Episode 193
Understanding How Financial Advisors Get Paid and the True Value of Advice - EP. 193
Introduction
In this episode, we sit down with Dan Kain, Senior Wealth Manager from S.E.E.D. Planning Group, to tackle one of the most misunderstood aspects of financial planning: how advisors get paid and what real value looks like at every stage of wealth. We break down the myths around fees, commissions, and the true cost of financial advice, especially for smaller investors. This episode is all about empowering you to make informed decisions about your money and your life by exposing industry practices and clarifying what you should expect from a transparent, fiduciary advisor.
Key Topics Covered
1. Misconceptions About Advisor Compensation
- Many people believe the size of their portfolio should dictate how much they pay an advisor. For example, someone with $5,000 may think they should pay far less than someone with $1 million, but the reality is that smaller accounts can require just as much, if not more, work.
- There’s a common misunderstanding about what services are provided and how much work comprehensive planning actually takes, regardless of account size.
2. The Challenge for Small Investors
- Small investors often face unique challenges. It can be hard for them to work with fee-only advisors, and they are more vulnerable to practices like “churning,” where advisors repeatedly sell products just to earn commissions, often at the client’s expense.
- This cycle can keep small investors from growing their wealth, as excessive fees and poor investment performance from structured products eat away at their returns.
3. The Value of Fiduciary Advice
- Paying a fiduciary advisor, even if it seems like a higher upfront cost, can be crucial for long-term growth. Fiduciaries are legally obligated to act in your best interest, and their guidance is based on experience and a deep understanding of your unique situation.
- The value you receive isn’t just about the time spent; it’s about the expertise and the hundreds of similar situations your advisor has navigated before. Implementing their advice can lead to significant improvements in your financial situation, sometimes by six or seven figures.
4. Comprehensive Planning Goes Beyond Account Size
- The amount of money you have doesn’t always correlate with the complexity of your planning needs. Someone with less money might have more complicated estate or tax planning issues than a wealthier client whose finances are on autopilot.
- An effective process involves digging into the details of each client’s life to determine the real scope of work required, not just basing it on the size of their portfolio.
5. The Emotional and Practical Value of Professional Advice
- Many clients are frustrated by the cost of planning, especially if it’s their first time working with a professional. But the real value comes from the advisor’s experience, ability to see the big picture, and the potential to improve your financial outcomes.
- If you’re only looking for free advice or don’t see the value in paying for expertise, you may miss out on opportunities to significantly improve your financial future.
Conclusion
This episode is an educational look at the realities of financial advisor compensation and the true value of fiduciary advice. Whether you’re just starting out or have significant assets, understanding how advisors are paid and what you’re really getting for your money is essential. By focusing on transparency, expertise, and a client-centered approach, you can make smarter decisions and set yourself up for long-term financial success.
Transcript
Welcome back to Digital Suits, where
we are wrapping up our mini series with
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:Dan Kane, senior Wealth Manager from
Seed Planning Group, and today we are
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:tackling one of the most misunderstood
aspects of financial planning.
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:That is how advisors get paid and
what real value actually looks like
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:at every stage of wealth for clients.
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:So in this episode, we will break
down the myths between or around fees
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:commissions in the true cost of financial
advice while sharing insights on why
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:smaller investors often face unique
challenges, how industry terminology
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:can be confusing and why working with a
transparent fee only advisor can make all
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:the difference in your financial journey.
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:I'm Travis Moss, the CEO of Seed Planning
Group, and this podcast is all about
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:sharing professional knowledge and
experience with you so that you can
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:get more out of your money and life.
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:Travis: Seems like there are
a lot of misconceptions about.
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:How will a financial planner
or wealth manager get paid?
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:And we talked a little bit about this
in the last two episodes, but somehow
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:people also think that the size of
the portfolio indicates the amount
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:of work that somebody has to do.
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:And we've had a lot of talks about this
internally, um, because we've never
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:had a minimum account size, but we're
getting to the point where we kind of
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:need to, because somebody with $5,000
literally might take as much work or
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:more work than somebody with a million
dollars, but they don't understand it.
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:They just say, well, I only have $5,000.
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:Why should I have to pay you?
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:You know, if I pay you 1%, that's $50.
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:Why should I have to pay you $10,000?
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:Like that person with a million dollars
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:Dan Kain: Mm-hmm.
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:Travis: not understanding, you know,
what the services are, how they work, how
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:people get paid, those types of things.
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:So.
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:Um, there's a lot of misconceptions about
planners, how they're paid, whether or
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:not the size of the portfolio should
dictate how much somebody gets paid.
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:This is one of the biggest challenges
that that small investors have.
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:So, a small investor, somebody
maybe starting out five, 10,
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:$15,000 is very hard for 'em to work
with somebody who is fee only or
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:somebody who is not gonna churn 'em.
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:Churning as a term, when I sell you
a product to make a commission, and
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:as soon as the, let's just say time
period where it's inappropriate to
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:sell you something new, to make another
commission, as soon as that's over,
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:basically they, the, the advisor flips
the product and makes another commission
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:Dan Kain: Mm-hmm.
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:Travis: no investment purpose,
just simply to make more money.
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:And you see it a lot with annuities
and, and you know, different
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:types of UITs and stuff like
that where people are just like.
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:Essentially churning products, they're,
they're selling them over and over
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:and over again just to make more
commissions, always at the detriment.
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:And so what happens a lot of times a
small investor who has 10, 15, $20,000,
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:they stay small forever because
they're giving up so much money in fees
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:Dan Kain: Yep.
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:Travis: bad investment performance
because of structured products.
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:'cause that's where a lot
of the commissions are.
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:Um, so I don't think people
understand that either.
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:You know, sometimes even though you have
less money, maybe you need to pay a little
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:bit more to a fiduciary to make sure that
you have a chance to grow your money.
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:Because if you're dealing with a financial
advisor and you don't have a lot.
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:They gotta make money somehow for the
time that they're spending with you,
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:whether, whether it's productive time
or not, that's a different discussion.
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:But they're looking at you like,
okay, you know, I, if I gotta
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:spend time with you, I gotta eat.
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:So what can I take outta your
account legally, basically.
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:Um, but they, so they think that
like the size dicta dictates it.
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:Um, uh, they, I don't think
people understand how much work is
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:required for comprehensive planning.
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:Um, and, and kinda what it's worth.
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:And so I just wanted to know a
little bit more on your thoughts
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:on, on that kind of experience.
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:'cause you're coming from a place when
people first engaged you prior to seed, it
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:was part of the cost of being in the plan.
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:So you were basically free
to them as far as they know,
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:Dan Kain: Yep,
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:Travis: right?
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:So then you get into comprehensive
wealth management, and now in order
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:to work with you, I have to pay you,
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:Dan Kain: yep.
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:Travis: which is a part of your
discussion with every client that you
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:work with, is what are we charging
and, and what are you getting for this?
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:How has that experience been and
and what are your thoughts on that?
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:Dan Kain: Yeah, and I think you,
you actually just said it, you
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:know, it doesn't necessarily matter
like the size of the accounts that
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:they have or, you know what I mean?
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:Because you can have somebody that
has $5 million, but there's not, just
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:not a ton of work for them to do.
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:I mean, they're pretty
much on auto autopilot.
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:Right?
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:And then
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:Travis: Right?
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:Dan Kain: somebody with a lot less
money that has of these other issues.
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:When we do comprehensive planning,
you're looking at estate planning.
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:They may have some big
estate planning issues or
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:Travis: Yep.
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:Dan Kain: you know, a lot
of tax planning issues.
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:So.
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:Yeah, that dollar amount doesn't
necessarily mean that there's
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:gonna be more planning if you
have more money, um, that's gonna
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:be dictated by life situations.
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:Right.
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:And I know
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:Travis: Yep.
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:Dan Kain: in, in our kind of opening
meetings with, with clients, we really
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:try to dig into like those details with
them and, and try to figure out, okay,
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:what type of client is this going to be?
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:Um, you know, how much work are we gonna
have around, um, all the different areas
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:of planning, not just, know, they have a
few thousand dollars, so they're probably
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:just a small client, no need to worry
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:Travis: Yeah.
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:Dan Kain: Um, so, you know, that
takes, that takes some skill and
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:some investigative skills, I guess,
to kind of determine, all right,
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:what is this gonna look like?
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:Um, you know, the, what's the whole
picture gonna look like for these clients?
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:Um, it doesn't necessarily
mean that money is less work.
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:I mean, it could be the complete opposite.
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:Travis: Well, so sometimes
people, um, they don't understand.
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:They, they have, you know, some kind
of question that they have financially
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:and whether or not you can answer
the question in just an hour or two
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:is a question in the first place.
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:'cause somebody asks you, kinda like a
deep question, you might need a lot of
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:background and it might take a lot of
workup and projections to be able to
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:give 'em an answer as a fiduciary, right?
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:If you're just selling product, it's easy.
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:I can give it to, you
have to sit on my desk.
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:Dan Kain: Yep.
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:Travis: But if, if we're talking
about from a fiduciary relationship,
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:I might have to do a workup for it.
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:But the other thing that people don't
understand is there's times where somebody
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:comes in and, and we're doing planning
and they're frustrated over what they
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:have to pay for the cost of planning.
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:Dan Kain: Mm-hmm.
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:Travis: Let's say it's maybe the
first time they've ever worked with
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:a professional and you know, they're,
you're not paying just for time.
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:You are paying for the fact that that
person or that person's team has looked
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:at that type of situation hundreds of
times and understands nuance and all
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:kinds of other things that we've talked
about over the last two, uh, episodes.
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:You're paying for all of that.
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:And so if they look at this situation,
they say, look, we're going to give
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:you a, um, um, some guidance that if
you implement the guidance, we think
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:it's going to improve your situation
by high six or even seven figures.
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:And, and that's, that's
a pretty common outcome.
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:Um, what is that worth?
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:Is that worth you bickering over, you
know, a couple thousand dollars in fees?
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:Well, you know, I need to see it first.
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:Well, how do you see the
future before it happens?
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:Or is there a chance that I've worked
on hundreds of financial plans and
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:I could sit in front of you and
say, by implementing this, this, and
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:this, these are the expected results.
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:Here's the range of output
that has now been improved.
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:That's worth something, you know?
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:And so if you're going to someplace going,
I don't see why I need to pay these people
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:for it, or I don't pay them, it's free.
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:None of it's free.
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:Dan Kain: Nothing's
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:Travis: It's coming
outta something, right?
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:You're buying proprietary
products, you're buying something.
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:So not, there is not a nonprofit in
this industry, and even like, oh,
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:I went to Fidelity, or I went to
Schwab, and they're working for free.
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:They're not working for free.
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:They're making money off of you.
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:You better believe they're
making money off of you.
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:Dan Kain: yep.
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:Travis: you may not understand how the
product are designed, or like, even if
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:you're sitting in cash in one of their
accounts, they're making money off your
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:cash, they're making a spread off of it.
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:There's no free lunch.
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:So you have to understand that there's,
you are always paying something.
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:So the question is, is what is the
value that you're getting out of that?
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:And if you're like, well, I don't
wanna pay anything for that, then,
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:then, and, and you're not even open
to the idea of, geez, you know.
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:I spend a little bit of money.
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:I make a little bit of money.
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:Then, you know, as, as a
client, nobody's gonna help you.
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:But that also gets you to the difference
in advisors and the difference in
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:who you're working with and, and how
they're able to articulate the value.
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:Because they're, like, we've talked
about, there's a dramatic difference
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:between the different types of planners.
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:And can they actually show you?
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:Can they articulate?
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:Well, we do.
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:Roth conversions are a great example.
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:So if I showed you a Roth conversion
and I showed you, okay, I'm taking money
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:outta your IRA, we're converting over
to the Roth, we're paying the taxes.
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:Look at the difference long term.
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:And you might say, well, you know,
yeah, that makes, that's, I look at,
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:look at how much more money I have.
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:But if, what if, what if
in doing that, you've also
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:manipulated the rate of return.
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:So what if on the IRA you had a lower rate
of return and on a Roth IRA you have a
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:higher rate of return 'cause you're using,
you know, some kind of historic analysis
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:based on a, an estimated allocation.
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:So was the, was the increase in assets
because you have a higher rate of return,
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:or was the increase in assets because
of the differential in the tax planning?
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:You don't know unless your
variables are consistent.
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:That's what you're hiring.
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:You're hiring people who
understand those things.
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:It can actually articulate,
no, this is where the value is.
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:This is where you find those values
so that you're not paying for people
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:just to move you around their products.
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:Dan Kain: Yep.
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:Travis: the industry terminology, making
it look like they're making you money.
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:But in the end, it's kinda like, you
know, if every time you go to the doctor,
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:they just give you a new drug, you know,
eventually you're gonna start scratching
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:your head and going, why am I just getting
new drugs every time I go to the doctors?
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:Dan Kain: Right.
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:Travis: It's, it's like that
with a lot of financial shops.
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:Every time you go in, there's,
they're prescribing you something
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:different or they're just
ignoring you completely, you know?
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:And it's like, okay, what's
this gotta actually do with me?
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:So I, um.
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:I do think that, that it's hard sometimes
for people just to understand what the
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:value is, um, that they're paying for.
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:And that's the sign of, I think
a good planner is somebody who
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:can help them understand, look at
the difference in the two paths.
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:This is the path that
you're taking currently.
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:This is the path that
we think you could take.
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:Dan Kain: Yep.
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:Travis: By the way, it's net of our
fees telling me that's not worth it.
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:Like I've had literally, people
come in, look at the difference.
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:Yeah.
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:I, I know that, and I know you can do
a, a, make a big difference, but I kind
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:of like, I, I don't care about money.
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:I literally had people say, I
don't care about, about having
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:better returns on my investments.
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:Dan Kain: Yep.
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:Travis: And I'm like, I,
I don't understand that.
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:You know what I mean?
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:Like what's the, so if you don't
care about having better returns,
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:why don't, why don't you pay to have
better returns and then donate the
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:returns to charity or something?
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:Right.
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:Like, like, why are we haggling over a
fee if you don't care about the returns?
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:Dan Kain: Yep.
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:Travis: It's a, it's a, it is just this
weird challenge, but I, I think it is
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:very, very difficult sometimes for,
for clients or prospects to understand,
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:what am I paying for in this space?
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:Dan Kain: It's tough.
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:And I think, you know, one of the
things I think that we do really well
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:is, you know, we not only look at their
situation, but then we say, okay, we
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:did these Roth conversions for you,
for example, but then also look at.
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:For your kids down the road, right?
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:Like, this
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:Travis: Yeah.
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:Dan Kain: is what's gonna
happen for them as well.
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:So not
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:Travis: Yeah.
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:Dan Kain: what they have going
on, but also is what is gonna
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:happen for your family too.
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:Sometimes that, you know,
strikes a chord with them, right?
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:'cause they're thinking,
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:Travis: Mm-hmm.
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:Dan Kain: now my kids
get the money tax free.
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:Like, you know, in that example, right?
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:So, um,
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:Travis: Which is also kind of always
a little bit of a oxymoron to me.
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:It's like, I, I really care how
much money I have and how the market
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:does, but I don't care about the
taxes and I don't care about how much
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:taxes my kids are gonna have to pay.
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:Dan Kain: right.
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:Travis: Well, that's because the
problem that you have is when you
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:look at your account, you see dollars.
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:When I look at your account, I see
dollars that belong to you, and I
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:see dollars that belong to the IRS.
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:Dan Kain: Yep.
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:Travis: And so when I look at the
account, I'm always trying to figure
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:out how do I reduce how much of
those dollars go to the IRS for you?
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:Dan Kain: Mm-hmm.
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:Travis: But 99% of people
are the other way around.
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:They're looking, I've got
$3 million in my account.
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:Okay?
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:And 3 million of that's taxable.
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:And so either you're going to pay
the taxes or kids are gonna pay
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:the taxes, but nobody's getting
$3 million out of this thing.
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:Dan Kain: right.
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:Travis: So how do we chip away at
the, at the chunk of money, are they
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:gonna get 700 grand outta you or are
they gonna get 500 grand outta you?
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:How do we chip away at that?
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:Dan Kain: yep,
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:Travis: So one of the compounding
factors I think for this issue is
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:also the non-standardized terminology
that the industry is using.
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:And for instance, there's fee
only and then there's fee-based.
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:Dan Kain: yep.
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:Travis: And I always love when I talk
to somebody who has done just a tiny
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:bit of homework and they'll be like,
ah, so I see that you're fee-based.
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:I really like that.
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:And I'm thinking, you
mean fee only, right?
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:Dan Kain: Right, right.
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:Travis: I don't know anybody who goes, ah.
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:So I see that.
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:I have to have a PhD to know
when you're making a commission
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:from me versus when you're not.
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:I really like that.
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:Like nobody, nobody's
thinking that, right?
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:They're, what they're really thinking
is, is I see that you're transparent and
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:I pay you a flat fee for whatever you're
doing for me, and that's how it works.
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:I don't have to worry about you selling,
you know, me proprietary products and
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:making extra cuts on things and you know
what's in there for you versus what, like,
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:imagine, again, go back to the doctors.
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:You go to the doctors, they give
you a prescription, then you find
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:out that that doctor, you were their
:
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:you know, a villa in Italy for it.
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:You know, like that would
really piss you off.
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:You would not be happy about that.
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:Dan Kain: Yep.
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:Travis: That's what's happening.
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:Like imagine if you found out, oh,
I bought this insurance product, or
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:this annuity, this index annuity.
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:'cause they said, well, you
know, everybody needs it and
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:this is why I should get it.
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:And so I got it and I, and then,
oh, I, I just saw this announcement
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:that so and so won a trip through
the annuity company to, you know,
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:Punana to the Hard Rock Hotel on me.
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:Dan Kain: Yep.
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:Travis: know, it's like, yep.
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:Congratulations.
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:You fell into that one.
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:Dan Kain: and that does happen
with pretty much firms out there.
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:Right?
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:Those types of trips happen.
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:Travis: They're not
supposed to do it anymore.
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:That was, that They took, that
they, yes, they passed a law that,
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:or rule regulations said you're
not supposed to do this anymore.
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:But, um, you know, everything
can be signed away with the right
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:disclosures and the right paperwork.
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:I think for most places it's like we're
not really doing a sales quota thing,
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:but if you sell enough, you get to go
to the leadership council retreat now.
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:You know, so that's for
people up in this threshold.
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:Uh, but we're not gonna tell
you what you have to sell.
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:But some of these things pay you
8%, some pay you 2%, you figure
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:out which one you wanna sell.
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:Dan Kain: Exactly.
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:Travis: Um, or they all, they all
are the same, but some of 'em equate
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:to double the points, you know?
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:So it's like, yeah, okay.
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:Whatever,
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:Dan Kain: Yep.
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:Travis: know.
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:Um, so, uh, but what is it, how would
you explain the difference between
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:Yeah, I can joke about it and our
listeners probably get tired of
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:me saying it over and over again.
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:So how would you describe the difference
between fee based and fee only?
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:I.
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:Dan Kain: Yeah, I mean your, your fee,
your fee uh, advisors or planners like
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:us, the only way we make money is through
either an hourly or, yeah, an hourly
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:rate, I guess you would call it, um,
a flat fee or assets under management.
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:So there's no commissions
involved whatsoever.
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:Um, we have no incentive, you're just
talking about, to sell somebody an
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:annuity and make a huge commission off
of it or sell somebody life insurance.
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:Um, so, you know, all of
our planners are salaried.
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:Um, we don't have that incentive.
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:So, and, and honestly, that ties
in with all of our, like the whole.
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:Part of our business where we even talked
about before, like with teaming, right?
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:It's not my client versus your
client and I'm selling them a whole
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:bunch of products and you're sell
your clients a bunch of products.
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:It's, work as a team and these
are our clients together.
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:They're
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:Travis: Yep.
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:Dan Kain: Um, so yeah, so there's
no conflict of interest really.
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:That's, that's the main thing is to avoid
that conflict of interest where we don't,
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:you know, we're not selling you something,
um, just to make a commission off of it
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:and then never talk to you again, right?
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:Travis: Yeah.
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:Yep.
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:Dan Kain: that's not our
business model at all.
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:But that is, you know, there
is some business models that
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:are out there like that.
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:Um, the fee based is more of a
hybrid model, so you have that, they
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:may potentially pay assets under
management plus a commission, right?
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:They may manage some money
for you, but then also sell
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:you some financial products.
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:So I guess it's more of
a, of a hybrid model.
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:Um.
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:You know, and, and when you hear fee
based, I think people, like you said
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:earlier, confuse the terms fee based and
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:Travis: Yeah.
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:Dan Kain: So they think, oh, fee based
is, I'm not paying them a commission.
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:Well, you very well could be.
375
:So, um, it's,
376
:Travis: and people throw the terms around
too, though I'm a fee-based advisor, but
377
:I don't sell anything where I can make a
commission, but I work with other advisor.
378
:'cause like to call yourself
fee-based or fee only is
379
:actually a dictation of the firm.
380
:You can't be fee only if
the firm has anything where
381
:they're receiving commission.
382
:So that's why you see the bigger
firms, and none of them are
383
:fee only because it can't be.
384
:But then you can have advisors
within the firm who operate kind
385
:of like a fee only, even though
they're licensed, where they work at
386
:a firm to sell commission products.
387
:They don't, but a lot of them partner
with another person at the firm who does.
388
:So they're like, I don't sell anything
that makes commissions, but the
389
:guy down the hall, he sells life
insurances and I send people down
390
:to him and he sends people to me.
391
:Dan Kain: Right.
392
:Travis: Well, guess what that is?
393
:You know that that's a nice way of saying
like, I've got an incentive that like,
394
:I need to send you over to that guy
so he'll send me some of his clients.
395
:Dan Kain: right.
396
:Travis: Right?
397
:So, and that's why it's at the firm
level, that designation is important.
398
:So when somebody says, I'm fee only
or I'm fee based, you really wanna
399
:understand how they operate and.
400
:Are there situations where
they're kind of getting kickbacks?
401
:You know, because it is, I like, I've
been in there, I've been in in the
402
:industry before where I literally watched
advisors give other advisors envelopes
403
:of money for sending them clients,
404
:Dan Kain: Yep.
405
:Travis: you know, um,
because they couldn't.
406
:Split a product fee with them, but they
wanted to make sure that they were,
407
:you know, rewarded for, for sending
them somebody, you know, so they might
408
:throw them some dollars on the side
and it's like, okay, well you know, you
409
:as the, as a client don't know that.
410
:You don't know that, okay, they said
that they only do, you know, only
411
:charge assets under management, but
yet they refer you somebody within the
412
:firm who does something commissions
and that somehow matriculates back
413
:to them in, in most situations.
414
:Most situations.
415
:I don't wanna say all, 'cause I
don't know, you know, I'm sure that
416
:there's some places out there that
are, that keep the lines fairly clean.
417
:But I would say that in the industry it's
probably, um, a minority of places that.
418
:Have a, you know, a firewall there
where they say, look, if, if our
419
:advisor tells you they only get paid on
assets under management, that's truly
420
:the only way anybody here gets paid.
421
:You know, if, if you have an advisor at
a big firm and they're getting paid only
422
:in assets under management, that firm
though, and they say something like,
423
:well, it's not on our approved list.
424
:You know, Morgan Stanley, Merrill Lynch,
any of the big wirehouses and stuff, a lot
425
:of companies pay them a fee to have their
investment products on the shelf at that
426
:investment firm or at that broker dealer.
427
:Um, there's a lot of other
money to be made behind the
428
:scenes you don't understand.
429
:So a lot of times it's like, well, you
know that I actually heard somebody.
430
:Well, how do you pick
investments for clients?
431
:Well, I use the firm's approved list.
432
:Okay.
433
:So that's everybody that's paying
the firm to have an investment
434
:on a list to make it look like
the firm has somehow vetted them.
435
:Dan Kain: Yep.
436
:Travis: What's your vetting process
of the firm's approved list then, you
437
:know, so if maybe I wanna work with
you, maybe you're great and maybe you
438
:have to sell off this list of 8,000
investments, but how do you filter that
439
:8,000 then that's what I wanna know.
440
:And so that's, again, it's, it's
nuanced, but it's, it's the type of
441
:advisor that you might be working with.
442
:And you need to understand these
things when you're, I think when
443
:you're engaging with 'em, because you
know, nobody wants to pay more fees.
444
:Nobody says, well, geez, I'd
like to pay you an extra 1%
445
:of investment management fees.
446
:And in fact, a lot of people,
I'll go index investing so
447
:I don't have to pay a fee.
448
:Okay, but do you understand
all the hidden fees?
449
:Do you understand all the ways that
they're making money off of you?
450
:Because those are coming outta
your bottom line someplace.
451
:Dan Kain: Yep.
452
:Travis: Um, all right.
453
:So a recent, uh, uh, in a recent
meeting, let me stumble over myself.
454
:In a recent meeting, it came up,
um, so we were having a group
455
:meeting and we were talking about
clients that have less assets that.
456
:There was a perception that maybe they
don't need fee only advisor helping them.
457
:Maybe they, they should just go to,
you know, just go, should go buy an
458
:investment, get a in a fund someplace, get
in an index fund, get in a American funds,
459
:just buy a fund, get your money there.
460
:You don't have a lot, you
just need to grow your assets.
461
:Um, and I think that there
could be an argument.
462
:I, I do believe that there is an argument.
463
:Get your, when you don't have a lot of
money and you're trying to accumulate,
464
:it's more important to get as much as
you can working in a diversified way
465
:Dan Kain: Yeah.
466
:Travis: at as low a fee as possible
to kind of build that portfolio up.
467
:Because your, your options at the
small end of things is you're either
468
:going to get a lower quality advisor,
um, because lower quality advisors
469
:will work with lower paying clients.
470
:That's the reality of that.
471
:Um, or you're going to be getting
sold things that are very expensive.
472
:Dan Kain: Yep.
473
:Travis: Um, and where you're gonna be
dealing with like pro, pro proprietary,
474
:proprietary, let's go over that.
475
:You're gonna be dealing with
proprietary type of en en
476
:engagements where I call it Vanguard.
477
:And they tell me what fund to buy, right?
478
:Or, or what's, what's, they won't
even tell me what's funds available.
479
:They'll say, these are all the
funds that are available based
480
:on how much money you have.
481
:These are the funds that you can get into.
482
:Um, but they won't necessarily tell you
the difference between the funds, right?
483
:You've gotta figure that out yourself.
484
:So that means you now have
to become investment expert.
485
:Um, so people with less assets, I think do
or would benefit from a fee only advisor
486
:because they would avoid the commissions,
the proprietary stuff, getting in higher
487
:quality investments right from the get go.
488
:Um.
489
:There's just a ton of
issues that plague 'em.
490
:So let's focus on this a little
bit 'cause I do know we have a
491
:lot of listeners that are in that.
492
:I'm just getting started phase.
493
:We would call 'em like Sprout
or Ignite Clients here.
494
:Dan Kain: Yep.
495
:Travis: Um, what are some of
the challenges that are facing
496
:that group of clients that are
just trying to get started out?
497
:They've got 5, 10, 15, $20,000
that they should be aware of.
498
:Dan Kain: Yeah, I think, and you kind of
mentioned it, right, like getting started
499
:and not getting frustrated when things,
um, don't quickly ramp up in that space.
500
:Right?
501
:So it's getting started and
being consistent with, you
502
:know, putting money away.
503
:I think having.
504
:You know, a planner or somebody who,
who can be by your side to actually
505
:show you, all right, this is, this
is what you will have someday.
506
:Right?
507
:Like, don't get frustrated that this
is gonna take a while because it
508
:Travis: Yeah.
509
:Dan Kain: It's, it's, it's a slow build.
510
:Right.
511
:But, um, know, and even, you know, away
from the investments and, and not even
512
:necessarily younger people, but even
people with, uh, that are approaching
513
:retirement that may have smaller account
balances that are like, you know what,
514
:why am I paying for this planning?
515
:I don't have much money put away,
but there's other factors that go
516
:into all of these other things that,
that you can be helped with, right?
517
:Like even like social security planning
518
:Travis: Yeah.
519
:Dan Kain: pension selection,
those types of things.
520
:So, um, I think it kind of falls in like
the younger crowd, just kind of having
521
:somebody by your side to help guide
you, but also, you know, even the crowd
522
:that's getting closer to retirement.
523
:If you may not have a ton of money
saved, but there's a whole bunch of other
524
:factors that advisor, a good advisor,
525
:Travis: Yeah.
526
:Dan Kain: can help you save long term
of making the right decisions, right,
527
:the make, making smart decisions.
528
:So,
529
:Travis: I think that that's
a good point though too.
530
:That age group that you were talking
about, like, I'm getting new retirement.
531
:I've got three or $400,000 that I think
is where most of the retail abuse is.
532
:So what I mean by that is if you
wanna know where the most sharks
533
:are looking to make a buck off of
somebody, it's in that dollar amount.
534
:Because when you have three, $400,000.
535
:Um, you can see how you
could run outta money.
536
:You can see how you could spend
that much quicker than, say, if
537
:you have a couple million dollars,
538
:Dan Kain: Right.
539
:Travis: um, and maybe bigger
pension and bigger social security.
540
:So what happens is you've got every
insurance agent, every broker, every small
541
:advisor kind of competing for that three
or $400,000 trying to sell their thing.
542
:That can make a commission.
543
:And a lot of times you end up with
products like indexed annuities,
544
:Dan Kain: Yep.
545
:Travis: variable annuities, fixed
annuities, CDs, stuff like that there
546
:where they prey on your fear of losing it.
547
:On the fear of running out.
548
:Dan Kain: I was just gonna say, it's
a lot of fear-based selling right
549
:Travis: Yep.
550
:Dan Kain: Yep.
551
:Travis: And they make
massive commit commissions.
552
:But your upside gets inebriated
and, and your access to
553
:principle can be taken away.
554
:And, and my experience with
clients in that size is.
555
:Yes, there is a, a potential
that you could run out of money.
556
:There's a potential, anybody could run
outta money, but the bigger risk is
557
:not that pot pool of money not growing
at all because you, you ended up in
558
:a product where it's the top side is
cut off where losing access to your
559
:principal and now life happens and you
need some of that principle and you
560
:can't get it without blowing up All
these quote guarantees that you've paid
561
:for that will never come to fruition.
562
:Um, because you know what?
563
:When you only have three or $400,000
and something happens to one of the
564
:kids, you don't think of yourself,
you think of the kids and you cash
565
:out part of that three or $400,000.
566
:And a lot of times that's blowing
up some of the products that the
567
:smaller advisors are gonna be selling.
568
:Most likely, if you're dealing in the
three to $400,000 range and you're not
569
:dealing with a fee advisor, you're gonna
be dealing with commission heavy products.
570
:You know, or proprietary products.
571
:'cause you're gonna be dealing with
smaller advisors, you know, people who
572
:are newer in their learning or in their
career, or you're gonna be dealing with
573
:people who are more seasoned in their
career, um, but not as successful.
574
:Lemme put that way.
575
:Right.
576
:And that's why they're still
selling commissions or, or higher
577
:cost products, trying to, you
know, get their next paycheck.
578
:And that's a lot of times where
we see churn and stuff like that.
579
:So I think that that's really, I think
that that's really, really good advice is
580
:because it isn't just about young people.
581
:This is also about, you know, I
have a lower assets for maybe my
582
:age and, and, and retirement goals.
583
:And it allows me to be preyed
upon based on, oh, aren't you
584
:afraid you're gonna run out?
585
:Let us show you how you won't run out.
586
:Dan Kain: Yep.
587
:Travis: Um.
588
:So I, I also think that it's
like, it's like habits, right?
589
:Like you need to have,
you need to be prepared.
590
:And having, um, a coach and having
you establish certain disciplines
591
:early is really important.
592
:It's harder to change when
you're midlife, right?
593
:I'm in my forties, I can say it's a lot
harder to get up and join a gym than it
594
:was when I was in my twenties or thirties.
595
:Um, you know, so it's
just harder to change.
596
:So you build the habits early,
um, and get yourself set up.
597
:You can accumulate faster, then you
have a lot more options, uh, and
598
:a lot more flexibility as you age.
599
:Um, and then you have
that compounding interest.
600
:You know, you're, you're, you mentioned
it, you know, it sound, it feels like it.
601
:It's very slow.
602
:Your first $10,000, when you make 10%,
it's gonna go to 11,000, and that's
603
:not gonna feel like it did anything.
604
:You're gonna be like, so what?
605
:What's a thousand dollars?
606
:Dan Kain: Yep,
607
:Travis: Your first a hundred
thousand, when it goes up 10%,
608
:same 10% that it did when you had
10,000, it's gonna go up to 110,000.
609
:Dan Kain: yep.
610
:Travis: Now you're gonna say, Hey, that's
cool, but it's still only $110,000.
611
:But when you have a million,
it goes up to 1,000,001.
612
:Dan Kain: Yep.
613
:Travis: Now you're gonna say,
well, that's a, that's a fancy
614
:car I could buy right there.
615
:And when you get to 3 million,
it's gonna go up $300,000.
616
:Then you're gonna say, okay, I
could that, that's a vacation house.
617
:You know what I mean?
618
:So you're, you're, you have to understand
that it's not sexy and it's boring, but
619
:in order to get to the bigger number, you
have to go through the smaller numbers.
620
:The way that compounding math works, you
wanna get all those thousands as you can.
621
:So if you have an opportunity to
keep more money in your pocket or
622
:give yourself upside on investments.
623
:You, you need to seriously consider how
are you appropriately doing that, even
624
:if it means you have to pay for a coach,
625
:Dan Kain: Yep,
626
:Travis: because what you need to
do is avoid the pariahs coming and
627
:basically keeping you small because
they're, they're living off of you
628
:because they're not successful and
they bent your ear and they got you
629
:kind of ensnared in kind of whatever
kind of business that they're doing.
630
:Dan Kain: yep.
631
:And that, and like you said, that first,
uh, that first a hundred thousand dollars,
632
:that feels like it takes a while, right?
633
:It feels
634
:Travis: Yeah.
635
:Dan Kain: when is this gonna happen?
636
:And then all of a sudden the compound
interest starts to accumulate and
637
:it's like, whoa, okay, here we go.
638
:And you get some momentum, and you
get some momentum and momentum.
639
:And all of a sudden, you know, like you
said, on a million dollars, a hundred
640
:thousand dollars, that's a lot of money.
641
:but it, it, it is a slow process,
for people who are just starting out.
642
:But, you know, if you have somebody by
your side to tell you this is gonna look
643
:like and show you what this is gonna
look like in 10, 20, 30, 40 years, um,
644
:I think it makes it a little bit easier.
645
:Travis: And I don't think you
have to have a million dollars
646
:by the time you're 40 either.
647
:Like I can think of a handful of
clients that we have that their goal
648
:by retirement and retirement was
like, I think late fifties, early
649
:sixties for them was to have a million
dollars and now they're at $2 million.
650
:Dan Kain: Right,
651
:Travis: And, and that was
five or six years ago.
652
:They retired, you know, just before COVID.
653
:And so you can see how quickly it
took 'em 30 years to get to a million.
654
:It took 'em six years to get to
2 million or something like that.
655
:You know, it was a pretty, it was a pretty
explosive pop from a million to 2 million.
656
:I, I can't tell you exactly how much
time period, but it's a short amount
657
:of time when you think about it.
658
:It took their entire adult
life to get to a million
659
:Dan Kain: Yep.
660
:Travis: and then.
661
:It took the, essentially we're
a couple years into retirement
662
:and now they're at 2 million.
663
:And they're like, well, I
never thought I'd be here.
664
:And you know, you get that sheepy little
grin like, okay, now what do I do next?
665
:You know?
666
:'cause it's like I never
thought I'd be here.
667
:You know, when I was a kid,
everybody talked about maybe
668
:someday you get to a million.
669
:And I did it.
670
:And then, wow, now I'm at 2 million now.
671
:And then, and this is why when, when
you re, when you retire, a lot of times
672
:your, your goals and things change.
673
:As you get into like your seventies, that
compounding math just starts to get wild.
674
:Dan Kain: Right.
675
:Travis: here you are, you've
been disciplined your whole life.
676
:You've accumulated a couple million
dollars, you get to retirement and
677
:you, and you don't need a lot of it.
678
:Right, and that's part of how you
accumulated it because you've been pretty
679
:disciplined living within your means.
680
:So you get to retirement, now you
have this big pot of money and
681
:you're like, okay, well I'm still
nervous 'cause I'm retiring, I'm
682
:not getting a paycheck anymore.
683
:Dan Kain: Yep.
684
:Travis: so I'm, I'm not really
thinking about philanthropy
685
:or giving to the kids at all.
686
:Then you get into your seventies and
you start looking at what the RMDs
687
:are gonna be and you go, holy cow.
688
:I never thought I'd have
three and a half, $4 million.
689
:I don't know how I got here.
690
:Dan Kain: Yep,
691
:Travis: Um.
692
:But I'm looking at the tax bill that's
coming my way in the next couple of years.
693
:What can I do about this thing?
694
:And that then all of a sudden,
philanthropy comes in and the kids,
695
:you know, giving to the kids or setting
money aside for the grandkids come in.
696
:And that's when that conversation
actually starts to get fun because
697
:you're subconscious or you're mentally
dealing with the fact that you also
698
:never thought you'd have that much money.
699
:Uh, but it happens.
700
:And, and, and it just, it just goes to
show, you know, it's, it is that last
701
:10 or 20 years, not the first 20 years,
702
:Dan Kain: Mm-hmm.
703
:Travis: you need to save in
the first 20 years so that you
704
:have something to grow off of.
705
:Dan Kain: Yep.
706
:Travis: But the big growth is gonna
come in the last 10 and 20 years.
