How YFP is Different Than Most Financial Planning Firms
Tim Baker, YFP co-founder and Director of Financial Planning, talks about his journey becoming a financial planner. He discusses why all financial planning is not created equal, how and why YFP Planning services differ from traditional firms, and the importance of fee-only, fiduciary, and comprehensive distinctions.
Summary
Tim Baker, CFP®, joins Tim Ulbrich on the show to dig into how YFP Planning was born and how and why it is different from many traditional financial planning firms.
After working for a traditional firm himself, Tim realized that there were a lot of gaps that he wanted to fill in supporting people on their financial planning journey. Tim decided to launch his own firm and began working with pharmacists from the start. After meeting Tim Ulbrich, Tim Baker joined the YFP team and merged his financial planning firm with YFP. Now YFP offers comprehensive, fee-only financial planning for pharmacists.
Tim breaks down several reasons why YFP Planning is so different from traditional firms. To start, YFP CERTIFIED FINANCIAL PLANNERS™ carry a CFP® designation. He explains that the barrier to enter the financial planning world is fairly easy and many people pass as financial planners without much education or experience. However, having a CFP® designation means that the YFP Planning team went through more rigorous training and testing and had to lock in between 4,000 to 6,000 hours of experience.
Tim shares that YFP Planning offers comprehensive financial planning. Many financial planners only focus on life or disability insurance or investments, however YFP Planning supports every part of your life that carries a dollar sign. YFP Planning offers support, guidance, and financial planning in the following areas: debt management, savings, insurance, investments, tax planning and filing, retirement, estate planning, budgeting, student loans, open enrollment navigation, credit, education planning, FIRE, real estate investing, and buying a home, among others.
Lastly, YFP Planning offers fee-only financial planning. This means that clients are paying for advice, not for the sale of a product like most traditional firms. In addition, YFP Planning follows the fiduciary standard. By law, YFP CFPs® are bound to act in your best interest.
If you’re ready to take stock on where you are and where you want to go in 2021 and create a financial plan to support your life plan, book a free discovery call with YFP Planning today.
Mentioned on the Show
- YFP Planning – Comprehensive Fee-Only Financial Planning for Pharmacists
- YFP 015: Financial Planning Series: Interview w/ Tim Baker (West Point to CFP®)
- XY Planning Network
- YFP Concierge Service
- Book a Free Discovery Call with YFP Planning
Episode Transcript
Tim Ulbrich: Tim Baker, excited to have you back on the mic. How’s everything going?
Tim Baker: Things are going well, yeah. Looking to turn the page here on 2020 fairly soon. So good to be meeting with you and Tim and our crew to figure out what YFP looks like in 2021, get a plan in place. So been a tough year but excited to look forward, look ahead and what’s to come for our team here in the future.
Tim Ulbrich: Man, I’m with you. It’s been a tough year. Looks like the first half of the year may be tough as well. But hopeful that we’re going to turn the corner here with the pandemic. Obviously we know many of our listeners, community has been impacted by that. And hopefully our community who’s been on the frontlines is going to get a little bit of a break here and some relief and hopefully get some time to refresh. I know we’ve talked with many pharmacists that I think are probably feeling burned out given the pressures, the circumstances, trying to manage work, trying to manage home, but we’re thinking of you all often, appreciate what you guys do, and yeah, we’re excited about 2021, lots of exciting things planned for YFP. And here, today, wanted to talk a little bit more knowing that we have grown a lot in the last few years, knowing that we obviously have many of our community members that are aware of what we do at YFP Planning, some that are not, and knowing that one of the things I find myself often talking about when I speak on the topic of personal finance is hey, when you’re looking for a financial planner, it’s really important not all financial planners and financial planning services are created equal. And it’s important to understand what you’re looking for, what’s a good fit, what’s not a good fit. And so we wanted to spend some time here today talking about why we do what we do, what some of the terms mean around fee-only comprehensive financial planning, how we got to this point, and ultimately what’s included in the types of planning that we do. So we’re going to do that. But Tim, before we dig into that, I think it was all the way back maybe Episode 015, somewhere around there, we had you on to chronicle your career path, your journey into financial planning. But it’s been awhile. And I don’t want to assume that the listener here in 2020 necessarily listened to Episode 015, so take us back into your trajectory into financial planning, all the way back to obviously your time at West Point, what you did from there, and then how you got into the work that you’re doing now and offering fee-only comprehensive financial planning to pharmacists.
Tim Baker: Oh man, I feel like it’s been awhile since I kind of told this story. So I’ll try to dust it off a bit. I feel like now it’s more about like the team that we’ve assembled and everything.
Tim Ulbrich: Yeah.
Tim Baker: But yeah. I took a very kind of a different route to becoming a financial planner. I — like to your point, Tim, out of high school, you know, I was pretty set on the United States military academy at West Point. And my trajectory for my career I thought would be very much intertwined with service, military service. So I worked my tail off to get into the academy. The world changed very — very quickly when I was there my freshman year, I think my first day at West Point was July 2, 2001. And obviously, a couple months later, you know, 9/11 happened and really changed the tone of what our job was and why we were there. So you know, I graduated four years later with a degree in international relations, you know, again, thinking that my career would follow more of a service track and commissioned as a Second Lieutenant and as an Armor Platoon leader, so tanks. But I quickly found out that, you know, sometimes you have a plan and life happens, you get punched in the face, and that plan goes out the window. So unfortunately, I was involved in a training accident that kind of derailed my military career, and I medically was separated from service. And I found myself a civilian, not really knowing what I wanted to do and really lost for a bit. So I backpacked Europe for about four months, saw 20-some odd countries and came back and started a career in material management, actually in Columbus, Ohio, where we recently moved back to. So my job was to basically move — manage the department that moved boxes from A to B for a big retailer here in Columbus. So I did that for a span of years and then moved out to southern California to work for a construction company kind of doing the same type of stuff of moving materials from A to B. And I would say it was around this time that I kind of had a — kind of a quarter-life crisis. I liked my job, but I felt like it didn’t like me. I was working way too many hours for a six-figure income, which was great. I didn’t really necessarily get a warm and fuzzy of what I was doing from a day-in and day-out. And you know, I had a relationship that kind of ended at that time and I was just not living the best version of myself. So I took some time off. I took probably about 9-10 months off to kind of figure out what I wanted to do. And I kind of came to this epiphany, kind of from some of the input from two different family members that said, “Hey, we think that you’d be actually really good as a financial planner.” And I didn’t really know anything about it. You know, finance had always interested me, but I decided to pursue that path and I moved from southern California back to the East Coast to work with a solo practitioner in Baltimore, Maryland, who was actually a Naval Academy grad, and basically started at the very bottom of the ladder. And I was more or less a glorified assistant and took probably a third of the pay of what I was making previously to really kind of introduce — or reinvent myself and really get into this profession of financial planning.
Tim Ulbrich: Well, I’m grateful — and I mean this genuinely — as my own financial planner but also knowing the impact you have had on the pharmacy community that you found this career pathway. I mean, I think it’s safe to say — and we’ll talk more about the team and the services that this transition and quarter-life crisis, whatever you want to call it, one of the results has been really putting a positive dent on helping pharmacists in managing their personal finances, obviously debt is one part of that, debt management, student loans, but also the rest of the financial plan, like we talk about often on the show. And I genuinely think the work that you did and the work that you continue to do has had an incredible impact, not only on our community but on others as well. So you’re working with a solo practitioner, and you decide to make a jump to start your own firm. So why, why, why take on that risk? Why take on that journey? And what was enticing about going down that path?
Tim Baker: Yeah. So again, not really knowing what I was getting into — and I think sometimes I talk to pharmacists, and they say the same thing when they go to school. I think the big difference is the debt that’s often taken on, you know, with becoming a pharmacist, which is a good and a bad thing from a barrier to entry perspective. So I completely just shifted and pivoted from what I was doing from a professional standpoint. And you know, to kind of back up to that, when I was trying to reinvent myself, my resume was written in a way that like that I just kept going back to material management. So I really need to do something bold, and it actually came down to networking. I know, Tim, you talked about that, to kind of get into that firm and really be super vulnerable to say, like, I don’t know anything. Like when I got into material management, I used to say like I didn’t really know what a forklift was. When I got into financial services, like the only thing that I really knew about financial planning was you would hire a person to help you, and I knew that credit card debt was bad and investments were good and buy a house, that was a good investment, which is what my parents had said. That might not necessarily be true. So I get into this world, and I’m working with a solo practitioner, and it’s very much kind of like you work with people who have hundreds of thousands of dollars and you’re working with them to help them with insurance and their investments and maybe give them a little bit of tax advice and things like that. And I quickly realized that me as a 20-something-year-old, I didn’t resonate — I wasn’t really resonating with the people that I was working with. You know, I was supporting the guy who was working with a lot of like pre-retirees and things like that. And then I quickly realized that there’s a lot of gaps.
Tim Ulbrich: Right.
Tim Baker: So after I started the process of getting my licensing and working on my CFP and getting that in place and getting everything that I needed to actually do the job, I started working with pharmacists fairly early on after that because I had friends — most of my friends in Baltimore were pharmacists, one of the guys I went to West Point with, one of my best friends, married a pharmacist. They were very much champions of me and what I was trying to do. And I found with pharmacists and that type of client that most financial planners will say, “Well, you have $150,000-200,000 in debt. I can’t help you. Come back to me when you have a couple hundred thousand dollars in your investments, and we’ll go from there.” Or they would say, “We can help you. We’ll invest your IRA, we’ll sell you a crappy insurance product. And then we’ll talk to you once every three or four years.” And when I looked a the student loans, in particular, I’m like, you know, and you’re not getting supportive advice, like that’s not good. You know, most financial planners — I think it’s gotten a lot better — but most financial planners, at least at that time, would say, “Oh, don’t worry about the loans. They’ll figure themselves out. And invest or buy this product.” And that’s not good advice. We say with pharmacist-type debt, it’s not hyperbole to say it’s a six-figure decision on which way you go. And I think you and Church would attest that like if you would have went a different path for your loans, maybe like a forgiveness route, it would have been a different result. So I was starting to see this gap in the market, and you know, a lot of it was like, “Hey, find your niche.” And I kind of had stumbled into this niche already of working with pharmacists. And it just steamrolled from there. So I stumbled upon a group called XY Planning Network, who was a group of fee-only CFPs, Certified Financial Planners, that really focused on Gen X and Gen Y, who are typically those individuals that maybe have a lot of debt, maybe decent incomes, but are not being serviced the financial planning sector. So that was really the main drivers as I was thinking like, hey, like I think I can do this better, more efficiently, more targeted to who I was serving anyway. And that’s what I decided to do.
Tim Ulbrich: So you started the firm Script Financial.
Tim Baker: Yep.
Tim Ulbrich: And I actually have in my hand right now as we’re recording right now my Script Financial pen, which is just an awesome, awesome piece of history. So you started Script Financial, and then you meet this other chump named Tim who knew this other chump named Tim that was also talking personal finance.
Tim Baker: Yeah.
Tim Ulbrich: And the paths started to align, right?
Tim Baker: Yeah. So I think one of the other reasons that I decided to go out on my own — and it wasn’t necessarily feasible in the model that I was in — was I wasn’t fee-only in that first, in that solo practitioner. And I think that’s a good distinction to make. So what I often tell a prospective client today when I talk to them, I’m like, for me, like whether you work with us or not, you know, that’s obviously a decision you need to make. But to me, table stakes are are you a Certified Financial Planner? So unlike a PharmD, a JD, an MD, you know, those are professions where there’s an education requirement, experience requirement, an ethics requirement. To become a financial planner, there’s none of that. You take what’s called the Series 65, you study for 8-12 weeks, and then you take a test, you know, and you can do exactly what I do or what we do today. So there’s often a lot of sales people that parade as financial advisors but that are really just hawking crappy products, to be honest. So sometimes people get upset with me, but it’s like thinking about like a real estate agent. Like the barrier to entry to become a real estate agent is really low. Now, to be a good real estate agent, you have experience and all those — good ethics and things like that. But the CFP designation is something that’s really, really important. And then the other thing that’s kind of table stakes is really if you’re fee-only. So this is really confusing, and it actually confused me because I was probably about a year, year and a half into my career as a financial planner before I even knew what fee-only was. And fee-only is where you basically separate the sale of a product like an insurance policy or an investment with advice. So anytime that you have an overlap between the sale of product and advice, there’s a conflict of interest because I would say, “Hey, Tim, you’re my client. If you buy this insurance product, it’s better for me in terms of commission, maybe not so great for you.” And the same thing with the investments. So in the fee-only world, you are — we’re what’s called “product agnostic.” So if I say, “Hey, buy this life insurance policy,” it’s not because I’m enriching myself anymore. It’s because that’s what I believe is a tool to better protect yourself and your family. So I kind of use the medical analogy. It’s why physicians are not supposed to get kickbacks from pharmaceutical companies because it taints their ability to prescribe medications without strings. The difference in our profession, you know, “profession,” is not only is it legal in our profession, it’s prevalent. So there’s something like 95% of advisors out there can sell you a product that enriches themself, i.e., commissions or kickbacks, that a lot of times the advisor doesn’t know. So that was a main catalyst for me to move. I wanted to very much niche down. Most financial planners, they want to be everything to everyone. That’s not our game. So we are very niche to the pharmacy profession and really wanted to provide services that kind of ease those pains that they were having. And then the other thing is to put myself out as fee-only or as a fiduciary, meaning that our — we are legally bound to act in the client’s best interest, which most people, you know, if you say, “Hey, your advisor can put their own interests ahead of yours,” they would be surprised by that. But that’s actually the case. So yeah, once I made that leap, I started to network and to figure out how to get myself out there. I came across Your Financial Pharmacist on Twitter, and you know, I always say like, “Who’s this imposter Tim talking about personal finance and pharmacy?” And I read your stuff, and I really liked it. And it resonated, what you were saying resonated with a lot of the conversations that I was having with pharmacists at the time. And you know, I reached out to you, and we decided to meet in Bob Evans in Ohio, and I think our first collaboration was the podcast, which now has almost 500,000 downloads, I think is where we’re at right now.
Tim Ulbrich: So fun story for our listeners about the podcast. I was reflecting on this recently — and then we’ll get to the meat of what we’re actually talking about here — is we at one point, Tim — I remember it vividly. I was on vacation with my family, we were down in Hilton Head, we were actually working on “Seven Figure,” wrapping it up, and we’re like, man, what should we call the podcast? Like should it be, you know, like — I was thinking of like Mike and Mike on ESPN, which are no longer a thing, right?
Tim Baker: Right.
Tim Ulbrich: I was thinking about other names. And then, I mean, clear as day, you’re like, “Maybe we should call it the Your Financial Pharmacist podcast.” Ahhh.
Tim Baker: Yeah.
Tim Ulbrich: So sometimes, it just hits you in the face, and you know, you don’t know it. But it was a good time as we were getting that started.
Tim Baker: Yes, yes.
Tim Ulbrich: So we’re going to come back, I want to come back and break down a little bit further in a moment fee-only, fiduciary, comprehensive, and compare some of the terms: fee-only versus fee-based, fiduciary suitability, talk more about why that’s important. But take us for a moment down the path of — so you start Script Financial, we merge efforts at YFP, obviously we start the company, you’re kind of doing — not kind of — you are doing all of the planning. Obviously now it’s a team that really believes in what we’re doing and really embodies obviously what you have built and the beliefs that we have around planning. So what’s your current role at YFP? What’s the YFP Planning team look like? And what can folks expect from that team?
Tim Baker: Yeah, so my role at YFP today is a bit different than when we started. My role is Director of Financial Planning. It’s really more about kind of managing the RIA or the Registered Investment Arm, advisor arm of the business. So I manage the team that basically brings financial plans to the pharmacists that we work with all over the country. And I think we’re in like 38 states now. So it’s really managing that team and our process and making sure that we are delivering plans consistently and kind of with — in line with our belief system. It’s the business development, so like the prospect meetings. It’s the IT stuff, the HR stuff, the compliance stuff. You know, we’re now overseen by the SEC, which is good but also compliance can be a bit of a tough thing to crack. So yeah, my day-to-day is more, you know, managerial now and the great team that we’ve assembled, we now have two lead planners, Robert Lopez and Kelly Redy-Heffner, who basically are in Arizona and Pennsylvania, respectively. And these are the individuals that really quarterback the financial plans for our clients. And they have the help of a support system, you know, Paul is our Director of Tax, Kim, Tom and Heather are really support to them. And really my vision with financial planning is that it takes a village. Oftentimes, financial planners, they’ll have themselves and maybe another person in support. We kind of employ the diamond team model that is the group that supports the client’s effort. So that’s kind of the makeup of our team. And I’m really excited about the team that we have. I look at across — and obviously, we’re pharmacy-owned, which is very unique. But we have CFPs that are both married to healthcare professionals — Kelly’s married to a physician, and Robert, I think his wife Shirley is a psychologist — and they’ve worked in their own firms dedicated to helping healthcare professionals. We have an MBA, we have a CFP-in-training, we have an IRS-enrolled agent. So I really like the team that we have, and I think it’s imperative that the team is in place to really support the efforts of delivering the financial plans. And like I said, this is — I think, Tim, you struck a chord with talking about your experience and your initial blog posts, you know, five years ago, with Your Financial Pharmacist. And we’re seeing that year-in and year-out as more and more pharmacists raise their hand and really are excited about putting their financial plan in place and improving kind of where they’re at currently from a finance perspective.
Tim Ulbrich: Absolutely. And a shout out to the team, they have done incredible work and I think have been so integral to our vision of helping as many pharmacists as we possibly can on their path towards achieving financial freedom. And as I mentioned, Tim, I want to come back to digging a little bit deeper into comprehensive, fee-only, fiduciary. And I really like what you said, whether somebody ends up working with us or not, I think it’s really important that they understand what they should be looking for that will point them in the direction of the services that meet their needs and that have their best interests in mind. And I can attest to what you said earlier about it may catch many people off guard when they hear that about the variety of these services but also the realization that most legally don’t have to act in the best interests of the client and may be charging for services in a way that may not align with their interests or needs. And I know for me as a pharmacist when I first started that work and did some of the exploration into the types of services, that was certainly eye-opening for me coming from a training where it is drilled into us over and over and over again that your job as a pharmacist is you need to obviously take care of the patient, but you need to be acting in their best interests at all times. So when you say comprehensive, what does that look like? Paint the picture of comprehensive financial planning.
Tim Baker: Yeah. So when you go to school to become a CFP, which I guess there’s schools now. I feel like that wasn’t there even when I was doing it. But they have a curriculum that kind of follows really I think the six main components. It’s kind of your fundamentals, which you think about like debt management and savings, insurance, investment, tax, retirement, estate planning. And a lot of people, you know, the last one there is estate planning. What is that? So you know, just to break those down, again, when we talk to prospective clients, the things that we talk about for us, we go a little bit further. Like we look at like banking, like how you bank, your cash flow and budgeting. Most financial planners kind of provide kind of ongoing cash flow and budget support, they’ll say, “Hey, you’re a good saver or you’re not,” and that’s it. We provide — because it’s behavioral. And I think a lot of pharmacists were saying, like, “Hey, I just want to be efficient with this resource, this income that I have.” The big piece and the fundamentals are the student loan analysis, which a lot of financial planners, you know, there’s a stat there that says 70% of financial planners don’t advise on student loans. Obviously with working with pharmacists, that’s huge. And then really a savings plan. You know, most financial planners will say, “Hey, just put that in your emergency fund.” And I’m like, man, I just want more. There needs to be more than just that. So we take it a step further. We really try to line up in a savings plan what we’re actually trying to achieve with the dollars that we’re setting aside. But insurance is typically your life, your disability, your professional liability if you’re a pharmacist. We do a lot more I think with like employer-provided benefits, so we do like a lot of open enrollment optimization meetings, so hey, Tim, it’s open enrollment, it ends this month, like what do I do? And we just log on — because that’s a big part of your compensation package. Investments, so we manage the client’s investments both at their job, so like 401k’s and 403b’s. Most financial planners don’t do that. So we can actually do that for you. And also, at our custodian, we do that at TD Ameritrade, so IRAs, Roth IRAs, you know, kind of the back door conversions, that type of thing. The big thing that I think that — I think a lot of financial advisors will do — is kind of like a nest egg calculation, are you on track or off track? I feel like most advisors will say, “Hey, you need this amount of money,” and then that’s it. We kind of like zero it in on like you’re either on track or you’re off. So we do the nest egg calculation and we dial that back. Another big differentiator is that we do taxes. Most financial planners don’t. They’ll say, “Hey, work with this accountant.” And in my experience, that’s what we said in my last firm, there was never really any cross-planning between the accountant that we are sending them to and their investments or anything that they had going on tax-wise, which I think is a major misstep. And I think the other reason that we do taxes now, Tim, is that most financial planners don’t understand student loans and kind of the tax ramifications to student loans. And by proxy, neither do accountants. So I got tired of sending people elsewhere to do their taxes and then completely mess up the benefits of what we’re trying to do from a student loan perspective by not aligning the tax strategy. So to me, keeping that all in house. And then finally, the estate plan, do we have the proper wills, power of attorneys and things like that? So that’s where most planners begin and end. And when we say comprehensive, we mean comprehensive. We go through credit, so credit score, credit report, especially if we’re leading up to a big purchase like a home purchase. Because we work with so many — I mean, we work with people of all ages, 50s, 60s, 70s, even 20s and 30s — but because a lot of our, initially our clients we’re in their 20s and 30s, a home purchase was a big thing that they hadn’t figured out. And when I bought my first home right before the housing market crashed, I didn’t know what a home inspection was or what an appraisal was, what I should be spending, how to get financing, where to find a good agent. So we kind of do that from A to Z, you know, whether it’s using our concierge with Nate Hedrick, going through the home purchase worksheet of what they should be spending and what their must-haves and nice-to-haves are, helping with financing. It’s such a big thing that most financial planners are going to be working with people in their 50s and 60s that they’ve run that race already. So I kept seeing like mistakes on the home purchase, and I think I’ve made them, Tim, you’ve made them. And I’m like, there’s got to be a better mousetrap here that we can build. And I think that we’ve done that. Salary negotiation is another thing. I kept hearing like, “Ah, I just accepted a job,” and I’m like, “Well, did you negotiate at all?” “No, not really. I was happy to have the job.” And I’m like, “Yeah, I’m with you.” But I feel like — and we’ve had some clients on recently that have experienced that and how to negotiate and things like that, so like, I think that that’s another thing to be able to advocate for yourself. Real estate investing is another one. Most financial planners are not going to encourage you to do that because a lot of financial planners are really incentivized by you investing traditionally in your IRA, 401k, etc., not something like real estate. But we feel as a team that is a viable way to build wealth, has lots of good tax — it’s not correlated, etc. Small businesses, we work with a lot of pharmacy entrepreneurs, and we’re expanding our services there. Education planning, so hey, you have kids, how do we tackle that, more people are interested in the FIRE, Financially Independent Retire Early. So that’s a completely different way to tackle the financial plan. And I think the thing that we do differently too is most financial planners, they’ll say, “Hey, here’s a 30-page document of what you need to do.” We don’t do that. So we’re very much education-focused of like, “Hey, this is kind of what you need to know,” enough to make you dangerous but not enough to bore you to death and then recommendations, really looking through the lens of how can we help you grow and protect income, which is the lifeblood of the financial plan, grow and protect net worth, which means increasing the asset efficiently and decreasing the liabilities efficiently. Most financial planners just care about hey, I got you a great return on your investments in terms of the IRA. But they could care less about the $20,000 in credit card debt or the $250,000 in student loans. And I think that’s a big misstep. So it’s income, it’s net worth, while keeping your goals in mind. And I think I put them in descending order of importance. So income is important, not as important as net worth, but not as important as your goals. And what I typically say is, the client is like, we might work together for 10, 20, 30 years, and at the beginning of our journey, we might say, “Hey, Tim, you need $5 million to retire.” And that’s typically where you look at me like I have 5 million heads because it’s such a big number and way in the future that we discount back to the present value. But let’s pretend that we do work together for decades and you have $10 million. That’s a great accomplishment, it’s a great thing, but if you’re miserable because you haven’t achieved or done the things that you wanted to do in life, what’s the point?
Tim Ulbrich: Amen.
Tim Baker: So to me, the hard part about financial planning — it’s not the technical aspect just like you need to be technical to be a pharmacist, that’s not really the hard part. The hard part is the human element. It’s really threading the needle between what — your present day self and your self that’s 30 years older, 40 years older, in the future. And I feel like if you’re not — if you don’t feel that push and pull, we’re probably doing something wrong. So that’s it, you know. It’s using all of these tools that are in front of us and trying to work with a client in the most efficient manner that is delivering a plan that is, you know, the best version of what a wealthy life is to them. And that’s what we try to achieve here every day.
Tim Ulbrich: Yeah, and as you say and I think articulate so well, it’s not just about the 1s and the 0s in the bank account, right? We’ve got to be thinking about the goals, we’ve got to keep that front and center. It’s got to be the framework from which we make decisions. And I think a fee-only fiduciary model allows a planner to invest the time and attention to putting goals front and center, even if that does not necessarily mean all the time that you’re dumping more money into investments, it might mean paying down debt, it might mean philanthropic assets, it might mean real estate, it might mean — insert any other goal that might not have a direct tie to compensation in a fee-only model but is the best for that client, for their goals, for the plan. And I think that’s the beauty of comprehensive, right, is you say all the time is that when it comes to planning and YFP Planning, comprehensive, anything that has a dollar sign on it, you want the planner to be involved and engaged with the client because everything impacts one another when it comes to decisions that are being made.
Tim Baker: Yeah, it’s true. And I think like — and I’ll invoke a conversation that I recently had, actually before we started recording this. We had a client that signed on with us early this year, and we were kind of doing a review. And their net worth when they started with us was like -$328,000 I think it was. And this was in February is when we actually like, you know, did I think our get organized meeting. Today, so we’re talking 10 months later, their net worth is -$188,000, right around there. So that’s a net worth increase of about $140,000 in less than a year. And again, I will stipulate — we were talking about compliance — this isn’t necessarily indicative of all results, all client situations, but I look at that, and I’m like, man that is great progress. That’s really — you know, we got the debt buttoned up, the investments are humming, they’re doing a lot better job budgeting and savings, but there’s — for one of the people in the marriage, like the work situation is almost to the point of being unbearable. And that to me is what’s on fire, it’s nothing really anything that’s really tied into the financial plan, it’s the anguish that she’s feeling with kind of her day-in and day-out job. And I’m like, we have to figure this out immediately because it’s just not sustainable. So like the 1s and 0s, like impressive, but like, one of the things we talked about early this year is to potentially look for a pathway out of her current position. And we just haven’t done enough, and then obviously COVID happened, but to me, like they’re wealthier than they were in a lot of ways, but in a lot of ways, we’re still stagnant. And I think it’s kind of making sure that all of those important pieces and those goals that are out there we’re working towards and we’re being — the word that we always say is we’re being intentional to that. So you know, to me, I think that’s what it’s really about. And it’s going to be different for everybody, right? And life changes. I have a lot of people that look at their goals and then 12 months later, they laugh because they’re like, they were in such a different place. So to me, I mean, I think part of this is like why we are so comprehensive in a lot of ways is maybe it’s ego on my part. You know, I think the finances permeate everything.
Tim Ulbrich: Absolutely.
Tim Baker: And I just — and for me, it’s like, alright, we would talk early on about salary negotiation. I’m like, I need to be a better resource to clients to help with that because you know, that should be something that pharmacists, our clients, are really putting themselves in a position to get the best deal that they can. Home purchase, I’m like, I really need to understand this from A to Z so when they make this biggest purchase of their life, they’re confident. And even like going into retirement, to talk about the other end of the spectrum, is I don’t think that financial advisors are really trained well to provide like a retirement paycheck and really figure that out. It’s all about accumulation in masses. But what happens when we then pivot into retirement? And not just the 1s and 0s and the mechanics of that, but also like what does a wealthy retirement look like? These are things that are I think a good financial planner is coaching and talking about to their clients on a continuous basis.
Tim Ulbrich: So I think the comprehensive nature, you know, as I’ve talked with many individuals, that resonates a lot with people, right? Because they understand that they’ve got multiple things going on. And I think with some background information, they can understand that the traditional industry may focus more on investments or insurance, but as you go down the list of the other topics, you gave the stat about student loans, not so much and certainly many others along the way, which we’ve mentioned here during this recording. So I think yes, I think many people will hear this and say, “Yes, comprehensive, comprehensive, comprehensive. I get it.” When it comes to fee-only, this is an area where I see people confused or perhaps sometimes get in trouble where they may work with maybe with an advisor that may advertise being fee-only but really come to find out that they’re fee-based. They’re not always in a fee-only situation. So tell us the distinction of that briefly between fee-only, fee-based, and why it’s so important. I know you’ve already mentioned, defined fee-only. But the fee-based specifically.
Tim Baker: Yeah, so when I was in my first firm and I was working with clients, you know, but when they do, typically for the planner or for the advisor, they kind of squirm in their seat a little bit because one, it’s not very transparent to the client. So like if someone were to say, “Hey, Tim, before you started Script Financial, how would you get paid?” or if a client would say, “How would you get paid?” I would say, “Pull up a chair because it’s going to take awhile for me to explain this to you. So in the fee-based model, what those advisors — and again, I don’t want to demonize, they’re good people — but again, like if I was a consumer, I would want to be in a position where I was treated as a fiduciary at all times or treated by a fiduciary at all times. So in the fee-based model, the previous model, if someone said, “Hey, how do you get compensated?” I would say, “Look, I could charge you hourly, an hourly rate like what an attorney does. I could sell you a mutual fund that pays me x% upfront plus a trail or a bigger upfront and no trail, so like an ongoing fee that basically takes away from the investment. I could charge you a percent of the assets that I’m managing, which is by and large what a lot of planners do. And even fee-only planners, that’s how they mainly do it. They’ll say, “Hey, you have $500,000, it’s 1%, it’s $5,000 a year.” I could charge you to sell you a life insurance policy, and typically those are the worst ones for you or better for me in terms of what they pay out. It could be an annuity. There’s just so many different ways to do it. It could be a flat fee. There’s so many different ways to do it, and it could be a combination of those too. So when I would work with like young pharmacists at first, I would be like, “Alright, well, I can charge you a flat fee for the financial plan, and then I’ll charge you x% of whatever I’m managing in terms of dollars, which is typically not a lot. And then I’ll charge you a commission to sell you this life insurance policy and this disability policy.” At the end of the day, it’s just so confusing to the consumer because they don’t even know what they’re being charged. And that’s why like — like when I talk to a lot of younger pharmacists, you know, I’ll say, like, “Who’s making the decision on who you’re going to hire as a financial planner?” And they’re like, “Well, it’s me, but I’ll talk to my parents about this.” And I’ll say, like, “Ask your parents what they pay their financial planner. They’re not going to know.” The first thing that my parents said to me when I decided to — after I was going through my quarter-life crisis and I’m like, I think I want to be a financial planner, they’re like, “Well, why would you do that? We have a financial planner, we don’t pay them anything.” And when we peeled back the onion, it was actually very, very significant of what they were paying. But it’s not an industry that’s known for being transparent. So in fee-only, you are not enhanced or enriched by any of the products that you’re selling. So if I sell you a life insurance product, I don’t get any commission for that. If I sell you a mutual fund or some type of investment, I don’t get any additional commission for that. So you’re paying for advice, not the sale of a product. And when I was in the other model, Tim, I would — you know, we would get taken out to lunch by mutual fund wholesalers that would show up in their fancy suits and take us out to an expensive lunch and show us these glossies of why their funds were so good. And they would say, “Hey, when your pharmacists bring money over, sell our funds,” wink, wink. So it’s almost like a drug rep almost — no offense to drug reps out there. But it’s almost like that type of relationship. And you kind of feel beholden to them, like, ugh, they took me out to a nice lunch. So it’s just kind of like icky. It was kind of like gross.
Tim Ulbrich: Yeah.
Tim Baker: So by separating the advice from like the tools and the products that you use, you’re not in bed with anybody, so to speak. So you’re really clear to advise on the client’s best interests. Now, that’s not to say that there aren’t conflicts of interest. There are. You know, if you’re in a AUM model, an Assets Under Management model, where you’re charging a percent of the assets that you’re managing, if a client has inherited $50,000 and they have $50,000 in debt or they could put $50,000 into their investments, from that perspective, you’re better off for them to — in terms of your compensation — for them to invest. So there are conflicts, even in the fee-only world, so it’s important to understand what those are. But in fee-only, it’s much, much less. And that’s important.
Tim Ulbrich: Yeah, and I think that speaks to the importance of fiduciary as well and that they are obligated to act in your best interests, that situation being a good one. And kind of putting a bow around this, as you talked, Tim, the words that stand out to me are — as you’re evaluating a planner — is do they have the credentials? What’s the scope of the service they’re providing? And how are they deriving their fees? So obviously we talk here, we believe firmly in the CFP given its rigorous education requirements, given its hours of experience, the examination someone has to be able to pass, their competencies. So the credential is No. 1. Second would be the scope. We talked about the importance of comprehensive planning, making sure that they’re addressing all parts of the financial plan and aren’t incentivized to spend their time in one area more than the other. And then their fee, where are they deriving their fee? Where’s that fee coming from? Is it transparent? Do you understand it? And is it being done in a way that has your best interests in mind. And that’s what I always tell people, one of the things I’m most proud of of the service that we built — you really built — at YFP Planning is that the fee is the fee, right? The service is the service, the fee is the fee. It’s there, it’s on the table. We’ve got nothing to hide, and we obviously stand behind the quality of what we do in that service. So Tim, for our listeners that are hearing this episode saying, “You know what, I’ve been thinking about a planner for some time, I see the value, I heard about all of the things that are covered in that planning engagement, that planning relationship, and I’d love to learn a little bit more and figure out are the services offered by YFP Planning,” are they a good fit for the individual and what their considering with their own financial plan? What would be the best next step for them as they vet that decision further?
Tim Baker: Yeah, so you can go to YourFinancialPharmacist.com, there’s a big green button, two big green buttons that say “Book a Free Financial Planning Call,” so that would be either with myself or Tim Ulbrich, and we would see, again, if we would be a good fit. So that would be the best avenue. Like I said, a lot of people right now are thinking about man, this has been a tough year, I really want to get my stuff together as we transition into a new year. So it’s a busy time of year, but I think it’s kind of the best time to take stock of where you’re at and really where you want to go and have the financial plan, support that life plan that we talk about where it’s not just about the 1’s and 0’s. So YourFinancialPharmacist.com, click the button, “Book a Free Call,” and we’d be happy to see if we’re a good fit.
Tim Ulbrich: Yeah, and we hope we’ll have a chance to talk with many of you here as we wrap up 2020, head into 2021, looking forward to setting those goals, setting that plan for the New Year. And as always, we appreciate you joining us on this week’s episode of the Your Financial Pharmacist podcast. And if you haven’t already done so, we would love to have you leave us a rating and review on Apple Podcasts or wherever you listen to this show each and every week, which will help other pharmacy professionals find the work that we’re doing on the podcast. And we also would love to have you join us at the Your Financial Pharmacist Facebook group, a community of more than 7,000 pharmacy professionals all across the country that are committed to helping one another on their path towards achieving financial freedom. Thanks again for joining, and have a great rest of your week.
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