Latest / The Perfect RIA / How Investments Work With Your Clients [Episode 255]

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How Investments Work With Your Clients [Episode 255] · The Perfect RIA

0:34
Matt: Today's podcast is brought to you by TPR live. That's
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important details. All righty. Back to the show.
1:04
Micah: Welcome to another amazing episode of The Perfect
1:07
RIA podcast. I'm your co host Micah Shilanski and with me as
1:11
usual, the legendary Matthew Jarvis. What's going on, bud?
1:14
Micah: You know,
1:15
Unknown: the day, so always excited to get fired up doing
1:22
practice management, right? And you and I are constantly
1:24
talking. Well, we're constantly talking to each other. By the
1:26
way if y'all ever saw that, the endless text thread between
1:29
Micah and I, you'd thought we were like 14 year old girls
1:31
texting each other constantly. But we talk to each other a lot
1:33
about our practices. We're constantly talking to advisors
1:36
about practices. In fact, like I was having lunch yesterday with
1:38
an advisor and we were specifically talking about his
1:41
investment models and luckily this advisor very good practice
1:44
very mature practice. He was looking for the angles, saying
1:47
like, how do I spend less time on invest but we see the
1:51
opposite from newer advisors. They're like hey, what software
1:54
should I get in which model should I use in which which tab
1:57
should I be using? And so we see this this dichotomy emerge in
2:00
the industry.
2:01
it's such a such a good thing to bring up right and to talk about
2:03
because I see so many times this is an excuse for playing office
2:06
service, Jarvis. That's 100% of what there's 'No Micah, the
2:09
investments matter so much and blah', right? We'll talk about
2:12
that in just a little bit. Right? But the reality is the
2:15
vast majority of the time that you spend on this, you are
2:18
playing office and we can go through a whole lot of scenarios
2:20
as to why and where that's going to creep up. And that's one of
2:23
the things that I really pick on anytime we have to look at a
2:26
trading company or you know, investment platform or like
2:29
Orion or BlackDiamond software, etc. I'm not picking on them
2:31
directly, just more in general by these comments. Yeah, but
2:34
they spend way too much time looking at stupid features that
2:38
don't actually matter at the end of the day to the client. Now I
2:41
get from their perspective, the advisors are asking for these
2:43
things. So they want them but they don't mean a damn thing.
2:46
They're not going to increase alpha, they're not going to
2:48
deliver more value. Right? So what should you really be
2:52
looking at? I know we had a great question from one of our
2:54
members kind of come up. We're gonna kind of weave into this a
2:56
little bit that talks about, you know, how do we explain
2:58
investment how do we do investments and then, you know,
3:00
are all clients profitable? That's a great question. These
3:03
are things we need to talk about, Jarvis. I know got my
3:05
list of things that I do when I'm talking about investments.
3:07
But what do you do when you're talking about investments to
3:11
Matt: Well, there's a lot of things that go into this and I
3:11
clients?
3:13
know your very similar approach in that investments are the last
3:16
things we talk about. When we're talking with a client or we're
3:18
talking about a prospective client, right, we're going
3:20
reverse or right, we're talking about cash flow. We're talking
3:23
about risk management. We're talking about taxes, we're
3:26
talking about income which is a part of cashflow, and only then,
3:29
just for a minute, we are talking about investments. In
3:31
fact, if you took our One Page Financial Plan Masterclass,
3:34
you'll see that the investment line is basically like build a
3:36
portfolio that will support your income in retirement, and that's
3:38
kind of the end of it, the end of the discussion.
3:40
Micah: Yeah, yeah. I
3:41
Matt: Now again, for our listeners, and thanks for being
3:41
mean, that's really where it kind of needs to be because you
3:43
got to think why are these clients coming in and hiring you
3:45
and this is the part that we forget so often, is clients are
3:48
not coming in. If you're listening to podcasts as a
3:50
financial advisor, you're not an institutional money manager. If
3:52
you are I'm sorry for you I hope you're doing very well. It's a
3:55
great career right? It's just a different path, but clients are
3:57
coming to you, they wish to delegate these things. And they
4:00
want to know if they're on track for retirement. So Jarvis, your
4:02
100% right on we always have to start at the top right, the
4:05
tippy tippy top financial plannings. One thing I was
4:07
talking about our advisors on our team is whenever there's a
4:09
question, make sure you're going up to the 30,000 view first,
4:12
before we get into details. Guess what, a 30,000 foot if
4:13
part of the TPR nation, you
4:14
we're going two different directions, the details are
4:16
gonna confuse the hell out of every single person and we gotta
4:19
get on the same page at 30,000 feet first, before we start
4:21
coming down. So what does that mean? You kind of hit it a
4:23
little bit before, Jarvis. For me, that's the five areas of
4:26
financial planning, right? We got estate planning, risk
4:28
management, retirement income investments and taxes. You've
4:30
got to be able to go through those five areas at high levels
4:32
and into details. And investments is a tool of
4:34
achieving your goals. That's all that is, right. So first kind of
4:37
really know where the client wants to be in all these other
4:39
areas first, then I can pull investments in as the tool is
4:42
the accelerant is the way to achieve these other goals.
4:44
Investments is not the goal in the end.
4:48
might be thinking I get that I get comprehensive plan and I'm
4:50
really fond of that, but my clients are coming to my
4:52
prospects are coming in. And even just myself like I'm drawn
4:55
to the investment like a moth is drawn. And we have to remember
4:58
that we're constantly being bombarded by the messaging. It's
5:01
like conspiracy of a costume party, but the messaging that
5:03
it's your investments are all that matters. That's all that
5:05
matters. Why we've been worried about the messaging, right? Why
5:07
is the cover of CNN or the CNN news feed or the cover of Money
5:10
Magazine, whatever, it's always saying 10 new funds to buy by
5:12
the way, this is the same language I use for clients,
5:15
right? I say Mr. Mrs. Client, have you ever seen a news
5:17
publication that says just on the same investments we
5:19
recommended last year? Have you ever seen that? No. You've never
5:22
seen that every headline is this headline: Buy this horse. That's
5:25
why Mr. Mrs. Why? I pause I reflect back and say why why do
5:27
you think that is? I don't know. It could never be the case of
5:31
the same investments make sense for more than a day. That yeah,
5:34
that's really good point. Why is that? So? Let me tell you why
5:36
Mr. Mrs. At the end of each market day when the stock market
5:39
closes, there's still people on the stock market for mostly
5:41
symbolic they cheer everyday that the market closes, it
5:44
doesn't matter if it went up or went down why why did they cheer
5:46
every single day? I don't know what... Because Wall Street
5:49
makes money regardless of which direction the markets go. Now
5:52
clients never thought of this by the way they think Wall Street
5:55
makes money as we make money. That's not the case. Wall Street
5:56
makes money on trading Fidelity Schwab LPL they all make money
6:00
on the trades and that's who's paying these and these media
6:03
outlets right when you see the commercials the commercial isn't
6:05
for long term investing. The commercial is for XYZ fund.
6:07
That's who's paying for this. So they want you to trade Wall
6:10
Street wants you to trade Fidelity wants you to trade
6:12
everyone wants you to trade. We don't want you to trade. We want
6:15
you to achieve your financial goals but we have to remember
6:17
that you're constantly being bombarded with the message of
6:19
trade trade trade, which is really the message of 'Pay us.
6:22
Pay us. Pay us.'
6:23
Jarvis that is such a fantastic language, right? Because it's
6:26
really putting the things in perspective. First of all, what
6:28
are we solving? Well, we're not solving for increasing Wall
6:30
Streets' revenue, right? We're solving for achieving our
6:33
clients goals and that ties nicely to the next piece. And
6:35
this is one of the things that I like to add to clients is: Look
6:37
we'll hold an investment as long as it makes sense to hold that
6:40
investment. And if there becomes a time it does not make sense to
6:44
hold that investment and kind of a good way to think about this.
6:46
Would I this again today, and if the answer is no - then I
6:49
probably need to transition out of that and we need to move
6:51
somewhere else. So sitting in and holding your investments for
6:54
the next 60 years and ever looking at him, not the camp
6:57
that I meant. This is something that should be reviewed, but not
7:00
actively traded on all of the time. Right. And I think
7:03
sometimes clients get that a little bit confused, but saying
7:05
well, passive investments means you shouldn't be doing anything
7:07
with them. And active investments means you're trading
7:09
every single day. Signal - there's a lot of middle ground
7:12
that's going to be there in order to make sure that you are
7:14
viewing things. And Jarvis, I like that language a little bit
7:16
too because it also gives me a little bit of permission with
7:18
clients about we'll say we do a little bit of a model change or
7:21
let's say we do a rebalance and it just happens the client came
7:24
in on Thursday, and then we change up our models next week
7:26
for some reason. And now it looks like we're actively
7:28
trading in a client's account and say it's great news Mr. Mrs.
7:31
Client, we've owned this other investment. I know you only
7:33
owned it for a week, we actually owned it and all of our accounts
7:35
for years and it came time that we moved out of it. And we
7:38
weren't gonna keep doing something just because we just
7:41
put you in it. We want to make sure that it's the right thing
7:43
for the long term.
7:44
Do I get another great quote and I think early analysts we've
7:47
talked about all that episodes. Early in my career, I didn't
7:49
think it mattered how you communicate. And I thought that
7:51
the technical knowledge was everything right? That the
7:53
investment Alpha was everything that this was really the thing.
7:55
And then the longer I've practiced and the more advisors
7:57
we've coached, the more I realized that how you
7:59
communicate is everything, a phrase that I use constantly,
8:02
especially when performance comes up and I got this one from
8:04
Nick Murray, which is Mr. Mrs. Client, if we're able to beat
8:07
the market by 2%, let's say we can beat it by 2% every year and
8:10
you run out of money at age 83. Did we win? Did we win? And the
8:15
question blows client's minds because we have somehow in our
8:18
mind that if we beat the market that solves all problems, but
8:21
that is the only thing we need to do. That kind of clicks well
8:24
wait a second, we could beat the market and still run out of
8:26
money. Oh my goodness or Mr. Mrs. Client if we beat the
8:29
market by 2% every year but you pay 10% a year to the IRS and
8:32
taxes. Did we win? Right, so my job one of my jobs as a
8:37
financial advisor, especially with investments, Micah this
8:39
goes to your point, step back to a 30,000 foot level because
8:42
again, everything that we're getting to hearing from
8:43
messaging this is let's get down to the absolute [...]. People
8:46
don't really talk about the Morningstar rating much anymore.
8:48
But that was the big thing for a long time. How many stars does
8:50
it have, or whatever the case may be? We need to get them to
8:52
step back and we need to step back as well.
8:55
Ok, Jarvis, so just one of the ways I like to get clients to
8:57
step back and focus off of the stock market and more on
9:00
themselves, is I use a lot of that same language. We start
9:02
walking through it and says okay, Mr. Mrs. Client, what's
9:04
going to be really important, is it we're tracking the index,
9:08
right? Is it that we're tracking the stock market and I'll use
9:11
air quotes because that same thing right with that Nick
9:13
Murray quote comes in there. It says the more important thing is
9:16
that we're beating your retirement benchmark. So, one of
9:19
the first things we need to do is we need to create the Bob and
9:22
Sue retirement benchmark. And that's going to be directly
9:25
aligned to your goals and the things that you want to achieve.
9:28
And then we're going to map that out for the next 15-20 years.
9:30
And as long as we're on track for the Bob and Sue retirement
9:33
benchmark, then we're set right so it's my job to look at it and
9:37
say how do we keep on track and it's also my job to raise the
9:39
hand if I think we're getting off track from the benchmark.
9:42
And when you say, hey, we need to make some decisions to make
9:45
sure we don't affect your retirement. So I don't care
9:47
about Wall Street making money. I care about Bob and Sue the two
9:50
of you being on track for retirement. Is that going to be
9:52
okay with you?
9:53
I love it. And we could spend what we've spent entire
9:55
masterclasses on this. I wanna shift on how to detect as an
10:00
advisor if your're playing office in this story I have to
10:03
tell this is gonna make sense you and I are similar age or
10:07
older, though you're much younger than I am. Your way like
10:09
is much younger. Someday you will catch up to me, son. But
10:15
you did start in the industry two years before me so that's
10:17
why this battle will go until the end of time
10:18
Micah: Very much.
10:20
Early in my career we had I can still picture my mind with a
10:22
lateral filing cabinet. And in it we kept the fax sheets for
10:25
each of the American funds mutual funds. Now again for
10:28
those younger advisors. They don't know what fax sheet is
10:29
because the internet was not reliable back then. Or a filing
10:32
cabinet is it's okay, filing cabinets. So we would order from
10:35
American and there was a count on each file. There was a count
10:37
of how many Growth Fund of America fax sheets and it was
10:40
somebody's job every week to go through there and to see how
10:43
many were an order however many we needed, so it was full. And
10:47
for those of you who can't see us Micah is laughing because he
10:49
knows this stuff. I think at least half our listeners are
10:51
like I've no idea what these guys are talking about. But that
10:55
was this insane example of playing office. And it's the
10:58
same if you're spending a bunch of time on Morningstar or
11:00
Bloomberg terminal or whatever you're doing and something that
11:02
helps me steal those weeds Micah is to think about how insane it
11:07
is to assume that me sitting in my office somehow has an edge
11:11
over Goldman Sachs. Like somehow I'm going to derive some piece
11:14
of information that Goldman hasn't already priced into the
11:17
models, right. There's just I'm bringing no value to the table.
11:20
know, just another way that I like to look at like today like
11:20
Well, you
11:22
how do advisors today kind of play office with it? A couple of
11:27
things. One, it was like my client communication just a
11:29
second. But one, how are you preparing for your meetings? How
11:33
much time are you spending reviewing investment performance
11:37
in detail now this should be streamlined. It should be
11:39
minutes and that's about it. On preparing for client reviw. I
11:41
know this isn't doing a horrible job for a client by the way, but
11:44
are still doing everything they're supposed to do. We
11:46
streamline our process down on it only look at the things that
11:48
I need to look at when I'm preparing for a client. So where
11:52
something that goes wrong will have an advisor comes up says:
11:54
Micah, how do I calculate the month by month net performance
11:56
of... You never get this question from any advisors? No?
12:01
Matt: I was tuned out I was like, grab a pencil and slam it
12:03
in my eye if I have this question come up.
12:05
So I've still got it from members. How do you count your
12:07
month by month performance blah, blah, blah, blah. And I'm like
12:10
not only do I not calculate and I don't even look at it. That's
12:13
not my job. I also don't calculate day by day. I also
12:16
don't calculate second by second, right that's not what
12:19
I'm focused on. So if you do have the buckets report, right,
12:22
I get a bigger picture. Are they on track with keeping up the
12:24
distributions? That's the bigger thing I'm looking at. I will
12:27
also look at five year trends with clients to kind of show
12:30
them a little bit more, especially if clients are you
12:33
know, big on the distributions, right? They're taking out kind
12:36
of the max distributions. Sometimes it'll happen and be
12:39
like Micah, you know, I gave you a million bucks. And you know,
12:42
five years later, it's only about 1.3 million. You know, I
12:44
really expected more growth in that period of time. And I could
12:47
say, Well, that's true, Mr. Mrs. Client, but she also took out
12:50
$600,000 in the same period of time. So, if you wouldn't have
12:53
taken that out, we'd be over 2 billion, right. So so I do like
12:56
to know net flows over a period in time. Now please, note,
12:59
nowhere in that comment I made I gave a percentage I talk in
13:02
dollars over this right I'll talk about maybe a 5%
13:05
distribution is the max, but I'm not talking percentage growth
13:08
over time. Because you can't go to store and spend percentages
13:11
right we go to the store and spend dollars is the client on
13:13
track dollar wise and where are they?
13:15
Yeah, every time you say percentage, I've always... My
13:17
mantras is if you're gonna say percentage, just say marshmallow
13:20
because it will make about as much sense and that's not to be
13:22
disrespectful to clients. It's just not how their minds work,
13:24
guys, financial advisors, you know, we can take a 37% of any
13:27
number, right clients don't think that way. Micah, let's
13:30
pivot just a little bit on this. This is something that you and I
13:32
have I don't know if we've ranted about on the podcast, but
13:34
we run into advisors that have outsourced their investment
13:37
management which there's no harm in that. In fact, for most
13:39
advisors that's a good rule but they don't understand how much
13:43
the client is paying. You and I talked to an advisor once who
13:45
wanted to join our coaching program. And he's part of a very
13:48
large RIA organization very, very large. You would definitely
13:51
recognize him as we said we'll call him Dave. Dave, how much
13:54
are you paying to be on this platform? He says guys, I don't
13:57
pay anything to be honest platform.
13:59
I sweet talk these guys. I got such a deal. I have such a great
14:03
negotiator. They almost pay me to be on here.
14:06
Matt: Jarvis, just nailed it. Right. This is kind of the big
14:06
Micah: Yeah, this is a true story. The guy had I think he
14:08
had $100 million in assets or so this is not like his day one.
14:11
And we said: Dude come on what do you pay? What are you paying?
14:15
I don't know about pay anything. How are they running the shop?
14:18
Well you know well so there's a clients are paying 50 pips.
14:21
Okay, okay. Okay, so you're charging one we're using that
14:23
thing. Now sometimes it's worth paying for other people to be
14:23
and they're charging 50 pips, so they're getting 1/3 of your
14:26
revenue. So when you said you weren't paying them anything,
14:29
you're paying them 1/3. Well, the clients paying that now this
14:32
is where we get hung up. That's why we always talk about when we
14:33
part of this. For sure. But what we want is knowledge of this
14:35
talk about red profitability referral, we're saying what is
14:38
every dollar of fees is coming out of client account and then
14:41
how many of those dollars end up on your tax return? Because in
14:44
this case, the client is willing to pay a buck 50 and you're
14:47
giving a third of that to this conglomerate who's not really
14:50
doing anything for you.
14:59
right the ignorance of it or the glossing over it and saying,
15:02
well, it's free, I don't pay anything. You're just lying to
15:04
yourself, knock it off. That's not how you run a business. It's
15:06
not how you do successful financial planning. And where
15:08
does that end? Right you just start lying to clients when
15:10
their distributions now you're taking out 12% a year you're
15:12
fine. You'll make it to 85. We wouldn't do that. Why would we
15:16
do it about our practice? We have to be looking at these
15:19
things with open eyes on what they really cost.
15:22
do. Playing office is reviewing the trades made by the trade
15:27
manager. That's playing office. Understanding how much the fee
15:36
is and what they're getting the client and you are getting
15:38
returned that's working on your business right? So there are
15:41
times to really dive deep , Micah I've heared you have
15:43
talked about that too. Hey, go through your entire P&L start
15:45
canceling everything that's all there and see what happens right
15:47
there's that's a place to spend time. Reviewing cash flow.
15:50
As long as the credit card charge doesn't say The Perfect
15:53
RIA - cancel it. Sorry.
15:54
That's right. Reviewing the client's cash flow where the
15:57
money is coming up that's worth reviewing where the dividends
16:00
went on the last special distribution now, no stop that.
16:02
Another good thing that could be done from time to time depending
16:03
Micah! Ryan, who's one of our longtime Invictus members, he
16:05
on your skill set is if you're really good at processes and
16:06
asked that we speak about what about clients or prospective
16:07
flows and whatnot. From time to time I like to look in and see
16:10
great from our office perspective, how are the trades
16:13
being communicated to the investment management team? How
16:13
clients that have preferences and he didn't really specify
16:15
will we free up cash flow on a monthly basis for clients?
16:18
What's the turnaround time when a client needs money that it
16:19
what preferences other than outside of the models? So I
16:21
sends in right? These are things you should know these are things
16:23
you should not micromanage. So if you don't know those things,
16:26
you should figure out what they are and then we can kind of look
16:29
at them and say okay, you know, or is it serving the client
16:32
best? Okay, I can argue that it's working on my business. I'm
16:35
making sure things are taken care of. I'm not getting caught
16:37
up in the detail which is executing those individual
16:40
things. I'm also not arguing it takes t plus two or t plus three
16:43
or how long it should be. I said tell clients great news by
16:45
Wednesday of next week we should have this money in your bank
16:48
account. Right? That's generally my standard line across the
16:51
board also when task are due etc. It's Wednesday of next
16:53
week. It's more than enough time for our team to get it done.
16:56
Most of time it happens a lot sooner than that. But again,
16:59
that's just really good communication with clients.
17:12
would imagine this is probably things like ESG or maybe it's at
17:16
least because I run into like, can we buy Facebook or can we
17:20
not own real estate? You know, those kinds of things. How are
17:22
you handling that when it comes up? What happens?
17:24
We don't buy racism funds, so we don't buy ESG investments. So
17:28
those are just out. So it depends on what it is right? So
17:31
I have some clients that like to do their own trading. And we
17:34
have play accounts.
17:35
Micah, real quick. You were sort of making a joke about it, but
17:37
sort of not. Like, as an advisor if there's things that
17:39
you are morally opposed to - do not do those in your practice,
17:43
don't do 'em and so, you know, Micah and I have we have our
17:45
things that we're morally opposed to and if a client comes
17:47
in and the day trading could be an example of that buying
17:49
cryptocurrencies, there's different examples of that. I
17:52
will not do things that I find morally wrong. I will not use
17:55
it. Using your morals that are totally blind or you need to
17:57
work on your morals if they're different than mine. Right but
17:59
don't do those things in your practice non negotiable. Once
18:02
you say like, Hey, listen, I don't want to own tobacco
18:03
companies and we can have that discussion. I do not do that.
18:05
Now someone comes into you and their morals are different than
18:08
yours. And it's a non negotiable that is not someone to work
18:10
with.
18:10
Yeah and this came up relatively recently. Well, in the last year
18:13
or so is client want to do this. And you know, it was like nope,
18:16
that's just not something we do. And here's the pros. Here's the
18:18
cons. Here's where we stand on it. I can understand that if you
18:21
have a different perspective that ok but this just isn't what
18:24
we really do and end of conversation, right? You know,
18:27
it was around. Anyways, so I have clients that like to trade
18:30
their own accounts. Well this is a play money, right, we set up a
18:32
new account at Schwab right. So it's self directed it's not
18:36
inside of our accounts - we'll set up a new account for them.
18:38
They can have online trading access, where we can get that
18:40
thing set up. My requirement is this has to be play money, my
18:44
definition of play money, it can go to zero and has no effect on
18:48
their financial plan. That's play money. So if a client has a
18:52
million bucks and let's say we need to cut out, you know, a
18:54
pretty says, hey, I want to pull 100 grand out for play money -
18:58
the answer's no. Right, that blows up my financial plan. I
19:01
got a client with a couple of million bucks and they'd like to
19:03
have $50,000 of play money and they take out a whopping 20
19:07
grand a year. They don't need it right. Go for it. Yeah, they're
19:11
welcome to do the play money and to hold them. Again, the
19:14
question is, is it their preferences, of course, against
19:18
our values, and then it's going to be out or is it does it
19:20
devastate their financial plan there's going to out. If
19:23
preferences violate our models, they're also out. So we do have
19:27
tobacco filters. And alcohol filters, right good Catholic, I
19:30
like alcohol. Some clients that don't like the filter, filter
19:33
the filter as bad as the wine Come on. Now. No Marriott stock
19:37
like these guys are drinking enough, get 'em out. Yeah. So we
19:40
look at those things. So we have tobacco and alcohol filters,
19:43
which we can easily put on clients accounts if they want
19:45
it. It doesn't work on ETFs by the way, so if you're doing
19:49
broad markets, so it's something fun to look at. So those type of
19:52
preferences would be fine. My preference I wouldn't take is
19:55
saying Hey, Micah, I want to review every single holding and
19:57
I want to review every single trade before it's made, etc. No,
20:00
that's just that doesn't fit into our discretionary models.
20:04
with a super concentrated that we're winding down over several
20:09
years. We will not, I will not inlude that money there. Because
20:18
I mentioned I say listen, this is not predictable enough
20:20
there's too much volatility too much risk. In this position. We
20:23
can't once it liquidates will add it back it will keep in mind
20:26
that we will not count it for distribution sale.
20:28
That's a good way to also is one of the things we generally have
20:31
a net worth statement when we're meeting with clients or clients
20:33
that had those concentrated pitches. Like Jarvis go pull up
20:35
my buckets and net worth at the same time. Think about how we
20:37
should probably start with the net worth and walk in a bucket
20:39
versus the other way around. Because right now I walk into
20:40
buckets. Right? And they're like their 3 million bucks, like 1.2.
20:45
They're like what the hell happend and drag them into
20:47
assets. I love to have that net worth statement. It's as you'll
20:50
remember we used to got this 3 million dollars, yep, blah,
20:52
blah, blah, blah, blah. That's the reason we set it up this
20:54
way. Right? So I show it to them in some way. So they don't think
20:57
the money is gone. But again, it's not in that distribution
21:00
bunny.
21:01
Something else when these preferences come up, and like
21:02
this technique I learned from you, which is just to ask a
21:05
little bit more about why the preference. Nine times a out of
21:08
ten the client against me is - no disrespect - but the client
21:10
is kind of repeating a buzzword that they've heard. Right and so
21:13
we need to I think we need to be heavier on small cap stocks and
21:17
we'll talk about that. I had a client actually, Micah, a couple
21:20
weeks ago for a review meeting. She says hey, I heard that
21:21
Fidelity came out with a crypto ETF, I think we should buy it.
21:26
My initial in my mind was like, Oh, give me a break, I'm gonna
21:27
fire this client right now. Well it's really interesting that
21:29
that happened, but tell me a little bit more about that. Long
21:32
story short, she wanted to put $1,000 over 3 million I said
21:34
great news, no worries. But I did also set the stage. There's
21:38
a line between fun money and if you want to be more of this
21:40
we'll open a fun money account, but this is certainly better
21:42
going to the casino. We have to assume that this could go to
21:44
zero. That's not going to cause a problem. Okay, that's fine. I
21:46
just want to put $1,000 in or whatever. Okay, cool. But to ask
21:49
them 'tell me a little bit more about this'.
21:49
This is don't throw the baby out with the bathwater type of
21:52
thing. Right? Now, with the next point of this question that's
21:54
gonna be is where do you separate the baby with the
21:56
bathwater, right. So you know, we're taking a client that's
21:58
meeting or three Ps - personal production profitable, right?
22:00
They're a good client. They want a little exposure and something
22:02
else it doesn't blow anything up. Okay, fantastic. Let's go
22:05
ahead and we accommodate them. Now this is different than
22:07
saying okay, well, what if you have smaller clients that are
22:09
non profitable, but you're like it really doesn't cost me
22:11
anything to have these clients? Should I just bring in somebody
22:13
in house to run them because just kind of pure profit first,
22:16
what are your thoughts on that?
22:17
Don't do it. Don't do it. With every client is a bullet in the
22:20
revolver of compliance. So it will not matter if it's a $1 or
22:23
$100 million client, they can all sink your firm so there's a
22:25
compliance issue. The other issue you're not running a
22:27
nonprofit. If you want to do for pro bono, and you should do that
22:32
outside of your practice. You can call the local library or
22:34
the community group and say, Hey, I'd love to one Thursday a
22:36
month do pro bono financial planning, and bless your heart
22:38
for that. That's an incredible thing. Do not do it inside your
22:41
practice. Practices have minimums. We talked about
22:43
regular green. Everybody has to meet the bottom. There's none of
22:44
this like free money thing. That's not a real thing.
22:46
It could I'm from the West End, we don't have any phrases. So
22:46
So I'm from the north, so forgive me, but my understanding
22:48
of southern talk is that bless your heart means you're an idiot.
22:52
we're just really passive aggressive. We were just looking
22:55
at you like okay. You should do that...
22:57
If you want to do it, I mean, I mean, again, knock yourself out
23:00
in that aspect of it. But treat it for what it really is. Don't
23:02
lie to yourself about it. And that's where I feel advisers
23:05
come in. Alright, Jarvis. Speaking about not lying to
23:06
yourself, this podcast is all about action items. So kick it
23:09
off for us What action items our listeners can do this week?
23:11
Interesting, making a joke about not lying to ourselves. How
23:15
ofted do we lie about our professional and personal
23:17
development, like oh, I'm reading this book I'm learning
23:19
but I don't like I'm listening to people like I listen to every
23:21
single of your podcasts. I think you'll be sure to give it five
23:22
stars. How is Surge going on - I haven't implemented Surge. Okay,
23:25
so don't lie to yourself when you're doing personal
23:27
development that you're just entertaining like could've been
23:29
avoidance behavior aswell.
23:30
Yeah, it can be, right? It's always good to kind of scratchy
23:32
this for me to scratch that learning edge. But then I gotta
23:34
come back down. What am I doing? And then also not putting so
23:37
much on my plate - It's not going to get done. And so that's
23:39
a fine balance from everyone depending on what you can
23:41
execute on but I love that Jarvis you got to be taken
23:43
action. Action item number two. I'm gonna throw in there, review
23:45
your investment conversate your investment process and cut out
23:48
half of it now. How do you know you're talking about investments
23:51
too much - the client is talking about investments too much.
23:53
Jarvis in your client meetings, how often are clients bringing
23:56
up and talking about investments or one hour meeting how many of
23:59
those minutes are your clients or you talking about
24:01
investments?
24:02
When maybe two or three sentences I guess is that a
24:04
minute? Let's call it 5 on the high side. It's about fair right
24:11
five no more than 8 is kind of 10 would be like a new claim.
24:14
We're transferring things more time but on the ongoing basis -
24:17
it's less than five reviewing buckets, talking about
24:20
investments. And that by the way, that's not doing a
24:21
disservice that's not hiding information. That's giving all
24:24
of the key information needed. The custodian bombards the crap
24:27
out of the client with all the details, right? So it's not like
24:29
you're hiding because they get all the details. Your job is to
24:31
show them what they need to be doing. So if your investment
24:33
conversation is more than five minutes, you need to figure out
24:36
what you need to cut out of there to get it to five minutes
24:38
or less.
24:39
Action item number 3 you need to have and this goes to the core
24:42
of The Perfect RIA Surge meetings and time blocking: you
24:44
need to have time on your calendar monthly, maybe weekly,
24:47
but really monthly when you're going to review investments.
24:50
This is not him bored on a Tuesday and I should be
24:52
prospecting so let me review our investmet models. And this needs
24:55
to be an allocated time and anything that comes up on
24:57
investments, even a random thought needs to have a file we
24:59
have a file for our investment policies file, drop things in
25:02
there and the way that is when I look at it. It's the only time I
25:06
look at it. You can tell the easiest giveaway that you're
25:08
playing office is that this wasn't on your schedule,
25:10
whatever it is you're doing, like I'm reviewing investments,
25:12
that's an important thing, but it wasn't on my calendar for
25:14
three more weeks. I'm playing office. 100%
25:16
I love files that I can drop ideas in. Right so that way I
25:16
Hey, Micah. Thank
25:21
can get it out of my mind. I can drop it down and then address it
25:24
later at the appropriate time. So again, you got to do
25:26
something with those ideas. Jarvis that's a fantastic one.
25:29
Another fantastic idea that comes up all the time is give us
25:31
five stars five stars right five stars share this podcast. We're
25:34
transforming the industry with your help. Jarvis, as always
25:36
this is a blast. Thank you so much, my friend.
25:39
you. Until next time, happy planning.
25:40
Micah: Happy planning!