fee only financial planner

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 392: Keeping Your Investment Portfolio FIT

Posted on by YFP Media

Tim Baker, CFP®, and Tim Ulbrich, PharmD, share strategies to address fees, inflation, and taxes, helping you keep your investment portfolio fit and achieve your financial goals.

Episode Summary

In this episode, Tim Baker, CFP® and Tim Ulbrich, PharmD discuss a crucial topic related to personal finance: keeping your investment portfolio fit.

Tim and Tim explore three silent threats to your investments—fees, inflation, and taxes. Learn practical strategies to manage fund fees, mitigate inflation’s impact, and use tax-efficient approaches to safeguard your portfolio. Whether you’re starting to save or nearing retirement, this episode delivers valuable tips to protect and grow your wealth.

Key Points from the Episode

[00:00] Introduction and New Year Greetings
[00:12] The Importance of Keeping Your Investment Portfolio Fit
[01:32] Understanding Investment Fees
[02:08] Expense Ratios Explained
[09:12] Other Types of Investment Fees
[12:35] Advisor Fees and Their Impact
[20:36] Inflation and Its Effects on Investments
[26:19] Strategies for Pre-Retirees and Retirees
[31:06] Taxes and Investment Income
[36:37] Building a Retirement Paycheck
[39:39] Conclusion and Final Thoughts

Episode Highlights

“ Step one is we got to save money. That that’s hard enough. But when we do that important step, we want to make sure that we can hold onto as much of the pie as we possibly can.” – Tim Baker [9:01]

“ And not all financial planning services are created equal. And so it’s not just a black and white discussion of what are the advisor fees, but what’s the construct and the makeup of the advising. And then those fees can look very different and whether they’re transparent and whether or not it has a return on investment with it.” – Tim Ulbrich [13:00]

“ I always tell the story of when I got into the industry and my parents were working with an advisor and I asked the question, “ Hey, what are you paying for that? The answer I got was like, oh, it’s free kind of through your dad’s work. And I’m like, uh, you know, there’s no free lunch.” -Tim Baker [13:55]

“ If you’re in a relationship and you’re not sure how the advisor is making their fee. That’s a big red flag.” -Tim Ulbrich [17:39]

“ The best number in terms of progress with the financial plan is your net worth, right? The assets, the things that you own minus the liabilities, things that you owe.” -Tim Baker [18:33]

“ The timing of when you retire is going to be one of the most important things. It’s related to your success in terms of having your assets not run out on you.”-Tim Baker [29:02]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Tim Baker, happy new year. Welcome back to the show.

Tim Baker: Yeah. Happy new year. Uh, can’t believe, uh, we’re on the other side of the new, uh, the new year already. The holidays, it’s, it’s pretty crazy.

Tim Ulbrich: We are, and we’ve got a topic that is connected to the theme of new year, but of course we’re going to bring it into first personal finance and that’s keeping your investment portfolio fit, fit, standing for fees, inflation, and taxes, really three things that are silent forces that can be working behind the scenes.

On the investment portfolio. You might not always see them directly, but their impact can really be big, especially over time. And Tim, that’s where you come in. That’s where our team of the only certified financial planners come in that have worked with pharmacists, clients all across the country to navigate this topic.

This is an area, right? That doesn’t really get [00:01:00] enough attention since I think it’s hard enough to focus on prioritizing saving. Let alone worrying about maintaining the integrity of those savings. Right.

Tim Baker: Yeah. And, and this, and this, if, if not paid attention to can be the, the drag right on your portfolio and your ability to build wealth over time. And, um, it’s important to, you know, especially, you know, when you’re evaluating your, your finances, which, you know, maybe a lot of us are doing at the start of the new year, um, to, to take a look at it and see, you know, Where we’re at with things.

So, um, yeah, it can be kind of one of those things that are behind the scenes, especially if you’re, if you’re struggling just to kind of get the portfolio and kind of the wealth building aspect of your, of your finances off the ground.

Tim Ulbrich: So Tim, let’s start with fees. We’ve all heard the saying, you get what you pay for, but sometimes in investing it might be the opposite, especially regarding fund fees. The may more you pay in fees, the less you actually keep in returns, potentially. We’ll, we’ll talk about that in more detail. And whether it’s from fund management fees to trading [00:02:00] commissions, there really can be many hidden costs that can add up, especially in the long term.

And it’s important that we understand what these fees are and whether or not they’re, they’re transparent, or we’re even aware of what they are. So walk us through the different types of fees that investors might encounter on their portfolios.

Tim Baker: Yeah, probably, probably the one of the most important ones, um, that, that we talk about is the expense ratio. So the expense ratio is essentially what a fund takes. Um, to manage said fund, right? So the way I explain this, Tim is, you know, let’s say I’m a, a fund manager and I’m managing billions of dollars of a large cap fund, right?

So my job is to, you know, gather information and, and really buy and sell stocks, large cap stocks inside of my funds that my investor has shares in. So for me to do that, I need. You know, a place of business. I need an [00:03:00] office space, which might be on, on wall street or thereabouts. I need analysts. I need to pay for information.

I need to, um, pay myself, pay salaries. So all of that work that’s done, you know, needs, you know, you know, revenue would essentially support that. So what the expense ratio is, is a percentage of the, the money that, that the fund manager is managing that they take out. Um, to basically pay themselves and all those things that I mentioned.

So the, the big, the hard part about this is that it’s not necessarily a line item on your, on your like, account statement. So, if you look at sometimes they’re listening to the account statement as, hey, you’re paying, you know, a half a percent, 0. 5 percent or 1 percent or, or, um, You know, 5 basis points, which is 0.

05%. So it might be listed as this is what the expense ratio is, but you can’t really draw a line from that [00:04:00] to, like, what’s actually being taken out of your account, which, which is hard. Right? So, and what we often see is that. You know, there’s a lot of people that just don’t pay attention to this at all.

Um, and if we take the example of a large cap, you know, one of the, one of the big things, which like a, which with a large cap is that, you know, you can buy a large cap where you’re paying. 0. 03, three basis points, or you’re paying way north of that 1%. And really the only thing that’s different is the fee itself.

When you actually like, you know, unwrap that fund and you look at the individual stocks that they’re in, it’s all the ones that we know, Microsoft and Amazon and things like that. So you’re kind of paying a premium for. I don’t know what a name potentially. So it’s really important when you’re looking at, when you’re selecting your investments, or if you’re working with an advisor and they’re helping you select investments that, you know, you are getting.

Bang for your buck. Right. So it, my, my thing is like, if I’m going to pay, you know, a hundred [00:05:00] basis points, you know, 1 percent versus five basis points. So that’s a 20 X difference in fee. For me, the way that I look at that, this is like, I should be getting 20 times more performance or 20 times safer. For the same amount of performance, but it’s typically not the case, right?

It’s typically not that. So, you know, I can say that, you know, where we, what we typically like to do is drive those fees, that expense ratio down as, as much as possible. And some of the other fees that we’ll talk about, um, and really let the portfolio do what, what it, what it does, what the market do, what it does.

So the expense ratio is a, is a huge, huge part of that.

Tim Ulbrich: Tim, when, when we hear, you know, five basis points or 0. 05 or three basis points, 0. 03 versus something like 1%, You know, I think we look at that with a little bit of shock and awe, but, you know, the average investor, if you’re not thinking about this, looking at these, if you don’t feel them right in your portfolio, necessarily, you know, it’s not impacting monthly cashflow per se.

You might look at those and say, [00:06:00] how, how much does that really matter? Right. So why, why does a type of difference when you look at something like five basis points or 0. 05 versus 1%, you know, over a long period of time, the question really is impact. What, what is the potential of that impact?

Tim Baker: Yeah. So, I mean, if you, if you take a, you know, for just simple math, if you take a, , 100, 000 portfolio, and you’re in a fund that is charging you 5 basis points,. That’s 50 per year for that. Um, if we stack that up, so let’s say I’m invested in the same type of large cap fund, but it’s charging me 1%.

That’s 1, 000. Per year. So like, you know, if we add zeros to this, we can kind of see where this is going. Right? So, so to me again, like, I don’t, you know, one of the, one of the positions that we, that we pay a little bit more and they’re newer, um, and more specialized is, is like the spot Bitcoin ETFs. Like, I think the, the fund that we’re in, it’s, it’s 20 basis point, but typically our, our portfolios are four or five basis points, [00:07:00] 0.

04, 0. 05. So what I tell the client, as I tell myself is like, if I’m paying more and I’m not getting that return, or it’s not safer.

It doesn’t make sense. So to me, it’s driving those down, you know, um, as much as possible. And you can see the numbers like, again, like if I look at 1%, I’m like, oh, it’s not really that much. But over time and over many years, it’s just, those are the, those are the things that erode, erode your gain and they don’t really need to be.

So, um, you know, and to back up, like if you buy an all stock portfolio, like you don’t buy a fund, you don’t have Expense ratio, because they’re not inside of a fund. You’re buying the individual stocks. The danger there is you’re potentially, you know, um, paying commission. So anytime you buy and sell you can, you, you are charged a fee and then just the, the risk that you take, you know, in terms of like, are you broadly diversified?

Are you putting too many eggs in, in one basket? So, you know, what, what I view as, you know, good investment practice is I can, I can build a well diversified Portfolio, um, for minimal cost and again, I would put minimal cost of anything less than, you know, in the 20 to, you know, 10 basis points, like, in that range, um, and feel good about, you know, the, the construction of the portfolio and the risk that I’m taking.

Um, so I, I do think that I, I’m willing to pay the toll, the expense ratio for that and not necessarily buy individual stocks and bonds and things like that.

Tim Ulbrich: So Tim, you mentioned expense ratios. Um, obviously that, that kind of becomes the top one that we think about, especially if they’re inside of a fund, you mentioned commissions, what, what other types of fees are out there that, that folks might, may not be as aware about?

Tim Baker: Yeah. So if you’re thinking about trading and transaction fees, um, you know, there, there are brokerage commission. So these are fees charged by a broker for executing trades on your behalf. So it could be something like a, a stock trade commission. Um, these are typically flat fee, so it could be anywhere from 5 to 10.

Um, a lot of these have kind of gone, there’s a lot of commission free brokers, um, that have kind of, you know, um, squashed a lot of these, but they’re still there. If you’re, if you’re option trade in, there’s option trade, uh, commission fees, there’s mutual fund, uh, transaction fees. So these can range anywhere.

You know, when I was in the broker deal world, I think it was almost like 30 per trade, right? Typically the range is, you know, 10 to 15. You know, 50 per trade. So, um, they’ll, they’ll, uh, they’ll, you know, brokerage will charge us, you know, to buy and sell, you know, mutual funds. There could be like spread costs.

So the difference, this is the difference between like the bid and the ask price of a particular trade. So they might, um, have a little bit of a spread. So they’re, so, so the, you know, the brokerage is making money. Um, one of the big things that I remember, especially being in the broker dealer world is account maintenance fees.

So these are, these are fees charged, uh, for maintaining an account. Um, such as an IRA. Um, and these, you see these more [00:10:00] Tim in like low interest rate environments. So they’re not making a whole lot of money on the float of the money that, you know, cash that they’re sitting on. So they try to find ways to make money.

Um, and these, these could be. I think when I saw them, it was like 50 an account. I see them anywhere from like 25 to a hundred dollars annually. Um, sometimes there’s foreign transaction fees. So these are applied to trades on international exchanges. There could be redemption fees. So these are fees for selling certain types of mutual funds or ETF within a specified, like holding period.

Um, so as an example, like if you, if you look at your account statement and you see, Like, uh, a mutual fund that you had that has an a, like next to it, that’s an a share mutual fund that you were probably, uh, sold that had like an upfront commission. Right. And, um, a lot of people don’t know that up going in, um, and they pay that and they’re like, what, what the heck happened?

There’s also C shares. [00:11:00] That you pay a little bit on the front end and then you pay an ongoing fee, um, which is not great. Those are typically the worst ones. And then you have a B1, which is kind of an in between that. There’s like a holding period that you can sometimes get redemption. So being, um, where we, we don’t, you know, we don’t operate in them, but I do come across a lot of clients that are like, oh, I’m not paying commissions.

And I look at their statement and there’s A’s and C’s. That’s what you typically see, excuse me, all over the place and they just don’t realize it. So. And probably the last one that I hear is kind of like robo advisor fees, right? I’m in a particular program and I’m paying, you know, a certain, certain amount.

So those are the ones that, you know, um, expense ratio, expense ratio, and then trading, trading fees, transaction fees, and kind of a slew of those that you’ll, you’ll often see.

Tim Ulbrich: Is that, is that it, that’s all you got on the list of, uh, potential fees that

Tim Baker: Yeah. And then we haven’t even gotten into the advisor fees, which we can talk about, but yeah. Yep.

Tim Ulbrich: let’s talk about that. Right. Because obviously, you know, that’s the work that we do and it [00:12:00] has to be factored in and, and full disclaimer, we’re, we’re biased in the value of the work that we bring clients. And we, we believe when you talk about advisor fees, Tim, when it’s done well, which is why we believe in the fee only model.

That’s why we have the model that we do that. Yeah, it’s a fee. Yeah. And it’s a fee that we have to factor in, but there’s a return on investment of that fee that we also have to account for. And not all financial planning services are created equal. And so it’s not just a black and white discussion of what are the advisor fees, but what’s the construct and the makeup of the advising.

And then those fees can look very different and whether they’re transparent so how do you think about the advisor fee piece?

Tim Baker: Yeah. And I, and I think, I think a big part of this is just like transparency, right? Like oftentimes, you know, when I would, I’d ask people that I’ve worked with an advisor, like, what are you paying them? They’re like, uh, I don’t know. Like, and I always tell the story, you know, of, you know, when, when, when I got into the industry and my parents were working with an advisor, you know, I asked the question, I’m like, Hey, what are you, what are you paying for that?

And it’s, you know, the answer I got was like, oh, it’s, it’s, it’s free kind of through your dad’s work. And I’m, I’m, And I’m like, uh, you know, there’s no free lunch. Right. So, and then years later, when I actually looked at it, you know, the fees were significant, like North of eight grand a year, right. Um, in the product.

So, you know, in the, in the broker dealer world, again, no shade to that, you know, where it’s more like fee based, so you can charge commissions, you can charge flat fee percentages. I think the problem is, is like. You know, what the advisor is trying to do is one help the client, but also make a living. So, so they’re, they’ll say, Hey, I can, I can get you in this investment and then I earn a commission.

Um, or I get you in this investment. I earn kind of an ongoing fee. And then maybe I sell you, you know, a life insurance product that I earn a commission or an annuity in our commission, or I charge you hourly. So it’s really just confusing. Right. So I think like. Transparency of fee and like, what you’re paying is really important.

And I think marrying that up to like the value that you’re receiving, right? So there’s some people that they view comprehensive financial planning as. Selling you an insurance product and managing your money. And that’s it. And then maybe talking to you once every couple of years, we don’t view that as comprehensive financial planning.

Like we, we view that as very light financial planning, if, if financial planning at all, maybe some investment management. So when you look at the different ways that advisors can charge, you know, fees, it could be a flat fee. It could be an AUM assets under management, which is a percentage of what they’re managing.

And it can be an. Assets under advisement, so it’s, you know, the feet, the investments that they’re managing directly at their own custodian, but also managing indirectly, say, at like, a 4 or 1 K or a 529. it could be commissions that we talked about, which could be commissions on insurance. It could be commissions on investment, which is kind of what we’re talking about here.

An hourly fee or kind of a combination of all these things. So, you know, I think I think the, the, the, the hard part for the consumer for the client is to determine a, like, what the heck are they paying? And are they getting value for that? Um, and if they’re not, then obviously, you know, reassessing it. So, you know, and there’s.

There’s pros and cons for all of these, right? Um, and there’s, there is no such thing as, um, you know, sometimes advisors, especially in the feeling where we’ll say, you know, we have, you know, we give conflict free advice that does not exist. It doesn’t in any model, there’s always a conflict of interest. And I think, you know, the advisors that that is willing to say, like, Hey, we think this is in your best interest.

However, cards on the table, it’s also going to change our fee, increase our fee. Um, and that can go the other way too. It’s also going to decrease our fee. Um, you know, I think those are the type of advisors that are my people, you know, we want what’s best for the, for the, for the client, but understanding, you know, what model you’re in and then like what you’re actually paying is going to be half the battle.

And, and, and more often than not, when I talk to prospective clients and I ask them, Hey, what are they, what are they, what are you paying? They’re like, I literally have no idea. And I think that’s problematic.

Tim Ulbrich: Yeah. And that’s what my experience tells me, Tim, is that, you know, especially the pharmacist households that we’ve worked with, even those that decided, Hey, we’re not, we’re not a good fit. Um, and that’s okay as well is transparency is what matters, right? They want to know what’s involved.

Everyone has a different definition of what, what is return on investment. What’s value that can change in different seasons of life. So, um, I think the transparency pieces is so critical. And if you’re in a relationship and you’re not sure how the advisor is making their fee. That’s a big red flag. Right.

And I think something worth exploring further.

Tim Baker: Yeah, and I think, you know, um, you know, when we talk about fees, like, you know, you’re no model is going to fit everybody. Right? So I think like, it’s just again, being comfortable understanding what you’re paying. Um, and, and, and what I was going to say was, you know, oftentimes, especially with pharmacists, type a scientific minds, they’re like, okay, if I’m going to give you, you know, X amount of dollars in fees.

What is the ROI? And I’m like, well, define ROI because the way that we look at this, the way that we look at ROI is that you, there is a quantifiable that you can count ROI, but I don’t even think it has anything to do with investment returns. I really think the best number in terms of progress with the financial plan is your net worth, right?

The assets, the things that you own minus the liabilities, things that you owe. But I think the other unspoken thing here is the, not the quantifiable things, but the qualifying things of, of what, what have we done with your plan with, with your life plan supported by the financial plan?

That’s hard to count. Whether it’s that, that family, that. Finally, you could buy the house when they didn’t think they could or had the baby or retired early or pivoted careers or got back into a passion that they had put on the sideline for a long time because of whatever reasons. Those are the things that get me fired up.

They have nothing to do with. Ones and zeros in the bank account or net worth or things like that. And I think if you’re in that type of relationship and you have that type of trust and rapport, that’s worth a lot. Um, so that’s my soapbox, Tim.

Tim Ulbrich: I agree. And, and I, you know, would be remiss if I didn’t put a plug in here for what we do and, and for those folks listening that would like to learn more about our fee only financial planning services, what our team of certified financial planners can offer, um, you Working with households all across the country, uh, virtually, you can learn more, your financial pharmacist.com. You’ll see an option at the top, right? You book a free discovery call to learn about those services. Tim, let’s shift to inflation. Um, so in addition to fees, we have to pay attention to inflation and this one feels a little bit sneaky, right? I mean, you’re making money, but inflation is quietly chipping away at your purchasing power.

Yes. Today. At the grocery store, I think we’ve all felt that recently and and perhaps five six years ago It was hey inflation what but we all have felt that more recently But not only in our expenses today might we feel that but also in the future When we think about how far our savings will go so explain to us how inflation erodes the purchasing power Of an investor’s returns over time

Tim Baker: Yeah. So when I talk about like, cause there’s a lot of people out there. That are super risk adverse. Right. So they’re like, Tim, do I really have to invest? Can I just like stuff my mattress or put money in my bank account, my high yields. And I call it a day. And the answer is like, especially if we’re aspiring to be a seven figure pharmacist, plug the book, um, answers.

No, you can’t. And the, when I talk about this, you know, um, with, with, in, in, in, in different talks, like when I look at inflation, if we take, If we take a latte that you buy at Starbucks in 2025, and let’s say it costs 4 dollars. Um, and maybe that’s just a plain coffee these days. But if you, if you, if you get that, that coffee at 4 dollars, if we use historical rates of inflation, and most advisors will use about 3%.

Now, you know, we’ve had years and spikes that, you know, some people are like, well, let’s use 3 and a half or 4%. But if we use 3 percent and we fast forward 30 years, from 2025 to 2055. That same latte that would cost 4. 00. Costs 10 30 years from now. So what that means is that your dollar just goes less far.

And this is why my dad’s in the 70s. You’d always talk about, you know, his grandparents would give him a nickel and you go to the candy store and buy half the store. It seemed right. You can’t buy anything for a nickel today, right? So the, the idea of investing and having a solid investment plan is to keep pace with the inflation monster, but then also get ahead of the tax man, which is what we’re going to talk about next.

So unfortunately we can’t bury our hands, head in the sand or, you know, and I, and I say that, Facetiously and just put money into a check into our savings account and call it a day because over time that, you know, 400, 000, you know, if we, if we look at it from an investment is going to be equivalent to 1, 000, 000 or the purchasing power of 1, 000, 000 in the future.

So. That’s why we need to invest and take appropriate risk and equities and bonds. And I would argue equities, you know, mostly through, you know, the working years of most people, or especially early on. And then as we get closer, you know, start to to add more bonds and fixed income. But that’s really what it is because, you know, every year, you know, the price of goods and services.

Goes up. Um, and it’s a systemic thing that we can’t escape. Um, you know, that we really have to adapt our financial plans to.

Tim Ulbrich: Yeah. And I think Tim, it can be easy to lose sight of historical trends when we’re in

Tim Baker: Yeah, for sure.

Tim Ulbrich: time periods. Right. So, you know, I’m thinking of this moment while we’re recording, although rates have come down, high yield savings accounts are. 4 percent ish, right. Give or take, um, we’ve had historically high inflation, you know, the last couple, a couple of years for obvious reasons we’ve talked about on the show.

And so I think sometimes people look at that and they say, oh, well, you know, 4%, that’s really good historical rate of inflation, but we can’t confuse those. Right. Because just a few years ago, what was our high yield savings account earning less than 2%? Well, I mean, for a while right down there, I mean, even lower than that.

So when we zoom out. Yeah, we get, get those emails, right? Your, your savings account has gone down, but you know, if we zoom out, we look at the historical rate of inflation. If we’re not investing and it taking some level of calculated risk and what that risk tolerance and capacity is, is different for, for everyone.

And that has to be customized, but if we’re not doing that, right. Our, our long term investments really come to be at risk and in terms of us achieving our long term goals.

Tim Baker: Yeah. And I’ll give you an example. So if we talk about the long term effects of inflation, so, um, over time, inflation compounds, meaning it’s cumulative effect on person power grows significantly. So, like, if we take 100, 000 portfolio and we invested at, um, we get a 6 percent annual return over 20 years.

Without inflation, that portfolio grows to from 100, 000 we’ll call it if we, if we then interject reality, which is about a 3 percent inflation, the real value of that investment, if we adjust for inflation would be 180, 000. So that’s, that’s the, that’s the rub here. And again, that’s, that’s why, you know, when people are like, Oh, I’m like really conservative.

I don’t want to take risk. I’m like, you kind of have to get in front of this, you know, especially in, you know, younger in your younger years, um, you know, to get in front of again, inflation and then, and then the tax man.

Tim Ulbrich: Yeah. And this is also why, when we’re doing things like retirement projections, nest egg calculations, especially for people that are maybe in that, you know, front half of their career, let’s say they look at these numbers and they’re like, is this wonky math, right? These seem like they’re huge. They’re out of reach.

Well, we’re, we’re thinking about it in today’s dollars. And obviously we have to be thinking about it. In the future as well, Tim, you alluded to retirement age a little bit. When you’re talking about asset allocation, let’s just touch on that a little bit more. So for maybe some of the pre retirees listening or people that are in the second half of their career that are thinking about retirement, it’s on, on the horizon and are concerned about the long term effects of inflation on their portfolios, ability to generate income and to sustain itself.

What are some general strategies that we’re, we’re thinking about employing? I know you’ve talked before on the show about, Hey, social security, right? It’s, it’s one of those rare vehicles that we have some inflation protection. What, what, what [00:25:00] other thoughts here?

Tim Baker: Yeah. I think as you look at your, your investment strategy, like there are things that, yeah, you mentioned. So that’s why we’re a big, you know, a big believer and really having a very purpose based strategy when it comes to a, uh, social security claim. And because once you made that decision, it’s kind of forever.

And that can really affect the amount of. Inflation protected income that you have coming in the door. Um, so the other things you can think about is there are inflate, there are inflation protected security. So there’s tips treasury inflation, protective securities that are linked, um, to they’re kind of marked to inflation.

So as you know, as, um, Inflation goes up. So does the interest payments for which you, you know, which you receive, um, they don’t necessarily, they’re not necessarily, you know, growth oriented, but it helps you kind of, you know, at least keep pace with that. What we’ve been talking about, you know, at length here is, is really having a portfolio that’s invested in growth oriented assets.

So stocks. Real estate could be commodity commodities that outpace inflation over time that kind of provides a hedge against inflation reinvest in your return. So compound and helps offset offset the negative effects of inflation over time. Another thing that, again, we believe in, um, that not everyone does, but even diversify internationally.

So invested in global markets may reduce inflation. Um, Risk retired, you know, tied to kind of the U. S. Dollar or the economy. And then probably the big thing I hear, or I see, and I actually just had a conversation with perspective client, you know, they were sitting on over 200, 000 of cash and I’m like, why?

And part of its monitor cash holdings. So cash lose unless it’s in a high yield. It’s kind of getting close to that. You know, and today 4 percent cash loses purchase and power quickly in inflationary environments. So you want to really limit the cash that you have idle. So we kind of talk about, you know, you want your emergency fund and any short and medium term goals that you need cash for.

So that might be a trip might be a project on your house, et cetera, et cetera. And that foundation is set to then get money into the market for more, you know, longer, longer term type plan. And so those would be things, you know, like, like I mentioned, you know, it could be, you know, what you invest in, whether it’s tips, you know, growth, equity type of, of stocks could be commodities, but then also some of the things that you’re doing, you know, with cash and, and how you reinvest returns and things like that can help Kind of tackle, tackle the, the, the problem, you know, the, that won’t ever go away, which is the inflation, um, associated with your, with your assets.

Tim Ulbrich: Yeah. One last thing I would add in here, Tim, and this is where I think the flexibility piece is so important. And we’ve, we’ve talked at length on previous shows about this, but if someone has some flexibility. With their retirement situation, whether that be part time work, whether that be the [00:28:00] timeline of when they retire, and we’re in a high inflationary period or a downturn in the market, right?

Things that we may not anticipate happening. Those types of levers that we can pull go a long way in terms of how we maintain the integrity of our, our investment pie as we go throughout retirement, so it’s not a set it and forget it so important when we think, you know, I think back to my early years of saving.

You know, coming out of pharmacy school and it’s like, all right, we’re going to pay it away, whatever, 20, 25 percent of our income. And we’ll kind of think about this tomorrow and that that’s good early on. But then you get to this point in time where we start to ask this question. I’ll be like, Hey, are we on track?

And you know, what is the horizon timeline? And then more nuanced questions, like some of the tax strategies, when we think about withdrawals or, Hey. You know, the markets had an unexpected downturn or we’re, we’re in a down market for a longer period of time. And maybe it’s not the best time to retire, or maybe I could retire early.

Right. There’s all these wrinkles that we have to consider as we get closer to that timeline.

Tim Baker: [00:29:00] yeah. And, and, you know, probably the timing of when you retire is going to be one of the most important things that, you know, um, You know, it’s related to your success in terms of having your assets not run out on you.

Tim Ulbrich: All right. The last piece of our, uh, keeping your investment portfolio fit fees, inflation, taxes, taxes is number three, certainly last, but not least. This is a big one, right? They could take a huge chunk out of your investment Income, particularly if you’re not strategic about it. We’ve harped on that on the show many times before about being proactive with your tax planning and how important that is to the financial plan and whether it’s not maximizing tax advantage accounts, whether it’s realizing, you know, capital gains, taxes, when you’re selling investments or taxes on interest income, if you’re not paying attention to taxes, Tim, it can really hurt your returns.

And, and I think tax is just one of those dry topics that, Hey, we’d rather not really think about.

Tim Baker: Yeah. And it’s, it’s another one, it’s another one that has major [00:30:00] implications on, you know, again, your, your ability to, um, grow your wealth and, and, and keep pace with, with lifestyle, especially in retirement and, and, and really throughout your, your, your whole life. So, you know, I, I think, I think one of the big things that I think about, so when I, when I talk about taxes and investment, I kind of lead with a little bit of a depressing, like example.

So like, if we look at a million dollars and a traditional 401k, a million dollars in a Roth IRA, a million dollars in an HSA, et cetera, then one of the questions I always ask is like, how much money do we actually have? And. Unfortunately, we don’t have 3 million or 4 million dollars, how many bucks it is because anything that is gone into a pre tax bucket, like a traditional IRA, a rollover IRA, a traditional 401k uncle Sam has yet to take his bite of the apple.

Right? [00:31:00] So the mechanics of this is like, if I put money into my 401k, let’s say I put 20 grand in, um, I make 100, 000 a year. The IRS looks at me is if I made 80, 000. So I get a deduction for that. So that 20, 000 goes into my, my 401k. It grows tax free, which is great, which means I’m escaping capital gains. I don’t have to pay capital gains.

And then when I pour that money out in retirement, that’s when it gets taxed. Right. So if I have, you know, over time, I have a million dollars there and I’m in a 25 percent tax bracket, actually 750, 000 of that is mine. And 250, 000 of that is the government. So I think what’s really important about taxes and investment is actually something called, um, asset location.

So these are different types of investment accounts that have different, uh, tax treatments. And the, and the three main buckets here, Tim, are the. Uh, The tax deferred accounts, which I just talked about. So this is kind of a traditional 401k traditional IRA. [00:32:00] So these contributions are pre tax and the investment gross tax referred and then the withdrawals are typically taxed at ordinary income levels.

We have the tax free accounts, which is a little bit misleading because you actually pay the taxes, you know, as it goes in. Um, so these are things like Roth IRA, um, Roth 401k. So the contributions are after tax. So I’ve got my paycheck. I’ve already been taxed and I put those money into a Roth. That investment grows tax free and the withdrawals are then tax free.

So when I pour out that money, so if I have a million dollars in a Roth IRA, I pour out all million dollars of that. I actually get all million, all 1 million of that. And then the last one is the. Taxable accounts. These are the brokerage accounts. So these are taxes, taxes are paid annually on interest, dividends, capital gains, typically the contributions are with after tax dollars.

So I was, I was taxed on it, um, through my paycheck. I contribute that to a taxable account. It grows, but then any capital gains, um, interest dividends, [00:33:00] I’m, I’m taxed again. Um, and that’s where we get into things like tax loss harvest. So, you know, depending on where you’re at. geographically where you’re at in life, you want to have a little bit in column a, a little bit in column B, a little bit in column C, right?

So it’s really important to be able to when we’re building, if we fast forward to retirement and we’re building a paycheck, if I’m the maestro and I’m building a retirement paycheck, I know that Maybe we’re getting in some in from consulting part time work team. Maybe we’re getting some in from, um, social security, which is also taxed, but then the gap that I’m trying to make up between those things and what we need to, you know, live in and thrive.

I’m pulling from these 3 buckets and, you know, if I have a balance of those 3 buckets, it benefits me because what I’m trying to do as a planner is fill up your tax bracket in the most efficient way [00:34:00] possible. So I might take some from the pre tax bucket to get you to, you know, to max out that 12% Um, tax bracket.

And then maybe I go to the, um, the, the Roth to then, you know, get the rest. Maybe we’re, we’re retiring at 58. So then I’m, I’m using primarily, um, a brokerage account because anything between before 59 and a half, you know, I get a penalty and pay taxes. So, excuse me, that’s the, the asset location is really important to determine how we then pull it in retirement and what makes the most Efficiency wise, um, from a tax perspective.

Tim Ulbrich: Yeah. And what you’re talking about, Tim is building a retirement paycheck, right? We talked about this on episode 275. We’ll, we’ll link to that in the show notes, but I love that visual. Cause we all, we all can relate to that, right? Throughout our career, whether we work for someone else, we’re self employed, you know, we have some semblance of a, of a paycheck, maybe it’s fixed, maybe it’s variable, you know, for time, but eventually we’re going to get to [00:35:00] this future state where maybe we’re working part time or eventually we’re not working at all, Or we have to produce our own paycheck.

And there’s going to be multiple sources that are feeding into that. You mentioned it could be social security. It could be, uh, an annuity. It could be, uh, coming from an IRA. It could be coming from real estate. It could be coming from a 401k, right? All these different pathways. And it highlights so well, the point that not all buckets and dollars are created equal as you articulated.

So, well, you could have two people that both have 4 million. And where that 4 million is going to go and how it’s going to be deployed could be very different depending on what buckets from a tax standpoint. And it’s important on the front end. So we’re talking withdrawal side with the building and the retirement paycheck, but it’s also important on the front end is we’re saving, not that we can predict everything that will happen in the future.

But if someone says, Hey, Tim, I want to retire early. And they’re serious about that. Well, we got to think about where those buckets of dollars are going to be and how do we build a plan and a way to support that? So, you know, this is where [00:36:00] online nested calculators fall short, right? Just, just punching in numbers and saying, Hey, Tim, you need 3.

4 million saved, like where, how, what’s that going to look like? What are the tax treatments? All those questions have to be answered.

Tim Baker: Yeah. And it’s, it’s so nuanced, right? Even like, we talk about our own situations. Like, we’re two Tim’s in Ohio. Our financial situation is similar, but different. But even, even with slight variation, we just, there’s, there’s certain things that we, that, that I’m doing in my plan that you’re not doing and vice versa.

Right? Like, one of the, one of the cool things about being self employed in Ohio is, you know, your first 250, 000 per year, there is no state income tax. Um, So, you know, when I moved from Maryland, I’m like, Oh, like I need to really take advantage of that. And hit my Roth harder than what I was, because I’d rather pay the tax.

Now, I just pay federal, um, and, you know, use another example. Like, if I decide [00:37:00] to retire in Florida, you know, maybe I don’t I don’t need to do that, you know, but I’m not retired. I’m not planning on doing that. But, you know, if you’re, if you’re working in a state with income tax and retirement with a state that doesn’t, again, there’s legislative risk there because, you know, things could change, but all of those things kind of play a part in this.

Journey, which is what it is. Um, and it, it’s hard to get that from a calculator and, you know, it is nuanced. And I think, um, you know, provide, you know, it requires a level of care and attention, um, especially when we’re talking about the, the nest eggs and, and the assets that were, you know, that we’re working with over time that, you know, just requires some level of love and attention, really.

Tim Ulbrich: Tim, great stuff. We covered a lot in a short period of time, fees, inflation, taxes, three really important parts as we think about our investment portfolio. And we really are just scratching the surface on all of those areas. We’ll link to some of the episodes. We’ve got more information in the show notes.

Thank you so much everyone for listening to this episode of the podcast. If you’d like [00:38:00] what you heard, do us a favor, leave us a rating and review on Apple podcasts. Or if you’re watching on YouTube, would you help other pharmacists find our show as well? And finally, an important reminder that the content in the show is provided for informational purposes only is not intended to provide and should not be relied on for investment or any other advice, information on the podcast and corresponding materials should not be construed as a solicitation or offered by ourselves, any investment or related financial products for more information on this, you can visit yourfinancialpharmacist.com forward slash disclaimer. Thanks so much for listening. Have a great rest of your week.

[END]

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YFP 312: Secrets About Financial Planners (and How to Feel Confident in Who You Partner With)

Posted on by Tim U

Justin Woods, PharmD, MBA shares takeaways from 350 financial conversations with pharmacists looking to work with a financial planner.

Episode Summary

Navigating the world of financial advice can be a tricky thing. You’re often confronted with baffling jargon, an overwhelming amount of choice, and a lack of transparency, which will typically leave you feeling more confused than when you started. Here to help us unpack these topics today is YFP team member, Justin Woods, PharmD, MBA who has had over 350 financial conversations with pharmacists! We talk with Justin about why pharmacists tend to be skeptical when it comes to hiring a financial planner, the various terms and titles used in the financial services industry, and what outcomes you should expect as part of the financial planning process. Tuning in you’ll learn about key factors that hold people back from pursuing financial advice — like previous negative experiences — as well as an overview of how the financial services industry has changed over the years, and how this impacts clients. We also discuss key terms, like “fiduciary”, and how understanding their implications can help you navigate the industry, before unpacking the four factors of financial decision-making and how planning can help you live a rich and meaningful life.

Key Points From the Episode

We welcome back Justin Woods, PharmD, MBA Director Of Business Development at YFP.
Some of the reasons why pharmacists tend to be skeptical of financial advice.
How past negative experiences can prevent people from getting financial advice.
Why it can be so challenging to navigate the financial advisory market.
The concept of “fiduciary”, what the term means, and why it matters.
How the financial services industry has moved towards tailored advice.
Optimizing for a particular niche and the benefits and value that come with that.
The variety in the types of services on offer (and why it can be overwhelming).
What clients should expect from their financial advisors in terms of scope.
An overview of the four factors of financial decision-making: financial analysis, money scripts, emotions, and overall well-being.
The importance of being comfortable with raising questions with your advisor.
Establishing the ROI you expect from your financial plan.
An overview of the various fee models of financial advisors and what to be aware of.

Episode Highlights

“Most pharmacists I talk to have a difficult time really thinking about one person in their circle who works with a financial advisor.” — @justin_woods [0:05:41]

“[Fiduciary] is just a fancy term, right? But it basically means that it’s a person that you can trust with your life savings that is ethically bound to act in your best interest. So oftentimes, I compare it to taking the oath of a pharmacist that a lot of us did.” — @justin_woods [0:12:56]

“You want a particular outcome, but you may not be as concerned with how it’s done as long as you get there. And there is a lot of complicated financial jargon out there that oftentimes can scare people away or make them feel stupid.” — @justin_woods [0:27:05]

“I feel like pharmacists work so hard for this six-figure income and view it as the ultimate security in life. And what I see from pharmacists that I talk to is that the income alone doesn’t give you the freedom, flexibility, or time that a lot of people are looking for.” — @justin_woods [0:30:49]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00.4] TU: Hey everybody, Tim Ulbrick here, and thank you for listening to The YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom.

This week, I welcome back on to the show, YFP team member Justin Woods. During the show, Justin shares takeaways from over 350 conversations that he has had with pharmacists, looking to hire a financial planner.

Some of my favorite moments from the show include hearing why pharmacists are skeptical when it comes to hiring a financial planner, the various terms and titles used in the financial services industry, why fiduciary and fee-only matter, what outcomes to expect as a part of the financial planning process, and the various ways that financial planners get paid.

Whether or not you decide to work with our team of certified financial planners at YFP Planning. Our hope is this episode will give you the insights and information of what to look for when hiring a financial planner.

If you are interested in joining more than the 280 households in 40-plus states that work with YFP Planning for one-on-one financial planning and wealth management, you can book a free discovery call at yfpplanning.com. Whether you’re just getting started, in the middle of your career, or nearing retirement, our team is ready to help. Again, you can book a free discovery call at yfpplanning.com.

All right, let’s hear it from today’s sponsor, Pyrls and then we’ll jump into my interview with YFP Director of Business Development, Justin Woods.

[SPONSOR MESSAGE]

[0:01:26.6] JW: This is Justin Woods from the YFP team with a quick message before today’s show. If you’re tired of relying on shared passwords or spending hundreds of dollars for drug information, we’ve got great news for you. Today’s podcast sponsor, Pyrls, is changing the game for pharmacy professionals. Pyrls offer us top drug summaries, clinical teaching points, a drug interaction checker, calculators, and guideline reviews all in one user-friendly resource.

They also recently add free weekly quizzes to test your pharmacotherapy knowledge. Whether you’re on your web browser or accessing the mobile app, Pyrls has got you covered. Visit pyrls.com to get access to more than 25 free pharmacotherapy charge to get you started. Upgrade your drug information resources today with Pyrls, don’t miss out on this game-changing resource.

[INTERVIEW]

[0:02:21.8] TU: Justin, welcome back to the show.

[0:02:23.7] JW: Thanks for having me, Tim.

[0:02:24.8] TU: Excited to have you in this discussion that we have today. Also, an exciting time for you Justin, some of our listeners may know, many may not that you and Sarah, you have twins on the way, super exciting phase of life. How’s the preparation coming? I don’t know if you can be fully prepared but how are you feeling?

[0:02:42.4] JW: Yeah, we feel, I guess, mentally prepared, right? As two pharmacists, we want to plan for everything and so we’re just anticipating the arrival. My wife is 33 weeks pregnant right now. So I guess, on average, twins go to 38 weeks. So it could be any time now to be honest.

So yeah, we put the car seats in the minivan this morning, and yeah, exciting stuff around here, a very expensive season of life with daycare and whatnot but yeah, we are excited nonetheless.

[0:03:14.4] TU: You know, it’s funny, I was reflecting back. You know, I’ve talked about this, you know, as Jess and I had our four boys and you know that adjustment from one to two and then you go two to three, everyone says, “Hey, you go from man to man to zone defense.” You’re going right there, right? One to three so.

[0:03:26.6] JW: Yeah, we’re going right there, we’re going right there. So thankfully, our toddler who is two, a little bit over two, already knows that there are two babies on the way. She’s already been trying to be very helpful, so we’re hoping to bring her into the defensive scheme a little bit as well.

[0:03:42.2] TU: Yes, I love that, I love that. Well, it’s been a while since we had you on the podcast on episode 250, we talk about 10 takeaways that you had from 50 financial conversations with pharmacists, colleagues. We’ll link to that episode in the show notes and for today’s episode, we’re going to dig deeper into the now over 350 conversations that you’ve had with pharmacists and what you’ve learned, and why we struggle evaluating professional financial advice.

Why we struggle perhaps in choosing and hiring and evaluating a financial planner. Our goal being, Justin, that we can pull back the curtain on some of the secrets about financial planners so that our listeners can feel confident in who they partner with, whether that’s with us, we hope so, or whether that’s with someone else and certainly, that’s okay. We want them to be informed in that process.

So Justin, let’s start this off. One of the key takeaways that you’ve had, again in now over 350 conversations with pharmacists all across the country at all different phases of their career, which I too noticed early on in my experience building YFP is that pharmacists are skeptical when it comes to hiring a financial planner. That’s not to say a bad thing, right? Tell us more.

[0:04:54.2] JW: Yeah, it’s not a bad thing, right? But when I talk to pharmacists and I survey them to understand how they feel about financial advisory services they shared, we’re just confused about what advisors do, skeptical if they can actually trust them, right? That trust piece is huge or some folks who have actually regretted their decision to work with a particular advisor and oftentimes, when I tell people about the work our team does and the breadth and depth of the topics, the advice that we offer, they share, “Gosh, I didn’t know financial planning covers all of that” right?

And in my opinion, a major factor of that is that people often don’t talk about money with family, with friends or colleagues, and from that standpoint, it’s not talking about money, they’re probably not talking about their financial advisor either. So in most pharmacists I talk to have a difficult time really thinking about one person in their circle, right? Who works with a financial advisor.

In fact, in 2022, only 35% of Americans worked with a financial advisor, and a more interesting stat, is that a study done by AARP found that 45% of people would rather visit the dentist than make an appointment, an initial appointment to talk with a financial advisor and nothing against a dentist, right? Because my mom was actually a dental hygienist for about 35 years but people distrust financial services as an industry.

They don’t know how to choose or vet a good advisor and they don’t even know what an advisor does, right? So the other side too are folks who are in that pre-retirement phase is 74% of Americans have shared that they wish that they could get a financial planning do-over or set up a better financial situation. So there’s really that this gap between what people are afraid of, maybe because they don’t know enough about it, and what they wish they had done about in the first place too.

[0:06:46.4] TU: Yeah, that’s really – I mean, the visit to the dentist is fascinating, right? I think of you know, that process obviously. I love dentists too but not necessarily my favorite place to go and so I’m curious to pull this back a little bit further, Justin. From all these conversations you’ve had with pharmacists, why is this discomfort, this feeling, this, “Hey, I’d rather not do this at all or look at it” do you have a sense that it’s from maybe some that have had a previous experience that left a bad taste?

Is it influence of you know, maybe a parent or family or friends or others? Is it just this topic of personal finances you mentioned is one that especially if I’m maybe not exactly where I want to be that I don’t want necessarily someone, you know, making that worse or me feeling judged by where I’m at with my financial position, what’s the read you get on why the pharmacists you speak with maybe are even though they’ve taken that step, obviously, to meet with you or you wouldn’t have those conversations, still maybe not the most comfortable thing that they want to be doing?

[0:07:47.7] JW: Yeah, because there is a lot of confusion out there about what is a financial advisor and when most people think of financial advisor, they think of just the investment piece and realistically, that is only one piece. If you think about the term “financial advisor” technically, it’s just a generic term with no precise industry definition.

So this title can describe many different types of financial professionals like stock brokers, life insurance agents, tax preparers, investment managers, and financial planners. There are some estate planners and bankers who also may fall under this category as well. The only distinction is that this person has to provide guidance and advice.

If they just press a button and place trades for clients or simply prepare your tax return without providing that advice piece, they would technically not be a financial advisor and according to the Bureau of Labor Statistics, there are more financial advisors than pharmacists.

In fact, the job outlook for financial advisors has a growth of 15 per percent compared to 2% per pharmacist and these numbers alone show that the demand for people seeking professional advice about their situation and the number of options a pharmacist has when it comes to actually hiring a financial advisor.

So that process of vetting an adviser and find out where that best fit is that can feel overwhelming at the same time.

[0:09:15.8] TU: Yeah, I’m so glad you brought up the numerous titles that can be used. One is I often share with folks is you know, the term financial advisor or financial planner or wealth manager, whatever term you may see in and of itself isn’t really going to tell you a whole not about what this person does. We’ll talk about fees and how they charge and scope of services and all that.

Really, the ownership is on the consumer to understand you know, “What does that mean and are they qualified and are we a good fit?” we’ll talk about fiduciary and some of those responsibilities as well and I think because of that variety and because of that confusion, Justin, I suspect that that may be playing into not only the low percentages of folks that are engaging with advisor but also that feeling of like, “Uh, I’d rather just not engage.”

I do still think there’s a piece of, “Hey, maybe I had a bad previous experience that validated some of the concerns that I had” or maybe I have a family member, a parent, a relative, someone that’s saying like, “Hey, don’t work with an advisor” Because they had that experience that maybe was less than ideal, you know, themselves or as we talked about just a little while ago, I do think for some, especially if they’re in a position where they think, “Hey, maybe I should be progressing further than I have thus far.”

That you know, engaging with someone that is going to, you know, reinforce some of the opportunities of where things could be a little bit better could add on to some of those negative feelings and feelings of self-judgment that people may have as well. So lots to consider and unpack there and this reminds me, Justin, when Tim Church and I wrote the book Seven Figure Pharmacist.

We sat down to write this chapter and I kid you not, a chapter on evaluating a financial planner, understanding your financial planner, by far it was the chapter that took us the longest to write and had the most edits and revisions and it’s because of everything that we’re talking about. You know, there’s not a simple understanding of what these terms mean.

I think, more than anything, there’s some good questions that people can be asking to try to figure out more about, “What are the credentials, what does the scope of service look like, what does the fee, is this a good fit for me?” but you know, we’re used to the model of, we know what a PharmD means, right?

There are variances in educational programs but there’s a set of accreditation standards for good reasons when it moves to you know, the public understanding, what is a pharmacist, what does a registered pharmacist mean, what does a PharmD mean, there’s some level of consistency, right?

Same thing with the PGY1 accredited, PGY2 board certification and I think my experience and I suspect for many of our listeners, we adopt that mindset and we try to apply it to the financial services industry and it doesn’t work because there’s so many differences and nuances in this industry, and if we don’t do the homework and understanding a lot of what we’re talking about here today, I think that further validates that feeling of like, “Ugh, this is confusing.”

“I have this skeptical feeling, maybe this is a little bit you know, not ideal for what I’m looking for” or “Hey, I don’t mind paying a fee” is something I hear often but I just want to make sure that it’s transparent and I know that you know, this is a good investment that I’m making. So really good breakdown, Justin, of the titles and some of the concerns that are out there in the confusion of it. What about the concept, Justin, of fiduciary?

This is a common question that I get. I think we’ve made some end roads into this term becoming something that people are looking more for but there’s still a lot of confusion of like, what is a fiduciary, why does this matter and why isn’t everyone a fiduciary? It just seems like common sense.

[0:12:54.6] JW: Yeah, definitely, and it is just a fancy term, right? But it basically means that it’s a person that you can trust with your life savings that is ethically bound to act in your best interest. So oftentimes, I compare it to taking the oath of a pharmacist that a lot of us did, right? But if you partner within an investment broker, technically, they only follow a suitability standards.

So they believe that a recommendation of a transaction involving a stock or bond, right? It’s based on what the customer may disclose in connection with that recommendation. So they’re only looking at a piece of that person’s life or what that person has told them. So in most cases, those who follow suitability, they’re not required to collect as much information, data about you before they tell you what to invest your money in.

It’s kind of like a pharmacist only reviewing half of a patient’s medication list before making a recommendation, right? I actually met with a pharmacist last week who said that she asked her financial advisor if he was fiduciary and he replied with, “I always do what’s best for you” and that may be true, right?

There are a lot of good financial advisors out there but being fiduciary, right? Had taken that oath, demonstrates a level of commitment and transparency that the advisor is held to that standard at that standard at the same time.

[0:14:19.5] TU: Yeah, that’s a good call, Justin, right? Just because someone is not a fiduciary or something we’re biased toward and obviously not a fee-only advisor, meaning that you know, in a fee-only model, you are compensating the advisor for the advice that you – they are giving you, they’re not getting paid by recommendations of insurance products, your investment where they’re essentially getting a kickback.

You know so we use these terms, fee-only and fiduciary but just because someone is not fee-only or fiduciary, it doesn’t mean that they’re incompetent. It doesn’t mean that they’re a bad person. It really means that “Hey, we got to do a little bit more homework to line up.”

Well, why aren’t they a fiduciary, why aren’t they fee only and what implications may that have to me and my financial plan, and is that the best option or not in terms of engaging or working with someone in that area? So I think it is a really important concept, John Oliver, Justin, has a great segment.

[0:15:08.2] JW: He does. Yeah, I’ve watched that a few times, it’s funny.

[0:15:10.4] TU: Great segment on fiduciary and suitability if you want to learn more about this. The example I always give Justin, when I present in this topic is that if I’m going to buy a suit, right? And I got to two different suit shops, one is providing suits under a suitability standard, if we play this out, one is under a fiduciary standard.

I like a nice slim-fit suit, right? That’s appropriate for the width of my shoulders, my arms, my leg, overall physique and so if I go to the fiduciary shop and I say, “Hey, these are my measurements, they’re going to do the work and they’re going to get me a nice fitting to that is the best. It’s the best fit for me and my personal situation” that’s the comparison to the fiduciary standard of the financial plan.

If I go to the suitability standard suit shop, you know maybe they don’t take the right measurements or they don’t have to do all of that analysis. Maybe I’ll leave with a little bit of a baggy suit, right? Too long, doesn’t get tailored. It’s not terrible, maybe it is on some level. You can argue it’s appropriate but it’s not necessarily the best fit, right? Or the best option for me and that comes to play exactly in the financial plan.

Whether you’re working on, you know, retirement planning or other parts of the financial plan, you know we really want to make sure that as you are evaluating, are all parts of the plan that that fiduciary is really looking at what is the best option for you and your personal situation. So a fun example and I think, you know, to draw this to pharmacy.

Like could you imagine walking into some pharmacies, Justin, whether the pharmacist was you know, obligated to do all of these things whereas in some cases, you know and the other that they only have to do half of the DUR. It just doesn’t make sense, right? As we think about drawing lines.

[0:16:45.8] JW: Right, exactly, exactly, and Tim, to tie off your analogy a little bit, imagine if you were to go into that fiduciary suit shop and that suit shop only worked with pharmacists or people of your body type and height and I think that gets to what the financial planning industry has molded it into is this focus on niche or niche. We can debate that term too, but the financial advice industry for a long time was predominantly transaction-based, where the advisers earned a living solely from those commissions that they earn on whatever product that they sold.

So there was really no need to meet with those clients until there was an opportunity to implement a product, say like life insurance for example. So it was essentially for advisors to be as broad in their messaging and marketing as possible, right? To cast a really large net to reach anyone with a pulse who might buy that product but then in the last decade, we’ve really seen a movement to provide tailored advice and it’s a really caught on, where you developed a unique expertise for working with those clients and the problems that they face and that in turn, leads to development of services and scope and a business model that really fits a client for their need.

So for example, obviously I’m biased because I’m a pharmacist but if I was asked to recommend a treatment regimen for like Osteomyelitis in an adult, right? I could spend hours researching that topic and hopefully feel confident in my decision or I could just call a friend, who is a PGI2-trained infectious disease pharmacist who has that experience, who has that knowledge to help me feel confident in the solution for that patient specifically.

So that’s kind of where I feel the benefit or the optimization of that niche comes in. Obviously, that perspective is biased too since our financial planning team, we primarily work with pharmacists like us.

[0:18:52.5] TU: Yeah, it’s a really important point though, Justin. Someone recently was kind of challenging this concept on LinkedIn a few weeks ago and I really started to think more deeply about it. Obviously, it’s the bread and butter of what we do and the more I think about it, the more I even firmly believe in the value of the niche and this individual is really, you know, kind of arguing against like, “Why is there a need to really differentiate financial planning services for healthcare professionals?” or more specifically, in what we do with pharmacists and we see very specific examples of this on a weekly basis.

There is value in repetition here. We have a planning team of five CFPs that work with you know, return on 80 households all across the country and you know some of the things that come up over and over again like, “Hey, I’m working on a student loan forgiveness plan and I’m working with a nonprofit hospital.” “Oh, by the way, we’ve had you know, 15, 20, 30 other people that are navigating this” maybe not that same employer, although we do have some of that overlap with institutions like the VA for example.

But we’ve been down this path, we’ve crossed these T’s, dotted the I’s, we’ve seen where the bumps are along the road or even just more generally in some of the trends that we see of pharmacist in terms of income and barriers and challenges and you know, where they’re at, at certain points of net worth throughout their career. I mean, all of these things compound over time with some of the experience and I do think that there’s a lot of value that can come from the niche.

[0:20:21.4] JW: Yeah.

[0:20:23.0] TU: Variety also comes Justin, in the types of services that are offered. This is one that I think gets overlooked so often. You have these conversations way more than I but it feels like there’s this general assumption that like, “Hey, I’m looking at three financial planners” and not necessarily asking the question to understand, “What does that relationship actually look like? Who are the clients that they work with? Are they like me?”

Do they have experience in these areas? So I’m really referring here to the financial planning process and what a client can or cannot expect in terms of scope of service and there are wide variances here. Tell us more.

[0:21:02.7] JW: Yeah and I first want to start with an example that I had last week, I’ve gotten on a call with a pharmacist from Ohio, and right out of the gate, she kind of asked us about our fees and I was very transparent that if you’re only evaluating based on fees of cost, it’s going to be a raise to the bottom because our financial planning model is not the “cheapest out there” but you really have to advocate for yourself and understand, “Okay, does the scope of the service, does the process that this team or this person offer, does that fit me exactly?” and pharmacists want that structure and the financial planning process provides that too.

So it really starts with collecting all of your data and talking with clients that understand your financial situation. So through that conversation with a planner, they can map out both the short and long-term personal and financial goals. So if you look at my financial plan, it certainly has all the big things like retirement and paying off our student loans that are still there but it’s got other things too like going to Disney every year, right?

My wife and I want to do a trip to Africa for our 10-year anniversary, it’s got our beach home in there. So it is really establishing, okay, a road map of where all your goals fit in and then how do we use your income or money as a tool to reach those outcomes at the same time. So it’s kind of a traditional soap note, where the CFP professional, right? Your financial planner will look at this objective, the objective, then they’ll develop that assessment and plan to maximize the potential, the probability that you will reach those goals and achieve those outcomes.

So they often support you put the plan into motion and then monitoring some financial lab value, so to speak, to really understand that progress and making financial decisions, that can be broken down into the interplay about four factors that often aren’t talked about. So there’s the financial analysis, there’s the money scripts, there’s emotions, and there’s the overall well-being too.

And unfortunately, financial analysis has been viewed for too long as the overriding predominant factor in making a good decision but if we boil every decision down to a cost-benefit analysis without giving it the proper – consider the other factors, then we’re doing a disservice to our clients too. So without understanding the money scripts, you know we can’t really understand the client’s beliefs and values in financial decision-making.

An example of that is, you know, some of our clients have student loans and so often times that may come up in a conversation. I had one pharmacist couple who shared that their partner had been in a life-threatening accident. So that really changed their perspective on what they found meaning on in life and they really didn’t care about the student loans. They didn’t care about the math around interest.

They just want to pay the minimum amount and live their life now too. So it is all about working with somebody who understands what that process is and can really help you balance those personal and financial goals at the same time.

[0:24:17.3] TU: Yeah and Justin, the more I experience, you know, for Justin and I and our family and our financial plan, I feel like with each passing year there is a greater and greater appreciation for less about the math, more about the emotions, more about the goals, more about the behavior and I think part of this might be some overconfidence. You know, I even had that I would say early in my career of like, “I’m good with math, I can punch a bunch of numbers.”

But executing on the financial plan versus just developing one or two very, very different things and I think this is such an important part as you’re evaluating different services. You know I think that many pharmacists, myself included, we’re analytical human beings. We see service, we see price, we compare, those often are not apples to apples as you’re looking because of what we’ve been talking about here throughout the episode.

So you really have to pull back the onion of, “You know, what is the scope of service? What is the fees that are being here? What are they going to cover, what are they not going to cover?” you know? Do they typically work with individuals that are working through the challenges that I have in my financial plan? You know, if I have USD 200,000 student loan debt, you know most firms may not work with individuals that are early on their credit.

Do they even know some of the nuances on student loan repayment? So I think there’s an appreciation that’s happening that to your point, much of the history around the planning relationship is focused on the math on the analytical side I think because of the evolution of FinTech. We’re seeing some of that become more of a commodity and I think that’s going to lead to more of a value of the relationship and really looking holistically at the plan.

The things that you mentioned are what ultimately we hear from people about success and living a rich life, right? The trip to Africa, the beach home, the going to Disney every year, like if you and Sarah wake up and because you had a really good analytical math person doing the planning and you have USD 3.5 million saved but you haven’t lived a rich life, who cares, right?

[0:26:12.5] JW: Right.

[0:26:13.0] TU: So I think that as individuals are looking at option A versus B versus C, what’s the scope, what’s the price, what are the expectations, do they have my best interest in mind, how often are we going to be meeting? These are the types of things that we want to be evaluating.

[0:26:27.8] JW: Yeah, yeah. I think pharmacists, myself include the way that we are trained, the way that we think. We often get focused in on the mechanism action or the process in ensuring that the process itself will help us achieve those outcomes. When we think about it from our profession, so the general public oftentimes does not have an understanding of how the drugs that they take work nor do many of them care, right?

But they have confidence in their doctor and their pharmacist who give them advice, education, recommendations as well. I feel like it’s the same thing when you consider financial advice, right? You want a particular outcome but you may not be as concerned with how it’s done as long as you get there. And there is a lot of complicated financial jargon out there that oftentimes can scare people away or make them feel stupid too.

I was actually speaking with two pharmacists last week from Kansas and they shared how they’re trying to balance their personal and professional life, acknowledge that they are not confident about their financial literacy or what they know. So they shared, they were really looking for somebody who could educate them, help them understand their financial situation to feel more in charge, take control, and just give them peace of mind of where they might end up.

I felt like the husband brought a really good analogy there, he went on to show that as a pharmacist, he doesn’t jump into a conversation with a patient about the Pharma Co. connects of Vanco, right? But I feel like many financial, traditional financial advisors do that exact thing where they show you some fancy charts and graphs to make it just feel confusing, to justify their value over time but if you currently work with an advisor, right?

Are you comfortable telling them you don’t understand something and asking questions because I’ve heard this exact scenario from my sister in fact, where she doesn’t feel comfortable saying she doesn’t know something with her adviser. So as you said, it is a lot about that, that relationship piece.

[0:28:34.1] TU: Yeah and I think that’s a great example. You know, that couple you mentioned, you know just last week, I heard things like peace of mind, I heard making sure that we have our goals defined. I heard comfortable in terms of financial knowledge and literacy, which is interesting because I think those are some of the greatest outcomes that come from the relationship but they also aren’t necessarily the ones that we look at and say, “Hey, we can punch this in a calculator and determine the ROI” right?

[0:28:59.2] JW: Yeah.

[0:28:59.5] TU: So this is where I think you feel as a buyer, as someone who is evaluating financial planner is a common question, Justin, I’m sure you get is like, “What’s the ROI?” right? “I’m going to invest X and what am I going to get?” and I actually think the better we’re doing on the planning relationship, you talk about living the rich life with the Africa trips, the Disney trips, you know what you guys are doing as family experiences, putting a dollar amount to the joy in living a rich life, we know what that feels like.

But to answer the ROI question, that’s not an easy one and perhaps, maybe not even a good fit if that’s the focus.

[0:29:33.8] JW: Right, exactly. I actually spoke with a pharmacist recently who shared that his expectation working with a financial planner was that our team would return a hundred bucks for every dollar that he paid to work with us and I try to think about that if a patient had come to a pharmacist like that. So imagine if a patient has said, “I expect this medication to reduce my A1C by five percentage points” right?

In reality, there’s so many other factors like compliance, adherence, diet, exercise, access for building too that would be impossible to quantify the exact ROI there too. So what the pharmacist asked, “Okay, if we lower your A1C by five percentage points, what would that actually do for you?” right? I think for most patients, it would help them, one, feel a lot better, right? Less fatigue so that they can keep up with their grandkids at the playground.

Maybe more time, right? Maybe you avoid some microvascular complications that don’t derail your ability to drive across the country in an RV, right? Or maybe prevent a major heart event that allowed you to live longer too. So I feel like pharmacists work so hard for this six-figure income and view it as the ultimate security in life and what I see from pharmacists that I talk to is that the income alone doesn’t give you the freedom, flexibility, or time that a lot of people are looking for.

[0:31:05.8] TU: You can see this. You again, do a lot more of these discovery calls, talking with colleagues across the country that are looking for hiring a financial planner. You see this more than I but I recall many of these conversations where you can in real-time see and feel kind of the split-brain feeling of like, “You know emotionally, these are the things that mean, are most important to me” right?

The peace of mind, the security, making sure I’ve got a good plan, perhaps on the same page with the spouse or partner, and we know that those are very difficult to quantify but then are buyer mode goes on. It’s like, “Okay if I am going to spend X, what’s the return and why?” and so I think this is a hard thing to reconcile but it is an important one for obviously someone to feel good about moving forward.

I think for the expectations from a planning relationship, you know we always say that Justin, sometimes we can move forward with us. We don’t want them coming on board and having buyer’s remorse. That’s not a good fit for them, that is not a good fit for us. So the discovery process, the evaluation when done well and I think this is good advice whether someone’s looking to work for us or with someone else is that you want to feel good about that relationship on both sides.

So if someone is expecting a 101 ROI and you know, we kind of navigate that and we move it forward, guess what? In two or three months, we’re probably going to realize this isn’t a good fit and so I think establishing that upfront is really valuable. Fees, Justin, let’s save the best for last, right? So much variety here when it comes to fees and what someone is paying. Often we hear from folks that, “Hey, I am not paying anything.”

We’re like, “Well, not so fast” so sometimes, this is transparent, sometimes it’s not. So what have you learned in terms of the various fee models that are out there and the expectations that clients have for how they’re compensating a planner for their advice?

[0:32:48.3] JW: Yeah and this is the one question that not many people can answer, right? How do advisers get paid? I say that from experience because my first four to five years of working with an adviser, I had very little understanding of the fee structure, how much I paid, and from you know, 350 conversations with pharmacists, they have a very similar perspective as well. I believe it speaks to the industry as a whole, right?

They are not very transparent about fees, which can certainly add to that feeling of distrust and being skeptical too. So if you’re listening to this podcast, you currently work with an adviser and don’t feel you pay anything, right? That should be a red flag, to ask more questions and be an advocate for yourself to make sure it is a worthwhile investment and if you are working with a financial adviser, there is no such thing as free advice.

So financial advisers typically fall into one of three different payment models, right? There’s commission, there is commission and a fee model, typically it’s called fee-based, and then finally, fee only. So both commission and fee-based, they receive compensation based on specific financial products that they sell you. It could be insurance products, annuities, investment options too like mutual funds.

Fee-only though, those financial planners are compensated directly by their clients for advice, planned implementation, and that ongoing management of all of the assets but I feel like oftentimes people just stop there but that’s not all because if you’re not informed and educated, there are other fees that you may not consider and I learned this the hard way. So in a commission-based model, there are fees tied to the sale and ongoing management of a product too.

So it could be life insurance or disability insurance too, there are things like transaction fees, periodic charges, annual operating expenses. When you look at things like mutual funds, there are often sales charges, also known as sales loads, those are commissions you pay when you invest in a mutual fund. So there are also expense ratios too, so when a lot of folks come to me and say, “Hey, I’m paying X amount for my adviser” oftentimes those do not include those additional expenses like the sales loads, the expense ratios as well.

An example that I had, it is a pharmacist who is working with an adviser, asked that adviser, “What are your fees or how can I understand this a little bit better?” and that adviser replied with emailing them a 46-page document talking about –

[0:35:35.5] TU: I’ve seen those, I’ve seen that.

[0:35:37.0] JW: Exactly, exactly and I feel like you know, seeing a document like that is just kind of praying and hoping that your client won’t read that because I often wonder if the adviser themselves can even explain what their fees are.

[0:35:51.9] TU: Yeah, we talked about this Justin, Tim and I in episode 208 of the podcast, we broke down some of the fees on investments, why that’s so important. You talked about a handful of them. I think the transparency piece here is so important not only for understanding but also again what I shared just a few moments ago, you want to feel good about this relationship, and you know we’re not shy about charging fees.

We feel like our planning team provides a ton of value and the return on investment is much more than the fees that are paid by the client and we’re proud that those are transparent and if we get to that point through transparency and we determine, “Hey, it’s not a good fit because of X, Y, or Z” so be it, right? But the transparency is there and again, whether we’re the solution or someone is looking at hiring another adviser, I think feeling good about that decision.

Feeling good that you know and understand the fees and I think the separation piece is a really important one. So you know, if you’re in a planning relationship where we hear this all the time, “Hey, I’m not paying anything for financial planning, it’s free financial planning but I just bought a whole life insurance, I had a commission associated with it” right? So there is a natural inherent bias in the advice that is being given.

It doesn’t mean again, that they’re a bad person, it doesn’t mean that they’re incompetent but where does the incentive lie for them to be spending your time? Not on comprehensive financial planning, not on your student loans, not about setting your life goals and making sure we’re on track with living a rich life both today and tomorrow. It is about spending time where the dollars are going to be earned. And in that model, it’s selling a product.

That’s one of the things I love about the fee-only models that you’re paying the planner for the advice that they are giving and sometimes that means you are working on traditional things, like investments or retirement planning. Sometimes that means you’re getting in the weeds on student plans or budgeting or buying a home or buying an investment property or working through a difficult conversation with a spouse and getting on the same page.

Talking to mom and dad about finances, teaching your kids about it. I mean, all of these things are important parts of the financial plan but they’re not traditionally incentivized where an adviser is going to spend time on those things if they’re going to be compensated through recommending a certain product.

[0:38:04.4] JW: Exactly, exactly, yeah.

[0:38:06.6] TU: Great stuff, Justin, it’s hard to believe it’s been over 350 conversations. That’s pretty wild, right? When you come back to that.

[0:38:12.7] JW: Yeah. Yeah, I had to look at that number before we jumped on but yeah, 353 as of today.

[0:38:20.0] TU: That’s awesome. That’s awesome. So for those that are listening, if you want to learn more about the comprehensive financial planning and wealth management services that we offer through the amazing team at YFP Planning, our five CFPs, and the folks that support them as well, you can book a free discovery call with Justin. We’ll link to that in the show notes, which is the direct link to his calendar.

You can also go to yfpplanning.com and get to that as well. Again, that discovery call process, that conversation is all about understanding what are the goals, what are the things that you are facing in your financial situation right now. More than anything, Justin is going to be asking good questions, listening, sharing more about the services, and trying to identify “Is it a good fit with what we offer or is it not?”

So it truly is meant to be the discovery in nature, there is no obligation through that process, and again, yfpplanning.com or you can book directly to Justin’s calendar. We’ll link to that in the show notes.

[0:39:12.5] JW: And Tim, I would just add one more thing there if there’s time, is that you know through our conversation, we’ve really only scratched the surface on a couple of these topics. So if somebody is still feeling pretty skeptical like confused about this, I do have an on-demand webinar that I recorded with all of my learnings from these conversations, my own experience too that goes into a lot more depth about the various topics like scope and fees and whatnot.

I feel like for a lot of folks, I think there’s been 60 people who have watched that so far. It really helps them understand and feel empowered about evaluating financial advice if it works for them or not. So that’s typically a really good first step if you are still a little bit uncomfortable.

[0:39:58.1] TU: Awesome, we will link to that webinar in the show notes so folks can access that as well. Justin, thanks so much.

[0:40:04.3] JW: Thanks, Tim.

[END OF INTERVIEW]

[0:40:05.6] JW: Hey, this is Justin again from the YFP team. Thanks for tuning in to today’s podcast. If you’re a pharmacy professional, you know how crucial it is to have access to reliable drug information. That’s why we’re excited to tell you about Pyrls, today’s podcast sponsor. Gone are the days spending hundreds of dollars for access to drug information, Pyrls offer top drug summaries, clinical teaching points, a drug interaction check or calculators, and guideline reviews all in a user-friendly resource.

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[DISCLAIMER]

[0:40:58.7] TU: As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and it is not intended to provide and should not be relied on for investment or any other advice. Information on the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment.

Furthermore, the information contained in our archived newsletters, blog post, and podcast is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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Why I Left My Old Firm to Be A Fee-Only Financial Planner

Posted on by yfpadmin

Why I Left My Old Firm to be a Fee-Only Financial Planner

This is a two-part blog series detailing my fees. This post will cover why I left my old firm and switched to the fee-only model. The second post will cover the reasons why I charge based on income and net worth.

One of the things that fired me up about launching Script Financial was the prospect of running a fee-only firm. Why is this so important to me? It’s important because the fee-only model is best suited for financial planners who want to give their clients sound, unadulterated financial advice. Pricing that involves commissions or other kickbacks to sell products introduces conflicts of interest that just aren’t needed. There’s a better way.

Ask your advisor how they get paid and if they bumble around about the commissions they earn over here and the fees they receive over there, take pause! This advisor is probably a fee-based (or commission and fee) advisor that earns fees on money they manage AND commissions on mutual funds, insurance and/or annuity contracts they sell. I know this because I used to be a fee-based advisor and it was a question that I muddled through and, frankly, felt uncomfortable with. This was especially true after I discovered the fee-only model.

To be clear, fee-based advisors are NOT bad people and I have great relationships with many of my old coworkers. The majority of the time, these advisors will act in the best interest of the client. My question is this: why would you even want to put yourself in a situation where you could potentially put your own interests in front of the clients? What if money is tight or you really want to take the fam on that European vacation you’ve been promising? Doesn’t that bring temptation into the mix when there need not be? I decided to take those situations off the table and went the fee-only route. It’s a route I feel comfortable with because that is the way I would hire a financial planner if I was the consumer. And I think that’s a healthy thing to do…look at your business and operate how you would want to be treated. So I made the leap and I’m happy I did.

The problem is that the public is mostly unaware how advisors are compensated. I mean, I was in the industry for a year and a half before I actually understood what fee-only was! Most people believe that their advisor is working with their best interests in mind and that may not be the case. Most advisors operate under the suitability standard versus the fiduciary standard. Let’s put it another way. Say, I’m selling you a suit or a dress (depending on what you’re in the mood for that day). If I’m following the suitability standard that most advisors out in the world follow, I need only sell you a suit/dress that fits, not one that particularly looks good. I mean blue.. err… white might not even be in your color wheel!

But you want to look good, right? If I’m the suit or dress salesman following the fiduciary standard, I need to make sure that the suit/dress not only fits, but looks great on you too, which is in your best interest. It would look something like this:

So, becoming a fee-only advisor was a major catalyst to launch my own firm. But how would I charge clients aside from the fact that I wouldn’t accept commissions or kickbacks? Needless to say, I spent copious amounts of time determining how to charge client fees in order to a) truly help my clients meet their financial goals and b) build a sustainable firm, so I could be around for the long haul. I probably looked at 6 different variations of pricing. I made my pros and cons list and checked it twice. The research was diligent and tireless and it looked a lot like this:

What did I settle on? I chose a model that calculates the fee based on a client’s income and net worth. Quick side note: net worth is the number you get when you add up all the things you own (bank accounts, investments, property) and you subtract all the things you owe (student loans, credit cards, mortgage). This is your net worth or your personal balance sheet. However, in order to properly explain my model, I will often reference a pricing structure that is much more widely used in the industry, which is charging clients based on Assets Under Management (AUM). This is money in accounts, such as your traditional or Roth IRA or a brokerage (after-tax) investment account you set up to buy stocks and mutual funds. While this model proves useful for some (like older people who have investable assets), I believe it has a few shortcomings, mostly that many of my clients (and other GenX and GenY-ers) have yet to amass assets to manage. This does NOT mean that these clients do not need financial planning advice because most people do (heck, I need a financial planner because I need someone to be objective about my financial situation and hold me accountable to the goals I make!). Because of this fact, this demographic of people are often turned away and/or underserved. Check out my next post that will outline the 7 Reasons Why I Charge Based On Income and Net Worth.

The fee-only and income and net worth pricing model are what works for me and my firm, Script Financial. If you’re looking to hire a fee-only financial planner, you can find one by searching the National Association of Personal Financial Advisors (NAPFA) or the Fee-Only Network.

About Script Financial

Tim Baker, CFP®, is the founder of Script Financial, a fee-only firm based in Baltimore, MD that is dedicated to helping pharmacists and young professionals meet their financial goals. For more information on the services offered, contact Tim today.

Tag: fee only financial planner

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