Latest / Mortgage Marketing Radio / Ep #82: The Truth About Money

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Ep #82: The Truth About Money · Mortgage Marketing Radio

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1:17
Hey listeners, Jeff Zimper, welcome to another episode of Mortgage Marketing Radio.
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I am thrilled you're here today and I am 100% confident that after today's episode,
1:45
after you listen to this episode, you are going to be glad you're here too.
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You're going to be glad you're a follower, a fan of Mortgage Marketing Radio.
1:54
So this week, I'm very fortunate and blessed to have a very special guest who I have to
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give a quick shout out to my friend, fellow Mortgage loan officer Ed Connerky, who on episode
2:06
71, we had a conversation about how to have advice versus price conversations and win.
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And Ed and I, our conversation largely focused on becoming financially literate and educating
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your clients about something financially related on every conversation as a point of differentiation.
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And one name came up in that conversation repeatedly.
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If you haven't heard that podcast episode yet, go back to that, right, it's episode 71,
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right.
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So you can just go to Mortgage Marketing Institute.com forward slash 71 to get to that.
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And then you'll understand what led us to this episode today.
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My special guest today is for 30 years.
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This gentleman has worked every day to teach people about personal finance.
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He's widely regarded as one of the nation's top financial advisors, having been named
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in 2016 among the country's top 10 wealth advisors by Forbes Magazine.
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The nation's number one independent financial advisor three times by barons and one of
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the two's 10 most influential figures in the investment advisory field today.
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Who am I talking about?
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I'm talking about Rick Edelman.
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Rick Edelman, author of nine books on personal finance, number one, New York Times best selling
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author with more than a million copies collectively in print.
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His first book, The Truth About Money, was recognized with an excellence in financial
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literary education book of the year award from the Institute for Financial Literacy and
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Gold Medal Axiom Award and on and on and on.
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And since then he's come out with multiple books.
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He's featured on a hundred talk radio shows across the country.
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He's at his own television series and specials on public television airing across the United
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States in Asia.
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And listen, you want to talk about a man making a positive impact in financial planning
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for everyday people.
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Today Rick's firm Edelman Financial employs 161 advisors serving more than 36,000 families
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in 43 offices across the country managing over 21 billion in assets.
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That is only half of the resume and that is some serious accomplishments.
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So I am just incredibly honored to have Rick as a special guest and I've been listening
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to and following him for a number of years on a previous local radio station of mine in
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Los Angeles and just you know, was always impressed with his grasp of financial planning.
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But probably equally important is his ability to take some of the complex concepts around
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financial planning and boil them down and break them down.
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So a simple guy like me, you know, can understand them and I'm just thrilled here to have Rick
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here today and our conversation covers a lot of different bases.
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Number one, you know, we talk about why a guy with such a resume with financial planning
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finds the conversation, you know, talking about money, boring, very interesting.
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And then we get into 11 reasons why Rick believes you should carry a big mortgage.
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We talk about using your 401k to buy homes or not.
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We talk about why most people still, even in the country where we've got a wealth of information,
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most people are still uneducated when it comes to financial planning.
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What are some things we can do about that?
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And we also talk about the future, right?
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How Rick sees mortgage planning professionals in the future, what their role will be, how
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to compete with, right, the influx of technology, threatening to displace us and what is really
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the core of success of anybody who is involved in financial advising of any type, whether
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it be financial planner, mortgage advisor or whatnot.
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We also get into a conversation about the future, which is related to Rick's most recent
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book, The Truth About Your Future.
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The money, God, you need now, later and much later.
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And there's some interesting and compelling reasons.
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I found this book to be very, very interesting through the concept of what the future holds,
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right?
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For instance, we're likely to live a lot longer.
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And so how does that impact our financial planning, right?
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We're likely to live much more healthfully and vital, right, with more vitality than we've
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had in the past.
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And so why this is important and how it impacts our overall investment strategy.
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And then of course, an interesting delve and conversation into technology and the dark
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side of technology.
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Very interesting as we get into this.
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And lastly, for those of you who are at all interested in stepping up your financial
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game, becoming financially literate and becoming more, having more of a fiduciary responsibility
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with your clients, maybe becoming, you know, getting involved to a degree with some financial
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planning aspects of your career, perhaps what about if you're interested in affiliating
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with Edelman Financial and some of the 40 offices they've got around the country?
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How many times do you talk to a client where they don't have a financial planner and you
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wanted to refer them to a competent one, or maybe looking for ways to partner with a financial
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planning firm such as Rick and his team at Edelman Financial?
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Well, we talk about that as well at the end and provide some links in the show notes
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for ways that you can connect with Rick and his firm.
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So all I can say is sit back and joy, don't be distracted, right?
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Take some notes if you need to and enjoy this conversation we have with Rick Edelman.
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Let's get into this week's show.
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Rick Edelman, welcome to the show.
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Oh, it's a real pleasure to be with you.
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Thanks, Jeff.
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No, it's my pleasure, man.
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I really appreciate it very much.
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You know, in the formal intro, obviously I spend a lot of time talking about who you
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are, your kind of background and accolades.
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And for me, personally, the impact I think you're having in the financial planning space
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is, you know, second to none, I guess is what I'll say because as I told you before, I'm
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a listener and fan and follower of yours for quite a few years.
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On the radio, you have made a huge impact with I know thousands of people across the country.
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But one of the questions I wanted to start with in doing some reading and preparing for
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this was, so looking at, you know, kind of your track record of success, if this is somewhat
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accurate, Forbes ranks you consistently in the top 10 of independent financial planners.
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Three times ranked number one over 30,000 families that you've helped 42 offices, roughly
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16 billion in assets under management.
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But something I read about you said, you find the conversation of money boring?
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Well, we're a 21 billion now, but who's counting?
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The, yeah, it is boring.
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I mean, money is, I really, I like to brag that I got through college without ever having
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to take a business class, which is crazy for, you know, a financial advisor with six professional
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designations and lifetime achievement awards and all this stuff.
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But it's because it's not about the money.
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It's about our lives.
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My wife, Jean loves to say that personal finance is more personal than finance.
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And that's really the heart of it is that it's not just about keeping score, which is
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what Americans love to do, you know, how much money do I have, how much money did I earn,
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did I beat my neighbor and, you know, am I making more than him and all this, it's really,
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when we achieve our goals in life, am I able to get my kids through college and off to
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a good start in life, am I able to buy a home, am I able to retire and comfort, can I care
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for my aging parents, am I able to support the community?
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That's what it's all about.
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And it's not about expense ratio and, and P, ratio and technical charting.
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It's not about the markets.
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It's about life.
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And so, yeah, money's boring, but, but clients, that's the thrilling, exciting part.
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Ah, that's interesting.
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So I'm curious, then, you've obviously been in this game for many, many years.
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Financial education is something that's readily available out there in the world today.
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Why do you think that, and this is my perception, so correct me if I'm wrong, but why do you
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think most people still struggle with that area and having a financial plan and succeeding
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financially?
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Yeah, you're right that they're both those points.
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Yes, there's a lot of financial education available and yet people still blow it.
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When I first started back in the 80s, there was no outlet for financial education.
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There was Louis Rookhizer, if you know who that was, you're dating yourself.
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I do.
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Nobody can use the words to go out, but you can't spell his name, though.
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Nobody can spell Rookhizer.
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And, and you had kipplingers, and that was it.
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And so, when Jean and I started our practice, we began with financial education.
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We were teaching college planning courses to elementary school PTA groups, and, and then
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I started doing more and more seminars, and then I was invited to do the radio, and then
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I started doing TV shows, and now I've written nine books from the number one New York Times
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bestselling author, and, and on and on and on, because it's all about financial education.
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So yeah, today, as you said, now there's a huge amount of availability of financial education
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and literacy, and it's dramatically improved, but yet still most Americans are financially
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illiterate, most fail basic financial literacy quizzes.
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Why is that?
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It's real simple.
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Our parents will talk to us these days about sex, you know, my parents never did, but today
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sex is a common conversation at home, so is religion, so is politics, but money is still
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the taboo subject.
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Kids don't know how much money their parents make.
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Kids have never watched their parents complete a tax return.
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Parents don't talk to their kids about money.
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Schools don't teach about money either.
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Only 17 states require that high school kids take a class in financial education, and
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of the 17, only 14 require that they take a test associated with it.
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And employers don't teach about money either.
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They shove papers in front of you on day one saying, join the 401k, but they don't give
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you any financial education about why and how to do it.
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So we're all financially illiterate because nobody has told us of the need to learn how
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this works.
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So who does teach us, most often insurance agents and stock brokers who are trying to
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sell you something, which means you're not getting information, you're getting a sales
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pitch, and they love to intimidate you, obfuscate, they love to make you fear this subject.
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Many Americans have a fear of math in the first place, and they exploit that.
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They make you worry about things so that you're dependent on them.
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The fact is, personal finance and financial planning is not very complicated.
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Investment management is easy.
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There are basic principles.
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Anybody can learn.
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Anybody can implement.
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Anybody can maintain.
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It's inexpensive.
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It's simple.
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It doesn't take a lot of time, but Wall Street doesn't want you to know that.
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They want you to be their slave to their power, and it's not necessary any longer.
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So that's the crusade that Jean and I have been on for the past 32 years of trying to
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help Americans understand how money works and how to put it to best use for themselves.
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Yeah, and I'll have to say, you do a great job of educating on that, and particularly
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not making the conversation of money boring.
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If anybody has heard you're radio show, you're podcasting on TV, clearly you make it
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engaging and fun and talk about it in real world terms.
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So I think that probably, as you recognize, is one of the keys to your success, if you
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will, in terms of building a following.
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I appreciate that.
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So let's face it, the subject of money is boring, and if there are no visuals, there's
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no car blowing up that you can put on TV, and so I do my best to make it as entertaining
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as possible on the air.
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Talkers Magazine named me the number two most important weekend only talk show hosts
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in the country, and we're really honored to be able to get this message out across the
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country.
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Yeah, and what I love about you, if I'm correct, right?
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So you're, as I said, you've got over 30,000 clients that you help manage their finances
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over 40 offices across the country.
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But what stands out for me unique and different about you is that, you know, it's not the
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typical place where you've got to, you know, start with 5 million for an account or whatever
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to get with a financial planner.
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You're literally open to helping write the average mom and pop.
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Yeah, our household minimum is $5,000, and if you don't even have that, we'll work with
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you pro bono.
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It really annoys us that the people who have the expertise, who are best able to give
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you the advice you need, investment advisors, to often demand a $500,000 or $1 million
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minimum.
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I know an outfit that has a $10 million minimum, Goldman Sachs is $25 million.
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You know, most firms won't talk to you unless you're already rich because unless you're
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rich, they can't make a lot of money serving you.
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And we think that's incredibly arrogant.
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It'd be like a physician saying, I will only work with healthy rich people because poor
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and sick people are wasting, you know, they're too much work and asshole.
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It's crazy.
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We can't tolerate that in a society, but we do when it comes to money.
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So 1% of Americans have lots of access to financial advisors and accountants and attorneys,
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but the 99% of America who's working really hard to make things work for them are on their
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own.
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They can't find anyone to help them.
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And so we're devoted not only to serving millionaires.
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We've got a lot of millionaires as clients, of course, 21 billion assets, but we're thrilled
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to serve anyone who wants our help regardless of whether you have a lot of money or not.
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Okay.
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So let's pivot a little bit because we know our listening audience is mostly, you know,
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mortgage loan officers and they're in the streets every day.
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I think on a similar quest, hopefully, and that is to help people make an informed decision
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about their mortgage.
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How would you suggest for the mortgage loan officer listening right now?
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Because I see a lot of parallels to their role and to a role of a financial planner in
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terms of education.
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There's some advice or tips you would give them so that, you know, they could a, differentiate
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themselves by providing education and help fulfill kind of that mission that I think they
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can relate to.
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You know, it's really interesting.
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Mortgage brokers get a bad rap because people perceive them as salesmen.
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And they only deal with a mortgage broker because they have to.
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I mean, nobody wants to deal with a mortgage broker, but what people want is to buy a house.
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Right.
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They have to get a mortgage and that forces them to deal with the loan process.
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Nobody wants to.
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They have to.
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And they don't understand the mortgage process.
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Everybody hates the mortgage process because it's tons of paperwork, tons of time, lots
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of questions, often asked repeatedly.
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I mean, we all move a drill.
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And so mortgage brokers get a bad rap, especially because by definition mortgage brokers are doing
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something that American consumers inherently believe is against their best interest.
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What am I talking about?
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Your granddaddy said to you, owning a home is the American dream and owning it outright
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is what you need to do.
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Own your home, free and clear with no mortgage.
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That's the American dream.
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And that myth has been boisted on the American public for a hundred years.
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So everybody grows up saying, I want to own a home and I want to own it outright because
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that's the safety.
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And here, when they come along to my house, they don't have the cash for that half-million
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dollar house.
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They're forced to get a mortgage.
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So they're forced to do something they don't want to do to do something that is contradictory
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to what their granddaddy told them to do.
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And on top of that, the paperwork process is crazy.
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The fees are ridiculous.
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The exercise is time-consuming blah, blah, blah.
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So mortgage brokers get a bad rap.
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They're selling people a product that nobody wants.
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In fact, I think that mortgage brokers are heroes because mortgage brokers are doing two
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things that most people do not fully appreciate.
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The first thing that mortgage brokers are doing is providing the money necessary to enable
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you to buy the house.
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Without the mortgage broker, you're not getting that house, period, end of story.
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So that's the first thing.
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And if we don't help you buy that house, it's not only bad news for you, it's bad news
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for the entire country because this economy's biggest industry is the real estate industry.
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And it's built on leverage because nobody has the cash to build these buildings, whether
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they're residential real estate or commercial office, industrial, whatever.
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Everybody has to have the leverage to be able to afford these massively expensive projects.
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So the mortgage brokers make the world go round.
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That's the first part.
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The second part is something that I don't even think mortgage brokers fully appreciate.
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And I've been trying to spread the word within the mortgage community for 30 years.
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A mortgage, and I'm now particularly talking about home ownership, not necessarily corporate
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and commercial and all that stuff, because we deal with ordinary individual consumers
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at the retail level, mortgages for ordinary Americans are one of the most important tools
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available to help you achieve financial success.
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In our view, you should never pay cash for a house.
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You should get as big a mortgage as possible for as long as possible, a big 30-year mortgage
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as big as you can qualify for and never pay it off.
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No 15-year loans, no biweekly mortgage plans, no extra payments.
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You just get a big a mortgage as you can qualify for that you can afford, make the regular
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monthly payment, leave it at that, which frees up as much cash as possible, which you can
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then invest, and that's how you help create wealth.
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And it's gotten to the point where I've created 11 great reasons why you should carry a big
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long mortgage.
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It's in a couple of my books, it's in the truth about money, it's in ordinary people extraordinary
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wealth.
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I've got a 90-minute video on the subject.
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I actually have an article on our website for folks to re-vow tell you.
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It's very compelling information, and the nifty thing is, when I talk about why you want
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to get a big mortgage, people listen to me because they know I'm a fee-based financial planner.
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I'm not in the business of selling mortgages, I'm not a mortgage broker, I'm objective,
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I'm an independent third party saying this, when a mortgage broker says it, people think
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that they're full of conflict of interest, it's just a sales pitch, why should I believe
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you?
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So that's why mortgage brokers who know me, they know I'm a big fan of them and I endorse
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the work they're doing.
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And mortgage brokers are doing a terrific, valuable service for the American public.
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And so anything I can do to help mortgage brokers do their jobs, I'm happy to do because
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it's of such great value for the country.
20:23
Yeah, I love that.
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And I know we're going to provide a link to people in the show notes so they can get a copy
20:28
of that report 11 reasons to carry a big mortgage.
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But speaking of your books, I was reading about that in one of your books last night, and
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you have a great example in there about nervous and Nick versus smart Sam.
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And I think what you're hitting on here is kind of back to the original question.
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And I was actually thinking about this the same time while I'm preparing for this interview
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because you obviously have a team of financial planners under you that are dealing with people
20:54
on a regular basis.
20:55
And I'm sure you, just like the mortgage loan officer listening, they still need to,
20:59
in their sales process, they need to differentiate themselves and I'm assuming, well, I know, just
21:04
by who you are, one of the ways to differentiate is through education, right?
21:08
Right.
21:09
And so.
21:10
And that's really the key.
21:11
In other words, mortgage brokers, I believe, if you just go in with the sales page of, hey,
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let me give you a loan, you're competing with every other mortgage broker on the planet.
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What we have to recognize is that one of the mistakes that investors make is compartmentalizing.
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We've got a big, huge complexity in the world of personal finance.
21:30
We have a lot of competing interests.
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I'm trying to save for retirement, but I'm also trying to pay for my kids' college.
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I want to buy a home, but I'm also, you know, got my need to save to help my parents.
21:41
And anyway, we've got all these conflicting issues.
21:43
We've got short-term goals and long-term goals, trying to lower taxes while maximizing returns,
21:49
all this stuff.
21:50
If you as the loan officer are only focusing on helping you buy the house, you are ignoring
21:58
all the other elements of that individual's personal financial situation.
22:02
So my view is you can set yourself apart from the rest of the mortgage brokerage community
22:10
by being holistic, by looking at it from a bigger picture, by saying to the client, your
22:17
choice of a mortgage loan actually has an impact on your retirement savings potential.
22:25
That's a conversation most mortgage brokers will never have with their client.
22:29
And when you begin to help them recognize that this is a bigger conversation, and you refer
22:35
them to a financial planner who is like mine did with you, such as the advisors in my
22:39
firm, the development financial.
22:41
We can now work as partners to help your client, our mutual client, not only get the biggest
22:48
mortgage possible, but simultaneously maximizing their opportunities for retirement success.
22:55
And the client will appreciate this to no end, because now you're not just a salesman,
23:00
pitch, and a product, you're now a trusted advisor helping to serve the client's best interest.
23:06
And boy, what a world of difference that is.
23:08
Yeah, that's such a great point.
23:09
And I have to take a moment to give a shout out to Ed Connerky, who is a loan officer
23:14
that I interviewed on the podcast, who's also affiliated with you, and what kind of struck
23:19
a chord during our conversation was him becoming financially literate, and his goal being
23:24
in every conversation to educate the potential home buyer on one thing that they didn't know
23:30
financially before, as a point of differentiation.
23:33
One of the questions he always asks to your point about the type of mortgage you choose is,
23:37
for instance, somebody shows up in the call, yeah, what's your rate on a 30-year fixed
23:40
mortgage?
23:41
His question is, well, why do you want a 30-year fixed mortgage?
23:45
Yeah.
23:46
Just to start there.
23:47
Right, exactly.
23:48
Just to start the dialogue is the point, because we need to have that conversation about
23:53
the bigger picture and how the mortgage fits in to the overall plan.
23:57
I had a question for you on the 11 reasons to carry a big mortgage, because some people
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probably heard that and thought, well, you know, the new tax law, and I know you addressed
24:04
that as well.
24:05
So, how is the new tax law impacted, you know, the attractiveness of having a mortgage?
24:10
No impact.
24:11
I mean, everybody's looking at the fact that the mortgage deduction, especially on how
24:17
equity loans is changed, lower tax rates reduces the value of the tax deduction.
24:22
Of my 11 reasons, the tax break is buried somewhere in the middle.
24:27
The tax deduction is not a big deal when it comes to the strategy.
24:32
I mean, let's face it, most, I don't know if it's most, but a great many Americans get
24:37
little to no tax break from their mortgage, you know, because of their income situation
24:42
or tax situation or whatever, it's not because of the taxes.
24:45
The number one reason for carrying a big, long mortgage is liquidity.
24:50
What a lot of people do is they take 100% of their available cash and use it as a down payment
24:56
and they mortgage the balance and the only reason is they have to, they have no choice because
25:00
they've used 100% of their available cash, which often includes borrowing from parents
25:04
or whatever, caching in 401k's, who knows what.
25:09
It's a big mistake because if you have no cash, great, you've made the mortgage payment
25:15
a little bit less, but if you lose your job or if you have some kind of other financial
25:20
crisis, anything from the car breaking down to a medical problem or a marital problem,
25:26
all of a sudden you have no resources.
25:27
You have nothing to bail you out of that short-term problem you've got, whereas if you minimize
25:32
the down payment, conserve your cash and invest that money.
25:38
That money remains available to you, should you ever need it, and you can generate an
25:42
income stream off of it to help you make the new mortgage payment, which is now bigger
25:45
than always what it is.
25:47
Liquidity is king.
25:50
If you give up all of your available cash, you've got a really big problem.
25:54
This is why, ironically, the less wealthy you are, the more important it is that you
25:59
have a mortgage.
26:00
I don't care if Bill Gates has a mortgage or not.
26:03
It's not going to make any difference to his net worth.
26:06
For the guy who's got a $100,000 income and 30,000 in cash, oh my goodness, giving that
26:12
cash away where he'll never see it again until he sells the house of that, he's setting
26:16
himself up for a real crisis.
26:18
That's just an illustration that you need to think about this whole mortgage conversation
26:23
in a manner completely different than you are used to.
26:27
Are you a believer in borrowing from, you know, 401K accounts using investment money for
26:33
the down payment on a purchase?
26:35
No, absolutely not.
26:37
There's one exception.
26:39
Definitely not use any money from retirement plan assets.
26:44
That retirement plan is for retirement.
26:47
IRA is an individual retirement account, not an individual I want to buy a house account.
26:53
So never touch those assets because retirement is far more important than anything else
26:58
from a financial perspective.
27:01
If you do have savings and investments, then sure that money is free game for consideration
27:07
for use of the down payment.
27:09
Absolutely.
27:10
Especially if you've been saving and investing with the home purchase in mind.
27:15
But if that savings and investments are also equally earmarked for other purposes such
27:19
as your kids college fund or other reasons, then no, I'd be hesitant to doing that, which
27:26
is again why we have to go back to the fact it's a financial planning process.
27:30
And for that reason, we have to recognize how important it is that we look at this comprehensively
27:38
and holistically and not just, oh, I want to buy a house and do whatever it takes, meaning
27:42
liquidate everything everywhere, let's borrow from everything everywhere and make it happen.
27:46
You might succeed in getting the house and you also might simultaneously succeed at
27:50
destroying the rest of your financial life.
27:51
Yeah, being house rates cash poor?
27:53
Yeah, exactly right.
27:55
And in fact, there's an important caveat or I should say piece of fine print to my advice
28:00
of getting a big long mortgage as big a mortgage as you can get.
28:04
You also want to get the cheapest house possible to maintain your lifestyle.
28:10
In other words, my advice is not that you get the most expensive house.
28:13
You want to get the cheapest house possible that meets your needs and then get the biggest
28:18
mortgage on it.
28:20
This is not advice to buy too much of a house.
28:23
We've all seen that scenario where people buy more house than they can afford and they
28:29
end up losing the house, think back to 08 when millions of Americans found that they had
28:34
bought houses.
28:35
They fundamentally could not afford.
28:36
And here's a news flash for you.
28:39
The mortgage industry got a lot of criticism back in 08 because so many Americans got
28:43
mortgages that were fully levered and then they lost those homes in the 08 credit crisis.
28:48
Not a single American in the country.
28:50
Here's the news flash.
28:51
Not a single American in the country lost their home because their mortgage was too big.
28:57
The reason they lost their home is because they had simply bought a house that they couldn't
29:01
afford.
29:02
The mortgage is a smoke screen.
29:04
I had nothing to do with it.
29:05
If they had bought a cheaper house, if they had maintained better liquidity, they would
29:10
have been able to maintain that property through the crisis.
29:13
So make sure you don't buy too much of a house.
29:15
And again, the mortgage broker can help there, counseling the client correctly.
29:20
Exactly.
29:21
That's what I'm just going to say.
29:22
That's our opportunity to demonstrate, you know, use that word fiduciary responsibility,
29:27
if you will.
29:28
Right.
29:29
But you've got to take some ownership in that you're you're settling people with the biggest
29:31
out of their life.
29:32
So it's not about making a sale.
29:34
It's about putting them in the better place.
29:37
Yeah.
29:38
I'll tell you a horror story.
29:39
Just a number of years ago, one of my clients, his parents died tragically in their 50s.
29:46
He inherited the money and his kid was a high school dropout.
29:51
He's now in his early 20s when his parents died.
29:53
He gets this hundreds of thousands of windfall from an inheritance, a real estate broker hooks
30:00
up with them and convinces them to buy a house for the full amount of the inheritance
30:05
he got.
30:06
$650,000.
30:07
The kid had no job and convince them to buy the house and get a mortgage on it.
30:12
And I said, when the kid told me about this, he was my client, the son of my client,
30:19
I called the real estate and said, how can you give him this advice?
30:22
He will lose that house.
30:23
And the real estate agent said, all I have to do is demonstrate that he'll be able to
30:27
make the mortgage payments for three years after that it's not my problem.
30:32
And I'm like, this is the most horrific approach.
30:36
The more admirable approach would have been to counsel this kid to say either don't buy
30:41
a house at all or buy one far less expensive that you can in fact maintain.
30:47
And so it's easy because there are some sleazy people in every industry, not just real
30:53
estate or mortgages or investments, they're bad apples everywhere.
30:57
Because of the bad apples, it's really easy for you to shine and set yourself apart.
31:02
Ed Carnegie has done a great job with us.
31:05
And he has set himself apart in his community as a mortgage broker who cares about your
31:13
personal finances and demonstrates this with the nature of his advice.
31:17
He's not hesitant to say to a client, you shouldn't get this mortgage, you shouldn't
31:21
get this big alone, you should get a smaller loan, you shouldn't be buying bad expense
31:25
in that of a house.
31:26
Even though it costs him money because his sale will be smaller, his commission will be
31:29
less, he's focusing on the client's best interest and clients love him for it.
31:34
There's referral business, it's huge because of it.
31:36
Exactly.
31:37
So I think everybody would do well by following Ed's lead.
31:41
Absolutely agree.
31:43
Yeah, that even told me about a story about one of his clients where for three years they
31:47
were just ditching the buy house and they came back to him about once a year and presented
31:51
the financial situation.
31:52
Okay, are we ready now?
31:53
And it's like no, no, not yet, not yet.
31:57
You said no to three opportunities to get, because you could have done the loan, right?
32:00
But like you said, it's not the right thing to do.
32:02
And they are so grateful to him for it.
32:05
They have said thank you Ed, so much we would have been in a bad spot had we made that
32:08
decision.
32:09
And I mean, what does that do to throw your business?
32:11
So every time they buy a new house, they're going to turn to him, every friend who tells
32:15
them they're in the market, they're going to refer to him, you know, you can do well
32:19
by doing good.
32:20
Yeah, exactly.
32:21
Okay, cool.
32:22
So I know we don't have a lot of time left.
32:23
I wanted to transition, you know, as listeners know, there's multiple books you've got
32:29
to be able to choose from one of your, I guess your original book was the truth about
32:33
money, right?
32:34
Yeah.
32:35
That was my first.
32:36
Yeah.
32:37
New York Times best seller.
32:38
But what I'm most interested in for today's call anyways is the most recent book that
32:41
you just came out with, which is the truth about your future, the money guide you need
32:46
now later and much later, right?
32:50
The world changing.
32:51
It's just, I mean, I was reading through that book and I was really actually kind of
32:54
taking it back for a moment because you as a financial planner started getting into
32:58
the things that I didn't expect you to get into, yeah, such as AI, machine learning and
33:05
things like that.
33:06
Why are you talking about that, you know, under the of a financial planner?
33:10
So I had the opportunity 10 plus years to go to meet Ray Kurzweil.
33:16
He's, many concerned in the smartest man on the planet, he's got hundreds of patents,
33:20
he's on the faculty, Harvard, now director of engineering at Google.
33:24
And he is the co founder of Singularity University and Ray encouraged me to go, which I did in
33:30
2012.
33:31
I went through their executive program and it's all about exponential technologies where
33:37
you learn about artificial intelligence, machine learning, big data, nanotechnology, biotechnology,
33:44
bioinformatics, neuroscience, 3D printing, the blockchain, financial technology, education
33:52
technology, the list goes on and on.
33:55
And what I discovered through this program, meeting some of the world's sharpest minds
33:59
in all of these fields, scientists and physicists and PhDs and on and on and on, that the rate
34:07
of change in our society is accelerating because of the growth in computer technology.
34:14
It's all about Moore's law.
34:16
We know Gordon Moore, the co founder of Intel, who said that every 24 months, the computers
34:21
are doubling in speed and becoming half as expensive.
34:24
It's now they're doubling at 18 months now, even the rate of acceleration is itself accelerating.
34:30
And they were all able to talk about the whizz bang, nifty stuff that's coming down the
34:33
pike, self-driving vehicles and tourists on the moon and so on and so forth.
34:40
And all that was great, but I asked them simply two questions.
34:44
I said, what does this mean for personal finance?
34:47
And how do we need to change our strategies?
34:51
And no one was able to answer those questions because they had never contemplated the subject
34:55
in that lens.
34:56
So it set me on a journey 10 years ago to answer those two questions.
35:00
What does artificial intelligence mean?
35:03
What does self-driving cars mean for your investment strategy, for your career, for housing,
35:12
for leisure and recreation, for insurance, for college planning?
35:17
And I spent years in research and it took me a long time to figure out the answers and
35:24
the result is my book, the truth about your future.
35:26
So the first half of the book is an exploration of these technologies because most people are
35:30
unfamiliar with them.
35:32
And the second half of the book is what it means for personal finance.
35:36
And it's all extraordinarily fascinating.
35:40
People are astonished when they are presented with the future.
35:44
I mean, we all know that flying cars are in our future.
35:49
I mean, George Jepsen will one day be a reality.
35:52
We all know that.
35:53
The question is, how long will it take for that to arrive?
35:56
I'll pose the question to you, Jeff.
35:59
How long will it be before we see in the commercial marketplace self-flying cars?
36:07
Wow.
36:08
That is a big question.
36:09
The immediate figure that comes to my head is 30 years.
36:12
They're already flying.
36:15
Really?
36:16
In Dubai, Indonesia, and India, they're already in use.
36:20
These vehicles will fly a passenger up to 200 pounds, up to a range of 100 miles, up to
36:29
30 miles, at 100 miles an hour, flying it in altitude of 3,000 feet.
36:34
Many of these countries have recognized that they don't have a good infrastructure.
36:37
They don't have a good road system.
36:39
It's expensive to build roads, so why don't we just fly from here to there instead?
36:43
It's the same thing Africa did in the 1980s with telecommunications.
36:49
We spent 100 years laying cable across the country for telephones.
36:55
They went straight to cellular.
36:57
They skipped the 20th century.
36:59
They went from the 19th century to the 21st, thanks to wireless communications.
37:04
And many of these countries are doing the same thing with transportation.
37:08
They're saying, why build roads when you can build drones?
37:11
Well, obviously, somebody hears that and the immediate thought, you know, I'm getting
37:14
visions of Blade Runner in my head, but the immediate thought is, you know, I mean, chaos.
37:21
Well, there are a lot of issues associated with a lot of these technologies, and that's
37:26
chapter 12, the dark side.
37:28
Don't read it before you go to bed.
37:31
I was reading.
37:32
Yeah, I mean, the chapter 12 will freak you out, simple as that.
37:36
But the point is the future is coming much faster than we had thought.
37:40
And as a result of this, we need to look at very serious changes in how we manage our
37:44
personal finances, everything from college to career, to insurance, to investment management.
37:53
And the good news is throughout all of this, it sustains and supports the mortgage advice
37:59
because we're going to be living a lot longer than ever.
38:03
And that means a 30-year mortgage makes more sense than ever.
38:07
Are we going to see six times better?
38:09
I can argue, it's my new 12th reason because we're living longer.
38:14
Absolutely right.
38:16
Longivity is at the crux of many of the changes that are coming about in our society.
38:23
Right now, life expectancy is age 88.
38:26
Many people don't know is that in 1900, life expectancy was 47.
38:34
At the American Revolution, the average life expectancy was 23.
38:40
So it's now at 88.
38:41
So we are advancing our longevity.
38:45
Scientists are now at the point where we're adding a month a year to longevity.
38:50
And it's not going to be very long where we reach what they call escape velocity, where
38:55
we're adding a year for every year.
38:57
So the longer you live, the longer you're going to live.
39:00
We're projecting that at this stage, most people today are going to live into their 110s or
39:05
120s.
39:06
Wow.
39:07
And that means the notion of retirement as we know it, where you retire at 65 and are
39:12
dead at 85, that's passé, that's not going to be your future.
39:16
That was the future your grandparents had and maybe your parents, it's not the future
39:20
you and I are going to have or our clients.
39:23
And with a longevity of that nature, it upends everything.
39:26
It upends college planning, it upends careers, it upends investment management.
39:32
And so we have to shift our strategies and our approach because of all of this, because
39:37
we're going to be living not only so much longer, but so much healthier than ever.
39:40
They're projecting that by the time you're 95, you'll be healthier than when you were 55.
39:45
And that aging itself is merely a disease.
39:48
They're already reversing aging and mice and experiments in Japan.
39:52
So they won't be very long before they're able to do this with humans.
39:55
So it's all getting very, very exciting and it's happening very, very fast.
40:00
One aspect, I'll give you an illustration in the world of investment management back
40:03
in 1920, the typical company in the S&P 500 had a life of 65 years.
40:12
Today the average S&P company lasts 15 years, which means by 2025, 40% of the S&P 500 will
40:20
be gone.
40:21
So when people ask me, how should I be investing my money or they brag that they own an S&P 500
40:26
stock index fund?
40:27
I'm like, really?
40:28
40% of those companies won't even exist.
40:31
So you've got to really ask yourself, how am I managing my money?
40:35
Look at Kodak in 2012, Kodak won bankruptcy.
40:39
You know why?
40:41
We stopped buying film because of our smartphone.
40:44
It's all now digital photography and Kodak couldn't make the leap from being one of the best
40:49
known brands worldwide, one of the biggest companies in America with 130,000 employees.
40:55
They went broke due to a technology overnight.
40:57
And in the same year, they went broke Instagram 18 month old with 13 employees was sold for
41:03
a billion dollars, using digital technology to Kodak invented.
41:09
So we need to change how we manage our investments because many of the companies you're buying
41:13
and your mutual funds are not the companies of the future, the companies of the past.
41:18
Exactly.
41:19
And what you're talking about here is disruption.
41:22
And I want to kind of close out on that note because I think you've got a really, you know,
41:27
your thumb on top of kind of the changes or the disruption that's coming in the financial
41:31
sector through the lens of, you know, you've got obviously your firm with your financial
41:37
planners.
41:38
And then we've got my listeners, which are retail mortgage loan officers.
41:41
And, you know, there's a lot of buzz about the technology disruption coming in the mortgage
41:45
and real estate space.
41:46
So I'd be curious to hear, you know, a couple of quick points from you on advice or what
41:51
you see coming and how do we as financial professionals pivot to stay relevant, you know,
41:56
what would be some suggestions you have?
41:58
First, become aware of exponential technologies so that you can effectively evaluate the impact
42:05
of these technologies on your career.
42:07
One of the things that mortgage brokers quite frankly have to be aware of is that artificial
42:12
intelligence and robotics pose a very real threat to your career.
42:18
It's projected that over the next 15 years, 40% of the jobs in America will be eliminated
42:23
due to automation.
42:25
And anything that involves paper is likely to be automated because computers are faster,
42:31
they're more accurate, they're cheaper.
42:34
And they never have a sick day, they never have an attitude, they never cause sexual harassment
42:40
in the workplace.
42:42
So we have to recognize that the mortgage process can be largely automated.
42:49
Look at quick and loans, look at the online advice that is already available in the future,
42:57
it's quite possible that when someone seeks to buy a house, automation will provide the
43:04
mortgage right away.
43:06
So how do you compete in that kind of a world?
43:09
Well, you're already competing against quick and loan and you've managed to do that.
43:14
How?
43:15
Number one is relationship.
43:17
Number two is a broader array of advice.
43:21
I mean, in my field as a financial advisor and investment manager, we deal with roboadvisors,
43:27
you know, online investment management services, I'm faced with competing against technology
43:31
as well.
43:32
How do we do it?
43:33
By providing a broader array of services than the roboads are capable of doing and providing
43:39
a relationship value that alleviates the client from having to do it themselves.
43:45
The biggest problem with quick and loan is that the consumer has to be the one at the keyboard.
43:50
They can't delegate it to someone else and that's part of the relationship value.
43:56
So you've got to be aware of what's going on technologically so that you can determine
44:01
how you can compete in an increasingly competitive environment.
44:06
Interesting.
44:07
Okay.
44:08
So I'd say start with my book, the truth about your future and in there are a variety
44:14
of sources for further learning so that you can stay up to date because the information
44:20
is changing at a very rapid quit.
44:22
Yeah.
44:23
No, it's great.
44:24
Like I said, I grabbed that book and just started digesting it last night and I barely
44:29
got through half of it, but in actually I skipped a head to the dark side because I mean,
44:33
you have to, right?
44:34
With that kind of title.
44:35
Who doesn't want to read it?
44:39
It made me think of shows like Black Mirror on Netflix, I don't know if you've ever seen
44:45
that show where I have not.
44:49
It's interesting.
44:50
It's very relevant to what you're talking about there in that technology is really changing
44:53
our society and taking over and you'd find it kind of interesting a couple of those
44:58
episodes to see the influence that digital technology being pervasive.
45:02
There was this one particular episode where you talk about augmented reality.
45:06
I think in one of the chapters, which is, you know, you have the technology to look
45:10
at a person and like in the case of the sports, right?
45:13
You can instantly look at your screen or hold up your tablet and you get like the stats
45:17
on the baseball player and all that stuff.
45:19
Well, in this particular episode, you had an eyepiece like a contact lens.
45:23
You put over your eye and as you meet people out and about it immediately uses that augmented
45:29
reality to give you like their social score, you know, right?
45:32
What's their ranking on their social profile and people didn't associate with people like
45:35
below a 2.6 and all that is really crazy.
45:39
That's awesome.
45:40
Yeah, that's where it's going.
45:41
Anyway, so very interesting stuff.
45:43
Thank you so much for being here.
45:44
I know you're busy.
45:46
Let's give the listeners where can they go to get access to your 11 reasons to carry
45:51
a big mortgage.
45:52
If you go to my website at rickaddleman.com, on the main page there, if you scroll down,
46:01
you'll see a series of stories you can scroll left and right and one of those boxes has
46:07
the mortgage article 11 great reasons to carry a big long mortgage.
46:11
You can also read my books, The Truth About Money and Ordinary People Extraordinary Wealth.
46:17
Awesome.
46:18
So I'm going to provide those links in the show notes.
46:20
Obviously links to your website, book resources and things like that.
46:23
I just want one other question real quickly and this reminds me of the chat I had with
46:27
Ed Connerky.
46:29
What about the, there are mortgage loan officers when they're taking a 10.03 and app from
46:33
somebody and hopefully they're asking good questions.
46:37
One of those questions would be, you know, do you have a financial advisor and when people
46:41
here, you know, no, I don't, I recommend that people are providing referrals to a competent
46:47
financial advisor.
46:49
Do you be or are you, you know, are there ways for my listeners to perhaps align themselves
46:53
with, you know, perhaps a financial planner in their local market?
46:56
Yeah, we work often with mortgage brokers and we're very happy to do that.
47:03
We can do joint seminars with you.
47:06
We can provide our educational materials that explains why you should carry a big long
47:10
mortgage.
47:11
We can provide a lot of resources and partner with you with your clients and exchange referrals.
47:16
A lot of our clients are buying homes and they're looking to get a mortgage and so we're
47:21
always looking for mortgage brokers that we can work with.
47:25
So yeah, just send me an email to ask Rick at RickEttelman.com and send it directly to
47:34
me and I'll put you to hook you up with my colleagues and we have offices 43 of them across
47:39
the country and happy to put you together with us and we can help out an awful lot of people
47:46
together.
47:47
Yeah, definitely.
47:48
So I'll put a link to that email in the show notes as well and yeah, I think for those
47:51
listening that are looking to align with professional firm like yours, you know, it's just going
47:55
to be great for your business and they're going to go to our clients that we're all serving
48:00
together.
48:01
So Rick, man, I appreciate you being here very much.
48:03
I'm going to keep listening to you on the radio show.
48:05
So keep doing the good work you're doing and I can't, I can't thank you enough for being
48:09
here.
48:10
You have it's been a real pleasure.
48:11
Thank you so much.
48:12
You bet.
48:13
And listeners, as always, thank you for tuning in.
48:15
If you liked today's episode, please take a moment, leave us a little rank in on iTunes
48:20
Stitcher wherever you're listening to this and we definitely appreciate you.
48:23
So we'll see you on the next one.
48:25
Bye for now.
48:26
Thanks for listening to Mortgage Marketing Radio.
48:29
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