uh, sort of background diligence, things that need to happen. We can talk a little bit about that.

Colin Kalvas: That’s a little bit different than traditional lending. So the cost to actually transact and pace has been a little bit higher. 1 of the really [00:20:00] exciting things that we’ve seen in the last probably a year to 18 months are a number of. Small, local community banks and. Getting really involved in pace from the actual.

Colin Kalvas: Lending side. So there are traditional banks that are now using this as a source of financing with their customers and banks are really, really good at deploying capital and doing it at a cost effective way. So, uh, they are costs associated with some of the smaller balance pace. Have been significantly lower than the cost that we’re used to seeing kind of in the traditional pace market.

Colin Kalvas: So I think we would expect to see that continue and to kind of bring that minimum dollar amount from a cost effectiveness standpoint. Kind of continue to go down.

David Bright: Okay. So less, less of a fit if it’s like your furnace went out in your house and you’re trying to fund a few thousand dollar thing, more of a fit if it’s like a, an Airbnb beach house where you’re [00:21:00] looking to do new solar panels, new HVAC with air conditioning, with windows, with that kind of thing. Is that, is that my understanding that right?

Colin Kalvas: That’s probably right. David. Yes. And the other thing about residential versus commercial, um, you know, we kind of talked a little bit about, um, the fact that. The market developed for residential starting in California and Florida, there have been a number of sort of regulatory things that have come up over time in the residential space.

Colin Kalvas: Unfortunately, there were some issues that arose with contractors and kind of the way they were interacting with some of the property owners. Uh, and also there was a, I think, a rightful perception that this really is a financing tool. And for a while, it was not regulated the way that other forms of consumer financing were regulated.

Colin Kalvas: So, there’s been a push to kind of bring it more in line with the ways that other consumer loans are regulated. Um, and there’s been [00:22:00] sort of some fits and starts with that, uh, but in general, through that effort, um, on the residential side, we’ve, we’ve kind of seen a slowing of the increase in the use of pace.

Colin Kalvas: For just kind of that HVAC replacement that you’re talking about.

Nate Hedrick: I, I’ve heard those horror stories of like, and maybe this isn’t pace, you can correct me if I’m totally wrong, but like where the, the, the door to door, like solar salesman is like, you don’t pay anything. We just throw it on your roof and like, don’t worry about it. And then two years later, it shows up in their property taxes and they have no idea where it came from.

Nate Hedrick: They’ve never been underwritten on that loan. They might have fixed income and they have no ability to pay that back anymore. Like, is that, I mean, that’s the, yeah. The bad stuff, right?

Colin Kalvas: Yeah, unfortunately, you know, we’ve heard those stories too. And the good news on those is that I think the market has appropriately reacted and put a lot of safeguards in place. So, where residential pace is available, there will be things now, like, you know, a confirmation of terms call where [00:23:00] you have to speak with a live representative to confirm you understand that there’s going to be a special assessment on your property.

Colin Kalvas: You understand that you have to pay this back, you know, those kinds of things. There is, um, significantly more underwriting of not only the property, but also the actual property owner that now takes place. Um, there’s kind of truth in lending things that are involved. So, um, the market has definitely reacted to those horror stories and tried to address them.

Colin Kalvas: Um, but yes, you know, they were out there and I think that caused some hesitancy. In the expansion on the residential side.

Nate Hedrick: That’s good to

David Bright: Okay. Uh, what about. I know a lot of investors jump into a property and they kind of cashflow repairs over time, meaning they’re doing a few things here, then they’re going to wait and they’re going to do a few more things and a few more things. What about that person that has already kind of started on some renovations and is now hearing about PACE financing?

David Bright: Can this be used retroactively for reimbursing [00:24:00] recent things and putting a larger umbrella over a portfolio of renovations? Or is this only forward looking?

Colin Kalvas: It’s a really salient question currently, um, because a lot of folks, you know, are finding out about pace now and they’re thinking, whoa, I just did a bunch of stuff that I think could qualify for pace, you know, last year. Can I can I use this tool and in a lot of places? The answer is yes, but it’s a little bit state and program specific. So there’ll be different guidelines for kind of how far back you can go, what you may have had to do at the time that you were doing the improvements in order to kind of qualify them for later reimbursement, and then how the money kind of comes into the property or to the overall sort of capital stack that exists with the property.

Colin Kalvas: But in general, the answer is, uh, yes, for some period of time, you can look back and kind of capture some costs of some projects that you may have [00:25:00] already completed.

David Bright: What about contractors? Do the, do contractors need to be credentialed in a certain way, or is it just kind of basics like license bonded, insured, or is it, could an investor even do some of their own work on their own project and have materials paid for with PACE?

Colin Kalvas: Yeah, and that’s another one that has sort of evolved over time. Um, a lot of the models for the early pace development had contractors that would get kind of signed up on a platform to be able to go out and sell not only the improvements that they were doing, but also pace as one of the financing options for it.

Colin Kalvas: I think the market has generally moved away from that model to where, you know, any contractor that’s involved with a project. As long as they’re, you know, licensed, bonded, insured, like you said, it’s going to be able to perform the work in pace. Uh, we mentioned this earlier. There’s a little bit of extra diligence that’s needed [00:26:00] in.

Colin Kalvas: Ensuring that the improvements that are being financed qualify. Under the relevant rules, so, you know, in general pace can be used for those alternative energy and those energy efficiency improvements. But what that means in every state is a little bit different and how you prove that something really is energy efficient is a little bit different in every state.

Colin Kalvas: And typically, there’s going to be a professional that gets involved to actually show that by doing calculations, energy savings calculations that fit under those rules.

Nate Hedrick: Is that typically a consultant or do you have a contractor that gets to that level of knowledge that they’re doing that for the customer?

Colin Kalvas: Yeah, it can be, it can be different things. You know, there are folks out there that specialize in that kind of thing. Um, and they’ll, you know. Yeah, they’ll come into a project and they’ll do the analysis for you and they’ll kind of provide whatever it is that that you need. But a lot of times, you know, the [00:27:00] architect or the engineer or the contractor that’s involved on the project.

Colin Kalvas: Actually has somebody in their shop that can do those calculations as well. There are a number of free resources that are out there that can help with that to the Department of energy has some calculators that a qualified engineer can get on. And input a bunch of data about a building, and then it kind of spits out what the energy savings are.

Colin Kalvas: So, there’s probably a lot of different ways that you can. You can slice that, uh, just depending on, you know, who’s already involved in a project and what the local need may be.

Nate Hedrick: And I guess I didn’t ask this earlier, but it’s, it’s, it’s kind of churning in my head now. Like, so we, I get the loan. Um, I, I fund my project and do the rehab, then they start assessing it in whatever state way my property taxes follow. Um, how, how long is that typically like metered out over? And then what does that look like when I go to sell the house or want to pay off the loan early?

Nate Hedrick: Like, can I pay off my property taxes early to get my, like, how does, how does that all work? It

Colin Kalvas: Yeah, [00:28:00] those are really good questions and ones that a lot of times, you know, a property owner really needs to think through before they pull the trigger on using pace. Um, the term of pace financing is typically tied to the useful life of the assets that you’re financing. And, yeah, and, you know, in a lot of ways, that’s good for everybody, because it kind of helps match up the loan payments with the savings that you’re hopefully achieving from, you know, the energy efficiency improvements.

Colin Kalvas: But it also ensures that you’re not, you know, borrowing something that’s sticking with the property way past the time that you’re even getting the benefit of the improvement. Um, so a lot of terms will be, you know, 15, 20, 25 years, something like that again, kind of depending on the life of the improvements that you’re financing and industry standard and pace has been that it can be. Prepaid, um, so you can pay it off early and typically that is at, you know, the outstanding principal amount. [00:29:00] Plus any accrued interest, and then depending on where in the term, there might be a little bit of a prepayment penalty. Um, but that’s typically something like starting at maybe 5 percent and kind of graduating down over the first 5 or 10 years until then there’s no premium.

Colin Kalvas: If you’re beyond that period, you don’t have to prepay all of the future special assessment payments because fundamentally what the special assessments are. Are the full amortization of the loan. It’s not it’s it’s the principal repayment plus the interest plus any, you know, administrative fees or servicing fees that need to be collected.

Colin Kalvas: So, typically, you don’t have to prepay. All of those future assessments to get out of a pace loan, you’re just paying. Principal plus accrued interest plus any premium that might be due.

Nate Hedrick: it’s still a first position mortgage though. Right. So, or, or first position on, uh, on the property. Right. So if, if I go to sell it, like, do I have to get rid of that first?

Colin Kalvas: Yeah, and and, um, by 1st [00:30:00] position, we should actually be a little bit specific about what is in 1st

Nate Hedrick: why I brought the lawyer on the episode, not me.

David Bright: Yep.

Colin Kalvas: that’s a lawyer answer. Right? No. 1 of the big advantages of pace is that it cannot be accelerated. So, just like property taxes are only due for the year in which the bills are out there, you know, and they’re actually outstanding.

Colin Kalvas: You cannot force a property owner to pay. future special assessment payments in any given period. Uh, what that really means is that for the lien priority, only any unpaid special assessments have priority over private liens. You can’t accelerate the full principal amount of the PACE loan to become, you know, prior to a mortgage or some other type of lending.

Colin Kalvas: It’s only the unpaid amount. And that’s a big advantage for PACE because that. Makes it so that senior mortgage lenders [00:31:00] are willing to agree. That pace can go on to property, um, and it doesn’t interfere too much with, you know, with their mortgage. So, then 1 of the other advantages with the, the non acceleration is that typically there’s a corresponding ability to transfer the property to another owner. And you don’t necessarily have to pay off the pace loan. Um, that’s a negotiation that has to happen between the seller and the buyer. How do you want to handle this pace?

Colin Kalvas: That’s sitting on there and, you know. I would say sometimes the buyer says, you know, to the seller. Hey, we want you to pay it off just like the mortgage that’s sitting on there. You know, you need to pay that off for me to be able to buy this property. Um, but oftentimes we’ve actually seen that a buyer says, no, I get it.

Colin Kalvas: You know, I see the improvements that you did. I see the energy performance. That’s associated with that. I’m okay with stepping in and assuming these assessments going forward. Um, 1 of the advantages of [00:32:00] pace.

David Bright: And so in a refinance situation or sorry, in a purchase situation where someone’s coming in with financing on that. Like Fannie, Freddie, like some of the major lenders, they don’t really have a problem doing that. It’s easy to move that forward.

Colin Kalvas: I wouldn’t necessarily say, uh, with some of the federal programs that it’s easy. I think folks have found ways to kind of make that work, um, in different contexts. I would say, you know, the easier path is certainly when you’re not necessarily looking to some of those federal guarantee programs or underwriting programs.

Colin Kalvas: Um, as as part of it, 1 interesting thing kind of on the again on the commercial side is. Pace actually is compatible with lending. Um, and there are a couple of hoops to jump through with that, uh, but in general, it’s compatible and, you know, I’ve worked on a number of projects where there’s SBA lending and pace.

Nate Hedrick: That’d be cool. Yeah. Start up your own green business and get, get it paid for.

David Bright: Yeah.

Colin Kalvas: [00:33:00] Yeah.

David Bright: I’m imagining to some of the loan terms on, on PACE funding would be, uh, you know, better interest rates perhaps, or things like that to justify some of the fees. And so also then if someone’s purchasing or refinancing, it could be advantageous to keep that, that debt there in a, in a lower interest rate than what we’re seeing in the open market right now.

Colin Kalvas: Yeah. That’s definitely 1 of the advantages of pace. So that that high lean priority. That basically guarantees that the pace lender is going to get paid current. You know, they’re not necessarily going to get paid out of the deal, but they’re going to get paid current. That lean priority typically enables them to offer interest rates that are incredibly competitive versus other forms of junior debt.

Colin Kalvas: So pace is almost always cheaper than subordinate lending, mezzanine financing, partnership equity. It’s usually a little bit more expensive than mortgage lending, kind of [00:34:00] senior lending, but not always. And, you know, recently with where interest rates have been, some of those rate spreads have actually been very, very close.

Colin Kalvas: Pace versus traditional lending. So you’re absolutely right, David, that somebody might take a look at a property and say, I’d actually like to keep this pace on here because I can only max out my senior lending at 65 percent of the appraised value. I’ve got to figure out what I’m doing about the other 35.

Colin Kalvas: And it’s actually pretty cost effective in terms of cost of capital for me to keep some of this pace on here and pay it at a, you know, 8 percent interest rate instead of my other options.

Nate Hedrick: Alright, so Colin, you got my head spinning. I, uh, we’re going through a small addition at our house right now, and I’m kind of wondering, like, man, should I have gotten pay some financing on this? Um, it’s not an energy efficient upgrade. So it’s probably not a good fit. But still, I’m thinking about it. If someone is like, look, I have this project.

Nate Hedrick: I think it’s perfect. Just I heard this today. This is the most I know about PACE. Like, what are some of like first [00:35:00] steps to kind of get rolling on just figuring out if PACE financing is a good fit? Like, do I get a contractor first? Do I get a lender first? Do I call a lawyer first? Like, where do I go to get off the ground?

Colin Kalvas: I’d love to say you should call a lawyer first, but

Nate Hedrick: Nobody does that. We call the lawyer last once there’s a problem. Then we’re like, Oh my God, save me. Yeah.

Colin Kalvas: Right, right. Um, no, and really, it’s not the right answer. The right answer is probably that you want to check if you’re somewhere where pace is available because pace is pretty widely available, but it’s not available everywhere. So, currently, there are about 37 states plus the district of Columbia that have it.

Colin Kalvas: But, you know, that means that there’s a handful of states out there that still don’t have it. And even in those states that do have it, it’s, it’s not necessarily available everywhere in those states. Um, so there are a couple of good resources to kind of get you started with that. There’s a group in industry sort of trade organization called Pace Nation.

Colin Kalvas: Um, and they’ve got a [00:36:00] website and they’ve got a map of, uh, where Pace is currently enabled. And it’ll have a little bit of information about kind of what the program is called in that state. And then, you know, if you want to do some follow up research, probably look into what that program is and where all it’s available within the state.

Colin Kalvas: It’s kind of a first step. So first, just sort of checking. Could I even do it if I wanted to? Once you know that, um, probably actually getting in touch with that program. Is maybe the best way to go because they’re going to help talk you through exactly what is required for them, you know, in terms of the energy savings calculations, uh, they’ll also probably have a list of of lenders that you could talk to about, you know, who should I, uh, try and get some terms from or who can I talk to in terms of actually getting the pace financing and they might also be able to guide you through any contracting requirements.

Colin Kalvas: So, honestly, that’s probably if you’re starting from, you know, the starting line. That’s probably the best path to go is actually to kind of engage with the [00:37:00] programs because they’re going to be able to guide you through what to do.

Nate Hedrick: That’s good advice. And then the other thing that I’m thinking about is you mentioned earlier that it can take a little bit of time to coordinate all this, right? You’ve got the government involved, a lender, a contractor, like multiple entities. So it’s probably not a super fast process. What are you looking at for like typical, again, I’m sure it varies based on project, but like typical timeline, is it twice as long as mortgage lending?

Nate Hedrick: Three times? Like, I mean, where are we at?

Colin Kalvas: It’s a really good question. I think, um, a lot of the process, honestly, at this point is similar to other. Uh, types of financing, so a lot of what’s going to drive the process is going to be just. Underwriting diligence, things that would speed it up would be, you know, if you’ve kind of got your ducks in a row already with.

Colin Kalvas: financial statements that a lender is going to be looking for, you know, entity documents that they’re going to be looking for. A lot of the diligence that goes into it is going to drive uh, the process. I think a typical timeline from kind of [00:38:00] getting to a signed term sheet or, you know, a, a commitment or term statement from a lender to getting to closing is probably in the 45 to 60 day range.

Colin Kalvas: So it’s probably a little bit longer than, than traditional mortgage financing, but not a lot.

Nate Hedrick: That’s good.

David Bright: Yeah. And any other rules of thumb as you’re looking at this for, um, if it’s, you know, involving X number of. Uh, types of upgrades or X number of dollars, like make sure it’s at least this much for it to be worth the effort. Or is it, is it really just super project specific?

Colin Kalvas: Um, I would say that, you know, pace is going to be most effective in a situation where you can replace a significant. Amount of either cash or again, like partnership equity or junior debt that you would be thinking about putting into a project. Um, [00:39:00] that’s when it’s going to be the most effective where it’s not that effective is when you still have traditional mortgage lending capacity.

Colin Kalvas: That you can access. To pay for these improvements or just, you know, with whatever you’ve got going on with the project, or you’ve got a cash requirement and equity requirement that you’re not going to be able to get any lower and you’re just going to have to put it in. And the project scope is within that.

Colin Kalvas: It’s when you kind of have a gap where, you know, you’ve got the amount of equity in that you need. You’ve got your senior lending, but you’re still trying to figure out how to pay for these other items. That’s where pace is probably going to be the most effective. And I don’t know that there’s necessarily a dollar amount on that, but that’s kind of the situation.

Nate Hedrick: That makes sense.

David Bright: Um, so we’re recording this in early 2025 when there’s been a recent administration change. So, uh, I don’t want to put value statements on any of that or take a political stance in any of this, but there’s definitely a shift [00:40:00] in a lot of policies. In this realm. So do you see, uh, the, the shift on environmental aspects, global warming, some of those kinds of things impacting pace financing in this approach?

David Bright: Is this something that’s going to go away or it’s at risk where states will start dropping this? Or is this something that you see is safe and it’ll be here for a while?

Colin Kalvas: It’s a really good and important question and obviously timely for when we’re recording here. A couple of the things that I think make pace a little bit more resilient to some of the headwinds that. You know, the green new deal or green financing are facing currently. Are the fact that it doesn’t involve any kind of a cash outlay from the government.

Colin Kalvas: So, you know. We’re talking about private money coming from a pace capital provider going into a private project being repaid by a private property owner. There’s no governmental money anywhere in that equation. Yes, there is a governmental mechanism. [00:41:00] The special assessment mechanism, but it doesn’t cost anything to the local government.

Colin Kalvas: There’s no subsidy involved necessarily. So, I think that makes pace a little bit resilient to some of those headwinds. The other thing about pace that we’ve found over time is that. Um, yes, it was originally conceived of. As advancing energy efficiency and alternative energy policy goals. But where it’s actually been really effective is in promoting.

Colin Kalvas: Investment in buildings, uh, kind of the economic activity of that. And job creation, um, so there’s been a lot of. You know, contracting work that’s come out of the fact that pace is available. There are, you know, those energy engineers that are involved in these projects. Um, and just the fact of being able to do projects that may either bring new workers into an area or, you know, actually have, uh, jobs associated with the project has made pace [00:42:00] kind of, uh, economic development, job creation proposition for a lot of places.

Colin Kalvas: So I’m hopeful that pace, um, can withstand some of those trends that we’re seeing right now. And I think because of the fact that it’s not involving government money. And it furthers these goals of just investment and job creation, um, that we may see that be the case.

Nate Hedrick: I guess really good perspective, and it gives a good idea of why that that’s the case. I appreciate that it, Colin. This has been awesome information. And again, a topic that we have never covered on the show before. So really, really happy to have you on to kind of. Divulge your expertise here. If people want to reach out just to connect, learn more, um, or, or reach out to your firm, where, where can they find you,

Colin Kalvas: Sure, no, and thanks again for, um, the interest in this topic. It’s, you know, it’s kind of a little bit of a niche. Not everybody knows about it, but I do think it’s becoming more widely talked about. Um, so, you know, appreciate the chance to come on and hopefully share some information about it. [00:43:00] Yeah, I’m not super findable.

Colin Kalvas: I only have a linked in so you can try to find me on linked in. Um, but I’m not super responsive there. Um, but otherwise, you know, uh, just by email. Um, and, uh, I don’t know if you guys have that and can give it out or,

Nate Hedrick: drop it in the show

Colin Kalvas: happy to just give it. Perfect. There we go.

Nate Hedrick: Cool. We’ll call it again. Thank you so much for sharing all this. Really appreciate you coming on. And, uh, again, just really fun to get to interview a, a long, a long time friend. So thanks. Let

Colin Kalvas: Thank you guys. It’s been great.

David Bright: Thanks so much.

[END]

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