2022 EP0115 - Planning Matters Radio - Know Your Advisor

We want you to plan for success. Welcome to Planning Matters Radio.

Welcome once again to Planning Matters Radio. I am joined once again by the author of Understanding Your Investment Options, a fiduciary financial investment and retirement planner serving the great state of North Carolina, and a Ramsey trusted SmartVestor Pro, Peter Rishon. Thanks for joining us. Always a pleasure, Scott.

Thank you for the warm welcome. We're here to help people in their financial path and progress, looking at their investment, their retirement plans, and just making sure that we've got no stone left unturned, no blind spot that we have not uncovered and identified, and trying to just provide down-to-earth education so that you have a better understanding and more confidence with your money. It's not just financial products offered here and by your financial advisor. It's savers and investors with an ongoing relationship where you can have a resource for guidance that gets vital questions answered and your concerns addressed. Peter, I think trust and communication are probably paramount in forming that relationship with a financial advisor and a client.

Yeah, indeed. I mean, I think that there are a few questions that people have in mind when they end up speaking with an advisor. What are your credentials? How long have you been doing this? What kind of investments do you use? How much do you get paid? How do you get paid?

Where does that compensation come from? Do I write you a check? Do you take it out of the accounts? Does somebody else pay you?

But really, it is a relationship. People may not, on the surface level, understand it, but I've got just as many questions for them when they show up in my office trying to get to know who they are as people, as savers, as investors, and how they handle their money and then what are their views and values with their money. Have you had any bad experiences with money? Did you have any good influences in your life with money?

What was money like growing up? And then as a professional, how have you handled your money thus far? Those kind of questions are really going to give me kind of an insight into what we're talking about and why it's important to you. And there's a lot of additional questions that go into what do you own and how have you invested? We'll get to that. But in order to formulate a plan to achieve your goals, I've got to know who you are and what your goals are, just like you want to know who I am and what I do and how I'm going to help you achieve those goals.

Yeah. Knowing each other so that you know, even if you have a great relationship, to know maybe what are the terms of that great relationship? Why is your relationship? Why are you a good fit? Why is it a good match in terms of investing philosophy or maybe the shortcomings or strengths of a given person? So when someone comes to you, what are some of the first questions that you'd like to hear? And if you don't hear them, maybe you ask them yourself.

Yeah. Well, you mentioned the word relationship and it is a relationship and I've gotten into what I feel are some really good friendships with many of my clients and many of my friends have also become clients. At the end of the day, it is a business relationship and I'm always conscious and aware of that, that friendships actually can maintain even if that business relationship is severed.

Like any relationship that changes that can put some different dynamics on it. But with an advisor, I think that everybody should always be cognizant of the fact that that client advisor relationship is a business relationship and it's based on them helping you achieve the financial goals that are most important to you. So if it's all just about how smart I am, what investments I have and what the rate of return has been for you and not about, well what has gone on in your life?

What has changed in your life? What do you want these things, these accounts, these dollars to do for you in the future? Then maybe, maybe assess that dichotomy of the personal relationship and the business relationship because I think a good financial relationship does have a bit of both. But when people come in, they want to know who I am. You know, I'm a Dave Ramsey smart investor pro. I am a husband. I am a parent.

I am a baseball coach. I am a fledgling musician. From times gone past, I actually cut my teeth in the radio industry fresh out of college. I was running four talk radio stations.

I started a couple online stations well before the buzzwords of streaming or podcasting ever even were heard or muttered. But you know, I take the confidence and the trust that people place in me very seriously. And when it comes to that relationship, I want to honor that confidence and trust and have follow through and service on a continuing basis. And that's who I am as a person. That's who I am as a businessman and as an advisor. I own my own company, so I'm not beholden to any manager on high telling me what solutions or products or funds to sell.

We are independent. We are fiduciary. And that's a buzzword, but it technically means that I put the best interest of my clients first legally, morally and ethically. And I think that legally is the least of those concerns morally and ethically. I think that the fiduciary responsibility is perhaps the most important question that you can ask an advisor.

But how how do I do what I do? It depends on on the approach that we are taking. I can be pretty laissez faire and hands off and just help you set up your plan. Or I can be very involved and active and hands on on a almost day to day basis, managing my clients funds and accounts and investments and plan on a comprehensive level. You mentioned that word fiduciary and it sounds like a very positive thing.

And I understand it's the it's the position that you're in. What's the alternative if some financial advisor is not a fiduciary? What's what's the alternative?

What's the other option? So this is a little bit of a history lesson, but there were a couple different levels of of responsibility that were created by different laws that were passed in the 1930s and the 1940s. The Investment Advisory Act and the Securities Exchange Commission basically stepping in to license those that can offer, sell and transact securities. The first set of rules and licenses basically gave permission to those that have the ability to buy or sell securities and investments on somebody else's behalf. And that created a suitability level responsibility.

This type of investment just needs to be generally suitable for this type of person. The second level was the license and the laws and requirements that were pertaining to giving advice. And both are important. You want to be able to give advice and offer securities. But I think that the giving of advice is actually more important.

And that is what carried with it the fiduciary responsibility. So I've heard this great kind of story and an analogy where if I go into the local butcher shop and I am looking for something to grill out, Lou the Butcher is going to be full of suggestions. You know, he's got the lamb shanks, he's got the veal chops, he's got the nice ribeye steaks, he's got the tomahawk steaks. Those are some of my favorites, you know, and I like steak. So he says, I've got these fresh tomahawk steaks and these are delicious.

These are what you want. And I trust Lou because he knows meat and I like meat and he's going to offer me the product that best fills my desire to buy what he is offering. However, if I go to my dietitian, he is probably going to tell me, hey, Peter, you know, easy on the meat, buddy. A few more greens, a few more fruits and vegetables, a little healthier diet is going to help you stay healthy longer.

Keep your blood pressure, cholesterol under control and live a better life. Now, it's not that Lou the Butcher was wrong in offering me what I was looking for, but he wasn't necessarily looking out for my best interest. You know, that's the suitability standard versus the fiduciary standard. The dietitian is the fiduciary.

Even if they love meat or hate meat, they're going to give me the advice that is in my best interest. And the problem in the financial world is that most people think that they are talking with a dietitian when it comes to those conversations with their advisor. And oftentimes they're talking with Lou the Butcher, who's there to sell mutual funds because they are a suitable investment for this client that is coming in. When in actuality, those mutual funds may not be the best thing. We may want to pay off some debt. We may want to pay off the house. We may need to invest more in our 401k or Roth or mutual funds may not be the best overall investment or the mutual funds that that particular family has may not be comparable to this other institution's family of funds. It may have a better rate of return or cheaper price. A fiduciary is supposed to sort through all that and give recommendations that are in your best interest.

That's good advice. If you're hungry, which I am now, for more good advice, visit his website www.richonplanning.com. Peter, what are some things that you see as common problems with the way that people plan as a fiduciary and financial advisor that you strive to help them address? Probably the biggest is that they wait until a big event happens to even think about planning. Human nature is that we are procrastinators, but planning is proactive.

It's not a profession of financial reacting. It is planning. It is looking ahead. Being proactive and having these conversations in advance is always going to be to your advantage and benefit. Now that's not to say that with certain things we can't do some planning after the big events have happened, but you are always going to be in better shape if you are proactive. Then there are certain things that you can't unfortunately do much about after the event has occurred. So oftentimes I see people coming in after a big event or right on the precipice of a big event like retirement or maybe sadly the passing of a family member or something like that, being laid off. Let's be proactive. Let's talk about what can and might and will go wrong into the future way ahead of time so that we have a plan of action and are prepared for those things when they do happen. The old ostrich approach of burying your head in the sand, it does not save you from danger.

Your backside is still exposed. So you can't take that approach. And I would say that that's one of the biggest problems. If I could snap my fingers and fix something about the financial industry itself, I probably would talk about the advertisement of past performance. The way that mutual funds advertise their past performance is problematic at best and at worst. It's an out and out fallacy and lie and yet people make their investment decisions based on that.

And I can give a quick example. I know math doesn't translate fantastically over the radio, but if I said, hey, I've got this mutual fund with an average rate of return of 10%, you know, that's going to sound pretty good. But if I invest $100,000 over a three-year period and the first year we get a 60% rate of return, the second year we lose 50%, and the third year we get a 20% rate of return, well, that's an average of 10%.

60 minus 50 is 10 plus 20 divided by 3 is 10. But I actually end up with $96,000 for the 100,000 that I invested. The 60% return, my hundred turns into 160. The 50% loss, it goes down to 80. The 20% return, it goes up to 96. So I've averaged 10%, but I've lost money over three years. So to me, that's problematic about the financial world and people really need to understand the way that past performance is advertised and not make decisions based off that.

Yeah, it's interesting, right? The order of operations is so important, both in the planning and in the results and then furthermore, in the marketing that people absorb. I mean, if past performance is not a good way to advertise something, what would be a good way? Is it the more of the process that goes into it or what do you think? Well, I think that a lot of people go about it in a little bit of a backwards way. They focus first on the rate of return when that should be almost the last part of the process.

It's important. I'm not discounting the importance of getting a good return, but you should be looking at the amount of risk that you are willing to take and then only taking the risk that is necessary or appropriate to achieving your goals. Look, if I want to go to my brother's house, he's about an hour away and I ride on the highway to do so. The speed limit is 65 miles an hour and if I travel 65 miles an hour, I've got a pretty good chance of making it there unscathed and unticketed. I could maybe push it, risk it a little bit, get there a minute or two early, go 70 instead of 65. I'm taking a little bit more chance there or I could say, hey, I want to get there.

I have to get there in a half hour. So instead of 65, I need to do 130 miles an hour and guess what? My car can do that, but my risk is significantly increased by doing so, right? The risk of a car accident, the risk of passing an officer of the state of North Carolina or a man with a badge. It significantly increases my risk. And the same is true in the financial world. We can shoot for the moon and go full speed ahead and chase higher returns. But is that risk really worth it? And we have to think about the risk first, because if I get arrested for reckless driving or have an accident, I don't get to see my brother at all. And if we take more risk than is appropriate and our financial path is derailed, we might not achieve those retirement timeline goals that we have into the future.

Good advice, 919-300-5886 or www.richonplanning.com to talk with Peter Rochon. Peter, you mentioned people reacting to events and possibly putting off what they should have done in the past. What do you say to the person who comes in who maybe has procrastinated too long or has waited too long, but they have now made it into your auspices or the auspices of a financial planner? What do you do at that point? Is it too late?

What do you recommend? Well, if I wanted a tree in my yard, the best time to have planted it would have been 30 years ago. But if it's not there now, the best time to plan it is today. It's never too late to start planning. It's never too early. In fact, the earlier the better, but it's never too late. It's never too little.

It's never too much. Let's start where you are and formulate a plan. And guess what? Even if it's not the best news, the absolute optimal scenario, at least you move forward with the knowledge of what you need to do to improve the current situation and get where you want to be or closer to that target into the future. A lot of people actually want to plan proactively, but don't know where to start. And that's where kind of our process begins with just a conversation, a 15 minute phone call, and we get to know a little bit about each other, gauge whether it makes sense to get together.

We offer the opportunity for a complimentary review. That initial time is about an hour. It could go to an hour and a half.

It could be 45 minutes, but about an hour to sit down and talk about you and introduce ourselves to each other. No cost, no obligation for that. And that time alone, I mean, I have seen others charge hundreds of dollars for that, thousands of dollars for the planning that we will do after the fact, if we agree after that time that we want to step it forward. But before any bridges is crossed where it costs you anything, we have a specific conversation about that.

You know, you know what it is it's going to cost you, what to expect out of that. And we have that conversation so we can both gauge if continuing the relationship is going to be mutually agreeable and beneficial. But there are a lot of people that don't know where to start. That's why we have that process. Give us a call and we can start that conversation with you. There are a lot of people who have done some amount of proactive planning, but want to take it to the next step, want to understand what has been left unaddressed. That's another big area. A lot of people have done a really good job in saving. You know, there are a lot of millionaires out there and not everybody is, but for your situation, you may have done a very good job in saving and investing and accumulating money.

But the rest of the story may still be a mystery, like old Paul Harvey used to say, and the rest of the story. You know, making that transition to retirement and actually using those dollars. Scott, you mentioned earlier order of operations, and I still remember back to algebra, pedamus, please excuse my dear Aunt Sally, parentheses, exponents, multiplication, division, addition, subtraction. That was the specific order of operations that you had to go through in order to get the correct answer on a math question.

And guess what? With your money in retirement, there is a correct order of operations as well. And if you don't go through the right order of operations, you might come out with the wrong answer. And we don't want the wrong answer in retirement when our money runs out. So you're a financial advisor. You mentioned that you have various philosophies and strategies. What if someone comes to you and they have done a bunch of planning and information, but perhaps not the best version of that? They haven't procrastinated.

They've maybe gone down a path that's maybe not your philosophy, maybe not so great in general. How do you deal with that situation? Well, we look at it and we help run some analysis and get a better understanding of what's currently going on. And, you know, if I'm flashing back about a decade when I actually went to a mall, my goal was to get in and get out as quick as possible. So I always started with the map and where, you know, where I wanted to get to. But more importantly, the little red arrow that said you are here.

Right. And you got to know where you are in order to get where you want to go. And so really running those analysis of the investments, the risks that you're taking, the fees that you're paying, the taxes that you may be liable for, how to incorporate Social Security, what the order of operations should be into retirement. Like just going through that actually provides a lot of light and illumination on where the flaws are in somebody's portfolio. And from there, it's kind of the natural progression of, OK, we have spotted this problem.

Now, are we going to do something about it? And that's it. I don't usually put it that way.

That sounds kind of blunt here on the radio, but that at the end of it, that's that's what it is. Like when we run that analysis and we see inherent flaws, it's not that you have done things poorly or incorrectly, but again, there's like two halves of the game here. There's the first half where we grow and accumulate and the paycheck provides our lifestyle, financial support and the ability to invest. And then there's the second half when we go out and we have to use those assets and the rules completely change in the second half of the game.

And, you know, a lot of football teams can attest that just because we have a lead at halftime does not mean we win the game. The same is true in the financial world. A lot of times I'm actually congratulating people that they've done a fantastic job, but also illuminating places where the plan is not 100 percent complete. And it's my job to help them as much as possible to complete that plan.

Nine one nine three zero zero five eight eight six is the number to talk to Peter Rishon. Now, what about someone who just can't deal with worrying about their financial situation all the time? There may be aware of it, maybe a little bit too much, and it's just kind of consuming them. What do you do as a financial advisor in that in that case? So I actually I have people that like to do the worrying all the time, and then I've got people that don't want to worry at all. I have clients that I can almost guarantee you look at their accounts and their portfolios multiple times a day. Now, having me to bounce ideas off of and ultimately hold some responsibility for making the right decisions, I think they appreciate that. But more often, the people that I deal with, they don't want to become full time financial professionals after they retire, nor do they want their mood for the day or week determined by the direction of the stock market.

Is it red or is it green? And that determines, you know, if I'm going to feel good about myself, my life and and my day or not. So, you know, there used to be an old Greyhound bus commercial. Leave the driving to us. And from a financial perspective, kind of leave the worrying to us to whatever extent you feel comfortable. If you want to be involved, by all means, we can we can form a relationship based around that.

If you just want to enjoy your time and know that the check is going to show up and that the money is there and that somebody is going to warn you if anything is off course, that is all right as well. And we can form the relationship around that premise. That can be the basis for the way. And any advisor, again, going back to getting to know you, getting to know me and having that relationship, both both a personal and a business relationship, any advisor should be having that balance and talking through what those expectations are. Do you want to be day to day intrinsically and deeply involved in your planning or do you want to be laissez faire and hands off and forget the whole thing and just let me run the ship and let you know if we need to change course? How much of your role is educating people on just the different options that are out there, the different things that are out there, even if maybe it's not the path that you're going to advise them to take. But all these things are out there.

A hundred percent. I mean, my job at its core is educational. Now, that that education is not necessarily saying, OK, well, now, you know, and handing the implementation and execution off to you. But you should be able to explain your plan to a friend, a neighbor, a loved one, a perfect stranger comes up and asks you what you're doing with your money. Like at its core, you should be knowledgeable enough to explain and educated on how to explain what you're doing.

Guess what? That's going to benefit both of us, because if you can explain it, you're going to feel more confident. And if you can explain that Peter Rashan helped you have this understanding and confidence, that's ultimately going to benefit me as well. So at the core of my job, it's it's education.

It is making you feel confident and knowledgeable enough about your money that you can do the things that are more important to you and be more assured that the money is doing what it's supposed to do. In fact, Scott, I'd say that's one of the most fulfilling things about my job and probably one of the biggest reasons that I got into this profession. I mentioned that my background, I was in radio. I actually used to host a lot of different financial talk programs. And once upon a time, I got to run the board for Dave Ramsey when he was torn in the country.

It was a great experience. But through that experience, I got an insight kind of backed off and third party, third hand experience. I got the insight that not a lot of people actually had that fantastic understanding of what they were doing with their money or what their advisor was doing with their money. And I realized that I actually had a pretty good understanding of money. My mom taught me to balance a checkbook very early on in my life. We used to sit down and a single parent teacher household ends didn't always meet exactly. And, you know, dad helped out and chipped in.

But it still was important for us to make sure we were intentional with our money. And she taught me about that. And, you know, I've strayed. I've made a couple mistakes and probably a book's worth of them. But I've learned from those and improved the next go around. But that understanding of how to handle my own money was actually something that I found I was able to convey to others and help them get a better understanding and more confidence. That's really what what led me to this career. And I would say continuing day to day is is one of my goals and missions and and makes this job worthwhile. That's great to hear.

I mean, it's right. There's a reason why everybody does the things that they do. And you specifically and your financial planner to the listener out there, there's a reason that they're doing it. What are what is the core reason why you became a financial adviser?

If we could boil it down as we as we come to the end here. So I actually saw some bad experiences that people were having with their money. And I was standing off to the sidelines and I recognized why they were having those bad experiences and that they actually didn't didn't have to go through that. And these were not family members that did not directly impact me. But I understood that I had a working knowledge of money.

I mean, you know, I'm a Dave Ramsey, Ramsey trusted smart vester. I have not always been debt free in college. I ran up five figure credit card debt and it took me years to dig out of that. It was a painful lesson for me, but it taught me a lot. And now I'm a big fan of that.

Let's get that free and stay debt free. But I saw that people had been given guidance that did not end favorably. And from from the thirty thousand foot view that I had at the time, I questioned why were they ever given that guidance? You know, how how did they end up receiving that as advice?

Because it didn't make any sense and it cost them significantly, severely. And so I began my my kind of inquiry. And how do I become a financial adviser to to help more people understand how and why to make certain financial decisions and choices? Well, Peter, we really appreciate you opening up, kind of shedding some light on the on your personal relationship and your and the relationship that that our listeners can have with their financial adviser. And if you'd like to talk with Peter himself about his financial advising strategies and perhaps that optimized retirement plan, you can call him at nine one nine three zero zero five eight eight six or visit his website, W.W.W.

Rich on planning dot com. Peter, anything else before we we hit the road here today? Well, don't forget about the twenty twenty two financial and retirement planning checklist. It's one page, five big topics with several items to check off beneath those big topics.

Some investments, health care, taxes, legacy and several key milestones within each one of those to make sure you're on the right path. Great to go over on your own. We'll happily mail it or email it out to you. You can also go to the website. Rich on planning dot com is what it looks like. It's my last name, Rashan.

Rashan planning dot com and download a copy of my book, Understanding Your Investment Options, another educational resource. And we hope that you have a better understanding and more confidence with your money. Thanks so much for your time today, Peter. I know I've enjoyed it. I'm sure all our listeners have enjoyed it as well. And we'll catch you next time on Planning Matters Radio.

This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment, tax or legal advice from an independent professional adviser. Any investment and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management, a registered investment adviser, fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.