It's time to bring the heat, our financial advisors worth it. Brent, I am so excited about this because I think this is going to be a spicy one. Because there are a lot of thoughts around this. If you just go read through YouTube comments, some people love the idea of financial advisors and some people hate the idea of financial advisor. So we're going to break it down for you. Are they worth it and what do you need to know? Yeah, it cracks me up. People find out we're financial advisors. They come on our free platform, take all of our free stuff. And then they tell us what scoundrels we are for how we make our living. And there's a lot to unpack here. We're going to talk about what is an advisor. We're going to talk about the different models of service. And of course, we're going to talk about what you need to look for. And how do you actually customize this to think about do you need an advisor? Or maybe you don't need an advisor. We would give you that clarification today. But look, there's some baggage associated with this. We know right now, 28% of people that do not have an advisor perceive working with an advisor as being too expensive, as being an expensive endeavor. So we want to break down for you. Is that true? Does it have to be true? And what do you need to know if you're someone who is considering it or you're one of these 28% of people who say, no, not for me. No way, no how, never. We want to let you know the things you need to know all about advisory. This might be a shocker and it's not for me. We actually agree with this. I think, look, if you can come and get all the free stuff we're giving and your life is simple enough that you don't need a financial advisor, lean into being a great do it yourself for as long as you possibly can. We're going to go over in a second when you actually might want to consider hiring a financial advisor. But I want to repeat this. If you find your situation where you're like, what do these people even do to warrant their fee, you probably have not found the complexity that requires a financial advisor. So hang in there, take advantage of the free stuff, be the best version of yourself, but there will come a time with success that complexities go sneak in on. Yeah, we live in a world with podcasts and YouTube and books and magazines, where if you want to figure out how to pay off debt, they're free resources. If you want to know about simplified investing or asset allocation, they're free resources. If you even want to know basic tax and estate planning, there are free resources out there. So if that satisfies your situation, then you may not need an advisor, but we think in our opinion, there are three signs or three times when you may start to flag and say, you know what, maybe now is a time for me to think about hiring a professional. The first one, you just alluded to it, Brian. This is when complexity finds you. Yeah, it's one of those things where I think people will realize that you get to a million dollars and the market goes down 20% and you lose $200,000. It just hits different than when you're investing $150,000. I think about people who get into those highest tax brackets, where they're paying 37% federal, then they're paying, you know, state income taxes and they go, man, is there anything I can do or structure my accounts that can help me figure this out? Or maybe you run a successful business and you start off as a sole proprietor, but you're growing, you're adding employees. You know, like, how am I supposed to do this well? Is it business structure wise? Are there better ways to do it? Are there retirement plans I can add? Are there benefit packages that will let me keep good employees longer? All these things are complexities that when you started the journey, it just wasn't that hard. So see if this resonates a lot of times when we start out early on in our journey, we know where we are today and we kind of have an idea of the direction we need to go. That's fairly simple, if that describes you, you may not need a financial advisor, but oftentimes in life, the landscape changes, the number of options changes, the choices change and when the complexity finds you, it might make sense for you to consider hiring a professional to make sure that you get on the best path possible for your unique circumstance. So that's the first one. The second sign, Brian, maybe it's time for you to consider professional and you alluded to this is that the gravity of your decisions goes beyond your comfort level. The numbers just start to get a little bit bigger. Yeah. And this is something I want to be completely transparent. I found myself because I consider myself a good financial mutant and the fact that I don't waste dollars so much. So when I started writing my first book, Millionaire Mission, I remember just on, I sent a proposal to a publicist that I knew and then she called me up. She goes, Brian, this is really good. Do you care if I go ahead and send this to a publisher that I know and I'm friends with? I said, sure, why not? This is going better than I anticipated. Well, I didn't know they were doing. They sent me a contract and I was like, you know what? I'm a smart guy. I'm a financially minded guy. I was like, I can do this. So I started reading the contract, but the moment I started googling terms in this contract, I was like, what am I doing? I am out above my skis and my skill set. So I was like, let me bring somebody in to help me figure this out because I only get one shot to get this right and I don't want to screw up the ownership of my brand, all my elements with the financial order operation. So I brought in an agent that helped me negotiate the thing is that I think and you're going to see the payoff later. I ended up getting bigger offers from the same companies. I also got the contract written in a way that I was still going to own all my intellectual property. This is the power of I'd only done it once and I was kind of falling into some traps or making some mistakes because it was my first and only time hiring somebody who had done this hundreds of time saved me so much heartache and actually maximize the opportunity. I love it. And the third time where it might make sense is where you recognize there just aren't enough hours in the day. Maybe you don't literally have the time to focus on your financial affairs or maybe that's not how you want to spend your time. So if you find yourself in one of these three areas, that might be a warning sign that hiring a professional advisor might make sense for you. If these do not resonate with you, if these do not sound like something that describes your circumstance, then you might be at the stage where a financial advisor doesn't make sense for you at this place in time. I do want to explain what we want to focus our time on or what we call holistic financial advisors. Just as the name implies, this is people who are helping you with your entire financial life. Yeah. A holistic advisor wants to look at all the different pieces and facets of your financial life and help you figure out how they work together. So this is looking at areas like tax planning, insurance planning, investment planning, behavioral coaching, retirement planning, estate planning, and cash flow planning. If there is a financial thing that comes across your radar, a holistic advisor should be able to speak into that and help you guide. They're not an advisor who just has one solution no matter what your problems are. So you need to define, is this what I'm looking for? But even taking it a step further, Brian, we think about who a holistic advisor is and what they do, they can actually serve different roles in our lives. They can actually, at different points in times, be different professionals that we need. Yeah, this was something that I think you might have brought up in one of the show meetings. You had found an article that did a deeper dive on the components of different advisor, holistic advisors that are out there and I was like, this is perfect. So we jumped right into the different components. The first one, Bo, and I'll let you kind of jump in as the mechanic. What is a mechanic holistic advisor do for people? Yeah, a mechanic is exactly what it sounds like. This is someone who can step in and help make sure that your functional needs are met. When a client is looking for an advisor to serve as a mechanic, they want someone that can save them time that can reduce their anxiety and perhaps even build in simplicity. This is no different than when you think about going to an auto mechanic. Yeah, you might have the ability to change your oil, but you might not know how to change your brake pads or you may not want to have to change your oil. You might like the simplicity of someone else doing that. So a financial advisor can serve as a mechanic and serve that very specific role to make sure that a very functional need inside your financial circumstances met. I feel like in the beginning of when I started my first company, I had some clients that fell into this. I had a very successful family. He was eight figures of real estate, and he had a big problem with his estate structure. He had a big problem. We had a classic car collection that he needed insurance on and other things. He brought me in to essentially be the person that could turn around and triage his situation, but he was very clear with me. He did not want this to be a long-term relationship. So I served that role as a mechanic and fixed his financial needs. Sometimes when you're looking for a mechanic, this may be a one-time visit. This may be a type of advisor that works seniorly on a single item that you need help with. And we're going to talk more about what that looks like. But often mechanics can fit into that role. So that's the first role that an advisor can play. Let's talk about the second role. Oftentimes an advisor can actually serve as the doctor. Yeah. And this is the, I like to say if you've, anybody's read out live or any of those other new books out there about health wealth and so forth, this is the type of doctor you want. It's not just treating your symptoms. This is the doctor that hopefully has the critical drinking, critical thinking skills, critical drinking skills. This is the doctor that has the critical thinking skills to actually see what problems you may have in the future and kind of address those directly to make you the best version of yourself. And they have a depth of knowledge that they understand what you need and what is going on in your situation. Maybe even better than you do. They can see the full picture. They can help you monitor changes. They can actually prescribe things that you can change that will have positive incomes and outcomes and positive outputs from incomes that, from inputs that you change and they also have the ability to coordinate with other specialists. So the doctor may work with your CPA. The doctor may work with your estate planning attorney. They may work with other professionals in your lives to make sure that your financial health is as good as it possibly can be. So taking it to the next level, because we have a doctor, sometimes they're just preventing or giving you to helping you get the tips to be the better version of yourself where you currently stand. But there is another tier if you really do believe health is wealth and that's that personal trainer. Yeah, this is a big one. They, they, um, the personal trainer kind of whips you into shape. They hold you accountable. They make sure you're thinking outside of just, hey, how do I treat my moment in time? They're trying to say, hey, where do you want to be? Who do you want to be? What are your goals? There's, there's a lot that goes into this personal trainer mindset. We know that 80% of, of personal finances, behavioral base. So it makes sense that one of the things that an advisor might do is really help you focus on the behaviors. And part of that might be helping you get organized, helping you actually put together a plan of action to implement. They can also be your support. They'll be the ones cheering you along, giving you that positive affirmation. Yes, you're doing what you're supposed to be doing. Yes, you should be moving in this direction, but they'll also be the ones that can talk you down from the negative stuff. Hey, no, maybe it doesn't make sense to sell right now. Maybe it doesn't make sense to go run up that debt. Maybe it doesn't make sense to do X, Y, or Z. They're the ones who help you focus on doing the good things more and doing the bad things less. Yeah, but support seems like such a soft word. I'm just going to be honest with you. A lot of the things I feel like I had values. I'm a quasi therapist in a lot of ways. I can totally sense when two spouses have differing opinions and they're coming to me to be the arbitrator of where is the way the family is going. And look, I fully embrace this and I kind of it is a delicate walk that a good advisor does on trying to help their clients navigate that, but I think it's effective so that you can actually have good communication. No different than a therapist. Have you ever been to any type of marital counseling? They try to help you focus on that inner voice because it's powerful, but also how do you communicate better with your loved ones? You think money's any different than that? And you know what's required to be really good at this? A relationship with every party. So you kind of know where the weaknesses are, you know where the strengths are and you know where maybe there's inequality in the power structure within the dynamics, you can help them navigate that if you're doing this right. And I love that as the personal trainer type advisor, you sit in the position to hold them accountable. The things that you talk about, the behavioral change that you recommend, a really good advisor will be that accountability partner to make sure that you're actually falling through on that. If they're saying, hey, you as spouses need to begin to communicate more, the advisor follows. Hey, did you have the conversation? Did you guys talk about that? Did you follow up on that thing that we said that you needed to follow up on? Now, what I think is really interesting, Brian, is that we describe these sort of three different personas that exist inside of financial advisors, but I found in our careers, we kind of move in and out of them. It's not like you're only a mechanic. Some advisors are or you're only a personal trainer. Some advisors are, but we think a really good holistic advisor has the ability to move in and out of those different personas based on your unique individual needs and your unique individual circumstances. So we think a really well rounded advisor ought to be able to serve in all three of those different personas. Yeah, I completely agree with that. And I actually can see myself in every one of these roles. And I think this is something we try to train and teach our entire team to be good at. Okay. So we've talked about what they do. Now let's talk about, okay, well, I understand academically what they can do, but I know that there's going to be a cost associated with it. So am I actually going to receive a value and how will I know if my mechanic is good? How will I know if my doctor is valuable? How I know if my personal trainer is effective? Well, what's great is that over the past couple of years, there've been a number of studies that have been done really trying to measure how valuable a candidate advisor. How much value do they add? There were two very popular studies done, one by Vanguard. In 2022, they were trying to put the value of an advisor front and center and then another in 2023, completely independent done by Russell Investments and their findings were actually pretty interesting. Yeah, it was kind of amazing to see how close and I loved how they broke it down because I was like, okay, how are you going to tell me what an advisor can do? I know from just me, I've already given some clues on it with tax planning, account structure, business questions, if you're a small business owner, there's all kind of things like that I'm going to address. But how do you actually put that to a value number? So what they said is Vanguard found that advisors can add based on taking a holistic role in a client circumstance up to or even exceed the equivalent of a 3.24% net return annually. So if you were to hire an advisor, the idea is that your portfolio, your total well-being on average would be 3% greater than you would do on your own. Russell Investments, again, did a very independent study came up with a very similar conclusion. And advisor's value in the U.S. is approximately 4.12%. And by the way, both of these factor in a 1% management fee. So this is above and beyond the fee that the advisor charged. I can hear the footsteps. I don't know if you've heard them climbing out from under the bridge right now. The trolls are going to come and they go look at these two stats. Now, look, they're not our numbers. This is Vanguard. This is Russell, much bigger institutions than us. But here's what I like. Yes, the conservative assumption is they put a 1% asset under management fee in here. But what I like is they actually went deeper and said, let's actually quantify what makes up these numbers. So when you look at the first one, they both said behavioral coaching was a big piece. Vanguard credit behavioral coaching with up to a 2% annualized increase. Russell Investments said it was almost 2.5%. What I find interesting and we didn't create a slide on this. But for years, anybody goes back in our archives. We talked about the Dalbar study of the typical investor versus what the market, because you hear everybody say, well, just be the market. That's fine. And it does work. We love index investing. You've heard us talk about, but Dalbar and the most recent research that came out in April showed that last year was a great investment year. But the typical investor still underperformed the equity markets by five and a half percent. And a lot of that you can't tell me is behavior. It's people not understanding. How do you make your money work? How do you control the emotions? How do you understand the fear, the greed and make sure you stay the course no matter what comes your way? So just impacting behavior is a huge thing that advisors can do, but then Vanguard and Russell both took a little bit deeper. Vanguard said that focusing on spending strategy, how you actually spend your dollars and advisor speaking into that could add up to 1.2% annually, asset location, not just how you spread out your assets, but the different tax structure you have of your assets could add up to 60 basis points or 0.6% and then cost effective implementation. This means low cost investments, low transaction fees could add up to 30%. I'm sorry, 0.3% over a do-it-yourself investor. Russell investments called it something a little different, but arrived at a similar conclusion. They said that customization and family wealth planning could add about 1.14%. And then the tax smart planning and investing could add about 1.17%. So both studies found that advisors, when it comes to the tacticality of what they're doing, can be incredibly valuable to a client's overall situation. Yeah, now the tax smart, cost effective, asset location, all these things are on the same tree. And my CPA, you know, Spidey Census kind of really get excited thinking about these things because I do think a lot of people when you're simple, meaning that all you need to do when you're starting off is are you saving and investing 20 to 25% of your income? If you have kids, you get wills, are you buying life insurance, that stuff's basic. But I will tell you, complexity will find you. You're going to want to have somebody in your corner as all these financial things start coming your way. And then to round out both surveys that both added rebalancing, Vanguard said that rebalancing could add up to 0.14% of value and Russell investment said about 0.27. So you can see the totals. Vanguard says that even after fees and advisor on average could add about 3.2% annually. And Russell said it's about 4.1%. No, this is what that does not mean. This does not mean that every single year an investment advisor or a financial advisor, a holistic advisor is going to have performance that is 3% better or 4% better. Don't miss here is what they did is they looked at a study of a number of individuals say on average, what was the quantifiable value that you could associate with a cost to determine are they actually adding value to my financial circumstance? Because some years the number may be a lot higher. Some years the number may be lower. But this is a really interesting academic way to try to measure and assess of advisor's value. But I would argue Brian outside of like strictly the numbers and the percentages, I think that the benefits and advisor add or far exceed strictly dollars and cents. Yeah, I don't mind leaning hard into the tax planning though. I don't mind leaning hard into the behavioral stuff because it does panic you once you start spending the money that you took three decades to save. But you're exactly right. When we think about what are people looking for a financial advisor, peace of mind comes front and center. And I can tell you we're on if you didn't know, if you go to money.com/millionairemission, I had my first book come out and we're doing a book tour. And I've had so many people come up to us clients as well. And you know, it's been the greatest thing. I get to give them a hug and thank them to come out for the book tour too. You guys give us so much peace of mind. I feel so much better. And the data reflects us too is because look, a lot of you guys who are financial mutants, you're not going to leave this planet broke. So it's a matter of how do we make sure you get to live your best life. I've tried to do everything in my power to give you as much free advice. But if you do everything I tell you, you're going to reach a level of complexity. I'm facing this right now, by the way. When I, I've told Bo, we get back from the book tour. Even though I just did my estate plan in the last two to three years, I've got to come back and I'm inviting Bo to come and sit in on those meetings with those attorneys because I've got some hard decisions on account structures and other things I've got to make for my family. I'm going to need somebody, even though I do this for a living, I got to get outside of myself to make sure I'm doing the right decisions for my family. Yeah, it was actually discovered that 93% of folks who are looking for an advisor or have an advisor said the primary reason was for peace of mind. That was the thing that we're looking about. And one of the things that peace of mind is able to do for is it's able to impact your stress. Look at this. When we do our annual wealth survey of all of our clients who have come from the money guy show, 75% of our clients say they are not stressed about money. They say that I don't feel like I have to be stressed because I have a plan in place that I know it's going to be good before things get hairy while things are hairy and after things are hairy. When you compare this with the average American, 71% of Americans, this is according to the American survey, list money as a key stressor. Well, you can, I think, arrive at the conclusion that potentially one of the reasons why 75% of our folks say they're not stressed about money is because they have a plan in place. I think the other 71% don't have a plan. So one of the great things an advisor can do is actually implement a plan that can begin to give you peace of mind. Yeah, but I also want to be honest with people. I think if you are, when we talk about the five levels of wealth, and you hear about the typical American can come up, 60% of them can come up with a thousand dollars. I think a lot of Americans are struggling with just reaching kind of that stability stage and then they're not even getting a strategy or even security where most of our clients are. That's why I do love it. I don't mind sharing free information because I want people, I don't care where you come from. You know, me and Bo both come from very humble beginnings and I want everybody to know you can do this. That's why we lean so heavily on the free stuff so that you cannot be part of that 71% of Americans that just don't have the peace of mind. Please take advantage of that because I think if you start focusing making those small decisions, one on top of another, you're going to find not only do you reach your goals but you are going to reach that complexity that we keep talking about. So the financial planning board of standards actually did a study and they said, okay, well in addition to peace of mind, what are some other psychological benefits that folks who use it advise or find? Well, look at this, 73% of respondents that have a, that are CFP advised said they have a higher quality of life. Those that are unadvised, it was only 66%. 71% of those that have a CFP that's advised and said they have greater levels of financial confidence in their life compared to 60% of those that don't have an advisor. And then when you look at financial satisfaction, 72% of respondents that have a CFP that have a financial advisor said they experienced, they were financially satisfied. Compare that to the general population of unadvised folks. It's only 59%. So certainly having a team in your corner, having someone on your side helping you navigate financial, your financial life can certainly have some pretty deep psychological benefits. Now, Beau, let's be honest though, I know when I go to a nice restaurant and there's not prices on the menu. I'm like, oh my gosh, what is this place? There's no telling what this place costs or you go on their website and they don't publish. It's the worst. What their costs are, you're like, oh, this is, this is not good. There obviously has to be a cost for somebody to get all this. Can you walk us through the different versions or the different structures you might pay if you were paying a fee on for a financial advisor? So when it comes to financial advisors, there are really three main fee structures. Three different ways financial advisors get paid. The first is the commission side and these are more sales-based positions. This is someone who gets paid based on a product that they're selling. So rather than you the client paying, then there's some third party, the company they work for, the company they represent that is paying them a commission and it's a sales-based role generally. Well, then there's fee-based. Now, this is someone who gets paid directly from the client, but there's also a commission-based structure. So it kind of blends both of them. There is a good chance that a fee-based advisor could be more holistic. It's going to be less likely with a commission-based advisors because of the way their compensation is structured. Fee-based, you increase your likelihood, but then there's the third area and this is fee-only. This is the one that we love. This is where the only way a fee-only advisor gets paid is directly from you the client. So there's no third party that they are representing. They're not trying to get paid based on products they're selling, products they're pushing. They are getting paid solely and exclusively from you, the client. We like it because it seems to align the interest and it seems to remove a lot of conflicts. Well, it's also gotten confusing out there. Years ago, you had the suitability standard and then you had the fiduciary standard. It was kind of easy to tell if you had somebody who had the suitability standard, they were selling you something. But if you had somebody who had the fiduciary standard, they only got paid and they actually were held to a higher legal standard if they put your interest, the client's interest, even ahead of their own and it was held to that legal standard. The government and they were doing good work or trying to do good work by adding the fiduciary rule and retirement assets and other things. But in a lot of ways, it's muddied the water. It really has because now you have so many people that on a portion of your assets, they're going to still be trying to sell you products or doing something that's under the suitability standard. But then on another portion of your assets, they're going to be doing because the government mandates a fiduciary standard. So now instead of you knowing who is doing what, it kind of gets complex and confusing. So what I love is somebody who signs up and does fee only and then joins NAFA, XY planning or Garrett, they usually have to take an oath saying, look, I am going on the record. And it's not just because the government mandated this. I'm actually putting myself on record that I'm taking this fiduciary standard and I'm putting my clients ahead of even my desires. And if you add up the membership of all those organizations, I just said, it's still less than 2% of all the people that the Bureau of Labor Statistics classifies as a financial advisor. And that's why we want to focus on this 2% that are willing to go above and beyond. Not what's mandated by the government, but actually signed a decree signed an oath and says your interest comes first. So even inside of the fee only structure, there's some confusion. We want to hopefully bring that to light because even fee only advisors might have different ways of their compensation or structure. And there are three main tranches that you can look at. There are ones that are paid by the hour to be fee only. There are ones that have a fixed fee or a retainer based model. And then there are those that charge assets under management. That's a percentage of assets that they are helping you manage. So let's walk through the costs of each and then let's walk through the pros and cons of each of these different structures. So for hourly advisors, the cost for an hourly plan is generally going to be somewhere between $200 to $400 per hour. You'd say that's probably a line with what we've seen out there in the marketplace. So the benefit of hourly is it's probably one of the lower cost solutions when it comes to getting a holistic advisor. You're going to kind of know exactly what you're getting into. If they're going to work for you for six hours or for eight hours to help you develop a plan, you're going to pay for that. That's probably going to be the lowest cost financial advisory solution. And it is great for those one times because I got told you that there's a part of my career where I had a very successful individual hired me to fix some problems that he had. Definitely fell into that mechanic category. So now let's talk about some of the cons. One of the cons is this can often be a very transactional relationship. Rather than building an ongoing, in-depth, intimate relationship, it's going to be based on a project basis. Hey, I'm going to work with you by the hour and when you have a problem or when you have an issue, that's when I'm going to be thinking about you. And there may be an incentive for them to be very transactional, much less relational. Yeah, actually, I don't mind because I look back on that client that hired me. That's where his need was. He was primarily very illiquid in real estate. He needed somebody to fix his situation on the estate side. He needed somebody to fix his risk profile with all these cars and so forth. I think that's what he needed. And I met him where he was and I love that this is out there. I will tell you that I think for somebody, you saw this. He didn't want me going too much above and beyond because of, you talk about friction for use. It's because if I did more, it was go costy more. So he started having some apprehension about going any further. And then also, I recognize that if you're trying to change the financial landscape, there is, I shared with you, 98% of people of the advisors out there are working off a completely different model and you might be the most brilliant financial advisor in the world. But you're probably only, and we're going to talk about the Dunbar principle in a minute. You can only help so many people. That's right. So far, you're limited by your time. So the scalability of this is pretty small. You're going to only be able to help a few hundred people at a time and with millions upon millions. I mean, we know that if you take out housing equity and actually look at liquid equity, you know, liquid assets is only 5 million millionaires in America. Well, if you can only have 200, you know, clients or 150 clients, you're just not going to be able to do, have a huge scalable impact. So that's what we're going to be talking about. Now let's talk about the retainer model. Most financial planning retainers are somewhere between 2,000 to 7,500 plus per year, but this varies wildly. Some retainers can be as high as $50,000 a year retainer. It very much depends on the client and on their unique circumstance. But there are some benefits to the retainer base model. This does allow you to have an ongoing relationship. If you do have someone on retainer, they're probably going to know what's going on in your life. If you go back and forth, there's going to be access that you're going to have to the client and the client's going to have to you. And there's going to be a fixed cost associated with that. Again, going into it, you know exactly what you're going to be paying for services and less for some reason the scope of what you're asking the advisor for changes. Yeah. And it's also available. I mean, this is something, because you hear us, you know, some financial advisors, they're the advisors for millionaires and above. Retainer, especially if it's $2,000, $3,000 a year, it is going to be more accessible to people with smaller net worth. So if you think, hey, I need an ongoing relationship, I don't have assets for this person to manage. A retainer model makes a lot of sense for those type of situations. I love it. So now let's talk about some of the cons of the retainer base model. The first is that it's less likely to be a concierge service. When we say concierge, a lot of advisors will not only help you design a plan and put a plan in place, but they will actually help you implement and manage the plan through time. If they're a retainer base model, there's a good chance that they're going to design a plan for you and then they're going to hand it over you for you to implement. So there's a really good chance that it's not going to be as hands off for you and it's not going to be as much of a concierge service as some of the other advisory models. Well, when you say, I mean, let's talk, when you're setting up, maybe because I think that there are retainers that will help you with doing the paperwork, filling out the paperwork, you're just saying, like, ongoing support, ongoing tax planning and other things, it's just not going to be a direct relationship like others. But it is, I mean, it's going to have a harder time. And then the other thing I worry about is that if you were getting $6,000, $7,000 per client, is there an incentive or somewhat of a conflict that you'd be better served if you had 400 clients than if you had 150 clients. It doesn't incentivize volume over the quality and that's just something to be aware of. So if you're looking for a retainer based advisor, that's something, no, let's talk about the third type of advisor, the assets under management advisor, this is the type, this is the device that charges a percentage of the assets that they're helping you manage. Oftentimes, it's something around 1% of your total manage portfolio. So you look at the value of your portfolio, you multiply it times a fee percentage and that tells you what you're paying for the advisor. We think the benefits of this are one, you have aligned incentives. If your accounts go up in value, the advisor makes more money. If your accounts go down in value, the advisor makes less money. Unfortunately, your advisor wants the same thing that you want. Another big benefit is that with the assets under management model, it does allow for concierge service. This is something that is not necessarily going to be, it's going to be brains on, hands off. They want you involved in the process, but you don't have to be the one that actually implements the rebalancing. You don't have to be the one that actually implements the tax loss harvesting. They might be able to go and do an income tax return review. They're able to provide more rolled up white glove service. Well, just like we were talking about an hourly, the con is there's a friction for use, meaning every time they call you, it's kind of like when you call your CPA or attorney, you're like, man, I need this, but I know I'm going to have a fee. An invoice is just going to show up if I use this. What I love is I think about an advisor. One of our advisors came and was talking about they have, they work with the adult children. They work with the parent, the older parent, and there was a concern. They were over at the older parent's house and there was a concern. They came up. The adult child called it. We were able to kind of step in and not only do we help spouses, we help, you know, adult children with their parents. Since there's a relationship there, you know, there's no calling the 1-800 number, you know, given the variables all over. You actually know it and you're able to meet people where they need the help and actually try to get them to be the best version of themselves and also take away the hardship of some of the things that happen with money. Money makes things hard sometimes. Another benefit of the assets under management model is that for most advisory firms, they have a decreasing effective fee, meaning the larger your portfolio gets, the smaller the effective fee because it's a tiered percentage. So a lot of folks may start their relationship with the advisor paying X percent, but fast forward, 5, 10, 15 years in the future, the percentage they're paying for the advisory service is actually a much smaller portion of their total net worth or their total portfolio than it was when they began the engagement. So all those things I see on social media where it says that, you know, if you pay this fee and when your assets are $10 million, you're not really paying 1 percent. Well, we're going to get there. Buckle up. We are going to go through that. Let's talk about some of the negatives of the assets under management model. The first is, and you hear this, these types of advisors tend to focus on higher net worth individuals and higher net worth clients. And in my experience, that's true. Most asset advisors will have some sort of asset minimum that they work with. That's exactly why I started this show. I realized I knew I had a high minimum. I knew I was only working with certain people. And in 2006, I was like, Hey, I'm going to start giving people free education so they can be better with money because this shouldn't be something just for rich people. This should be something for everyone so that the younger version of myself would have had a shortcut to do this. We've tried to do that so that we can cut the corner off of that con. That's the abundance cycle is when you reach that success. Hey, maybe you'll think about who planted all those seeds. Now, the other con is that when it comes to assets under management, this is likely going to be a higher cost solutions. It's probably going to be more expensive than the hourly advisor or than the retainer advisor. So then you have to come back to, Okay, is this valuable? Am I receiving value for this? Because one of the things that I get so frustrated over is people like, Oh, well, is the advisor valuable? I don't know if my advisor's valuable. If you, if you don't have an advisor that is adding value to your life and you feel like you are better off for it, of course, you should not pay for it. Of course, that should not be something you're spending your money on. You should only spend money on something you believe you're getting a return on that's improving your circumstance. And I want to walk you through some mathematics that we see out there in the social media world that frankly is pretty frustrating. Right. And I think this is really, really interesting. Look at how fees affect you. We're specifically going to talk about assets under management. So maybe you've seen this. You have an individual that has a $1.5 million portfolio and someone says, Okay, well, if you have a million dollar portfolio and you can earn 8% over the next 25 years, it's going to turn into X. Well, if you add an advisor, that advisor is going to cost you nearly a quarter of the value over the life of your relationship. And so we actually ran the math on this. We said, Okay, someone that starts with $1.5 million earning 8% over 25 years is to do it yourself. At the end of that 25 years, their portfolio without any additions would be worth about $10.2 million. That's the way the math plays out. And so then what they said, Oh, if you had an advisor and that advisor charged a 1% fee by the time you got to the end of your 25 years, your portfolio is only going to be worth $7.9 almost $8 million. That advisor that 1% fee took 22% of your total terminal value. Yeah, I mean, I love how simplistic that is. But the problem is it's excluding some pretty big assumptions. As you've already shared, the fees go down the bigger you are. So this person, as they started having success in their portfolio reached $2 million, $3 million, $5 million. You're going to see some prices. It comes down substantially. This assumption only has value. If you assume the fees stays 1% the whole time, even as you're getting bigger, and then you also assume you got no value out of the relationship, meaning that you should have just stayed a do it yourself and maximize this journey. And we kind of agree with you. If your life is simple and you don't feel like you're ever needing to reach out to an advisor for proper structure, making the right decisions, protecting you from making that fear and greed decisions that sometimes derail us, then what are you doing? But there are a lot of faults with the math of the weight. Now, the math is right, but it's kind of like an error of a mission. It's still broken from reality because this isn't the way the math is really done in real life. Okay, so let's see what a more realistic example would look like. You have the do it yourself, and then you have the poor example of the 1% fee. What if you have an advisor, and that advisor has a tiered fee that decreases as the portfolio grows? And then we said, let's do this. Vanguard, which was the study we looked at a couple minutes ago, said that an advisor on average could add 4.2% over annualized over the life of working with you based on all the stuff that they're doing. And we said, but you know, you guys are financial mutants. So let's not even give the advisor credit for adding 4%. Let's cut it in half. Say you have an advisor because you're a really, really good do it yourself as a financial mutant, but hiring an advisor for you will add only 2% where Vanguard found that it would actually add 4%. How does that break down? And just so you know, because you guys are going to ask the question, we went ahead and said, let's use our fee schedule. Our fee schedule here to bound wealth is one and a quarter percent of the 1st million, 1% on the next 2.75 on the next 2 and a half of percent over 5. So as your portfolio grows, the effective fee that you're paying decreases. What does that actually look like through time? Well, you can see in this example, if an advisor charges a fee, but is able to add just 2% annually, instead of your do it yourself or ending with $10.2 million, at the end of 25 years, that person with an advisor actually ended with $13.1 million, which is a 27.5% increase on terminal portfolio value. Let's put some of this, because cost is what you pay, value is what you receive. If you're thinking about what your net result is, somebody who helps you structure your multiple million dollar portfolio to where you know how to put your investments where they're more tax efficient, tax location matters. If you have somebody who helps you when you have all this tax deferred, you'd say, because we all know the 1st account to reach million dollar status for wealthy people is there for 1k. Well, that's also probably going to be taxed at ordinary income tax rates. Wouldn't it be nice if somebody could help you structure the timing of how you're going to de-cumulate, meaning you're going to withdraw that money out in a tax-favored way, where instead of you paying 37%, we can get it down to maybe even below 15%. Those things matter. And then when you get into the estate planning, the legacy goals, this is what we're talking about. If all this sounds like, who needs that? If that's not you, take the free stuff. But if you were listening to this and you say, "Man, I've had some success and I am just realizing, I just don't know what I don't know. I have blind spots." I also worried what happens when I'm not here. Maybe I'm the financial mutant, but my spouse is not. You can't tell me that a person who has spent decades doing this, thousands of hours, helped people do this hundreds of times, there is value in knowing what your skill is, that 10,000 hours versus somebody who's coming in green as they can be, and wondering, "Hey, am I making the right decision? Who knows? Shucks, let it rip." That's just a little scary. So the question then becomes, okay, how do I know? What do I look for? We'll run through this pretty quickly. Here are some questions you can ask yourself. Is the advisor I'm looking at, are they credentialed? Do they actually have some expertise? And here are some credentials that we think are worth looking at. Certified financial planner, CFP, we think that's the gold standard for someone who's going to do holistic financial planning. Charter financial analyst is a very prestigious designation for investment professionals. It's one that suggests that someone has an affinity to solve complex problems. Certified public accountant is someone who has an expertise in tax and tax knowledge. A CLU is a chief life underwriter, a chartered life underwriter. This is someone who focuses on insurance. So you need to understand, are they an insurance person, or are they actually advisor? And then there's the chartered financial consultant, where this has fundamentals in financial planning and contemporary applications, but there's not an exam like the CFP. So generally speaking, when it comes to those two, we would prefer the CFP, but it's worth noting if someone has the chartered financial consultant designation. Well, also, let's talk about what is their fee structure. Is there transparency? Sure. Because that's one of the things that I think you can tell by our passion about this. We believe in what we do. I mean, and that's why I wanted to, I don't mind giving away the stuff and the data so you can become the best version of yourself, but I wholeheartedly sleep very well at night knowing that we're doing the best we can to make sure people live their most fulfilled life. And then the other thing you had to ask is, do they meet your needs and your money beliefs? Does the way that I look at money, the way that I think about solving financial problems aligned with theirs? If you are someone who only invests in real estate, and real estate is 100% going to be what you do all the time, you may not want to go hire a financial advisor that really believes that stock market investing is the way to grow wealth. Make sure you find someone that aligns with you and can meet the needs that you have, not someone who only has solutions that they recommend regardless of what your unique needs and preferences are. And also, don't forget the financial needs are you looking for that mechanic, where maybe it's a transactional thing where you just got to fix you in your triage moment need at the time. Is it a doctor? Well, yeah, you've got some issues. You need somebody to diagnose and treat that right now. Or is this more if you need the personal trainer where somebody is going to be hands-on, make you and challenge you and hold you accountable to become the better version of yourself? Another thing you should ask is how many clients does this advisor work with? Are they someone who subscribes to the Dunbar principle that they shouldn't have more than 150 clients in any sort of intimate business setting? Or is it someone who has 400, 500, 600 clients? You want to know what will the level of service you experience look like when you interact with this advisor? It ties into that relationship stuff. And I'd encourage you, go check out that Dunbar principle because it is something. There is research that shows us humans. We really can only do 150 relationships. So if you ask your advisor, how many people do you work with? And they work with 400 people, what does that mean? I mean, how well is the relationship? Or is it more transactional? Whereas I love that we pay a lot of respect to that principle. And another thing you can ask is, how does this person communicate? Do I like the way that they talk? Do I like the way that they present information? Are they deep down in the weeds person? Are they a big picture person? Or are they both that can navigate in and out? Not every advisor is a perfect fit for every type of client. So you have to define what communication style will be most effective for me if I'm going to end up hiring an advisor. And then I like talking about, are they an expert in what you need? I mean, I lean heavily and I've turned. But even though I'm the one with 16 years of tax prep and audit and representing clients before the IRS, I think you're almost like, if I would have the power, I would give you a kind of quasi-CPA because I've turned you into that same mindset. Figure out what your expert has specializations in. Is it something you need? Because we often get the question, "Hey, how does it take you to figure out on a withdrawal strategy or a mega backdoor Roth to see if somebody qualifies for that stuff?" I'm like, "Well, it only takes me 15 minutes, but it probably took six years' worth of experience to kind of know all the different elements that are impacting that person to make the right decision." Another question you can ask is, does this person have a line of views? What's their view on debt? What's their view on retirement? What's their view on generosity? You want to make sure not that your advisor has to be a carbon copy of you, but you want to make sure that your advisor understands the things that you value, understands the things that are important to you. And when it comes to counseling in you and giving you advice, is able to speak into those things in an unbiased and effective way, that's ultimately going to be most valuable for you and your circumstances. Well, I think because this is implied when it's something that's sitting under the surface. Sometimes people who have financial advisors, they feel like they're pressured. And that might be because somebody's trying to push you into doing something you don't feel comfortable with. I think people when they meet us, "Oh, they're shocked." Like, when I meet a neighbor or somebody socially, they hear financial advisor and they're, "Oh, no. This guy's going to try to sell me something." Then they're pleasantly surprised. I don't try to sell anybody on anything. I know what we have is special, and I know the skill set has been developed over decades. I mean, that's why we share free content, and I'm very confident in what we have. And I think anybody who comes in here, you're not going to feel sold on anything. It's more of an education because an educated consumer is a better consumer. You're going to be able to make, you're going to come out of the process, even a better version of yourself from a knowledge and expertise standpoint. So if you feel uncomfortable in your relationship because you feel like they're always making you do something, you're like, "What's the catch? Why are they doing this?" That is probably a red flag. So if you are someone who's thinking about, "Man, maybe I do need to hire an advisor. Maybe I am one of the people who's reached that time where it makes sense, I want you to go to moneyguy.com/resources. We have a free deliverable that you can check out, eight questions to ask your financial advisor, and it'll go through a lot of the stuff we covered today. So you can actually ask them, "Are you the person I should be working with? How would you answer these questions so that you can be that informed consumer that hires someone that can be an asset on your financial journey?" What I love is we did this in a very abundance mindset way. Look, I get it. Social media likes for things to be gnashing teeth. We hate them, we're against them. That's just not my worldview. I'm one of those people. I'm going to give everybody their roses and tell them, "Hey, there are advisors that are great on the hourly side. There are great advisors on the retainer. But just because you don't like AUM or your situation is not needing of that, doesn't mean everybody out there is the devil that you say they are. I would just ask you, look into, do the research, look at the mindset, look at what the value is in the situation. That's where the truth lies. And that's why I love that we get to give resources like these eight questions to ask a financial advisor because we know personal finance is very personal and not everybody is cut out of the same way. If we were all the same way, we could all, I just could say, buy the index fund, get life insurance, term life insurance, and make sure you have will if you have kids. Voila! Your 30-minute financial plan is done. But that's just not the way the life works. And that's why I love that we get to meet you on the free side. We get to meet you as you're accelerating your path and becoming a financial mutant. And we're going to reach you at the top at the abundance cycle when you take the relationship to the next level because that dreaded complexity. It's a good problem to have, but it will find you. I'm your host, Brian Preston. Mr. Bo Hanson, go to MoneyGot.com, MoneyGot Team, out. The MoneyGot Show is hosted by Brian Preston. A Bound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the Securities, Laws, and Regulations. A Bound Wealth Management does not render or offer to render personalized investment or tax advice through the MoneyGot Show. The information provided is for informational purposes only and does not constitute financial, tax, investment, or legal advice.
