Latest / The Perfect RIA / All Investment Management is Playing Office [Episode 267]

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All Investment Management is Playing Office [Episode 267] · The Perfect RIA

0:17
Micah Shilanski: The most value you add to your clients is
0:21
reading investment journals.
0:51
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0:54
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0:57
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1:02
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1:06
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1:09
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1:12
to retirement and what adjustments need to be made when
1:16
the markets perform poorly. Visit
1:18
theperfectria.com/guardrails to get your access today.
1:22
Matthew Jarvis: Hello, everyone to another of The Perfect RIA
1:26
podcast? I'm your co host Matthew Jarvis, with me, as
1:29
usual, the man, the myth, the legend, coming in live from
1:31
Wasilla, Alaska. Micah Shilanski, Micah, how are you
1:33
say, my friend?
1:34
Micah Shilanski: Man, I thought it was my secret underground
1:36
bungle. Again, yes, it's not like it's not Parker. I'm doing
1:40
fantastic. Jarvis, another day in paradise, yourself?
1:44
Matthew Jarvis: Doing good, doing it in the office this
1:45
week, a little mini surge. So always excited to be working
1:48
with the team. Excited Micha today be talking about
1:51
investments. And this actually came up recently with an advisor
1:55
who was saying, Hey, do advisors focus so much on investments
1:59
because they can't figure out how to deliver value in any
2:02
other way. And I thought that was a pretty insightful comment,
2:05
you know?
2:05
Micah Shilanski: I think so. Now I want to give a little defense
2:07
to it as well, right? I also think because investments matter
2:11
in the retirement plan, and it's a large portion of the
2:14
retirement plan is money, right? Is the investment, not the
2:18
planning side of it, right? There's a lot of other stuff you
2:20
have to cover, but it becomes a big dollar amount. And so people
2:24
get really wrapped around right? I think it's industry right?
2:26
Because again, like I talked about in previous pods, the many
2:29
issues that we have in this industry is it's so AUM focused.
2:32
It's not households focused. It's not helping your clients,
2:35
it's not heartbeats, it's not time, it's not value, it's all
2:37
about aum. And so at the end of the day, if that's all the
2:40
industry is talking about, that's the focus that's the
2:42
focus that's going to be there. Obviously, so many people are
2:44
going to be looking at investments. And I think that's
2:46
a very clever and I don't be too conspiratorial right here, but
2:50
it's a very clever way that really large companies push us
2:53
that direction, because that's how they make their money.
2:56
That's not how you add value to your client, though.
2:59
Matthew Jarvis: That's a great point, and we need to remember,
3:01
and there's some great lines in here between behavioral
3:04
management and investment management, right? Because at
3:07
the end of the day, and we've talked about this a lot, no
3:10
matter how fancy your investment portfolio, and Nick Murray has a
3:13
great one. I love Mr. And Mrs. Client, if we could beat the
3:16
market by two points every year, but you still run out of money
3:19
in your 90s, did we win the game? Right? So investments are
3:22
critical. They are certainly not the entire picture, but we've
3:25
got to remember the behavioral standpoint, and we've got to
3:28
judge the success of our portfolios, not necessarily by
3:31
their ability to be quote, unquote, the market, but the
3:34
client's ability to stick with it. So if you have the greatest
3:37
portal in the world and the client blows it up in an up
3:40
market or blows it up in a down market, none of the rest of it
3:43
matters. And really it's the down market that I'm focused on
3:46
drivers. Now, maybe it's more anecdotal, but that's where I
3:49
see more issues happen in the past, is in down markets.
3:51
Clients get panicked, they get concerned. They want to make
3:54
massive changes, really in up markets, everyone is really
3:57
happy with kind of aggressive as many issues in up markets. But
4:00
push back on me if you see a different be two to one or four
4:03
to one or two or 10 to one, right? Because, well, and
4:06
there's a lot of psychology there, right? Risk aversion is
4:09
always higher than seeking out the gain. So there's a lot of
4:12
pieces there. And we also have to remember that our clients and
4:12
Micah Shilanski: And Charlie Munger, right? That's what he
4:15
ourselves are constantly bombarded by this message of,
4:18
have activity in your portfolio, right? It's just, it's non stop.
4:21
Because something I always share with clients is, I always say,
4:24
Have you ever went to the New York Stock Exchange at the end
4:27
of each day in every day when the market closes, they cheer.
4:30
They cheer when the market goes up, they cheer when the market
4:33
goes down. Why would they cheer? Even on days when the market
4:36
goes down, because Wall Street makes money on volume. They make
4:40
money every single day, which is why Mr. And Mrs. Client, you
4:43
never see a magazine headline that says, just hold on to your
4:46
investments. You've never seen that says, Just rebalance, buy
4:49
and hold. What you always see is buy these funds, sell these
4:52
investments, buy these symptoms. Why? Well, because the companies
4:55
that pay the financial media, not conspiracy, just look at the
4:58
ads they want activity. So everything we're bombarded about
5:01
is about more activity. Our job, Mr. And Mrs. Client, is to do
5:04
what's going to work best for you.
5:07
said when you were seeing him. And Warren Buffett was, you
5:09
know, I know. What should you do with Berkshire Hathaway, stock,
5:12
buy it and never sell it. Never sell it. Never sell it. Mr. So
5:15
that over a dozen times right of just hold this thing, it's going
5:18
to keep going up. And slightly biased in that, in a
5:21
recommendation, right? But, but also, it's not bad advice that
5:25
they're saying takes long term terms. I find it's really
5:28
important in these client conversations, couple things
5:31
that I need to dispel them of. One of them is a tax illusion,
5:34
right? We got to, we talked about that, dispel clients of
5:37
tax illusions. I also have to dispel them of market illusions
5:41
that are there. And what do I mean by this? I'm talking about
5:45
how they're focused on the markets etc, and thinking that
5:48
that is a direct return on their retirement or not, or if the
5:52
market went up by x or down by x, what their portfolio did. And
5:55
one of the things I work on, especially in our process of
5:57
success with new clients, is saying, hey, the SP 500 is a
6:01
really cool benchmark for certain things. However, I want
6:04
to create a bob and sue mark. What are the two of you need to
6:07
do to make sure you're retired? Because it doesn't matter what
6:10
the SP500 does. It only matters what you do, and are you on
6:15
track for retirement or not? Is that going to be okay? They
6:19
really like that idea, right? Because I'm trying to customize
6:22
this now, is elements of the s, p, going to be in there, or
6:25
elements inside of that customizable? But I wanna show
6:29
are you on track for your retirement? And I want to get
6:32
out of all of this conversation, up markets, down markets, etc.
6:36
Matthew Jarvis: So Micah, things like that, that kind of
6:37
terminology, that way to educate clients. That's where, as an
6:40
advisor, you can get a lot of ROI return on investment from
6:44
your time, right? So if you say, I'm to spend the next 100 hours,
6:46
or the next conference I go to, I'm gonna attend every mutual
6:49
fund presentation or crypto presentation or whatever, you're
6:52
likely not gonna get an ROI. Maybe that'll be fun. And let's
6:55
say that you could even, in some way move the portfolio returns.
6:59
Again, it's not going to matter if you can't keep the client to
7:02
the plan. So this is where, when I go to a conference, this is,
7:06
hey, what are you telling your clients about crypto? When your
7:08
clients say, I want to put everything in crypto, how are
7:10
you answering that question, not from a philosophical, not
7:13
esoteric, like literally, how are you answering that question
7:16
when the market falls 50% How are you answering the question,
7:18
Hey, should we sell everything as this time different? Those
7:21
are the things where I can get an ROI, that's where I can
7:23
really deliver value to clients. Is helping them stay with the
7:26
plan now, but it's more than just words that we use. Micah,
7:30
you and I were talking before we hit record about that. A lot of
7:33
design of our portfolio is about behavior management, the kind of
7:37
positions that we own, kind of rebalancing, way that we do, how
7:40
we explain it to clients, how the statements read. All of this
7:43
is from a behavioral standpoint, because we're dealing with
7:45
humans and not some AI engine, though. I guess that would
7:48
probably be worse.
7:50
Micah Shilanski: Yeah, money's emotional, right? There's all of
7:52
these things you don't think it is have a conversation about,
7:54
you know, estate planning with a blended family. Money's
7:56
emotional on so many different topics. So investments is the
8:00
same. What do we need to do to build a plan that meets the
8:04
client goals and has the greatest likelihood that they
8:08
are going to stick with the plan? That's what I'm going for.
8:10
So majority talked about this before, too on the bottom, I
8:12
don't know too much.
8:13
Matthew Jarvis: We haven't talked about so far as we go
8:15
with six hundred episodes later.
8:16
Micah Shilanski: Yeah. I know, right. One of the things that I
8:18
really like to talk share with clients is saying, I want to
8:22
take the least amount of risk it has to take to meet your goals.
8:26
And now that's not giving you a risk to me two questions and
8:29
saying, if you won the lottery, what would you do with the money
8:31
tomorrow? Right? But it's saying, hey, my job is to tell
8:34
you, what do you need to do to meet your goals. I'm not
8:38
wondering what an emotional questionnaire says you should be
8:40
doing with your money. That's a great way to go broker, to
8:42
manage your money by emotions. We want your money. Manage your
8:45
money based on your investments, your cash flow, your retirement,
8:49
etc. That's how we need to be looking at this for the long
8:52
run.
8:53
Matthew Jarvis: You know, I want to make sure that also covering
8:54
both sides of this, which is this is not a pass to be like
8:57
negligent or or to just sort of ignore clients investments. And
9:01
we see that sometimes we'll meet with advisors, they'll have
9:03
hundreds of clients off 1000s of not a system for rebalancing.
9:07
There's not a system for investing. Every client has a
9:09
quote, unquote customized model, which means whatever I felt like
9:12
that day, correct? Now I can't rebalance it because it's super
9:15
unwieldy, so I just ignore it. There's no pass on that. The SEC
9:18
and the vendor call that reverse churning. There's no pass on
9:21
that, but we quickly get to the margin of diminishing returns
9:24
once you have streamlined into a sofa models that all of your
9:26
clients use with the risk tolerance based on their needs
9:30
and accommodate whatever unique financial situation they have.
9:33
The margin of admission insurance catches on really
9:35
quickly. If you're saying, Hey, should we be 27.2% in this
9:39
position, or 27.3 you're not making a difference there?
9:42
Micah Shilanski: Yeah, it's 100% the case. Now I can say I was
9:44
guilty of that, right? Especially when I first started
9:46
Jarvis, like all of my clients, had kind of quasi different
9:47
Matthew Jarvis: It's knowing which ones to plan and which
9:49
models, what was going on, etc. And I really felt like I was
9:52
doing a good job, because for each client, I was understanding
9:55
their needs, figuring out what portfolio would be best, and
9:57
what do they want to invest in, what do they not want to invest
9:59
in, kind of building these 1000s. But at the end of the
10:02
day, it became this, as you said, unruly beast that I wasn't
10:05
able to add the value we needed to add. So we had to make some
10:08
big changes, and we say, Hey, cut down at the end of this,
10:11
what are just the core models that this really is? And then
10:14
clients have to get their different allocations to those
10:16
models, or to have their risk tolerance be where we want it to
10:20
be. But besides that, you know, I need to cut this down to a
10:22
core, handful of models that we can manage. You know, gear
10:25
towards retirement. This is the power of a niche, right? Like a
10:28
lot of my clients are retirees, federal employees preparing to
10:31
retirement. So what does that mean? That means great. They're
10:33
really similar in a lot of their goals. So my models are kind of
10:36
geared. I've got some younger clients too. Well. The great
10:39
news is, with younger I have less fixed income, right? I
10:42
mean, it doesn't have to be a complete model setup, but
10:55
ones you aren't right. So it'd be all sorts of getting into
10:59
commodities and futures trading and adding crypto allocation and
11:02
stuff. But you need to say, hey, here are lanes I work in, and
11:04
here are lanes that I don't work in. So that when those
11:07
temptations come along, when we as advisors who are notoriously
11:10
have short attention spans, who notoriously like shiny objects,
11:13
and you say, You know what I should add to my portfolios, is
11:15
this whatever derivatives exposure? No, that's just not a
11:19
lane I go into. And so that helps me narrow my focus. Here
11:22
are the things I own. Here are all the things I do know. And if
11:26
by chance, the world changes, and a new product comes along
11:29
and I evaluate it needs to have a process to go through and not,
11:32
Hey, I just took on Bob and Sue. I bet they like this new
11:34
derivatives exposure. Yeah, that's 100% the case, right? So
11:38
what's that process?
11:39
Micah Shilanski: How do I be effective, and how do I manage
11:40
this in terms it comes a little bit more challenging, I gotta
11:42
say. Challenging, I gotta say, if you're gonna own individual
11:44
fixed income items, structure notes, etc, this really does
11:47
come make your portfolio a lot more complex. So you really
11:50
gotta ask yourself, right? So you're diminishing returns,
11:53
where is the value that's going to be here? Is this something
11:56
I'm going to be able to monitor and really roll out with a lot
11:59
of my clients? I mean, structured notes are kind of
12:01
cool. However, they come with a lot of more time management
12:04
issues.
12:05
Matthew Jarvis: They do. They're harder to rebalance. You can't
12:07
really rebalance them. They throw off all the models. This
12:09
is also something that we need to look at, right? How are we
12:11
doing this at scale? Right? If you've got 100 or 200 or however
12:15
many clients, you have an ensemble enterprise practice,
12:18
you have 1000s of clients, there's got to be a streamlined
12:20
way of doing this. It can't just be well, this way, I'm gonna do
12:23
it here, and I'm gonna do it differently. The other way,
12:25
you've got to streamline this stuff, because it's not, it's
12:27
not bringing a lot of return to the table. It's got to be
12:29
straightforward doing it differently. Time to step up.
12:32
Over here, we need a so box sound effect. Micah, like, I
12:35
don't know what the sound effect for soapbox is, but ladies and
12:38
gentlemen, if I could have your your attention, please.
12:39
Micah Shilanski: So one of the things that we need to be
12:42
focused on right now, right? And I'd love to call out advisors on
12:45
this is, right, assuming you're not driving pull up your
12:48
investment account, what was your contributions to your
12:51
retirement account this year and last year? Right? How much have
12:54
you made? Now, I'm not just saying your IRAs. I want to say
12:56
everything you're saving for retirement, right? So not just
12:59
for one case, etc, all the money that you're saving, where is it
13:02
and how is it allocated? And show me how that's allocated
13:05
compared to the rest of your clients. You know, are you
13:07
investing the same way that you're recommending to your
13:10
clients, or are you a special and unique snowflake, that
13:13
you're having your own little models and you're not actually
13:15
putting your money where you tell your clients.
13:17
Matthew Jarvis: There's a lot of issues here, and advisors get
13:20
really heated about this one, Micah, and I suspect is because
13:23
most advisors know that they are following their advice. And so
13:27
there's a couple of angles here. One is Micha, you and I are both
13:30
our average client. We're business owners. We own multiple
13:33
companies. Our financial situation is dramatically
13:35
different than most of our clients. We could make a real
13:37
case to say our personal investments could be much
13:40
different than clients. We can make that case. There's
13:42
definitely a case to be made there. Yeah. But it comes back
13:45
to if I'm going to tell a client to do X, if I'm going to tell a
13:47
client max fund retirement accounts, if I'm going to tell
13:50
them to have a diversified portfolio, if I'm going to tell
13:52
them to own equities for the long run, I have to do the same
13:55
thing, even if by some chance, I'm able to do some other exotic
13:58
thing, take on leverage, access to something else, I have to do
14:02
the same thing. And if I'm not, I am doing myself and my clients
14:06
a massive disservice. So this isn't about like arguing the nth
14:10
degree here. It's if I don't do these things, I am doing my
14:13
clients and myself a disservice.
14:15
Micah Shilanski: 100% the case, right? One of the things that I
14:17
love to share with my clients is the fact that saying, Hey, I
14:20
believe so much in the investments that I'm
14:22
recommending. I own the exact same things I'm invested in the
14:25
exact models that you are now. It might be slightly different
14:28
allocation wise. Again, my time horizon for years. Great news.
14:33
You're going to retire before me, so I'm going to be here with
14:35
your retirement, right? But that means I'm going to have a little
14:38
bit less in some areas, but I'm still going to own a lot of the
14:41
same things you own, because I want to make sure that if I'm
14:44
committed to something, I should be investing my money in as
14:46
well. Now Mr. Mrs. Client, that does present a conflict of
14:49
interest, I do understand that. So we might be owning the same
14:51
things. And if you would ever want to see what I own in my
14:54
account, I'm delighted to open it up and show you to prove that
14:57
I own the same thing. Is that, okay? Yeah, you ever had someone
14:59
take you up on that once. Oh, interesting. Yeah,
15:02
Matthew Jarvis: I never have. I'm always surprised. I'm always
15:04
thinking I would like to see my tax repairs tax return. Yeah, he
15:08
never offers to show to me again. Sometimes people get hung
15:11
up on this. They say, Well, hang on a second. Micah, you're not a
15:13
retiree, therefore your portfolio should be different.
15:17
And the difference, though, is just in fixed income allocation,
15:20
which is the exact same thing I tell a client who's not retired
15:22
yet, Mr. And Mrs. Client, once we get within five years of
15:25
retirement, we need to start building up a five year buffer
15:28
so that when not if the markets go down, we've got fixed in same
15:32
goes for me. I am more than five years from retirement, so I can
15:36
make a case. Micah, that I need zero fixed income allocation. I
15:39
still, however, this just my personal allocation. I still
15:42
keep a 10% fixed income allocation so I can own the same
15:45
things that clients have. And I always advise clients to have a
15:49
buffer. You never know what will happen in life. You always need
15:51
a buffer. So does that 10% fixed income drag on my personal
15:55
portfolio? 100% it does. 100% it does. But I'm endlessly
15:58
committed to doing the same thing. I advise to clients..
16:00
Micah Shilanski: Your fixed income hasn't done nothing but
16:02
go up in the last four years. Like, where have you been
16:04
investing?
16:07
Matthew Jarvis: That's a different episode, the after
16:09
hours episode.
16:09
Micah Shilanski: So that's a really important distinction,
16:11
right there. And I tell the clients the same thing, right?
16:13
It was saying, hey, my allocation is going to be
16:15
different. Now. Again, I could justify the same thing with
16:18
younger clients. I have no problem with them putting like
16:20
four one case, they can't touch the money. It was 100% in
16:22
equities. Sure. Equities, sure, right? And I can make that
16:24
argument for myself, but I'm defying not investing in what I
16:28
tell clients to invest in. That's the caveat. Now, there
16:31
are some things that I do that I'm not investing in, right?
16:34
We're changing a lot of annuities right now, just
16:35
because the change in interest rates, they're getting better
16:37
deals. So you could take this to the integrants as Mike do own
16:40
the same type of all of those annuities. Fair point, I do not
16:43
right, but as many of these areas that I can I wish to move
16:47
into to make sure I'm putting my money where I'm recommending it
16:51
for my clients.
16:52
Matthew Jarvis: And again, just like we tell clients, hey, if
16:53
you want to have a fun money account, we can set up a fund
16:55
money account. Here's how it works, and that's I do the same
16:58
thing for the couple of fun money stocks I want to own. I
17:00
want to support Elon Musk, I own Tesla shares that's in my fund
17:03
money account at an allocation that does not impact my
17:05
financial goals, because again, I'm going to follow the same
17:07
advice. Micah, you're right, and this doesn't necessarily apply
17:10
100% right? For example, I have never had a spouse who was
17:14
terminally ill, and yet I still advise clients with terminally
17:17
ill spouses, right? So there's limits to this, but at the same
17:20
time. Any place that I can do exactly what I tell the clients
17:23
do, I'm going to do exactly that thing.
17:26
Micah Shilanski: Not just any place that I can recommend to
17:28
the client what to do, anything the client is going to do that I
17:31
have an opportunity to do. I'm going to do it. Example,
17:35
timeshares. I've been to timeshare presentations before,
17:37
and one of the reasons Kelly and I first sat on one, she's like,
17:39
why do you want to do this? She's like, it's not worth the
17:41
$200 or whatever that this whatever the discount. I was
17:43
like, no, but clients didn't do this, and I was with the sales
17:46
pitch is, yeah, right. I want to see what this experience is
17:49
really like. When I get my statements, I get my statements
17:52
the same way clients get their statements. And I look at it, I
17:54
own the same things. Now when I look at it in that structured
17:56
note, all of a sudden drops in value, but it was guaranteed, it
17:59
was structured. See, but it's guaranteed. Like, what the heck.
18:02
What great news. I get to see how that's reported on Schwab.
18:04
So when the client comes to the question, but on my statement, I
18:06
know it's the same thing, and here's what it means. Remember
18:08
how it's described as A, B and C, let's pull up your statement
18:11
right now. I know that intimately, because my money is
18:14
there too, and I get to see this. I tell the other advisors
18:18
too. I said, Hey, if you have an opportunity to travel like a
18:20
retiree would take those same experiences and see it from the
18:23
eyes of a 6575 eight year old, because now, when we're advising
18:27
these clients, we can see things so much easier, so differently,
18:32
and give them advice to them.
18:34
Matthew Jarvis: Another place this comes in. I don't know if
18:34
we've gotten on or off the soapbox here. The other place
18:35
this comes in is the logistics of how your own account is
18:41
managed. So if you're going in there and just placing your own
18:44
trades haphazardly, or doing your own cashiering haphazardly,
18:47
that's not okay. One, you're breaking the system, right? And
18:51
you're showing your team, hey, this system is only important
18:53
when it's important, but the others you're not experiencing
18:56
like a client experiences, right? So let's say that you
18:58
want to move money from your broker's account to your
19:00
personal accounts, right? Well, if you just go in there and
19:02
transfer the money to yourself, you're not experiencing the call
19:06
in having your call put on hold, having to listen to the
19:09
voicemail be like whatever that case is, waiting three days,
19:11
waiting the fourth day, it's still not there. Is it going to
19:13
happen or not happen? You're missing all of those steps which
19:17
are critical in the client experience. So we have to
19:19
experience this firsthand, even if on paper, we could say it's
19:22
faster to just do it myself.
19:24
Micah Shilanski: Yeah, or you want to see a really experienced
19:25
have your wife call in and do the transfer, and when she's
19:28
frustrated at the experience, you're really going to hear
19:30
about it, right? Because it wasn't taken care of. But that's
19:32
a great way to learn what's actually being said. And how
19:37
does this actually go through? Like, my wife is very smart,
19:39
Kelly, she has gotten a lot of this stuff, but sometimes, like
19:42
with the CPA, we'll be chatting with them and explaining some of
19:44
this tax stuff. It'll be interesting just to hear how
19:47
Kelly receives it. And it's again, that lens of I get to see
19:50
this now a little bit more through a client experience than
19:53
from the advisor side. And there's a lot to learn right
19:55
Matthew Jarvis: Yeah, there is, you know, Micah related to that
19:55
there.
19:57
is how we communicate investments to clients. You and
20:00
I have the opportunity to see a lot of advisors in action. We
20:03
watch a lot of recordings of advisors in their presentations,
20:06
and a lot of times, especially if you're not super attuned to
20:10
body language, you can miss out that you've lost the prospect of
20:13
the client. So you start waxing lyrical about the standard
20:16
deviation of this and how the Monte Carlo simulation is that,
20:19
and you don't notice the subtle glazing of the eyes, right?
20:22
You've completely lost them. And by doing that, you've lost
20:27
credibility. So we think, Well, it's my job to educate, which we
20:31
translate to lecture, because we're used to that, right? If
20:33
you grew up in any kind of cool situation, I go to the industry
20:36
conference that you get lectured at, right? Well, let me just
20:38
glaze over and tolerate this. That's reducing credibility with
20:42
the client. You're damaging that relationship. But if I can sit
20:45
down and I can say, hey, tell me a little about your situation
20:48
when the covid crisis happened and the markets fell like, how
20:50
was that for you? And then they say, Boy, I almost as good as it
20:54
turned around quick. I was going to panic out. That's a different
20:56
discussion. And they said, Hey, I've committed to not looking at
20:58
my statements during those couple Okay? That's a different
21:01
discussion. So we've got to understand the difference
21:04
between truly educating clients and just lecturing them. You
21:08
know, Chairman said, I really think that comes down to
21:10
empowering clients to solve on their retirement, right?
21:12
Micah Shilanski: That's really what we're going for, is, how do
21:14
we empower clients that they're not at the end of this whip
21:17
getting, you know, back and forth, etc, with whatever the
21:19
market's going to do that day. How do we make them the driver
21:23
in this? And so let's pivot the conversation a little bit of
21:25
saying, hey, investment allocations, it's going to be
21:27
what it's going to be. What are things our clients can control?
21:30
Okay, they can control how they're spending money. They can
21:32
control a little bit on their distribution side and a little
21:34
bit on how do we make this more proactive? Now, different tax
21:38
conversation. Let's just leave this on the investment side.
21:40
This is why I love the buckets so much, right? One is our five
21:44
year rule. You already mentioned it before, right? And we explain
21:47
that. So now we're empowering clients that says, hey, we're
21:49
being proactive, not it. But when the markets go down, we
21:53
have a plan to keep you in retirement. Your Cash Flow
21:55
coming, right? So this is empowering to them. Then the
21:57
other thing is the 5% distribution. I think you use
22:00
5.4% right? Either way. What this does? It empowers the
22:03
client. Hey, I want to pull out $200,000 to buy an RV. Awesome.
22:07
So we pull out 200,000 bucks, and we're kind of maxed out
22:09
under a 5% distribution. That means we got to reduce our
22:12
income by about $10,000 a year. This is what it's going to mean.
22:16
Is that something that you would like to do, right? But now I'm
22:19
empowering the client. I'm not telling the client yay or nay,
22:21
it's a bad decision. This is a guide to discovery. I'm giving
22:24
them the tools toward in their retirement, and that's also when
22:28
the market goes down. We're giving them the tools to stay
22:31
invested. Says, Yeah, we absolutely could sell out 100%
22:34
that is absolutely one of your choices. Keep in mind, remember,
22:37
we had a plan for this, that when the market goes down, we
22:40
have five years in reserve. Now. Why do we have that? Five years?
22:43
8, 9, 10, 11, 12, right? In order for that market to come
22:47
back up so we can have those conversations, which are, I
22:50
think that empowering them, that's what really kind of dials
22:53
down the emotional aspect of it and allows them to stay the
22:56
course.
22:57
Matthew Jarvis: It also gives us, like a way to communicate
23:00
and message with the client in a way that's delivering value and
23:02
not just noise. So so often, as advisors, because we're
23:05
bombarded with investment commentary, we're bombarded by
23:08
this fund manager's thoughts or this whomever's thoughts, it
23:11
lets us communicate with clients in a valuable way. So for
23:14
example, anytime that we're rebalancing client portfolios,
23:17
especially when the market's up, we're letting them know, Hey,
23:19
Mr. And mrs.. Client, the markets are up. We're topping
23:22
off your ward chest, right? Or, Micha, you call it that cash
23:24
reserve bucket, we're topping that off. So we have a full five
23:28
years, especially right now, in today's political and market
23:31
environment, right? We're living clients because they're
23:32
concerned, right? They're saying, hey, these things are
23:34
going on. I'm really concerned. Great. New chest is filled to
23:37
the tippy tippy top. We've got a full five year buffer. Now, was
23:42
that really any different than saying, Hey, we've automatically
23:44
rebalanced through the changes in interest rates, blah, blah,
23:46
blah, huge. It's hugely different. It's night and day
23:49
different, actually, because I put it in a framework, the
23:51
client now understands this framework. Oh, they've made
23:53
these changes in my portfolio, so I'm better positioned for
23:56
something to happen now, yeah, have we hedge or no, we're still
23:59
following the same thing we've always followed, but we're
24:01
putting in a way that empowers the client and they understand
24:04
it, right?
24:04
Micah Shilanski: Because now they can do something. Because
24:05
what the heck does rebalance mean? Right? It's a marshmallow,
24:08
right? So really important on these conversations about, how
24:11
are we empowering our clients, how are we putting this in our
24:13
process of success to make sure that they're empowered to stay
24:16
in the long run? Again, my goals are making sure we're achieving
24:19
the client's retirement goals and creating a plan they're
24:22
going to stick with when things get hard, well, it gets tight,
24:26
when the markets go down, when inflation goes nuts, when a
24:29
death happens, right? Any of those things, what's a plan they
24:31
are going to stick with? And I think it's the same analogy as
24:34
what's the best workout plan, what's the best diet what's the
24:37
plan, financial plan, the one you're going to do at the end of
24:40
the day, it's the one the client is going to do. And it doesn't
24:42
matter how elaborate we get, if the client is not willing to
24:45
follow it, it is worthless. All of your time wasn't worth a damn
24:50
cent because the client isn't willing to take action on it.
24:53
Matthew Jarvis: One of the fun is related to what you just
24:55
said, which is, as an advisor, whatever investment strategy you
24:59
follow, whatever that is, you have to be able to come into the
25:02
client meeting with 100% conviction that this is the best
25:06
possible investment strategy. It doesn't mean necessarily that
25:09
you don't think there could possibly be a better one
25:10
somewhere, or that there aren't still pros and cons, or that
25:13
there aren't still risk but you've got to sit down and say,
25:15
Hey, Mr. Or Mrs. Client for your goals, this is the best possible
25:20
move we can make, which means you cannot sit down in a client
25:22
meeting if you're bearish about about equities, and you think,
25:25
man, I really think with this election, the bottom is going to
25:27
fall into the market. All things going to go to hell. You cannot
25:29
sit in that meeting and tell clients they should buy
25:31
equities. You have to sit in that meeting and say, Hey, Mr.
25:34
Mrs. Client, no matter what happens with the election or
25:37
interest rates or anything, I am 100% confident that the owners
25:40
of the world's greatest companies that we also own will
25:43
get up the next day and say, Huh, that's a challenge. Let's
25:46
keep going. And that's why conviction day in and day out.
25:49
And so clients hear that and they share that conviction, but
25:52
it can't be wishy washy. If you're wishy washy, then you
25:55
need to go something else. You start doing fixed index
25:57
annuities or something. I don't know if it needs to be something
25:59
you have 100% conviction behind, which also means you own the
26:02
same thing. Because if you have 100% conviction, you do that.
26:05
That's the only time you have conviction.
26:07
Micah Shilanski: You know, that's kind of funny. And if you
26:08
don't believe that, when the market goes down and the world
26:09
Matthew Jarvis: There is that. And you can just take piece of
26:10
goes to hell in a hand basket, the owners of these companies
26:12
will stand up and accept that challenge. It doesn't matter
26:14
what you
26:19
that. You can say, like, listen, it can all hell at some point.
26:22
Statistically, it will. At odds are, it's not today. This is our
26:25
least matter.
26:26
Micah Shilanski: Yeah, yeah. I like the former. Way you said
26:28
that, not so much the latter, but yes, yeah. Well, that goes
26:31
back to how you position it right.
26:32
Matthew Jarvis: Like, if I sit down with clients, it's easy to
26:34
be pessimistic. Well, the world's got to end someday, and
26:36
if it does, we all, you know, the whole world to death in a
26:39
few months. But that's not super empowering. Find Jesus. Come on,
26:42
we could get some Empower there is that there?
26:44
Micah Shilanski: All right, so this podcast is all about action
26:47
items. So kick it off for us. What's a good action item our
26:51
listeners can take this week and implement?
26:52
Matthew Jarvis: Yeah, and again, I know we end every episode with
26:54
this, but it really is, guys and gals. It's really all that
26:58
matters. There are so many advisors out there that are
27:00
quote, unquote, smarter than Micah and I. They have better
27:02
college degrees, they have more designations. They have this
27:04
alphabet, suitable letters. They speak at conferences, they
27:07
attend conferences, and they're at the other day, not helping
27:10
clients. And so it's the things that you do. So action number
27:13
one, your investment allocation needs to be perfectly aligned
27:16
with your clients, which means have a team member or have
27:19
another advisor. Look at your models, look at your
27:22
investments, and if they're out of balance or out of model, to
27:25
have make that change right now this week. Don't wait for the
27:28
market to move right now this week, make that change.
27:30
Micah Shilanski: Yeah, just shoot an email, shoot a task,
27:32
call your office and just have a get line. I love it. Number two,
27:34
this will be a fun one. Ask your spouse what your financial plan
27:38
is? Don't accept the answer. Well, that's your job, not mine,
27:42
or that you have that, etc. Does your spouse know what your plan
27:45
is? Does your spouse know your cash flow, your investment plan,
27:48
your taxes, etc? And don't say it doesn't matter, right? What
27:51
do we tell clients at the same day? Right? We tell clients know
27:54
the spouse needs to be involved in this process so something
27:56
happens to you. They need to at least know the high level of
27:58
what's taking place, not the details. Where are you at on
28:01
that?
28:01
Matthew Jarvis: I'm so relieved, Micah, you didn't call out mine,
28:03
which there's a little post it note. I have my emergency
28:06
bracelet. If you look at my medical bracelet, it says I
28:08
don't drink milk. Call Micah. So that's what happens to me. Call
28:16
Micah. He's gonna charge you a fortune, and just blame that on
28:19
me. So that's crazy. That's correct, yeah, but it is Jokes
28:23
aside, right? It's physician healed ice, and we think that
28:26
those things don't matter, yeah? And they do, because it's, it's
28:29
a breach in your integrity. It's a breach of my integrity. And it
28:32
was integrity to not have these things in place, and it's making
28:35
you a worse advice. And when you look, you say, how come I'm not
28:37
achieving my goals? How come my clients are they can't trust you
28:41
because you don't trust you.
28:43
Micah Shilanski: All right. Last Action item is, hey, we're
28:45
transforming the industry. Guys, so many days are taking
28:47
wildfire. They're spreading, etc, and it's because the great
28:50
advisors that listen to our podcast like you share this.
28:53
Listen early, listen, often, vote, early. Vote. Often give us
28:56
those five stars. Send this out to other advisors. We have more
28:59
goals to transform the industry, and we cannot do it without your
29:03
help until next time. Happy planning.
29:04
Matthew Jarvis: Happy planning. Before you leave a quick word
29:07
from our sponsors. Hey everybody, I want you to take a
29:10
quick look around your office and on your desk there should be
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The Retirement Tax Services Desktop Tax Guide. And if it's
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not there, or if it's not burned, meaning you didn't
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download the desktop tax guide. This is a must have resource for
29:27
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