Technology is great. There are so many things people can do for themselves now that weren’t possible in the past. For instance, setting up an investment portfolio used to require a broker. The real-time ticker for stock prices was only available on the trading room floor. Funds required management and careful oversight. Now, however, there are countless apps, websites and tools allowing individuals with little to no financial planning experience to set up a successful portfolio and then forget about it.
“A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” – Douglas Adams, from The Hitchhiker’s Guide to the Galaxy #5
So why hire a financial planner? Maybe you don’t, because the set it and forget it model works perfectly fine for you right now. However, the greatest value a financial planner can provide is helping you with all the things you didn’t know you wanted to know.
What does that mean? Matt Robison and I discuss the value of a financial planner in this week’s podcast. In particular, we explore:
- The difference between Financial Planning and Wealth Management
- Building confidence in your path to financial success
- What is a fiduciary and how will the responsibilities of that title help you with your financial plan?
The bottom line is that a financial planner knows the right questions to ask in order to provide you with the best strategy to fulfill your individual wealth goals. Beginning with goal identification and working through all the steps that you need to build a comprehensive financial portfolio, a financial planner has the knowledge, expertise and network to insure your financial freedom.
Welcome to real financial planning broadcast on WkXL available wherever you get your podcasts in the financial planning entrepreneurs podcast feed, which is owned and hosted by Mike Morton, we do this like home and home thing on our podcast. It's weird.Mike:
Hey, Matt, it's great to see you, man.Matt:
So from time to time listener questions on the show, and we've got a great one great in the sense that it could completely destroy your business. You are the proprietor of Morton financial advice, we've got a question that goes right to the heart of everything you do professionally. I'm really looking forward to hearing what you have to say about this. Here is what an astute listener asked. She or he says I can pick a target date fund in my 401 K and brokerage account. Why should I pay for a financial advisor Mike Morton, what is it? You'd say you do hear?Mike:
That's right. I love this question. And of course, I hear these questions a lot. It's great. When something we think about the financial if when you're in the industry of trying to prove your value or trying to say, Hey, why should you pay for these services? And this question was a really good one because it's more along the lines of the portfolio. And that's what I loved about it was like, hey, financial advisors, right? Design portfolios helped me manage my money, we have these target date funds. Now, do I really need to pay for someone to figure out a whole portfolio management money? For me, it seems pretty straightforward. And if you go back and listen to our episodes, of course, what's my answer? Matt, the target date funds are fantastic. I highly recommend using target date funds, I love them. If that is what your choice is? The answer is no. Just use a target date fund and your 401 K's, your IRAs, set it, and forget it and you're going to be great. And I don't think that the person asking this question is gonna get value for someone to designing a specific portfolio for them necessarily. So if that's the question, if it's around wealth management, and investment management and your 401k aren't in your IRAs, depending on your situation, then you could be great. Just setting it now there are so many tools for people out there and users to use. We talked about that as well, in the past 20 years ago, you couldn't even get real-time ticker, you know, what's the quote on these stock prices, you couldn't even get those without calling up your broker. But now, of course, there are a million websites, you can click and find all kinds of stuff. So it's really a great do it yourself environment. So if the question is wealth management, okay, I know they said financial advisor, then you might not need to pay for that kind of advice.Matt:
This has been the end of the career of Mike Morton, financial advisor and owner of Morton financial advice. If you want to get some actual financial information, you'll have to seek it from someone else, no, I'm kidding. Because I love that answer, there's nothing better than hearing from someone who might potentially be in a position of selling you something who says you don't need to buy anything, which is great, that does buy a lot of credibility in my book. And I hear very much what you're saying here, which is, there are people out there who can take advantage of all the tools that exist these days, we've done shows on target date funds, right, you can go back in the financial planning for entrepreneurs podcast, feed, or capital close up, we have a lot of those episodes up in capital close up, check it out, and you walk through, yep, here are the pluses minuses, here's what you need to know, to start using target date funds. And we've gone through robo-advisors, you can actually have bots, essentially assemble your portfolio and do the nimbleness and the trading for you with all the settings. There's so much you can do on your own. So that's all awesome. And I don't want to say this in a way that sounds rude. But people do continue to pay you money. So really, what are they paying for? If they could just get a target date fund?Mike:
Yeah, that's exactly right. Really, you're using the word, financial advisor and that's where people really get tripped up. Because traditionally, you see a financial advisor and you think exactly what this question is, hey, my portfolio seems like I can do okay, I can pick a target date fund, do I really need a financial advisor? But let's break down what financial advisors can actually do for you and what you might be not thinking about. So in that case, it's what I call a wealth manager. And wealth managers do exactly that. Take some of your wealth, look at your overall portfolio design, create a nice allocation for yourself. Now, depending on where you are, if you're mid-career, and you've got some money and you're saving, and you can use a target date fund, and things aren't that complicated, great. But other people if you're getting near retirement, or you don't want to think about it, there's value to wealth management. So I'm not saying there's no value and we'll talk about that. But let's say that's one piece of what financial advisors do, wealth management. What are other things financial advisors do? Lots of other things! So one is doing financial planning. Do you have a plan for being confident about your financial future whether that's your kids in their education planning? Whether it's your wills and trusts, you've got young kids, do you have a trust set up for them or guardians set up for them? Do you have the right type of insurance to make sure nothing comes in sideways and wipes you out? And so those are the things that financial planning, comprehensive planning. Just look into all those areas of your life. That's another thing that financial advisors can do other things or specific questions, hey, I'd like to retire in two years, do I have enough money to do that? You know, there's a specific question that you want to get answered, and you want some professional help. So there's another thing that financial advisors can do. So look at the list, when you're doing research online, like you do, just look at what it is that you are really looking for. And financial advisors can really help with a variety of different topics and situations.Matt:
What it all reminds me of, is something that I actually cited, I wrote an article for Newsweek, about a month ago, and I started it off with a citation of a great source, the Hitchhiker's Guide to the Galaxy. If anyone's ever read The Hitchhiker's Guide to the Galaxy series, the premise here is that a super-intelligent race of beings, designs a computer to answer the question of life, the universe and everything, and they come up with an answer 42. And no one understands what the answer means. And then they realize maybe we didn't understand what question we should be asking in the first place. And I feel like your value proposition is not coming up with the answer. There are plenty of places you can come up with answers. You can go online, you could go to Fidelity, you could go to Ameritrade, whatever, you know, all these services are, and they'll be very happy to tell you, oh, typical person, and he's probably had this much in stocks as much, but we'll set up a thing for you. And they'll do all that. And you'll get answers. But I'm not clear that you're asking the right set of questions by doing that. And it seems like most of what you're doing is trying to help people figure out what are the relevant questions in their lives?Mike:
Yeah, I love the way you said that Matt because it's really true. What you find out there and Google or these other places are a lot of answers because they're assuming you know, the questions. And they're also just using the tools they have available to them to try to give you answers. But really, it's about the questions and discovering what questions are important to you, and what you need to get answered in your life to feel more confident, feel more organized, and feel better about where you are, and your future. So I say that it's funny, every client or somebody that comes in to ask me questions about hey, what do you do? What can we do together? What kinds of things do we cover? They're always coming in, not because of those questions, oh, can I retire in a couple of years? or I need a second look at my portfolio. People are really coming in because of how they feel. All right, that person that's like, hey, my question is, can I retire in a couple of years, they finally reached out to a financial advisor because they feel very anxious, I feel anxious, that I may not have enough to retire in a couple of years, like I want to, or the person that comes into my office saying, Hey, can you take a look at my portfolio insurance, I need a bunch of different things kind of looked at. They're just feeling overwhelmed, and disorganized about their financial life because they're busy doing a lot of other things. And so a lot of what I solve or work on is figuring out what those questions are in figuring out those feelings and how we're going to switch those from being anxious or nervous to be more confident about your future by putting together that plan, which we've talked about, like a number of times on this show.Matt:
I think the other thing that's awfully hard these days is, you and I are both familiar with the psychologist Barry Schwartz. And we've talked on the show before about the psychology of choice. And there can be too many choices in the world. And it makes you a lot less happy. He's found that the optimal number of choices is somewhere between 6 and 14. I beg to differ with Dr. Schwartz because if it comes to something like ketchup, I need three choices. I don't need 6. Yes, I feel good if I'm not like locked into one much beyond a few. And I think that's the problem with information available online about everything these days is there so much, and honestly, there's so much crap, what's really hard to distinguish is who's like Ed's discount, night time, financial advice, and who's giving you something that's high quality, thought out, research-based in statistics and math and experience and is somewhat considered and tailored for you? And again, I'm not trying to turn this into a commercial for you, per say, or for financial advisors per say. What's ironic about us doing this show together is I actually don't really, I'm in the camp of the person asking the question, it's there are things where I'm just totally comfortable saying, Yep, I'm good with a target date fund. That's good enough for me. That's cool. But you're making a good point to me, which is, that we can't just rely on what's available out there on any question. I'll give you another example. My wife's a doctor, right?Mike:
To ask the question, right?Matt:
Like, why should I go to a doctor when there's WebMD and the internet? And I think there's a good reason, knowing what are relevant pieces of information, how to put the right pieces of information together, how to ask the right questions. And look, the answer is honestly, and my wife would tell you this 90% of the time if you've twisted your ankle, and it's pretty obvious, that's what it is, or you've scraped yourself, or if you've already been told by a doctor, you have leprosy, but you can go online and look up what are the symptoms of leprosy. What should I know about leprosy? I'm not meaning to make light of leprosy. I don't know why that came into my mind. But for that initial diagnosis of, hey, I don't feel well, you want to actually go to an experienced healthcare provider? Probably a doctor, right? It's the same thing. I feel like we're belaboring this, but it all makes sense to me.Mike:
The other thing that kind of brings up there is the amount of information, of course, there's tons of great information online, and sorting through it takes time and effort, like you're saying, and figuring out what's relevant and all that. But it also is that time and effort piece, you know, do you have that time to sort through, read all the articles, figure out how they apply in your life, many people do fantastic, that's great. But many people don't want to spend that time and effort, let alone figuring out what are the right resources. And so it takes a lot of effort. And so again, you can research all that stuff on Dr. Google, or you can just make an appointment and go see your primary care doctor, and they can just tell you a lot of the answers right there and save you a lot of time and effort.Matt:
It's never been more important than during a pandemic. I remember when I was working in the State Senate of the state of New Hampshire, and I had anti-vaccine activists coming to see me and telling me about all the bad things that happened with vaccines, like, you know, you might get diseases. And they're saying like, Oh, don't you realize, like these bad effects? I'm like, I'm sorry but with great respect, you got your doctorate on the internet, like, how did this happen? Anyway? All right. Look, I think we've killed this point. But I want to follow up on the idea of Eds discount, Fly By Night financial advice, because there are an awful lot of people out there, and not all of them are created equal. And just because someone is attached to a big name, you may have heard of just because they work for your bank, or they work for someplace that runs commercials on TV, doesn't mean that they're the right fit for you, either. So what should you look at? What should you demand of someone that you might be considering? As a financial advisor?Mike:
Yeah, we've already highlighted some questions about yourself knowing your situation, and what it is that you value or need from a financial advisor. Is it that portfolio management look, I'm about to retire. And I've got a million dollars in target date funds, I understand they're good, but I don't want to deal with it. It's overwhelming it makes me anxious, it makes arguments between me and my partner, I want someone else to manage that money and create that paycheck and retirement for me, boom, there's a great value potentially, for an advisor, or any of the other things that we've mentioned, the things that you're looking to answer and get help with. Have a list of those and make sure the person that you're hiring can do those things for you and is really good at doing those things. Another simple thing is to always recommend finding a CFP-certified financial planner. It's a great standard, but it's pretty hard to get and takes effort. It's not that it's hard, but it just takes a lot of work and effort. And so I think it's a good differentiator just to make sure that person is serious about their craft and their job, make sure their fiduciary that they're working 100% for you and make sure they're aligned with you as a person because you get along with the conversation. Is it resonating? The person sitting across from you what they're saying, how does it feel? Because hopefully there's a relationship you will have for a long time, whether it's, hey, just answer a couple of questions. I don't see it in a few years when I have the next questions. Or if it's you're handing over a million dollars for somebody to manage for you. You really want someone that's sitting with you aligned with you that you're really taking advice and building that trusting relationship with.Matt:
And just to follow up on the fiduciary piece for a second people respond to incentives. I'm not saying that people who give advice where they may also personally benefit are bad or wrong, or that's not the kind of person you should use. But could you just clarify what you mean by a fiduciary? And what does that mean in terms of their incentives and your incentives?Mike:
14:44 A fiduciary is legally responsible for giving you advice that makes sense to you. All right. So they have to put themselves in your shoes. The way I always say to all my clients is if you had all the knowledge and experience that I have, what decisions would you make for yourself? And I try to put myself in my client's shoes, and try to give them those recommendations because that is giving them recommendations for them not based on me, or my biases, or what I think or how I think they should invest or spend their money, but really for them. And that's what the word fiduciary is for legally responsible for giving advice that is for that client, specifically?Matt:
And what is it that and I know we've talked about this a little bit, but how do you know that you're getting value? I guess that is the question because what's so hard is living in an alternate reality. It's the saying it's hard to disprove a negative, it's so hard to prove what if I hadn't done this case of the universe? Because we don't live in the multi maybe we do live in the multiverse, but we don't get to visit it like Dr. Strange. How do you know, if you're getting something valuable? How do you know that you're getting something over and above what you could have done yourself? What you could have looked up yourself?Mike:
It's a pretty difficult question. I think one of the things is if you're at that point, where you're considering you, obviously, did it on your own until some point and then you wait, hire financial advisors, unless your parents already had an advisor, and you just work Trust Fund and, you know, just went straight into having an advisor your whole life. But at some point, if you're at the point where you think, Oh, maybe I should think about calling somebody, you're doing some internet research and some stuff, what is the question you're trying to solve? And that's where we're asking what are your questions? And recognize, okay, if I get those answered and solved, how will I feel? And what is that worth to me? So it's really, it's nothing that I can give you like concrete because it's different for everybody. But a lot of it is whether you're trying to retire, I think that's worth a ton, do I have enough to quit my job, and do whatever I want and financially for the next 30 years and not have a job, I think you should pay some money to figure that out. That's pretty important. You don't really kind of like want to screw that up. So that has a lot of value, whether it's in that you're in the middle of your career with young kids, and you're just ready to get organized. And I don't have it that will and trust or insurances or blah, blah, all this stuff we've talked about, I just really want to get organized. How does that make you feel? And what's that worth to you? I can't answer those types of questions for everybody individually. But I think because you said it's the question, what are you trying to solve? And how is that going to make you feel in the future?Matt:
And just to feed some of that back to you. One way I think about what you just said is, don't expect that what you're going to be able to do is go forward a year or two, and say, here's what I had in terms of my investments. And here's how that performed. Here's what my financial advisor put me into. And here's how that performed.Mike:
Possibly, I think exactly what you're saying if that's what you're hiring for. So that's fine. If you're like, Listen, I don't want someone else to manage this portfolio and do better than the market than what I could do myself. I'm sure there are smart people out there that can do that. Then yeah, find someone that says, Oh, yes, Mr. Robison, I will definitely perform better than your historical portfolio. Here I'm going to do all these smart things and then hold them accountable and track it and see how they do. I would never say or do that. And no financial visor actually can really say, oh, I will outperform you can't make those kinds of claims. But I would never even posit that is what I do. Now other people do their wealth. As I said, wealth managers might say, Look, this is what we do. And here's all the sophisticated tools you use, and blah, blah, blah, stuff. That's not what my practice is about. Because I don't feel it's the most important thing for my clients. But if that's your situation, that's what you're looking for, then just know that, hey, here's what I'm looking for. Here's what I want someone to do, go find someone that says they can do it.Matt:
I'm going to push a little bit on this point because I see what you're saying is hey, man, the proof of the pudding is in the eating. So someone claims they can beat the market, which mathematically we know you can't overtime, you really can't the magic beans are not out there, then, by all means, knock yourself out, go for it and make them put up or shut up. But I don't want to dismiss it entirely because I think you're right. There are some specific things that we've talked about on this show. When it comes to tax planning, tax loss, harvesting, and rebalancing for risk across different types of accounts, you've brought up like, oh, there are I bonds you could invest in and you can get this return. Yep, there are very specific things that you can actually have a knowledgeable person point out to you that you wouldn't just find on your own by Googling, right? Those are measurable, and they're real. And if that's what you're looking for, you should actually see an increase that is measurable in how your money performs.Mike:
Yeah, it's measurable, but as you said, We don't live in the multiverse. So you can't say, oh, I would have done this. And you did this. So instead, here we are. Now there are certain stories, I had that, of course, we find, oh, yeah, I was looking at donor-advised funds, and someone had set aside $60,000 to give away to charity. Okay, so this was the earmark that was just in a checking account. And they had earmarked, they just added to it over time and not $60,000. And then in the same year, this year that we started working together, they got a big bonus. So they're gonna be in a high tax bracket. So I was like, if you give away all 60,000, this year, into a donor-advised fund, then it really brings down your high taxes this year. And so there's an example if they hadn't done that, I could say, oh, mathematically, I just saved you $15,000. So maybe they would have done it that year anyway. So there are certain things that you can do. But let's get back to the original question. Should I pay for a wealth manager, someone to help me manage my investments? Alright, so I broke this down, there are four different things, I think are important here. One is the initial construction of your portfolio. Okay, do you have the right portfolio for you, the right allocation, then there's the implementation, so make some recommendations. So then there's the implementation of that portfolio? Then there's the ongoing management of that portfolio. Do you really want to do that? Do you want to look at the taxes every year, what you could do, what you could tweak, how to rebalance it, and stuff that takes work and effort? And then ultimately, outsourcing all of that without having the mental overhead of even thinking about it, you're going to hire someone to do all that stuff for you. So that they'll just check in with you when they need to. And you don't have to think about it at all. So there's definitely a ton of value to wealth management. And I should have said that started the show, like, definitely I agree. There's a ton of it. Is it just done that makes sense to you? Or are you the type of person that's like, you know, what, target date fund, good enough, set it, forget it? And I'm good to go. So you just have to know yourself what you were interested in accomplishing.Matt:
And I love finishing on that same note where we started, which is, hey, you know what, maybe the answer for you is no. And I like hearing that from anyone who might be in the business of wanting me to say yes, and you're one of those people I might warn, thanks so much for running through all of this.Mike:
My pleasure, Matt. Thanks for joining us in financial planning for entrepreneurs. If you liked what you heard, please subscribe to and rate the podcast on Apple, iTunes, Google Play Spotify, or wherever you get your podcasts. You can connect with me on LinkedIn for Morton financial advice.com. I'd love to get your feedback. If you have a comment or question, please email me at financial planning . Until next time, thanks for tuning in. This recording is for informational purposes only and should not be considered for investment advice. Opinions are expressed as our of the date of recording. Such opinions are subject to change. We do not guarantee the accuracy or completeness of the data presented here.