At times, the world of business and finance can seem like the wild west—and when it comes to money advisors, things are no different. You’ve got your white hats, your black hats, and a whole mess of ugliness in between.
On this episode, Michael and Matt saddle up and ride out into the rugged wilderness of financial advisors. They break down what makes a great financial advisor—and all the red flags that you should be on the lookout for so you can tell the good guys from the bandits. This episode can save you some serious time, money, and financial frustration.
How You Can Steal the Show
- Get an inside look at the financial advice industry from an established finance professional.
- Learn how most financial advisors make their money.
- Figure out what a fiduciary is, and whether or not you should hire one.
- Tell a truly great financial advisor apart from one you should stay away from at all costs. (Pun absolutely, 100% intended.)
- Understand the different ways that different kinds of financial advisors can help—or hurt—your bottom line.
Listen to more episodes of Steal the Show from this season and previous ones at https://stealtheshow.com/podcast/.
Learn more about Michael’s public speaking training company, Heroic Public Speaking, at https://heroicpublicspeaking.com/.
Learn more about Matt’s specialized financial services firm, Valley Oak, at https://www.valleyoakcpa.com/.
In this episode…
- [BOOK] Where are the Customer’s Yachts? by Fred Schwed Jr. (2:50)
- [RESOURCE] Money Chimp Compound Interest Calculator (27:40)
- [BOOK] The Referable Speaker by Michael Port and Andrew Davis (44:25)
Other episodes of Steal the Show you may be interested in…
- S4E2 How to Speak the Secret Language of Business Jargon
- Andrew Davis On Obsessively Tracking Your Career, How To Create The Speech People Talk About, And Why You Can Charge More Than You Think With The FEE Model
Transcript
Michael Port (00:00:05):
Hello, and welcome to Steal the Show with Michael Port, a podcast from Heroic Public Speaking. I’m your host, Michael Port. This season’s theme is Speakers with Money. I am joined by my very good friend, Matt Rzepka, the Owner and Chief Wealth Strategist at Valley Oak, a specialized financial services firm. Together we’re exploring some of the most common and daunting challenges facing speakers, entrepreneurs, and small business owners when it comes to finance. Now to be crystal clear, I have no conflicts of interest here. Hey, actually didn’t realize that rhymes. I don’t stand to make any money at all from you based on any of the educational material you hear on this podcast. My company is Heroic Public Speaking, which I co-founded with my wife, Amy Port. We’re a public speaking institution based in Lambertville, New Jersey and we provide world-class training to aspiring and working professional speakers around the world. I don’t sell anything related to financial services. Matt, however, does, and you are welcome to hire him. I do. But I will not be compensated in any way at all if you do. I’m doing this purely because I love the topic and I think everyone in our industry can benefit from learning more about business and personal finance. That’s it.
Michael Port (00:01:24):
So today we are talking about, I think my favorite topic, money advisors, the good, the bad, and the ugly. So let’s get right to it. Alright, Matt, before we really get into talking about financial advisors, I want to tell a story.
Matt Rzepka (00:01:45):
Okay.
Michael Port (00:01:46):
Now normally I always tell my students, don’t tell them you’re gonna tell a story before you tell the story. Just tell the story. But in this case, I thought you might kind of think what’s Michael doing? He’s just going off for a while. I don’t know what’s happening here. So yeah. I’m gonna tell you a little story.
Michael Port (00:02:01):
In 1929, there was a Wall Street stockbroker named Fred Schwed, Jr. And yes, that was his real name. Fred Schwed. Say that 10 times fast. Anyway, as you know, 1929 was not exactly an ideal time to be a stockbroker. The Great Depression was just around the corner and Fred, like so many of his fellow stockbrokers, had a lot of money in the market. Then the Wall Street Crash of 1929 happened and he lost it. But this Fred Schwed we’re talking about here, he’s not gonna let some measly market crash crush his dreams. So what does Fred do? He turns to writing and he becomes an author. Much like you and me. Fred publishes two books, a book on Wall Street called, “Where are the Customer’s Yachts?” and a book for children called, “Wacky the Small Boy.”
Michael Port (00:02:56):
Now I’ve not read “Wacky the Small Boy. “And who knows, maybe it’s just packed with sage investment advice, but that’s not the book I wanna talk about. Fred’s other book, “Where are the Customer’s Yachts?” goes on to be very influential. Since it’s publication, it’s been praised by people like Warren Buffet and Jack Bogel who founded Vanguard, one of my heroes. And you can find a copy of it online pretty easily if you’d like to read it as well. So this is what I’m trying to get at. Why did Fred Schwed, Jr. call his book “Where are the Customer’s Yachts?” Well, the title comes from an old story about someone who visited New York City many, many decades ago. As they walked along the water, a guide was showing them all the yachts in the harbor, all of which were owned by finance professionals on Wall Street.
Michael Port (00:03:48):
As they were admiring the boats, they turned to their guide and asked, where are the customer’s yachts? The answer of course was…crickets. The customers don’t have yachts, but their financial advisors do and they’re paying for them. So Matt, I wanted to tell that story because I think it says something important about the money advisor industry. Now, to be clear, I’m not totally anti-money advisors, I’m doing a podcast with one. I love this guy and I also pay him to advise me about money. But when I say that I think people should regard the money advisor profession with a healthy degree of skepticism, I mean it. So often the industry seems set up to confuse us so that we make our advisors a ton of money instead of the other way around. Okay. So now that I’ve fully impugned your line of work, go ahead and defend yourself.
Michael Port (00:04:46):
No, I’m just kidding. You don’t need to defend yourself. You’re not speaking for all advisors. But look, the fact of the matter is, we know that legally, most advisors are not required to give you advice that is in your best interest. They just have to give you advice that is suitable for you. So for example, let’s say the advisor is gonna recommend two different funds or could potentially recommend two different funds. They’re almost identically diversified and they’re both suitable for you. One of them is very low expenses, so it’s gonna cost you almost nothing to be in. The other one has a really high expense ratio and a load every time you put a chunk of money in a percentage comes out, or at least the first time. The advisor doesn’t have to give you the one that is cheaper if they think that they can make more money on the one that is more expensive. As long as that is suitable for you, they, they can do it. Unless of course they’re a fiduciary, which we’ll get into in a bit. But what is your perspective on the overall finance industry? The wealth advisors, the financial advisors, the money makers, the money managers, and brokers are a whole other story altogether, so what’s your perspective?
Matt Rzepka (00:06:06):
Yeah, the industry itself, whether it’s financial, professional, CPA, even attorneys, you always have to go into a situation with your eyes wide open and number one, ask if somebody’s a fiduciary. What are they advising you on and do they have to act in your best interest? So my first designation I achieved was the CPA and that by nature makes me a fiduciary. So everything that I do has to be in the best interest of the client. And again, a lot of that comes down education. If somebody doesn’t want to educate you as to what they’re recommending, I would be very skeptical. And this has been an argument going on for a while in the industry itself. We’re trying to adhere to a fiduciary standard by all which I 100% support. If you’re dealing with someone’s money, you should be a fiduciary to them. You should have to give them an advice and give them direction for what’s best for them. Unfortunately, the industry has not been that way. It’s trying to get that way, but there’s been some roadblocks along the way. And again, usually the financial professional world specifically, they have intention of getting you to do something that’s best for them. They want to create a simple, easy business model where they make a lot of money and you just invest and hope for the best. Yeah. And it’s not necessarily designed to be what you want or making sure you’re achieving your goals.
Michael Port (00:07:26):
Yes. So I wanna tell you one more anecdote from my earlier years, then I wanna talk a little bit more about being a CPA and what that entails. Because I think there are some things that you might be able to share that are actually new to people even though they’ve been using CPAs for many years. But then I wanna go deeper into the fiduciary duties and some more of that. But when I was leaving acting, I was trying to figure out what to do. This was in maybe 2001 or something, at least the late nineties. Trying to figure out what to do. And I had a girlfriend at the time who had a friend whose husband was a financial advisor down on Wall Street- had a firm. He was always very well dressed, very handsome and a really nice car, you know, and was kind of one of those socialite New York guys.
Michael Port (00:08:15):
You know, we spent an afternoon together, out at the Hamptons just because we were there with some couples and friends. And I was telling him I thinking about leaving acting and maybe it’s time. He said, you know, you’re quite charming. I was like, well thank you very much. He said, you’re also quite good looking. I’m like, oh, come on, you’re being no… He said, no, but I’m serious. He said, I think you might do really well working in our firm. I said, oh, are you in the entertainment industry? He said, no, no I’m in the finance industry. I’m a financial advisor. I was like, what does my charm and my looks have to do with that? He’s like, oh, because I think you can sell. And I said, sell what? I mean, I had no idea. I was a kid. Is it financial products? I said, yeah, but what do I, I know about financial products.
Michael Port (00:08:56):
He’s like, don’t worry about it. Come down to the office, look around, we’ll have lunch. We’ll talk. So I went down to his office. As soon as I walked in, I was like, I’m never working here. There’s I don’t care what they do. But I walked in, he introduced me to a lot of men, all guys, you know, preening…
Matt Rzepka (00:09:11):
Yep.
Michael Port (00:09:12):
Kind of thing. And then he took me out for lunch. He explained they would put me through a training program to learn the products. And then my job would be to sell the products. And I said, well, how would I do that? You know, I like to ask really obvious questions because often the answer is not obvious. So I try to ask like the simplest questions, like I wanna be thought of as like, that’s the dumbest guy in the room, because he’s just asking the simplest questions.
Michael Port (00:09:36):
So I said, well, how would I do that? He says, well you would start with all the people you know, and you’d start calling them and telling them about the tips that we have on stocks and the different funds that we’re investing in. And we teach you how to sell those types of products. And I said, how would I make money? He said, well, you’d receive a commission for all of that. I was like, really? I was like, so the better I am at selling them, the more money I’ll make. He said, absolutely. I said, how much do I need to know about finance? He’s like, nah, not that much. I was like, okay, this is a really interesting, very informative conversation. And I was just a kid at the time. And I think that’s one of the big problems with the industry.
Matt Rzepka (00:10:16):
Huge.
Michael Port (00:10:16):
Most people are going into it focused on selling financial products. But just because you can sell something to somebody doesn’t mean it’s worth selling to them.
Matt Rzepka (00:10:26):
Yeah. The analogy I like to give when we talk about this stuff is if you’re a golfer, you go out and buy a new driver because you think it’s gonna fix your golf game, but you should go or swing coach. We don’t wanna go to the financial club rack. We want to go get a swing coach. We want to get specific direction about what we should be doing on the overall process.
Michael Port (00:10:47):
Yeah.
Matt Rzepka (00:10:47):
Not just, Hey, I’ve got the newest, greatest product and it’s gonna save your life.
Michael Port (00:10:52):
Yeah.
Matt Rzepka (00:10:52):
Its not the case.
Michael Port (00:10:53):
Yeah, absolutely. As a CPA, what is it that you do? What’s your focus as a CPA and I’m asking this because I think it’s a focus or a process that would serve any small business owner. And so if our audience understands it, they might even be able to talk to their CPAs and be like, can we do some of this stuff? And if they push back on it, then you probably need to find another. Like I remember I was even before we worked together, we were just having a conversation about changing out some of our entities and creating a slightly different structure for lower tax exposure and higher profit margin potential. And I brought it over to the accountant I was working with at the time. And I was like, what do you think about this? Think this would work? He’s like, oh that would be good. I was like, well, how come you never suggested that? He’s like, I don’t know. I was like, okay, you’re fired. You’re done. That’s it. I’m out. I said, Matt, can I come work with you? So tell me about your process, your perspective as a CPA.
Matt Rzepka (00:11:46):
Yeah. The CPA industry is very historical. They’re often not bringing proactive ideas to the table for you to consider and what we do, we have all kinds of compliance things, all CPAs do that we have to file and take care of and get done. But we bring tax planning to the forefront of what’s going on. So tax planning is really twofold. What is it that you could change today, immediately to have a better impact and a lower tax consequence for you and your business? And then annual tax planning going forward into the future to monitor things as they change. And making sure first and foremost that you understand when you file your taxes and you pay your taxes on April 15th, what is that gonna look like? You know, the surprise game is not a great way to do your taxes. Hey, turn in on my, and I’m gonna sweat bullets until somebody calls me back and says, Hey, I’ve gotta either write a really big fat check or I’m getting money back.
Matt Rzepka (00:12:39):
You want to know that going in so that when you’re doing preparation of taxes, you already know the outcome. Because again, information is power that allows you to make decisions, allows you to start looking at what could we do differently. And the industry has never really been taught from a CPA’s perspective on how to do that. Now you’re seeing it more and more today. It’s evolving over time and it’s definitely happening more. But what you’re also seeing again, this is the money advisor game, a lot of people who aren’t CPAs are getting the tax industry and they’re marketing what CPAs are lacking. If you’re going down that path you just always wanna make sure you know the full story and what you’re getting and making sure that you’re getting accurate and proper advice.
Michael Port (00:13:21):
So you’re a CFP and a CPA.
Matt Rzepka (00:13:23):
Yes.
Michael Port (00:13:23):
A certified public accountant and a certified financial professional. And the CFP is the highest designation that you can earn in your field.
Matt Rzepka (00:13:31):
Yes.
Michael Port (00:13:31):
It’s a very, very rigorous test. I think the majority of people fail it the first few times. So it’s, you know, pretty substantial. But would it be relevant for someone to ask their CPA or a CPA who is both a financial advisor and a CPA, which they were first?
Matt Rzepka (00:13:49):
It could be. Here’s a funny government regulation that we have to deal with on top of the advisor situation. If you’re just a financial professional, financial advisor, you’re technically not allowed by law to talk about taxes. However, virtually everything you do with your money has a tax consequence.
Michael Port (00:14:05):
Right.
Matt Rzepka (00:14:05):
So then you’re forcing the industry to have two professionals involved. Those two industries have not really set up a system for those two professionals to be involved with each other efficiently. And then you start getting conflicting advice and then you, as the client start wondering what the heck is going on and what decision and who do I listen to. And then you’re frozen because you don’t know who’s telling you what and who’s right. What do I listen to? So you just keep trying to save money and make money.
Michael Port (00:14:30):
Yeah.
Matt Rzepka (00:14:30):
And you don’t learn anything. You don’t really know what’s going on and you don’t have a plan.
Michael Port (00:14:34):
Yeah. It really does help that you fill this role for us almost like a CFO in my pocket. Right? So we’re a small company, you know, Juli is our Director of Finance, but we don’t have like a traditional CFO. We’re not large enough to have one person who’s just the CFO and that’s all that they do. And because of the kind of relationship we have where you’re not just doing my taxes, you’re also advising us along the way. Even though we manage our money, I manage the company money and I manage my money. You are advising us along the way. So I feel like not only do we have a CFO who can help direct us in important financial considerations in the business and the tax implications of those choices because they are significant, but also the person who is helping do all the tax planning and strategy, but then also advising on savings and investing and making sure that our buckets are properly filled at the right ratios for what our goals are, et cetera. So you’re able to move through all of three of these areas. And I think that is one of the things that’s really been lovely for me because I think it also makes us closer. Most people don’t have like a close relationship with their accountant cuz they see them once a year if ever, but we talk on a regular basis because it’s not just about filling out the 1040 that’s almost to me almost the least of what you do.
Matt Rzepka (00:16:03):
Yeah. The transactional part of the CPA business is necessary, but it’s not the most important piece. And then additionally, our business models different than a lot of traditional CPAs where we do fixed fee. We actually educate and tell clients that we want you to communicate with us because if you’re trying to figure stuff out on your own, and then you tell us after the fact we can’t provide any advice or value, it says, oh, well maybe think about doing it this way.
Michael Port (00:16:27):
Right.
Matt Rzepka (00:16:28):
When I worked in a public accounting firm before we started the company, that was the thing I saw over and over that I said, Hey, there’s a need here. And that was one of the driving forces to start the company is that we’ve gotta be able to deliver advice differently. So if, if you’re getting charged by the hour or you’re not sure what something’s gonna cost, figure out how to get your current professional in with some sort of planning mantra where you can communicate with them more. And if they’re not willing to do that, then you probably need to look elsewhere.
Michael Port (00:16:54):
Yeah. Amen. So let’s transition into some of the uglier. No look, I think that it’s very, very unlikely that anybody’s gonna end up paying for their CPAs’ yachts. You know, CPAs don’t tend to charge extraordinary fees to individuals or small business owners, but often people in the advising industry are making a lot of money off people’s portfolios, even if the way they have those portfolios managed is not in fact productive and could be quite costly. So let’s talk a little bit about financial advisors. In the earlier episode that we did on terminology, we discussed the fact at financial advisors kind of a made-up term.
Matt Rzepka (00:17:37):
Yeah.
Michael Port (00:17:37):
And there’s lots of different terms that people use wealth advisor. What are some of the other ones? Financial professional.
Matt Rzepka (00:17:47):
Yeah. Even like wealth strategist.
Michael Port (00:17:48):
Wealth strategists.
Matt Rzepka (00:17:50):
I mean, you know, there’s all kinds of, and you have to be aware of what is just words on a paper versus a designation.
Michael Port (00:17:57):
Yeah.
Matt Rzepka (00:17:57):
You know, certified financial planner is the designation. That’s the CFP. CPA again. So you want to be aware of what the true credentials are versus a made-up credential.
Michael Port (00:18:07):
Right.
Matt Rzepka (00:18:07):
There’s a lot of that out there.
Michael Port (00:18:08):
Because if somebody is gonna manage your brokerage account or your retirement accounts, they do have to have some certifications. They have to pass some tests.
Matt Rzepka (00:18:18):
Yeah. Some federal securities licenses are required, but they’re not a required fiduciary.
Michael Port (00:18:23):
Correct. So let’s talk about what the difference is because some of those licensing, like I feel like if I studied for a few months, I could probably pass some of those licensure…
Matt Rzepka (00:18:31):
Absolutely.
Michael Port (00:18:31):
…tests. But if I just studied for a couple months, I could not pass the CFP test. It would take a lot more work.
Matt Rzepka (00:18:39):
Yeah.
Michael Port (00:18:39):
To get to that level. So can you talk a little bit about the difference between a financial advisor who’s just passed their, I don’t know what series they need, 6, 7, 52, 900, I don’t know what they need, but you do, and what a fiduciary is?
Matt Rzepka (00:18:54):
Yes. So the series licenses really allow you to sell different types of products. So you can get just a 6 and 63, which is just gonna really allow you to sell mutual funds and annuities and stuff like that. You can get a 7, which is more individual stocks and other things. And then there’s even four or five other licenses you can get. But none of them require you to be a fiduciary. It just allows you to sell the product. The fiduciary standard is really either given by a company or given by other designations that you have. So the CPA, CFP designations are really my fiduciary standard. And again, when I started that’s one of the benefits of me starting in the CPA world was I learned a lot about the full picture. And again, there’s assumptions there that CPAs are doing a lot in that full picture, some are some aren’t, but it gave me perspective to say, okay, how does this all fit together in a whole 100% puzzle?
Matt Rzepka (00:19:48):
And the licensure, if you just want to change career, you can go take the test, pass the test and start selling products. Similar to how you got pitched when you were thinking about getting out of acting. It just it’s a sales mantra more than anything else. What happens then typically is the financial advisor is successful at selling and then they start to figure out there’s more to this game. Now, some who have a fiduciary mindset then start realizing, Hey, I need to educate. I need to start doing things differently and serving clients differently and upping my game. But unfortunately, a lot don’t because they build up a book of business, so to speak and then just live off the income from that book of business, really irrespective of how the client is doing.
Michael Port (00:20:25):
Right.
Matt Rzepka (00:20:25):
And that’s a lot of the goals, unfortunately, with some financial advisors who aren’t fiduciaries is they just wanna build up a book and take easy street so to speak.
Michael Port (00:20:33):
Yeah. So if someone hears the term money manager, does that actually mean anything?
Matt Rzepka (00:20:37):
A money manager can be separate from a financial professional who is just maybe working for one of the big wirehouses. So they’re managing the day to day activity from the Wall Street trades, not necessarily working with clients. So there’s a lot of steps and pieces in the process where you’re gonna have different parties doing different things.
Michael Port (00:20:56):
So most people wouldn’t work directly with a money manager?
Matt Rzepka (00:20:59):
Typically not.
Michael Port (00:21:00):
Okay. And if someone was a money manager and trying to get them to invest their money with them, that would be odd?
Matt Rzepka (00:21:05):
It could be possible, but you want to make sure they’re basically just taking your money and trying to make money with it and charging you a fee for it.
Michael Port (00:21:13):
Okay.
Matt Rzepka (00:21:13):
They’re not really looking at whether that’s appropriate for you or how the rest of your finances fit together. They’re just taking, if you’re gonna write, ’em a check for a hundred grand, they’re only worried about the a hundred grand.
Michael Port (00:21:23):
Okay, so here’s the thing. Most people who go into the advisor business do so because it can be very lucrative if you are able to secure a lot of high net worth clients, which is why you see sometimes the storefront, it says like wealth something, right? So that’s okay. We want rich people. That’s what they’re saying. Or they’ll say I don’t take anybody who has less than a million dollars in assets, you know, whatever it is because if they have a lot of money under management and they are charging a fee for that service, say, let’s say the fee is 1.5%. Sometimes it’s 1%. Sometimes 1.5%.
Matt Rzepka (00:22:05):
And you have fees from the companies too.
Michael Port (00:22:07):
Correct.
Matt Rzepka (00:22:08):
Yeah.
Michael Port (00:22:08):
So you have this one fee, just assets under management fee, AUM. And if there’s a million dollars of your money that they are managing every year, you’re gonna give them 1% of that. But also they may have you in mutual funds that have very high expense ratios. So it might have an expense ratio of 1.5%, 2.5%, 3.5%. And now say 2.5%, 3.5% of whatever is in that fund is going to that fund manager.
Matt Rzepka (00:22:42):
Yes.
Michael Port (00:22:43):
Okay. So now we’ve got, let’s say it was 2.5% and you had to give 1.5% to the financial advisor. Now that’s 4%. Now there may be a load on the first money you put in. So you move a million dollars over there into this one fund and there’s a 5% load. You may have to pay 5% of that million dollars to that fund and they’ll split it with the salesmen, I guess in some way. They’re just like chop, chop, chop, chop, chop, chop chopping money off where they can.
Michael Port (00:23:11):
And then there might be additional costs of being in the fund, just due to a concept called churn.
Matt Rzepka (00:23:16):
Yeah.
Michael Port (00:23:16):
If they’re buying and selling stocks in that fund regularly, they may be incurring costs for that kind of churn. And there’s also often tax implications associated with that. And so I mentioned this because you don’t have to pay that kind of money to be in the market in a reasonable way. John Bogle, who was the founder of Vanguard said investing, the more you pay, the less you make.
Matt Rzepka (00:23:41):
Yeah.
Michael Port (00:23:42):
It’s kinda the opposite. Like if I’m gonna hire the best carpenter in the world, I’m gonna pay more. If someone’s gonna hire Amy or me to work with them, they’re gonna pay more because of the skill that we bring. But in investing, it’s a little different.
Matt Rzepka (00:23:56):
And technology has evolved and changed and you used to not be able to buy stocks as an individual.
Michael Port (00:24:01):
That’s right.
Matt Rzepka (00:24:02):
But the internet and everything, that’s evolved the last 25 to 30 years has changed the game.
Michael Port (00:24:07):
That’s right. So for example, I could do what a money manager will do because I take a very simple approach to the way that I invest. And it’s what would be considered a Bogle head approach. Fans of John Bogle. Which is I buy everything. I buy the total market. I buy the total bond market. So I buy the total stock market and I have a particular ratio of bonds to stocks that I am comfortable with at this stage. And almost every year I beat the funds that are trying to compete with the various benchmarks in the market. Not because I’m smart, but because I don’t do anything,
Matt Rzepka (00:24:45):
Let the process be the process.
Michael Port (00:24:46):
Yeah. So I, I stand there and do nothing once I’ve got it settled out and straightened out and just focus on producing money to then put into there to hopefully have it grow over long periods of time.
Michael Port (00:24:56):
This is a little bit of a long diatribe, a little bit of a soapbox. I’m not saying that nobody should work with an advisor. Like I think there are people that absolutely should be working with you as an advisor. They may not wanna be as wonky and geek out on this stuff the way I do. I mean, I spend a lot of time learning about this. I’ve enjoyed it. It’s not always been easy. It was harder at the beginning as I was trying to get up to speed. Now it feels easier, but some people may not want to and that’s okay. But if they are going to get someone to help them, that person has to be a fiduciary, has to sign a paper that they’re a fiduciary because sometimes what you’ll see advisors do is they’ll act for one thing as a fiduciary. But this other thing is like really deep into the small print. It says in this particular case, I’m not a fiduciary.
Matt Rzepka (00:25:44):
Yeah.
Michael Port (00:25:44):
And then all of a sudden, and you don’t know, and what they’re giving you is not actually in your best interest. So when do you think it is worth it for someone to work with a financial professional, like a CFP rather than doing it themselves?
Matt Rzepka (00:26:00):
A lot of that comes down to education and decision making ability. Because a lot of things when it comes to investing are opposites.
Michael Port (00:26:07):
Yeah.
Matt Rzepka (00:26:07):
Where you can’t make bad decisions at the wrong time or it could really cost you. No. So the example of that, the easy example is when the market’s going down, the natural reaction to most people is that they should start selling.
Michael Port (00:26:18):
Right.
Matt Rzepka (00:26:19):
And you actually would wanna start buying. And so if you don’t have some of those basic skill sets, you may wanna work with someone that maybe over time, you do start to manage it on own or in a different platform. But being fee conscious, you know, fee compression is real. And any advisor that’s not acknowledging it is likely losing clients. Fees are ways that financial advisors that just do financial advising also can give you advice. But again, you wanna understand that you’re signing up for that at the beginning, that you’re gonna get more than just money management.
Matt Rzepka (00:26:48):
I’m gonna get advice. I’m gonna get planning. We’re gonna talk about estate planning. We’re gonna talk about all kinds of things. We like to work with other professionals. The problem is, is we often run into who’s the head honcho issue. Or we picked up a really big client just based on the fee discussion. We did a review of their accounts and I said, well, what fee do you think you’re paying? And he said, oh I’m paying 1%. I said, okay, well I wanna make sure because it doesn’t look that way on your statements. And we just did some simple math. We was paying 1.75% and was really not happy because it had been a…now the performance of the accounts had been good still. So they were doing proper asset allocation doing some other things, but they didn’t properly disclose all the fees.
Michael Port (00:27:30):
Yeah. And you know, sometimes people don’t realize how significant a small percentage point is because they go, it’s 1%, what’s the big deal. But if you use a compound interest calculator just do a search online for compound there’s calculator. There’s one from Money Chimp that’s a good one. You put in your current principal, put in the amount that you’re gonna save each month or year, depending on, on what the text box asks you for. And then you’ll put in perspective interest rate. So you may say, okay, well I’ll put it in at 9%. If I got 9% percent on average every year for the next 30 years and you put the number of years to grow, what would it be? And then you see your total and you go, wow, that’s amazing. Well just take one percentage point off that, keep everything else the same, take one percentage, point off that.
Michael Port (00:28:16):
And you go, holy shit, that’s like a million dollars.
Matt Rzepka (00:28:18):
Yeah.
Michael Port (00:28:18):
That’s a big number. Now I think I am with you absolutely. That if somebody’s going to risk making mistakes because they are responding to what’s happening in the market or they think they are. And if they’re making very emotional decisions about how they are managing their portfolio, if they don’t have a written documented portfolio plan, meaning this is exactly what I do in this situation. Here’s, here’s what we’re doing for the long haul, et cetera. Then that really may be money well spent because if you go in and outta the market in and outta the market in and outta the market and you’re not optimized, your expense fees are too high, all these things. You may be giving away, way more than the one that you’re gonna give to a good advisor who is also a fiduciary for making sure that you don’t screw it up. I think that’s really reasonable.
Matt Rzepka (00:29:14):
Yeah.
Michael Port (00:29:15):
And then if you, you know, wanna learn more over time, you may say, okay, I’ll do it myself. But I think that for some people that really can make a difference. And if you pick an advisor, who’s a fee only there there’s questions you have, you can pay a fee, an hourly fee and get the advice you need and get more advice when you need it, et cetera.
Matt Rzepka (00:29:33):
Or if your professional doesn’t want you to transition to being more involved, then they might not be in it for the right reason. So somebody said, Hey, you know what? I want to get to a point where I can do this on my own. We would come up with a plan on how to do that. And let’s say they still wanted some advice. We can set up a separate fee agreement that doesn’t have to be a percentage of assets that says, okay, here’s what we’re gonna do now that you’re managing this on your own. So we can be accountable with you to make sure this is going how you want. And if it doesn’t, then we can change it back. But again, it’s about you, the client, not me, the advisor.
Michael Port (00:30:04):
Yeah.
Matt Rzepka (00:30:05):
And so you have to figure out what is gonna be best for you. And if you want to try and go down that path, someone should be there to support you in that.
Michael Port (00:30:11):
So let’s talk a little bit about insurance agents because sometimes advisors also sell insurance products. Sometimes they don’t. Sometimes there are people who sell just insurance products, but they don’t do any kind of money management or investment work. So can you unpack that for us?
Matt Rzepka (00:30:30):
Yeah. So insurance is a totally separate license. It’s a totally separate area of investments. In general. Some of them are not even really referred to as investments they’re referred to more as savings vehicles. You start to bring in annuities into that conversation. It gets very complicated quickly. Now the thing I like to say is there’s no product out there that’s intentionally bad. It’s just used wrong in context. That’s a sales model where, well I’m selling this annuity and I just want you to buy it because that’s how I to put dinner on the table, so to speak. But annuities, a lot of people will talk bad about annuities, and annuities are an insurance product. Annuities are very good when used properly. A lot of people today would say, okay, well I hate annuities, but they sure do love their social security check that shows up every month, you know. Social security is an annuity. And a paycheck type of mentality and retirement. Some role is certainly willing to play. Now you again, have to look at your total assets. That’s why the big picture’s always so important. And when you start talking about the different advisors in the mix, the insurance agent often just plays one piece of the role. So they’re not operating on all the information. Now that’s not is the case, but it’s probably more the norm than not.
Michael Port (00:31:45):
Yeah. If insurance agent quickly recommends a type of product without spending a significant amount of time going through the whole picture of your financial health and goals, would that be a red flag for you?
Matt Rzepka (00:32:01):
Yes.
Michael Port (00:32:01):
Yeah, because there are multiple types of insurance products. So let’s just look at life insurance for a second.
Matt Rzepka (00:32:07):
Yeah.
Michael Port (00:32:07):
So you have term life insurance policies. You get this policy for a certain term, 10 years, 20 years. And you have a premium that is agreed to at the beginning of the term and you pay that premium throughout the term of the policy. Now there are also permanent life insurance policies, but they come in many different forms. So you have a whole life policy. You have a universal life policy. You have a universal index policy. I mean, there might be more names that…
Matt Rzepka (00:32:37):
There are, yeah.
Michael Port (00:32:37):
…I don’t even know. So that can be really confusing, especially because they have been for many, many years, those permanent policies. The variable life, universal life, whole life. They have been pitched as investment vehicles. So they took an insurance product and they supposedly added an investment component that works in this very tax advantaged environment. That is sort of like the end all be all for everyone. And there are absolutely times it seems to me when some of those policies may actually be really effective. But for most people they seem like they’re just losses. Like you’re gonna spend a ton of money the first 10 years before you even start to break even on the policy. You’re not even gonna be able to understand the fees because they’re so confusing and baked into it. So you might be paying higher fees than, you know. So for most people they’re probably not necessary. But who would they actually actually be appropriate for? Who would use them and why?
Matt Rzepka (00:33:43):
The biggest thing when it comes to permanent insurance products is again, the sales process. Oftentimes all the benefits and ideas and here’s how this is gonna help you takes over the conversation. But it doesn’t sit down and look at a budget. It does doesn’t sit down and look at a plan. I don’t look at permanent insurance as investments, they’re savings products. You’re not gonna ever get a huge rate of return in any one of those categories. Like the market, you’re in it for the long haul, right? So the long term result of what’s going on there is really the place to focus. And then again, access to capital. So you have some unique access to capital. In some of those products. You do have some tax benefits. Part of it’s risk tolerance. I personally use some of those products for myself because I want to make sure there’s a portion of my money that doesn’t go backwards.
Matt Rzepka (00:34:35):
So if you’re not comfortable with some of the risk components of how all of your money being in the market would work, that would be one place to look at it. You know it’s such a personalized decision. I use it as my foundation when I started. I was not doing a lot of investing outside of some of those strategies first because I wanted to make sure, Hey, the business is the core asset, generating the income. I wanna make sure that always is moving forward and I’ve got access to money to make sure that’s happening. Then as that foundation grew, that’s when I started bringing in more risk categories, buying more stocks, buying other assets that carry risk to try and grow them faster. So it’s a combination strategy in my opinion, but whatever you do there, if you’re gonna go into one of those products or policies, you don’t want to go in it for the short term. You’re guaranteed to lose money.
Matt Rzepka (00:35:23):
If you do it for 2, 3, 5 years and quit. So don’t go into the process lightly. Then you want to take the time to make sure this is something I want to do. And if you make the decision to do it, you have to stick with it. Now it doesn’t mean you can’t change course. Like let’s say something changes and you need to modify what’s going on. Talk to the person who helped you buy the product. Now here’s the other issue with the good, the bad, and the ugly. A lot of times that person doesn’t exist anymore. So because it’s a sales environment, they didn’t survive the sales world and they weren’t producing enough income for the company, so their job was eliminated. Or they just said, you know what? I’m not good at the sales thing. I’m gonna go do something else. Well now you have a policy. And if you don’t have somebody to talk to that says, Hey, how do I get this back on track? A lot of policies are underfunded. They don’t have enough money in there where you can start to overcome the fees. And so that’s usually when we encounter a client who has a policy. It’s the first we looked at, what’s the funding component? Is there more funding that can get into this policy? We can make it start being more efficient for you.
Michael Port (00:36:24):
Earlier you mentioned, tell me if I got it wrong, but you know something to the effect of like policies aren’t necessarily designed to be bad or to be evil. You didn’t use the word evil, but maybe that’s what I heard. But I, I think so some of them are. Meaning like I’ve seen the way you’ve designed some of these and I understand the design for the most part. And they’re well designed and appropriate for certain people who want to for tax purposes, use that kind of vehicle. I bought two of those policies, not from you, but before we started working together. I bought one right after Jake was born, because that’s typically and people get life insurance. And uh, I don’t know, I met this guy, Jack. I don’t know how I met this guy. Someone introduced me to him or I called and said, Hey, do you have somebody who could get me some insurance?
Michael Port (00:37:07):
He comes to me and he, he never even talked about any other type of policy except this universal life policy. And I didn’t know there were any other types of policies. I was completely clueless. So he said, well, this is what your monthly cost is gonna be for the insurance. And look at this death benefit that you’re gonna get. You can put more into it because then you’ll get a return. You know, all of this stuff. I’d say that’s wonderful. So about eight years later, I needed more insurance. As you get older, often you need more insurance. So I went to get another policy and this woman was someone my mother knew that had helped her out, sold her some insurance. So she sold me a policy that was extraordinarily expensive. And after I bought it, I had this moment of like, wait a second.
Michael Port (00:37:52):
I don’t really understand exactly how this works. This was before the realization and adopted the mantra of if I don’t understand it, I’m not buying it.
Matt Rzepka (00:38:02):
Yeah.
Michael Port (00:38:02):
Simple as that. And then I said, well, how do I figure out if these are any good? I have to figure this out. I mean, maybe I got incredible products here or maybe I got dogs. I went online and I found this guy in Vermont who used to be the commissioner of insurance for the state of Vermont in his retirement. He just evaluates insurance policies for like 125 bucks. That’s it. So I sent them to him. He sent them back. And the one that I had had for a long time, he said, look, it’s the shitty policy, but you’ve had it for so long that you might as well just keep it, just stay in it because you’ve gone through most of the pain you’ve hurt yourself.
Matt Rzepka (00:38:41):
The pain is early.
Michael Port (00:38:42):
Yeah. Right. You already got beaten pretty badly. Now you’re out of the hospital and you still have a limp, but you know, you can walk this other one that you just bought. It is the worst policy I’ve ever seen. Dump it today. And I said, I just paid a $25,000 premium. He’s like, yeah, lose that money today. Because you’re gonna lose more money going forward. I was like, oh my God. This was around the time when I started getting more serious about learning, because I just felt like I was duped. I felt stupid. And I think that happens to a lot of people, but we just cannot give up when that happens.
Matt Rzepka (00:39:14):
And again, the fiduciary component to all this, how do you not have a conflict of interest? If you can design a policy one way and make more money, which is better for you and the insurance company versus designing the same policy a different way, which is better for the client.
Michael Port (00:39:29):
Yeah.
Matt Rzepka (00:39:29):
Unless there’s some other authority that’s trying to hold people accountable, there’s a lot that can go on there. That isn’t best for the client.
Michael Port (00:39:36):
Yeah. So tell me if this is accurate. My understanding is that there are a couple different times when permanent life insurance policies can be helpful. Most people should use term.
Matt Rzepka (00:39:48):
You absolutely want to have death benefit protection with term insurance. I own a lot of term insurance because again, one of my biggest risk is if I were to die, I wanna make sure my family has enough money to do everything I wanted them to do if I was here.
Michael Port (00:40:01):
And it’s cheap for the benefits.
Matt Rzepka (00:40:02):
Yes. Yes.
Michael Port (00:40:03):
And of course insurance is the only product that you hope you never have to use.
Matt Rzepka (00:40:06):
Yes.
Michael Port (00:40:07):
Or you’d like to use it when a hurricane destroys your building, but they won’t give you any of the insurance because they exclude anything from a flood, which is typical on all commercial business policies like that. But when our boat burned down, the insurance company wrote a check two weeks later, I think.
Matt Rzepka (00:40:24):
Yeah.
Michael Port (00:40:24):
Thank God I had insurance at the value of the boat. So it’s an incredibly important thing to have, but it seems like those permanent policies are relevant for two different groups. And tell me this is accurate. And if I’m missing anything. Number one as an actual permanent policy for somebody who may be disabled. Yes? Is that yes?
Matt Rzepka (00:40:44):
Yeah. Yes, absolutely.
Michael Port (00:40:45):
Okay. It could guarantee them a certain insurance that they could never get later in life because their health wouldn’t allow it, but they could get it earlier.
Matt Rzepka (00:40:53):
Yeah. Disability waiver is often a huge part of that to make sure you’ve got a guaranteed benefit access to some other benefits. Absolutely.
Michael Port (00:41:02):
Right. So that can be worth it. And then for people who have enough assets that they’re looking for more places to put their assets to protect it, either from taxes in part, you may not get total protection from taxes, but in part, or to pass the money down to heirs or to use it. I’ve heard this term a lot, but I think it’s abused a bit, but your own personal bank kind of thing is that in line with your thinking?
Matt Rzepka (00:41:28):
And even to the buffer account kind of strategy where in a down market, if I need money, the last thing I want to do is sell an investment. So if I don’t have leverage capability against my account, I may want to have another place to tap some resources, to be access to capital. And then reserve accounts are the way I like to look at. I want to make sure I’ve got enough money in reserve. And when I look at money and reserve, I don’t want it to go backwards. I don’t want it to have risk of loss. And that’s the other place that I really kind of focus in on.
Michael Port (00:42:00):
I think it seems like at the end of the day, the key is what does it cost for that benefit? Because I think sometimes we get into the mindset of any benefit will do. Like if we’re gonna get a benefit from it, I’ll take, it doesn’t matter what it costs. And it ends up costing more than the benefit is actually worth. And that’s the risk. So I still have trouble understanding exactly how those policies work and I’ve really worked on it. So I guess it comes down to, if people are thinking about the policy, number one, as you said before, if you don’t feel that the person who’s creating it or selling it to can explain it so that you can understand it, you probably shouldn’t buy it.
Matt Rzepka (00:42:34):
Yeah.
Michael Port (00:42:34):
‘Cause that means they don’t understand it. And even if they can, but you don’t understand it, you should wait until you have done enough work to actually understand it, to decide whether or not it is gonna be of benefit to you.
Matt Rzepka (00:42:46):
And an official cash flow plan. Like that’s where I’ve seen policies go bad in a hurry is somebody oversells the benefit its of the policy. But they don’t do a cash flow plan to see what the person can actually afford to pay. And then the next thing you know, you’re paying these bigger premiums because permanent policy premiums are substantially more than term and they’re that way intentionally, because you’re supposed to get other benefits from it if it’s designed properly. But if you can’t afford to make the payment and then you have to stop, you’re get guaranteed to lose.
Michael Port (00:43:15):
Yeah.
Matt Rzepka (00:43:15):
So you have to make sure you have a total wealth plan, a cash flow plan ,as to how those premiums are gonna get paid or it could end poorly.
AD BREAK (00:43:23):
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Michael Port (00:45:43):
So Matt let’s talk about estate attorneys. Who should consider hiring an estate attorney: when and why?
Matt Rzepka (00:45:50):
Yes. Most importantly, the easiest way is if you have minor children, I think it’s extremely critical that you do some estate planning and hire an estate planning attorney because the major risk you’re faced with is if you were to prematurely pass away, you and your spouse, your kids as minors need a lot of protection from your assets, your money, your wealth, as to what happens with those dollars who controls those dollars and or they get those dollars when they turn 18. Typically most parents don’t want a pile of money dropped in someone’s lap the second they turn 18. And without some trusts and some planning, those things are costly. You have to get into, what’s called a conservatorship, where somebody else is managing the money. If you’re in the media at all, Britney Spears had all kinds of hoopla about this stuff. So you could see how it can get outta control if minors have money in accounts and who’s in, in control and what you want to happen. So it’s kind of a roadmap for what you want to happen if you’re no longer here to see it. So I think that’s extremely critical to consider.
Michael Port (00:46:46):
Yeah. I think that one of the things that people often don’t like to talk about, but I think are really helpful to talk about is prenuptial agreements.
Matt Rzepka (00:46:56):
Yes.
Michael Port (00:46:57):
Two things. I will be telling my kids as they get closer to that age. Number one do not marry someone who is financially irresponsible. Number two, do a prenup. Period. Not because you’re going to get divorced. Not because you don’t trust this person, but because when you do a prenup, it forces you to have all the money conversations. It forces you to both talk about what you value. To understand what the other person values. My attorney, and you know him as well, Eliot Wagonheim, he describes a contract, I’m paraphrasing, but he essentially a document to help create really meaningful relationships. Not as something to handcuff somebody else or just protect yourself, but is how do you create something that makes the relationship more meaningful. When Amy and I did ours, we were coming into the marriage in different situations financially with different experiences and so it wasn’t an easy conversation, but it was some of the most important conversations we have.
Michael Port (00:48:02):
I mean I know some people do this in church where they’ll go through a program and then talk about money, et cetera. But doing it where you’ve gotta put it in writing and then sign to it and agree to it. It raises the stakes a bit, puts it at another level. I also think that this estate planning is so critical because I would be mortified if something happened to me and nobody knew what the heck to do with any of the stuff that we have. Like who gets what what’s that? And this people start why want this? And it’s not just about what you do with your stuff. It’s, you know, how do you make sure that you protect your assets going forward? If the inheritance tax structure should change?
Matt Rzepka (00:48:42):
Yeah.
Michael Port (00:48:42):
And it’s likely going to change at some point, because everything changes at some point, you also might wanna put all your life insurance policies into trusts, because it’s better for a number of different reasons, but then you’ve gotta decide, well, how do you distribute the proceeds through this trust?
Michael Port (00:49:00):
And who’s the executor and what’s their responsibility? Who would be the second you have. There’s a lot of things that you need to look at that help you create a stronger, tighter, clearer picture of who your family is and what you’re all about. I love it. I do. I mean it’s tedious. I don’t always love reading the documents because it’s, you know, legalese, but it’s really important. And I think that if, if I was gonna recommend what somebody should look for in an estate planning attorney, I would wanna make sure something really important: that what they’re giving them is not boiler plate. Because any estate, here’s a prenup, here’s an eyelet and trust for insurance policies. Here’s a whatever kind of trust. And they just give you the boiler plate, change a couple things, but that’s i.t as opposed to really understanding your situation, your wants your needs, desires and writing something that is specifically designed only for you and your family.
Matt Rzepka (00:49:56):
Yeah. So critical. And you see a lot of boiler plate stuff and you can get boiler plate stuff online. You can do a lot of it yourself. And any plan is better than no plan. And that’s a way that your assets can get depleted quickly is with no plan because fees and the courts. And everything comes into play and you don’t have any choice at that point. You work so hard to build up and gain all this wealth. You don’t want to see it dissipate quickly if something were to happen to you. And again, just some clarity so that your kids have some direction, you can write some pretty unique things into some trusts in estate planning documents about what you wanted for them or because you’re not there to counsel them anymore. We joke about it, but we call it the Beach Bum Provision where you don’t wanna just have all this money sitting in a trust funding some kid’s lifestyle where he doesn’t have to be a good human or a good citizen and productive. So you put some productivity components into an estate planning document. That’s the customization part that you mentioned that I think are critical.
Michael Port (00:50:52):
I fantasized about being one of those kids when I was younger, because I was not at all. But I do remember thinking, oh wouldn’t it be great to have a trust fund? Trust fund. Yeah, that’d be fantastic. But no, sadly enough, I didn’t. So when is this appropriate? Most of the people who are listening to this are not kids.
Matt Rzepka (00:51:14):
Estate planning is a lot about asset transfer. So you wanna understand what assets you own. A lot of assets we have today are gonna transfer by matter of law. So an IRA or a retirement account has a beneficiary designation on it. Number one, make sure you have a listed beneficiary because otherwise it creates an enormous problem. But if you do have a listed beneficiary, it’s gonna transfer to that person automatically. The law says so. So if you have a lot of assets in your portfolio that are gonna transfer automatically and you don’t have any minor kids, you might not necessarily need a full blown trust, you might be able to get away with a will or some other basic planning documents to make sure you’re covered. But powers of attorney are also extremely critical. Financial powers of attorney and medical powers of attorney to where if you’re not able to make decisions on your own, who is gonna make those decisions for you if you’re still alive?
Michael Port (00:52:05):
Yeah.
Matt Rzepka (00:52:06):
And those are so critical to know and plan to not fun things to think about, but very important things to have covered.
Michael Port (00:52:11):
There’s two other things that I’ve done that you wouldn’t do within a state attorney. You’d just do it by yourself. And it might seem a little bit morbid. You know, I don’t have any kind of death wish, but I have two other documents that I’ve worked on for years. One is called the Port Family Playbook, and that’s about a 60 page document that goes through all different categories of life. And it’s the kind of thing that I would want my kids to know if I wasn’t here to give them that advice. Or if they never actually asked me for the advice, but maybe they’ll just go look in the thing and say, what, what would dad say? I don’t wanna have to listen to him, gimme a lecture about it. But what would he have said in the book? There’s a section on con men in there.
Michael Port (00:52:54):
Like how do you watch out for a conman or a woman? There’s a section on trust and marriage and divorce and family and investing and savings and houses and why buying a house is not actually as good of investment as you might think.
Matt Rzepka (00:53:10):
Yeah.
Michael Port (00:53:10):
If it’s your residence, but it may be worth doing nonetheless. So this is what I do. This is called the Family Playbook and I’ve sent it to all three kids: 18, 16 and a half and 13. And they’re completely uninterested in it at the time. But I’m hoping that, you know, they may come back to it in 10 years, 20 years, 30 years when the section is interesting because they’re going through something like that in their life. And there’s a section from each one of their grandparents in there based on what they’ve learned, because they’ve learned more, because they’re older and have had more experiences.
Michael Port (00:53:41):
And then I also have Michael’s Death Checklist and that’s a really long document too. That is like a checklist of like here’s exactly where everything is, what to do.
Matt Rzepka (00:53:51):
Yeah.
Michael Port (00:53:51):
Codes for this, codes for that. Even the number of death certificates to order.
Matt Rzepka (00:53:55):
Yeah.
Michael Port (00:53:56):
And there’s a section and there’s a line in there. Call Matt Rzepka, tell him what happened, you know? And he will go to work on X, Y, and Z. And I keep that up to date because those things change. We changed the state attorneys last year. So that would change in there. But there’s a lot of stuff in there that like we have a safe in the house and I’m the one who opens it. But Amy needs to know exactly how to open it. So it’s documented.
Matt Rzepka (00:54:21):
Yeah.
Michael Port (00:54:21):
We do it in the business too. We’re very procedural operational. It makes the business better. I think money’s always in the systems and the processes that you design around, visionary ideas, not just the idea itself because you know, ideas are a dime a dozen and I wanna go out better than I came in. So they go, holy shit, look how he took care of everybody. This is pretty cool. That could help. When you lose a loved one, you’re not gonna be in the state to try to figure these things out.
Matt Rzepka (00:54:46):
I’ve seen it a lot. And the more organized an estate is the easier it is for the person dealing with the loss to actually grieve.
Michael Port (00:54:53):
Yeah.
Matt Rzepka (00:54:53):
Instead of having all this other stress around money and finance and well, where is this and how do I even do? I just turns into mess.
Michael Port (00:55:01):
Yeah, I’ve said this to you a couple times. You know, when we’ve had conversations, I was like, Matt, you’re the guy I’m trusting and I on leaning on, you know, if anything ever happens to me, you’re gonna know what to do and know how to help and make sure that everybody’s well taken care of. And having people that are like that in your life, that you really trust in that way, not just to make the right decisions financially, but you trust their intent and their will and their character. And that’s the most important thing. Because even if you made a decision that like wasn’t a decision I might have made, but you made it for what you think were the right reasons, I’d be perfectly fine with that.
Matt Rzepka (00:55:36):
Yeah.
Michael Port (00:55:37):
And I think that’s important and I don’t think family members are always those people because they deal with the loss in a different way.
Matt Rzepka (00:55:43):
Yeah.
Michael Port (00:55:44):
You need some other people around who can come in and help even if they’re hurting from the loss too. It’s a little bit different. So, you know, that’s another reason we’re we’re doing this show is because just to encourage all of our community to think more about the implications of what it might mean for them not to be here anymore for the people that are around them. Because a lot of the work you’re doing is for your family.
Matt Rzepka (00:56:08):
Yeah, yeah.
Michael Port (00:56:08):
And for the growth of that family.
Matt Rzepka (00:56:10):
Those checklists, those documents are great. One thing I’ve done, it’s called the love letter that goes with it. Where it’s kind of alright, if you’re reading this, that means I’m gone.
Michael Port (00:56:19):
Yeah.
Matt Rzepka (00:56:19):
And just kind of reiterating some of the high level things about what was so great about life and being with you and having a family and just a way to, again, help the grieving process start on a high note instead of on a, on a negative note.
Michael Port (00:56:33):
That’s beautiful. That’s really nice. That’s really beautiful. So last topic, I think it’d be a pretty quick topic. Speaking of families.
Matt Rzepka (00:56:40):
Yes.
Michael Port (00:56:40):
You hear this term bandied about often, family office.
Matt Rzepka (00:56:44):
Yes.
Michael Port (00:56:44):
You meet a young entrepreneur who just sold this company and is like, ah, I guess I have a family office now. You’re like, oh you have family office. But yes. So what is a family office? It seems it used to be for the Rockefellers. And now it seems like it’s being sold as a concept to just averagely successful people.
Matt Rzepka (00:57:05):
Yes. The family office concept goes with the multitude of professionals that you have to deal with. So if you’re working with a multitude of professionals and they’re all working with other people too, how do you again know that they’re doing what’s best for you? So if I want to get around that, I want to hire one of those professionals who only works for me. They don’t work for anybody else. Well of ,old you had to have 50 million, a hundred million, 200 million to be able to afford something like that because your CPA would be just your CPA. Your attorney is just your attorney. And that’s what they would call the family office. And the Rockefellers were very well known for developing that concept. And then over time, a lot of people who’ve accumulated major wealth like that have then set-up their own family office. Like everything else that’s been changed by technology, then that service model has also been changed. So what you’re seeing today is a shift to say, okay, someone needs to be at the forefront of all of our financial decisions and then coordinate with the other financial professionals to run a family office style model. And you have to be careful. There are more and more groups trying to do that now. But some people are jumping on the bandwagon from a sales perspective because that concept is great.
Michael Port (00:58:12):
And it also to be fair, I think it’s appealing to some people because it sounds impressive.
Matt Rzepka (00:58:18):
Yes.
Michael Port (00:58:19):
Like, well, I’ve had a point now where I have a family office. You know, it’s like, there’s some of that. And I, I see that in the industry a lot. Yeah, but I guess when I think about it, I certainly don’t have a structured family office, but to a certain degree I do with you leading it.
Matt Rzepka (00:58:36):
Yeah.
Michael Port (00:58:37):
I mean certainly your whole office. There’s a whole team of people who work on different aspects of our work, but you’ll also interact with our estate attorney, you with our other attorney, business attorney, you interact with the pension management company, and you are making sure everybody is making decisions that are in line with our financial objectives. Because that’s the point that we are most focused on and everybody else is working to support those goals. But if you weren’t also a CFP you wouldn’t be able to do it as well.
Matt Rzepka (00:59:09):
Yeah.
Michael Port (00:59:09):
You’re just an accountant. There’d be a whole bunch of things you’d be missing.
Matt Rzepka (00:59:12):
Yeah. A lot of CPAs are assumed to have a lot of training that they don’t. Now somebody may be a CPA and may be able to play that role well, if they’ve sought out additional education. You know, like in our world, we have continuing education that we have to do. Some CPAs look at that as a burden and they just do the minimal to get the requirement to check the box. I spent a lot of time in my early parts of my career. Just learning as many things as possible about all different areas that I could get credit for because again, I saw the need, the clients wanted it and needed those types of services and advice. So somebody leading that charge that can get communication on the same point, I’ve been in more meetings than I can count trying to wrangle down the insurance guy wants to do this. The financial advisor wants to do this. The attorney says this. I’m like, wait a second. This is the goal over here. This is what we’re trying to get to. How are you gonna get there? And it gets complicated. So that’s where that model can certainly help streamline some of that advice.
Michael Port (01:00:07):
Yeah, that’s a great, great point. So I think we are at the end of this episode, Mr. Rzepka, do we have any key takeaways that you’d like to share? Any next steps for our listeners?
Matt Rzepka (01:00:21):
Yeah. When it comes to working with a professional, you wanna work with somebody that you like and are comfortable with because you are gonna have to talk about a lot of things that often are uncomfortable. You even mentioned the uncomfortable part of a prenup. Well, imagine how difficult and uncomfortable it is if you don’t have that conversation and then you get divorced.
Michael Port (01:00:40):
Yeah.
Matt Rzepka (01:00:40):
And the same thing is with a professional. Have the uncomfortable conversations at the start. Make sure everybody’s on the same page, because then you’re gonna get in a situation where you feel like you’re able to give all that you can to the relationship and you’re gonna get the most out of it. And so right now, if you’re not sure what status your advisor relationship is in, start asking some questions. You know, just sit down and say, Hey, I want to get this dialed in. And I want to know that I’m on the right path and I wanna know what you’re doing for me.
Michael Port (01:01:09):
Yeah.
Matt Rzepka (01:01:09):
And if somebody’s hesitant to answer those questions, that that’s usually a red flag.
Michael Port (01:01:12):
That’s a red flag. Yeah. You know, we often don’t wanna make people uncomfortable.
Matt Rzepka (01:01:16):
Yeah.
Michael Port (01:01:16):
The other night we went to my father-in-law’s 80th birthday party. And on the way there, the kids in the back were kind of making fun of all the grownups who do things like, oh my God, you’re so tall since the last time I saw you, I can’t believe it. Oh, so what are you thinking about for college? What do you wanna do? Blah, blah, blah, blah, blah. And they were just, you know, all the lines that we’ve all said, and we’ve all heard. And I said, well, what if you asked them the same question they asked you right away? If someone says, oh, so how old are you now? And you’d say, I’m 16. How old are you?
Michael Port (01:01:48):
They’d be like, um, 74. And then they say, so, um, what are you studying right now? You say, well, I studying all the regular classes you’d take in high school. What are you studying right now? You just keep asking them, they’ll get so confused. But I think if I was going to go into financial advisors office, I’d actually ask them a lot of the questions they ask me. Especially if they’re suggesting something. If they say, well, I’m gonna put you in this vehicle, I would say, so do you also use that vehicle? If so, how? And I would ask as many penetrating questions as I could. Or I might say, well, how many of these have you sold? Uh, can I talk to 10 of those clients?
Matt Rzepka (01:02:23):
Yeah. I actually think you should be able to ask, well, what does your financial statement look like? You’re baring your entire soul to this person.
Michael Port (01:02:31):
Yeah.
Matt Rzepka (01:02:31):
Financially, everything that’s going on with your income, how are they similar or different? And if you’re not aligned, maybe they’re not the right person for you.
Michael Port (01:02:40):
Yeah.
Matt Rzepka (01:02:40):
So they may not be willing to show you all that stuff, but they should be willing to share bits and pieces of what they’re doing, whether they’re doing the same things that they’re advising you to do. That’s critically important to me. If somebody’s gonna give me advice on doing something and they’re not doing it, I’m really gonna question what’s going on. Now there may be a good reason. Like there are certain examples I could come up with where maybe I’m not doing something that I would advise, but I’m maybe not at that part of my life yet.
Michael Port (01:03:05):
Yeah, sure. You may have clients who are older and have companies that are 20 times as big.
Matt Rzepka (01:03:10):
Exactly.
Michael Port (01:03:11):
Yeah. So you might have just a different needs at the time.
Matt Rzepka (01:03:14):
Yeah. But that’s a reasonable answer.
Michael Port (01:03:15):
Yeah.
Matt Rzepka (01:03:16):
But if you’re similar or you’re talking about a concept that you both believe and they’re doing something different than what they’re advising you to do.
Michael Port (01:03:22):
Yeah.
Matt Rzepka (01:03:22):
There might be an underlying motive.
Michael Port (01:03:24):
Yeah, that’s a really good point. What a great way to wrap up this episode. So next week we’re gonna go deep into asset allocation. I think that’s gonna be pretty sexy stuff. Let me tell you. Alright my friend, that’s it for us today. Everybody, thanks for listening. Keep about who you are and what you offer the world. See you next week. Hey Matt, by the way, where’s my yacht?
