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How Should You Respond When Asked "What is Your Investment Philosophy" · Root Ready

0:00
SPEAKER_00: Welcome back to another episode of the Root Ready Podcast.
0:03
SPEAKER_00: I am your host, James Cannoll, with my co-host Eden.
0:06
SPEAKER_00: And Eden, today we're talking about how to respond when someone says, What is your investment philosophy?
0:14
SPEAKER_00: Now I say that.
0:15
SPEAKER_00: As I say those words, I'm a prospect.
0:17
SPEAKER_00: Like what comes to your mind as an advisor?
0:20
SPEAKER_00: Where do you want to go first?
0:22
SPEAKER_01: I'll just say that that question is so broad.
0:26
SPEAKER_01: Just it's so open.
0:28
SPEAKER_01: And there are so many different things that you could say about the investment philosophy that it's very easy to just kind of start slipping into the weeds and the jargon.
0:40
SPEAKER_01: And we're excited about it.
0:42
SPEAKER_01: It's, I mean, as advisors, we love talking about investments and the philosophy.
0:46
SPEAKER_01: And it's very easy, I feel like, to just kind of slip right into the data-driven, super deep explanations.
0:54
SPEAKER_01: And I think there's some ways to kind of summarize it in a less analytical and deep way.
1:01
SPEAKER_01: But it's such a broad question that it's hard to know just where to begin unpacking that.
1:06
SPEAKER_01: Yeah.
1:06
SPEAKER_00: Fully agree.
1:07
SPEAKER_00: And I think this is this is an episode that, you know, sometimes we do an episode like, hey, this is something kind of we need to learn, we should practice, we should rep.
1:14
SPEAKER_00: This is more just something of this should be a really easy thing, but I think a lot of advisors get tripped up with it because you're right.
1:20
SPEAKER_00: It's what's your investment philosophy?
1:22
SPEAKER_00: Oh, gosh, I can't.
1:23
SPEAKER_00: I'm so glad you asked.
1:25
SPEAKER_00: Sit down, because let me, you know, let me let me give you a 20-minute answer.
1:29
SPEAKER_00: And really what prompted this episode was um one, I hear this from people like, yeah, how should we be responding to this?
1:35
SPEAKER_00: But two, you know, we we try to get a lot of feedback from our clients and our prospective clients of what are we doing well?
1:40
SPEAKER_00: What could we do better?
1:41
SPEAKER_00: What, you know, anything and everything.
1:43
SPEAKER_00: And we got, you know, someone doesn't move forward.
1:46
SPEAKER_00: So a prospect reaches out to root, they don't move forward.
1:49
SPEAKER_00: We'll send this little survey after of, hey, what what was the reason for that?
1:54
SPEAKER_00: Essentially, was it investment philosophy misalignment?
1:57
SPEAKER_00: Was it planning philosophy?
1:59
SPEAKER_00: Was it uh cost?
2:01
SPEAKER_00: Was it whatever?
2:02
SPEAKER_00: And someone submitted services, like or on that form, um, something along the lines of, hey, your investment philosophy is way too different than ours, and we didn't feel comfortable with it.
2:11
SPEAKER_00: So, okay, interesting.
2:12
SPEAKER_00: So I, you know, I went in, I looked at this person's profile and I looked at their statements.
2:16
SPEAKER_00: And, you know, for people listening that don't know, like we we use primarily dimensional fund um ETFs as we at least construct our starting point models for clients.
2:25
SPEAKER_00: We can use anything.
2:26
SPEAKER_00: Obviously, we're an RIA, we don't get comp by anyone, but dimensional funds kind of our starting point when we use their funds for our starting portfolio lineup.
2:34
SPEAKER_00: Um I looked at this prospective client's investment statements, and they were all Vanguard.
2:41
SPEAKER_00: Now, for people that know Vanguard that know dimensional, like, yes, there's differences, but there's way more similarities than there are differences.
2:48
SPEAKER_00: And so when I'm reading this person's survey feedback and it's, hey, your investment philosophy is way too different.
2:53
SPEAKER_00: I didn't feel comfortable moving forward, it's like, okay, I think what's happening is it's a messaging issue of Eden.
3:03
SPEAKER_00: If you're my prospective client and you ask me, hey, I'm you know, we're really interested in root, seems like you guys are doing some cool things.
3:09
SPEAKER_00: Like, what's your approach to investing?
3:11
SPEAKER_00: What's your investment philosophy?
3:12
SPEAKER_00: And I say, okay, well, Eden, I'm glad you asked.
3:15
SPEAKER_00: Like, we we believe in something called the efficient market hypothesis.
3:18
SPEAKER_00: And what that says is all publicly known information is priced into securities as they stand today.
3:23
SPEAKER_00: When what that means is you can't outperform the market, but you can control the levels of risk you take by tilting to small cap, to value, to high profitability.
3:30
SPEAKER_00: Um, we're going to implement this through dimensional funds, which owns, you know, asset class investing, not index.
3:35
SPEAKER_00: And if I just go on and on and on and on, it's like, oh my gosh, this is, you know, maybe interesting stuff.
3:39
SPEAKER_00: Like that seems so different from what I've done.
3:42
SPEAKER_00: I mean, I've just been owning a Vanguard S P 500 index.
3:44
SPEAKER_00: Like that's um maybe cool, but it's just too big of a gap for me to feel comfortable moving forward with, is what's going through my head when the reality is the actual differences are not that different.
3:59
SPEAKER_00: And that's not the point of this episode, by the way.
4:01
SPEAKER_00: The point of this episode is we have attendance advisors.
4:04
SPEAKER_00: Your point at the beginning.
4:06
SPEAKER_00: This is a very broad question, which means there's a million different directions it can go.
4:11
SPEAKER_00: And as advisors, we get excited about geeking out about that stuff.
4:14
SPEAKER_00: So I want to hit all a million different directions it could go.
4:17
SPEAKER_00: And I want to give you the deepest, fullest answer to every little nuance there.
4:20
SPEAKER_00: And all of a sudden, you have a prospect that walked in saying, Hey, I think I should get some retirement planning help from Root, going, Oh, the investment philosophy is actually going to prevent me from doing this.
4:30
SPEAKER_00: When it was the messaging of that that was the deterrent, not the actual philosophy itself.
4:38
SPEAKER_00: Make sense?
4:39
SPEAKER_00: Any thoughts or pushback on that?
4:43
SPEAKER_01: No, I think that's 100% accurate.
4:45
SPEAKER_01: And also everything, it's funny because everything you say in the jargony deep explanation is correct.
4:51
SPEAKER_01: It's just that there are ways we can reframe those to be higher level, starting at that higher level umbrella point rather than just diving right into the weeds.
5:02
SPEAKER_01: But I think you're spot on too that this is something that typically advisors love talking about and we think it's super interesting.
5:08
SPEAKER_01: So it can be really easy to just get all excited and dive right in.
5:13
SPEAKER_00: It can.
5:14
SPEAKER_00: And I always try to put myself, it's hard.
5:16
SPEAKER_00: You know, we're that proverbial fish that's in water and doesn't know what water is sometimes.
5:21
SPEAKER_00: And we like, we have to put ourselves, put yourself in the position of anyone else.
5:26
SPEAKER_00: You know, you're really sick and you go to the doctor's office and you say, hey, what's going on?
5:30
SPEAKER_00: And they launch into a 20-minute thing with these, you know, doctor terms and the full name of illnesses with Latin roots and all that.
5:38
SPEAKER_00: And then you're like, oh my gosh.
5:39
SPEAKER_00: And then then like another doctor comes in, just like, hey, Eden, you know, you've got what you got a, I don't know, you got the flu.
5:48
SPEAKER_00: Get plenty of fluid, rest, you're gonna be fine.
5:50
SPEAKER_00: Okay.
5:50
SPEAKER_00: Like they might have said the same exact thing, but the I wouldn't call it just bedside manner, but also just ability to communicate like a human matters so much there.
6:00
SPEAKER_00: Like one of those doctors, I'm gonna feel really okay, this person I can relate with and I'm gonna trust them more.
6:06
SPEAKER_00: Even though the other doctor said smarter sounding terms, I just don't feel like there's a there's too big of a gap.
6:12
SPEAKER_00: When in reality, there's no gap.
6:14
SPEAKER_00: It's just the way they explain something.
6:16
SPEAKER_00: And that's the curse of knowledge sometimes.
6:18
SPEAKER_00: Is to me, like here's what I would say.
6:22
SPEAKER_00: If you said, What wait, what's your investment philosophy?
6:24
SPEAKER_00: I'm gonna say it's it's it's we're gonna control what we can control.
6:28
SPEAKER_00: We're gonna keep costs down as much as possible.
6:30
SPEAKER_00: We're gonna diversify broadly, we're gonna be very mindful of the tax impact of what we're doing.
6:35
SPEAKER_00: And most importantly, Eden, we're gonna tailor your investment portfolio to your actual needs driven by your financial plan.
6:41
SPEAKER_00: So it's not two standalone things.
6:43
SPEAKER_00: Um, that's probably a very unsatisfactory answer to a financial advisor.
6:48
SPEAKER_00: If I, like, you know, if I'm interviewing at root and say, hey, what's your investment philosophy?
6:51
SPEAKER_00: Like, I actually want to know, what are you guys doing?
6:54
SPEAKER_00: Like, what's the approach?
6:55
SPEAKER_00: What's your fund, the the the you know, the mix of funds that you're using?
6:58
SPEAKER_00: And so we have to think about that.
7:00
SPEAKER_00: Like the the satisfactory answer to me is not gonna be the same satisfactory answer to a client.
7:08
SPEAKER_00: And what's a client gonna do?
7:09
SPEAKER_00: If it, you know, if if I if you're my prospective client, Eden, and you ask me, I give you that answer, and you want to know more, what are you gonna do?
7:17
SPEAKER_01: You're just gonna ask at that point.
7:19
SPEAKER_01: You say something like broadly diversified.
7:22
SPEAKER_01: It's a pretty generic term, but a client who's maybe, you know, an engineer or something might go, what does that mean?
7:30
SPEAKER_01: What does broadly diversified mean?
7:32
SPEAKER_01: Oh, okay, we can talk about that piece independently from the rest of the philosophy.
7:36
SPEAKER_01: They might go that direction.
7:37
SPEAKER_01: I think it really opens the doors to have a couple of those key points.
7:41
SPEAKER_01: Feel like three or four, like you just did.
7:44
SPEAKER_01: Here's rounding out high level.
7:46
SPEAKER_01: And then if they have littler questions, deeper questions, what funds do you use?
7:50
SPEAKER_01: What does that mean?
7:51
SPEAKER_01: What does this mean?
7:52
SPEAKER_01: Okay, great.
7:52
SPEAKER_01: Let's go there.
7:53
SPEAKER_01: Let's have that discussion.
7:55
SPEAKER_00: Yes, exactly.
7:56
SPEAKER_00: If they want to know more, they're going to ask.
7:59
SPEAKER_00: And the key here is one, by them asking is give you permission to continue and they're they're showing you what they want, but you like let them double-click on what's most important to them.
8:08
SPEAKER_00: Like if the this this conversation truly could go thousands of different directions.
8:13
SPEAKER_00: What does diversification mean?
8:15
SPEAKER_00: Do you use ETFs or mutual funds?
8:16
SPEAKER_00: What about individual stocks?
8:18
SPEAKER_00: How much concentration are you okay with?
8:20
SPEAKER_00: What are your thoughts on investing in real estate?
8:22
SPEAKER_00: What are your thoughts on investing in emerging markets?
8:23
SPEAKER_00: What are your thoughts on dividend investing?
8:25
SPEAKER_00: What are your thoughts?
8:26
SPEAKER_00: Like, there's if I try to answer each of those in my explanation of our investment philosophy, I have completely lost you.
8:33
SPEAKER_00: And all I've signaled to you is this person doesn't know how to read another human being, and I don't think I want to work with them.
8:39
SPEAKER_00: Even if the investment philosophy is very similar to what we're doing.
8:43
SPEAKER_00: Like I took a very small gap between what you're doing and what we'd recommend, and I've made it an enormous gap, not in reality, but in perception of reality, which is all that matters when we're we're talking about a prospective client.
8:56
SPEAKER_00: So you're gonna double click.
8:58
SPEAKER_00: And even when you double click and say, what do I mean by diversify broadly?
9:02
SPEAKER_00: Cool.
9:02
SPEAKER_00: Now I have permission to go there.
9:04
SPEAKER_00: Now I can like dedicate the time and energy to that.
9:09
SPEAKER_00: And a lot of people will.
9:10
SPEAKER_00: But what you're essentially trying to do is you're trying to give, you know, go one layer deeper each time, because at some point, you know, if you're on a scale of one to 10, some people will want a one out of 10 in terms of how deep they want to go.
9:22
SPEAKER_00: In fact, I would venture to say a lot of people want that, at least at the beginning.
9:26
SPEAKER_00: Like when it's actually come in time to, okay, Eden, here's what we're gonna do with your investments.
9:30
SPEAKER_00: Okay, tell me more about that.
9:31
SPEAKER_00: Why that specific fund?
9:32
SPEAKER_00: Why that specific allocation?
9:34
SPEAKER_00: Where I see the drive happening or like the wedge widening is more so like on the front end of the relationship sometimes of, oh, this is just too big of a change.
9:43
SPEAKER_00: I don't even think I can move forward.
9:45
SPEAKER_00: And now that person's lost out on the opportunity to have some really incredible planning done because the way we message something that just needed to be messaged a lot more simply, and it would have gone better.
9:58
SPEAKER_00: Where do you see this show up?
10:00
SPEAKER_00: Like where are investment conversations coming up in conversations with your clients?
10:04
SPEAKER_01: There's a couple places, and one of them is what you just spoke to, which is the early on.
10:09
SPEAKER_01: I think it comes up often, but it also does speak to what you just said that more often than not, when someone asks that, I find that they don't have, you know, 10 deeper questions at that point.
10:20
SPEAKER_01: They sometimes just want to hear that we have a thoughtful process for investing, and that's all they want to hear.
10:26
SPEAKER_01: And they're like, okay, great.
10:27
SPEAKER_01: Moving on.
10:28
SPEAKER_01: I mean, we had a prospect recently who all she was looking to hear is that we don't just freely trade options in her account without her permission because she had interviewed another advisor where that was in their contract, that they can do that.
10:38
SPEAKER_01: That was all she was looking for.
10:39
SPEAKER_01: She just wanted to make sure we didn't do that.
10:41
SPEAKER_01: No further questions.
10:42
SPEAKER_01: That was it.
10:43
SPEAKER_01: So definitely see that come up early on.
10:45
SPEAKER_00: I I'm gonna pause right there because that is so important what you just said.
10:48
SPEAKER_00: I never in a million years, if someone asked me what's your investment philosophy, would be thinking, oh, the question behind the question is they want to know if I can freely trade options.
10:57
SPEAKER_00: Never the only way is to keep it simple and let them tell you what further questions they have.
11:05
SPEAKER_00: So sorry, I just want to affirm that.
11:07
SPEAKER_01: But keep going.
11:08
SPEAKER_01: And that was exactly it.
11:09
SPEAKER_01: Naomi had answered the question really well, succinct, you know, reducing risk, super important as you're heading into retirement, all these things.
11:16
SPEAKER_01: And she was like, okay, great.
11:18
SPEAKER_01: Um, do you guys do options?
11:20
SPEAKER_01: And that was really the question that she was asking.
11:23
SPEAKER_01: So it was really helpful for us to know that.
11:25
SPEAKER_01: And she was like, okay, great.
11:26
SPEAKER_01: That's really all I was worried about.
11:28
SPEAKER_01: So for sure, that's just one prime example of finding the question behind the question and just starting simple can help do that.
11:36
SPEAKER_01: So definitely see it come up early on in the relationship in the kind of prospect pipeline phase.
11:41
SPEAKER_01: But I would also say it does come up periodically after a client has, you know, bought into it, we're on board, they're invested in the portfolio.
11:49
SPEAKER_01: I think it comes up when maybe there's some turbulence, some noise going on, either economically, the markets being a little funky.
11:58
SPEAKER_01: People can sometimes feel nervous about the investment philosophy and feel like they want a refresher on where we are and what actions we will or will not take given the situation.
12:10
SPEAKER_01: And it's more of a reaffirming why it's important to stick to the original plan kind of conversation.
12:16
SPEAKER_01: So I feel like it's at the front end, just what even is it?
12:19
SPEAKER_01: And once they're a client, it's okay, how do we stick to it?
12:22
SPEAKER_01: Now what?
12:23
SPEAKER_01: Now we're in it.
12:24
SPEAKER_01: The world is happening.
12:26
SPEAKER_01: What now?
12:27
SPEAKER_01: So those are the places where I see it come up most often.
12:30
SPEAKER_01: Yeah.
12:32
SPEAKER_00: Totally.
12:32
SPEAKER_00: And I think this is the hard part and the reality, too, is you know, in a perfect world, it's like, yeah, I want to sit down with every client and go deep into why we invest the way we do and what is our philosophy, and what are we gonna do when turbulence heads on that takes a lot of time.
12:49
SPEAKER_00: And it's like it's you almost have to like prioritize what do we say and when.
12:54
SPEAKER_00: Because I could, you know, if I if this happens all the time.
12:58
SPEAKER_00: Um, hey Eden, just you know, here's your portfolio, here's what I recommend.
13:01
SPEAKER_00: We're not gonna time the market.
13:02
SPEAKER_00: We're not you know, yeah, of course.
13:03
SPEAKER_00: No, James, we're never gonna time the market.
13:04
SPEAKER_00: Cool.
13:04
SPEAKER_00: Everyone says that when things are good, and then as soon as the market goes, of course, it's like, well, James, what are we gonna do?
13:10
SPEAKER_01: Are we gonna check?
13:12
SPEAKER_00: I'm not a market timer, but in the in that that's just like the common conversation.
13:16
SPEAKER_00: And so it's how do you strike this delicate balance of giving enough information and framing properly so you're not overwhelming, but like you're also setting the right expectations on the front end and then using those downturns as an amazing learning lesson, like an amazing opportunity.
13:32
SPEAKER_00: And also, by the way, setting expectations every time you talk to a client.
13:36
SPEAKER_00: You know, if we're going through review meetings right now, hey, look, your your portfolio is doing pretty well.
13:40
SPEAKER_00: And it's up X percent on the year.
13:43
SPEAKER_00: Let me remind you that there is going to come a time.
13:45
SPEAKER_00: I don't know if it's next month, next year, next quarter, whenever.
13:49
SPEAKER_00: This portfolio will be down 20, 30% at some point.
13:52
SPEAKER_00: Let me remind you of our investment strategy.
13:54
SPEAKER_00: Uh you're gonna have some allocated to root reserves, you're gonna have some allocated to growth.
13:58
SPEAKER_00: What we're gonna be able to do on our end is like change where does money potentially come from.
14:01
SPEAKER_00: So I'm setting that now because my you know, in my my experience, the thing that trips investors that most isn't the downturn.
14:09
SPEAKER_00: It's the just not being emotionally prepared for it, not being uh aware of it and not just telling people it's gonna happen, but quantifying that.
14:19
SPEAKER_00: Eden, you have a$2 million portfolio.
14:22
SPEAKER_00: There's a 25% downturn.
14:23
SPEAKER_00: You're gonna look at your statement and see$1.5 million.
14:26
SPEAKER_00: In other words, you're gonna see$500,000 that you lost.
14:29
SPEAKER_00: That's not gonna feel good.
14:30
SPEAKER_00: And I want to tell you this on the front end that we have planned for that.
14:34
SPEAKER_00: Because I have no idea when it's gonna happen.
14:35
SPEAKER_00: No one does.
14:36
SPEAKER_00: We have no idea when the recovery is gonna be.
14:39
SPEAKER_00: But the good news is we don't need to.
14:41
SPEAKER_00: And, you know, kind of go back into our here's why we allocate this to reserves, here's why you allocate this to growth.
14:47
SPEAKER_00: Um we need to be taking those opportunities as frequently as possible so that when that downturn happens, the client's like, man, I've been coasting.
14:56
SPEAKER_00: I've had so many years in a row of amazing returns, you just get lulled to sleep.
15:00
SPEAKER_00: That's just how it is.
15:01
SPEAKER_00: And then when the downturn happens, you feel like, oh my gosh, this is unprecedented.
15:04
SPEAKER_00: No, it's not.
15:05
SPEAKER_00: It's just, it doesn't happen every year.
15:07
SPEAKER_00: And so when it does happen, it catches you off guard.
15:10
SPEAKER_00: Um, anything else that you would add to that before we go over a couple other points?
15:16
SPEAKER_01: I think just on that piece, when you're in the advisor chair, I think we've alluded to this before, but it is a lot about coaching.
15:23
SPEAKER_01: And this is a prime example of coaching the client through what they can expect, working with us, being invested in the market.
15:31
SPEAKER_01: And I can see, you know, we've had a great year in the market.
15:34
SPEAKER_01: We've had a couple little downturns here and there.
15:37
SPEAKER_01: But um, one that happened earlier this year, just as an example of how good Naomi is at this, one of our newer clients was like, Oh, I noticed the market's been a little up and down this week.
15:46
SPEAKER_01: Have you been getting a ton of phone calls and emails?
15:49
SPEAKER_01: She's like, No.
15:51
SPEAKER_01: No, nobody's reached out with concerns.
15:54
SPEAKER_01: And that really points to just how important the coaching is, bringing this up repeatedly so that there isn't that shock and the, oh my gosh, I need to call because I'm down$500,000.
16:06
SPEAKER_01: If you coach the client well, it's kind of surprising how they start to get more comfortable with it.
16:13
SPEAKER_01: And of course, that's not the case all the time, but if you do a good job on the front end and throughout the relationship, just continuing to remind them of this and why the philosophy is the way it is, there's a lot less of that panic mode that happens when the market does take a little bit of a dip.
16:29
SPEAKER_00: Yeah, love it.
16:30
SPEAKER_00: Fully agree.
16:31
SPEAKER_00: Fully agree.
16:32
SPEAKER_00: Well, let's let's go over a few what I kind of think of as like best practices.
16:35
SPEAKER_00: How can you use investment conversations to build trust, to deepen the relationship, to better serve your client?
16:44
SPEAKER_00: Even going back to when they ask, when a client asks, what's your investment philosophy?
16:51
SPEAKER_00: I don't know what the number is, but my guess is the number of people they're like, I need to work with Root Financial because their investment philosophy is maybe 0%.
17:01
SPEAKER_00: Now that's not because we don't believe very strongly in it, but that's not like that is a supporting component to what we do.
17:09
SPEAKER_00: Um, people are coming to us for the planning, for the strategy, for the relationship.
17:14
SPEAKER_00: And so keep that in mind.
17:15
SPEAKER_00: And and if I go back to this is like no magic to these four points, but it's like, hey, what's our investment philosophy?
17:22
SPEAKER_00: It's one, diversify broadly, two, keep costs low, three, be mindful of taxes.
17:27
SPEAKER_00: Okay, first three things, like a lot of people are coming to us, not always, but from Vanguard, from Schwab, from Fidelity.
17:34
SPEAKER_00: Like, okay, cool, check, check, check.
17:36
SPEAKER_00: Like that's pretty so they're more looking for is this very different than what I've been doing, or is it pretty similar?
17:42
SPEAKER_00: So so far in their head, what they're saying is, oh, cool, like this isn't a radical shift that's gonna feel really overwhelming to have to process and think through.
17:50
SPEAKER_00: But then the fourth point, the hey, most importantly, uh, we're gonna tie your investment strategy to what your financial plan calls for instead of running it as a separate standalone model.
18:01
SPEAKER_00: Boom, like all of a sudden it's like it's the same, same, same, or like similar, similar, similar, but with that piece that I'm actually missing.
18:08
SPEAKER_00: Of I can't have my investment model over here and then run my financial, like they're they have to be very interwoven and intertwined.
18:16
SPEAKER_00: So it's kind of one through three, okay, cool, building comfort.
18:19
SPEAKER_00: And then four, oh, this is bringing it into the fold of everything.
18:23
SPEAKER_00: So advisors be mindful of that.
18:25
SPEAKER_00: No one's hiring us for our investment philosophy.
18:30
SPEAKER_00: That being said, people will not hire us when we explain it poorly or we overexplain it or or lack the um proper way of tying it back to what matters.
18:40
SPEAKER_00: Um, another thing of what fund company do you use?
18:47
SPEAKER_00: The wrong answer is, oh, we use dimensional funds.
18:51
SPEAKER_00: Now it's the right answer.
18:52
SPEAKER_00: That's not how I would message it.
18:54
SPEAKER_00: I if you ask that Eden, what fund company do you use?
18:57
SPEAKER_00: Whatever one, Eden, I believe, is gonna give you the highest chance of accomplishing your goals.
19:02
SPEAKER_00: We're an independent fee-only RIA.
19:05
SPEAKER_00: Like we're not getting commissions or kickbacks for using one fund company or another.
19:09
SPEAKER_00: So literally, my only uh interest in this is what's gonna help best position you to meet your goals.
19:17
SPEAKER_00: Okay, so what I've done is frame it as like we can use anything and we're married to nothing.
19:23
SPEAKER_00: Next part, it's a dimensional funds is a company that we use that we believe manages their portfolios very well.
19:30
SPEAKER_00: And we'll talk more about that, why we believe it's a really good starting solution.
19:34
SPEAKER_00: That's that's a very common starting point.
19:37
SPEAKER_00: But we can use anything.
19:38
SPEAKER_00: If at the end of the day Vanguard's better, we can use Vanguard.
19:41
SPEAKER_00: If at the end of the day, an individual stock portfolio still diversified is better, a direct index or an SMA, we can use that.
19:47
SPEAKER_00: So I want to emphasize that my only uh kind of box I need to check here is is this investment solution the thing that's gonna best position Aiden to meet her goals?
20:00
SPEAKER_00: The actual fund company.
20:01
SPEAKER_00: I don't want to say it doesn't matter because it does, but it it's almost incidental to what we're actually trying to get out of it.
20:08
SPEAKER_00: So you're still answering the same thing, but you're doing it in a way that reframes the way people think about it.
20:14
SPEAKER_00: We're not a Vanguard shop, we're not a dimensional fund shop, we're not a BlackRock shop, we're not a whatever shop.
20:20
SPEAKER_00: Like we are a shop that our only priority is to serve our clients really well and optimize their chances for success.
20:26
SPEAKER_00: And therefore, we're gonna use whatever fund company we think best positions us to do that.
20:31
SPEAKER_00: Um same thing for like mutual funds or ETFs.
20:36
SPEAKER_00: I wouldn't just say, oh, ETF, like I I, you know, we typically start with ETFs, Eden, but we're an independent RIA.
20:44
SPEAKER_00: I mean, we don't have any proprietary products, we don't get paid to sell one thing over another.
20:47
SPEAKER_00: We can sell almost in or hold any almost any investment that you can think of for you.
20:52
SPEAKER_00: So it's like what's the question behind the questions?
20:55
SPEAKER_00: Like, are you just gonna stick me in this mutual fund?
20:57
SPEAKER_00: Are you just gonna know he answer the question, but do so in a way that is kind of making sure they're understanding how we think about this, and it's not the product itself that we are starting with.
21:09
SPEAKER_00: It kind of goes again purpose, plan, product at the very end, and just happens to be this fund company or that mechanism, you know, ETF first mutual fund that we do.
21:21
SPEAKER_00: Um, anything on that that you would push back on or add to?
21:26
SPEAKER_01: I think an important piece of what you said is also like you said, we're checking a lot of the boxes of people coming to us.
21:34
SPEAKER_01: Typically, a good fit for us isn't gonna have a radically different investment strategy from ours.
21:39
SPEAKER_01: But I do think you pointed to a very important differentiator, which is the way that we structure the stock to bond allocation.
21:48
SPEAKER_01: I have noticed that come up more recently with newer prospects, is that they are expecting us to structure that based on their age and proximity to retirement because that's That's what they have typically experienced.
22:02
SPEAKER_01: And that is typically the way that that goes.
22:04
SPEAKER_01: And I've found that that is a differentiator in how we approach the investment philosophy.
22:09
SPEAKER_01: And people are pleasantly surprised by that.
22:13
SPEAKER_01: I have rarely seen any pushback on that piece.
22:16
SPEAKER_01: And people like that better.
22:18
SPEAKER_01: That it's not just, oh, you're 60 years old.
22:20
SPEAKER_01: You should be in whatever model portfolio just because you're that age.
22:25
SPEAKER_01: People are definitely into that piece of the philosophy.
22:29
SPEAKER_01: And I do think that's a strong differentiator here.
22:31
SPEAKER_00: I fully agree.
22:32
SPEAKER_00: And I think even as you say that, I'm realizing I probably should have framed this a bit better on the front end.
22:38
SPEAKER_00: The way you answer this question, what's your investment philosophy is very different, in my opinion, if they're asking, like at the in the very first conversation with you, of does this even make sense to work together?
22:48
SPEAKER_00: Versus if they're asking this when you're actually going to recommend their specific investment allocation.
22:55
SPEAKER_00: One is high level, is this a radical shift from what we're doing, or is this pretty similar, but it's going to tie into the rest of our plan?
23:00
SPEAKER_00: Like that, if if it's in the first meeting and you're, you know, your initial call with them, the the best way to drive that personal is to go way too deep, way too early without their quote unquote permission to do so.
23:13
SPEAKER_00: Right.
23:14
SPEAKER_00: If this is in the actual investment meeting itself, yeah, just saying, hey, Eden, we're going to keep costs low, we're going to broadly diversify, we're going to control for taxes.
23:22
SPEAKER_00: Um, here's what we recommend to see you next meeting.
23:24
SPEAKER_00: It's like, whoa, that maybe isn't enough.
23:27
SPEAKER_00: Like, why this specific allocation to stocks and bonds?
23:32
SPEAKER_00: And to your point, that's where we dive in.
23:33
SPEAKER_00: Our investment philosophy is different.
23:35
SPEAKER_00: It's not a generic 60-40 portfolio because you're a 65-year-old retiree and that's what you're supposed to do.
23:41
SPEAKER_00: It's a more intentional allocation.
23:44
SPEAKER_00: Within that growth allocation, here's how we recommend you invest between US and international, large and small.
23:51
SPEAKER_00: And this isn't us trying to time the market as much as the thing that's going to matter most to you in retirement is optionality.
23:56
SPEAKER_00: Like, do you have different places you can draw from?
23:59
SPEAKER_00: Because these will all perform very differently.
24:01
SPEAKER_00: And we need to make sure that we have an intentionally allocated amount each.
24:05
SPEAKER_00: And then finally, by the way, here's a specific fund that we're going to use to fill each of those allocations.
24:12
SPEAKER_00: Um, happy to dive into like why these specific funds, because I could talk about this for hours.
24:18
SPEAKER_00: But before I do so, like what questions do you have so far?
24:21
SPEAKER_00: And does this make sense?
24:22
SPEAKER_00: And you might say, This is great.
24:24
SPEAKER_00: I feel really so you're still using that same framework of wait for permission to go really deep and into the weeds, but do start adding more context.
24:33
SPEAKER_00: Like you're now at the point that you're recommending portfolio, which is past the point of does this relationship even make sense or not?
24:41
SPEAKER_00: For sure.
24:42
unknown: Yeah.
24:43
SPEAKER_00: Anything else on this?
24:44
SPEAKER_00: I think this can be a tricky one because there's not a perfect playbook of how much to give, how much not to give, is changes at not give, but how much to overexplain versus how much to state simply.
24:56
SPEAKER_00: Um, I'd say this changes at different points in the relationship.
24:58
SPEAKER_00: But anything else that comes up that you see that would be helpful to go over or does that cover it?
25:04
SPEAKER_01: I would just say for advisors listening, regardless of where you work and maybe even where you're at, in whether you're an associate, a lead advisor, senior advisor, whatever the structure looks like, having a good answer to this question and actually knowing what the company work for's investment philosophy is, is super important.
25:25
SPEAKER_01: And that's something that takes some time, I think, to learn, especially if you're new to a place.
25:30
SPEAKER_01: It's maybe your first finance job.
25:32
SPEAKER_01: It takes a little time to understand the nuances of each place's philosophy.
25:36
SPEAKER_01: And there's going to be differences across, you know, RIAs and everything.
25:40
SPEAKER_01: But I think understanding it and being able to explain it in your own words is super important.
25:46
SPEAKER_01: And that's something that takes time.
25:48
SPEAKER_01: And like we said earlier, this isn't really like a go home and practice it.
25:52
SPEAKER_01: But I think if you are like earlier in your career and maybe you're new to a company, asking other advisors how they talk about it, really understanding the fundamentals makes you super prepared for whatever direction this conversation goes.
26:06
SPEAKER_01: So I think that is an important piece.
26:07
SPEAKER_01: That again, this isn't like a go home and practice thing, but I think just knowing that and being able to talk about it in your own words and understanding the depth, the detail, the data behind it, knowing the why makes you super prepared for any direction this conversation may go.
26:21
SPEAKER_00: Yeah.
26:22
SPEAKER_00: Fully agree.
26:23
SPEAKER_00: And I think very good points across the board there.
26:26
SPEAKER_00: So I think that's a good wrap on this.
26:29
SPEAKER_00: Uh, thank you, everyone, for listening.
26:30
SPEAKER_00: If you haven't done so already, Apple Podcasts, Spotify, subscribe there, YouTube, Root Ready Podcast, subscribe there, and share it with someone who you think it might help, and even leave a review if uh it's been helpful at all.
26:42
SPEAKER_00: So thank you, Eden.
26:43
SPEAKER_00: Thank you, everyone, for listening, and we'll see you all next time.