0:00

A reason for the cold today . John is Welcome

0:02

to Internal Use Only . Something

0:06

just came across my desk , john . It

0:09

is perhaps the best thing I've seen in the

0:11

last six months . If you have 60 seconds , I'd

0:13

like to share the idea with you .

0:14

Got a minute A podcast for Wholesalers

0:16

.

0:17

Always be closing , always

0:20

be closing . Buy

0:22

Wholesalers . Blue horseshoe loves

0:24

anacostia . Okay , before we get

0:26

started , I have one question . Anyone here passed a Series

0:28

7 exam ? I have a Series 7 license

0:31

. Good for you , you can get up to it . Let's

0:33

cut to the chase .

0:34

Here's your host , dan Sullivan

0:36

. We've

0:51

got a very special episode on tap today with

0:53

an advisor affiliated with Raymond James

0:55

. When I did the 2023 survey

0:57

, the audience shared that you'd like to hear more

0:59

conversations with advisors , so this one

1:01

is a little bit different than most interviews

1:04

, I would say . When I recorded and edited

1:06

this , it really felt like it was just a conversation

1:09

, as if I was a wholesaler in the field , trying

1:11

to get to know this advisor , as if he was one of my prospects

1:13

. You'll hear this particular

1:15

advisor lay out his entire story about

1:18

how he got into the industry , how he

1:20

manages clients' money and , finally

1:22

, how he interacts with wholesalers . And

1:24

in this case , he has a different background on

1:26

actually how he is using wholesalers , how

1:29

he isn't using wholesalers and what that

1:31

does or what that means for his practice . So I

1:33

hope that you enjoy this conversation . Like I said , it's

1:35

a little bit different . Feel free to give me

1:37

feedback , either on the podcast Instagram

1:39

at internal use only podcast , or

1:42

through email at internal

1:44

use only podcast at gmailcom . Without

1:46

further ado , let's get to today's interview . Welcome

1:57

back , everyone , to another episode of the internal

1:59

use only podcast . My name is Dan

2:01

Sullivan . I am joined today by Tyson

2:03

Ray , cfp certified

2:05

exit planner SEMA . He is the

2:08

form wealth advisors CEO

2:10

, founding partner and senior

2:12

wealth advisor . Tyson , thank you so much for

2:14

being here with us today . It's a Friday afternoon . How's your

2:16

weekend ?

2:18

Dan , it has been great . Thank you

2:20

for having me on . I love you've

2:22

like , took something that was negative the internal

2:25

use only and have turned it into a positive . So

2:27

I'm just excited to be on the podcast

2:30

today and looking forward to sharing .

2:32

So I was very fortunate to get a copy of

2:34

your book , the Total Relationship , which

2:36

we'll talk about the tenants and the core philosophies within

2:38

it . But from the first chapter

2:41

it's very evident that you came up in

2:43

the industry at a time where stock brokers were really

2:45

driving the ship and

2:47

that was commission based sales , and that

2:49

seems like it really fueled the direction of your career

2:52

. So why don't you just tell us a little bit

2:54

about that , how you started in the industry and

2:56

really how that led to where

2:58

you are today at form wealth ?

3:00

I kind of had the upbringing of you know

3:02

, the ad left mom with the four kids and an eviction notice in the refrigerator

3:05

. And when I was like

3:07

12 or 13 , I lied on the work application

3:09

and said I was old enough to basically go work and

3:12

that was to go ride

3:14

my bike about a mile or two to

3:16

a restaurant where

3:18

on Friday night and Saturday night I could work

3:20

my tail off . But it was all

3:22

you . It was a fish fry on Friday night , all you could

3:24

eat . Fish is very popular in the Wisconsin

3:26

area and that means

3:28

I got to eat all I wanted as part

3:31

of like like , fed you like . I even got paid

3:33

to be fed like that . I was like blew my mind . And

3:35

then Saturday was all you could eat peel

3:37

trim , I mean King , right . I

3:40

mean I had to go to the bank and I had to go to the bank

3:42

to eat fish and shrimp Friday and Saturday night . But I started saving

3:44

the hundred bucks I can make on a Friday and Saturday night into

3:47

my chubby , chubby chicken bank account . And

3:49

this is back in the 80s when interest rates are like through the roof , right

3:52

. So also I'm watching the

3:54

bank put money on top of my money . Now

3:56

it was only , you know , dimes and nickels and

3:58

quarters , but every month it was adding

4:00

up as , like , wait a second , this is fantastic , fantastic . And when

4:04

I was 16 , or a

4:07

little bit before I turned 16 , I had been asked

4:09

I had gotten a separate job

4:11

of filling up the gas pump

4:13

at the end of the pier broke , and so basically

4:16

I got hired to carry five gallon gas

4:18

cans in each hand , barefoot , down the

4:20

drive down to basically gas

4:22

up these boats . And at the end of one weekend

4:25

a mastercraft

4:27

pulls up which is a really high end professional

4:29

ski boat and they

4:32

like , hey , kid , can

4:34

you spot for us ? Because you had to have a third

4:36

person right , one in the boat driving , one

4:38

skiing and then one one watching to see if the

4:40

guy fell or gal . So

4:43

I said Sure , so I jumped in . They

4:45

thought it was fun to teach me a little bit about skiing and

4:47

barefooting , which we did . Anyway , it was

4:49

getting dark and I was about to walk

4:51

back to my house and the guy says

4:53

, hey , can I drop you off ? And I'm

4:55

like , yeah , sure , it was

4:57

. In a Ferrari I was . I was like afraid

4:59

to get into it . Right , like my suit

5:01

, my seat . My my swimwear suit was still a little

5:04

damp , but he put a towel down like it was all in care

5:06

, chill . And I lied

5:08

at what house I lived in because I was too embarrassed

5:10

as he pulled into the

5:12

neighbors a couple of doors down nicer house

5:14

. I said you know

5:17

how'd you do it ? Like mastercraft , ferrari

5:19

, like what was it . And he

5:21

talked about you know , I had this business I owned , but I

5:23

really did really well in the stock market . That's

5:25

all I said . And I got out and

5:27

was just like Okay , like check the

5:29

box , right , stock market . Not

5:31

sure what exactly that means , but

5:33

you know , okay , about

5:36

a year or so later in high school they played the stock

5:38

market game where the

5:40

kids in school get phony money to go

5:43

into the , go make stock selections

5:45

and you have like a two month window in the economics class

5:47

where a stock broker came in to talk to

5:49

us about how it worked and you got to kind of pick your investments

5:51

and you got to trade and actually teaches all

5:53

the worst fundamentals of investing , because the whole game is

5:55

trying to make as much money as you can In a two month

5:58

window of time yeah

6:00

, leverage , leverage , right , all the

6:02

margin . Anyway , I

6:06

wanted to buy a stock now also

6:08

, by the way , this is just to date myself , and I don't

6:10

feel I'm that old . This

6:13

was like all done in the newspaper

6:15

, right ? This was not typing into a computer

6:17

with the stock quote was like you're pulling

6:19

it off the Wall Street Journal and you're looking

6:21

for the ups and the downs and the biggest

6:23

movers and little sections , and it was all the symbols

6:26

and the data printed out on these pieces of paper

6:28

from the close the day before . But

6:30

I had signed , I had picked out a stock

6:32

. I didn't know anything about it . I knew the symbol

6:35

was INTC , which was Intel at the time

6:37

. Back then it was before it was inside anything . They were

6:39

just the little startups that

6:41

they were and it had gone from 12 to

6:43

seven for whatever reason I didn't know . I knew it was at

6:45

seven bucks and I'm like , hey , I could buy 100

6:47

shares of that and I

6:50

probably wouldn't be doing what I was , what I'm doing

6:52

now . Had my mom said , yes , son , that's

6:54

a great idea , because then I would have got

6:56

it and you don't have to go after

6:58

what you often get . She said , no , well

7:00

, it's like what ? Like it's

7:02

my money , like wait a minute , I'm busting tables

7:05

, it's my no . And then I was mad . I

7:07

even had to have her permission Because it's

7:09

like , wait , it's mine . So

7:12

I dragged her into the broker's office and

7:14

thank God that broker's a saint , because

7:17

she actually tolerated me coming in with my 700

7:19

bucks that I wanted to invest in my mom who was saying no

7:21

, and we had to wait to do it in the evening

7:23

because my mom couldn't come otherwise . Well , this lady

7:25

took the time Karen

7:27

took the time to talk

7:30

to my mom and convince her . You know what ? All

7:32

right , no individual stocks , but we'll let him put $100

7:35

a month into two different mutual funds . And that's how I got started

7:37

at 16 . When I was 18 , and I didn't need my mom's

7:39

approval anymore , I went off and bought a few individual stocks

7:41

and rode the tech bubble and then blew myself up like everybody

7:43

else did , but in the process

7:46

, came out of college and I

7:48

had spent so much time trying to convince my mom why

7:50

this was working and a good idea that

7:52

I decided this was just kind of a natural fit and by divine

7:55

intervention I got introduced . A couple things came

7:57

into a

7:59

broker dealer office

8:01

and right out of college was pretty rare

8:03

, but same thing . It was

8:06

okay . Here's your 3000 people

8:08

you got to call every day , or

8:10

every month , I should say and it

8:12

was about peddling product and it was about trying

8:14

to make a commission and making a living and trying to figure

8:16

out how you're going to pay your rent but still do what's right

8:18

for the client . That

8:24

I didn't like so

8:26

much , so that when the first email came out and this

8:28

was like the dial up like it

8:30

sounded like a fax machine while your computer was getting

8:32

the email up and going right , and then out

8:35

it comes . The email message was

8:37

like the first email message my family put out

8:39

on AOL that

8:41

grandma was sick and basically

8:43

someone needed to opt to move home and be at

8:45

grandma's farm with her or she's , not

8:47

to go to a care facility . Now , this

8:50

is the woman that basically helped

8:52

me learn how to read . You know , when

8:54

my mom couldn't stand me anymore , I got to go to the farm

8:56

and then I got to go crazy and food and

8:58

running around and playing with it , whatever

9:01

, and there was a tug on my heart

9:03

of wait a minute , you get

9:05

one honorable , go back and honor

9:07

your grandmother and I had

9:10

been away from years , from everything

9:12

family and two , if

9:16

you don't have to have rent and the

9:18

farm always has food , so you can basically

9:20

have the rent and

9:23

lip and food expenses , some major hits

9:25

to living expenses , like all of a sudden I don't have to have this burden

9:27

about how to make enough money to do the right

9:29

thing . So move home , start

9:32

over basically my career

9:34

. I walk into an office

9:36

of this same broker dealer

9:38

. That is an office down the road . In

9:40

that office is a

9:43

senior advisor . I think he was 68

9:45

at the time . I walked into

9:48

the office , kind

9:50

of got started after a month or two , just getting

9:52

started slowly . I went into his

9:54

office one day and basically said hey , dan , like I was

9:56

talking to you , you know , let me see your portfolio

9:58

after 40 years of being a stockbroker , like

10:01

, is this really what I want to do for my career ? I don't know anything

10:03

. I just moved home , I'm living at the farm . I feel like a loser

10:05

, but I'm not having to screw people

10:07

out of trying to figure out this conflict of what's

10:09

best for them and what do I need to do to feed

10:11

myself . And

10:14

he hymned and hawed and basically printed me this statement

10:16

. And here he prints this statement , that seven

10:18

figures . And he had picked some wonderful

10:21

stocks for the whole run of the 80s and 90s

10:23

market and

10:25

he was looking for me to give him information . It's like , wow

10:27

, right , and

10:30

what I said was wait

10:32

a minute , why isn't this in the trust

10:34

? Why do you know what you'd

10:36

pay in estate taxes if you and your wife died ? It'd

10:40

be millions . And he's just like I

10:42

didn't know . Two months before I showed up in that office

10:44

, which they had an empty desk for me to work at

10:46

this is how I started there they

10:48

had sent a million . It was almost exactly

10:50

a million . It's like a million dollars in the dollar . I

10:53

still have a copy of that check to

10:55

the IRS as an estate tax . And

10:58

so he watched the family have to liquidate a significant

11:01

amount of money that they weren't planning on to

11:03

basically go satisfy this bill . So also , when I'm

11:05

saying , hey , you know you don't

11:07

even have this problem , he didn't know how to fix

11:09

it . And I said , well , if you give me access to your account , because

11:11

I'm new and been trained and I know how to do all this

11:13

stuff , but I don't have any clients to do it for , I'll

11:15

help and we put together

11:18

an elaborate estate plan and he

11:20

came back in the end and basically said I'm never

11:22

going to be able to get this done

11:24

. I'm like why he's like I'm never going to get my wife to

11:27

agree to it . Okay

11:29

, well , why don't you let me tell her ? Well

11:31

, I don't think . He's like , I don't think that's a

11:33

good idea . I'm like , well , you've been , you've been married

11:36

for 50 or 60 years to this point she

11:38

doesn't want to listen to you . I said she has no me

11:40

from Adam . So why don't you let her come in and

11:42

I'll try and explain to her . I said , with one rule

11:44

. He's like what's the rule ? I said you can't talk , right

11:47

, if you've been married this long , she's not gonna listen to you . She doesn't want to

11:49

hear your two cents . And really what it was

11:51

is she wanted him to be done and retired and the business

11:53

had kind of come first and it was his career and his success

11:55

and it was just this conflict in their relationship

11:58

and the business was what made the money

12:00

. That made the problem . Anyway

12:02

, she comes in and sits

12:04

down with him and I

12:06

asked I explained

12:09

hey , we have this problem that everything half

12:11

, you're gonna lose half everything you guys have , and I don't

12:13

think you understand that . She said I really not worried

12:15

about it . I said okay . I said I asked

12:17

you a different question . She said sure . I said you

12:19

do you have family China that

12:22

you plan to pass on to your daughter ? She's like , yeah . I

12:24

said how many place settings do you got ? You got eight or

12:26

12 . She said 12 . I said well , you're gonna have six

12:28

because the government's gonna take half . And

12:30

I said let's talk shoes for a second

12:33

. All your left foot shoes are gonna go to

12:35

the IRS and you have two Toyotas

12:37

, so let's just assume one of the Toyotas is going to the IRS . When

12:40

I'm saying you're gonna lose half of the value

12:42

of everything you have , it's gonna be half of the value

12:44

of everything you have financially and

12:47

that's an example . That's how I want you to think about

12:49

it . She looked at the senior advisor

12:52

and said you better fix this

12:54

and got up and walked out and the rest

12:56

was history , because we went , put the whole plan together

12:58

and irrevocable trust and Cheryl Mainer , trust

13:00

to avoid taxes is fantastic

13:03

and that then led to do you

13:05

have other clients we should be doing

13:07

this for , and

13:09

that experience took me on the path that

13:11

I've never gone off of and what the total relationship

13:13

the book we wrote talks about is the difference

13:16

between the conflict of the

13:18

sale or self versus

13:21

the opportunity to speak into someone's situation

13:24

, build a relationship and provide a solution that

13:26

they didn't see and add value

13:28

and may or may

13:30

not even be paid for that . But

13:33

just it's amazing how one

13:36

energizes me to

13:39

write a book , to be excited , to go make a difference , and

13:41

one sucked the life out of me of

13:43

just the struggle , the negativity of just the conflict

13:46

. And the reason we wrote

13:48

the book is I just think there's a lot of advisors or

13:51

a lot of people in the financial services industry that

13:54

just feel like there's gotta be a better way

13:56

to do this , and

13:59

a lot of people say they do some of these things

14:01

that are in this book but in the end they're still talking

14:03

about a portfolio or thinking their value

14:06

add is beating some performance of

14:08

some picket index and

14:11

the industry is the constant here

14:15

we've done better than , or here you gotta have something else

14:17

. You can never be content with what you have and

14:20

I think we've created

14:22

kind of the antithesis of this . That I

14:25

think the last thing about the book

14:27

, maybe before we dive into it , is the other

14:29

, and I didn't write it for this purpose , but it's

14:31

what it became . This industry is regulating

14:34

the whole best interest , what's

14:36

best for the client . They're trying to create checklists

14:38

and FINRA and SEC

14:40

are trying to create these regulations and

14:43

effectively I feel like the book is a how

14:45

to guide to

14:47

do what's best for a client . So

14:51

anyway , that's a long story to the story , but

14:53

there's that , if

14:56

I played that out just a little longer , four

14:59

years or so after that event of

15:02

helping him with his estate plan she

15:04

had passed , he decided to retire

15:07

and I took over a 40 year established

15:09

financial practice and

15:11

the beautiful thing about that was is from when I

15:13

helped him and then we helped do the estate

15:15

planning for all of his clients and in

15:17

what Pandora's box that opened up for opportunities

15:20

to have relationships and learn a ton of things

15:22

, especially

15:24

when he retired and I took that practice over . I

15:26

never and to this day I've never had

15:29

to have another client or had

15:31

to feel like I needed a sale or

15:33

I had to try and cover how I was

15:35

going to pay my team or pay myself . It's

15:38

like we could just do what was good and

15:40

what was right . And a lot of times we do what's

15:42

in conflict . Us Like

15:45

we spend a lot of time in

15:47

our careers convincing clients to

15:49

make , pay off debt or

15:52

go enjoy some of the money that they have . And

15:59

I actually told a CFO of a company

16:01

this morning cause he's frustrated with a defined benefit

16:03

plan that's just a mess and the 5,500s

16:06

all screwed up . And I just looked at him

16:08

. I'm like if this is such a headache and you guys

16:10

don't like it , why don't we just close it ? Or

16:14

if you don't like it cause it's in this brokerage account

16:16

, which is how you had it and how I ended up with it roll it back

16:18

into the TPA so they can consolidate and simplify

16:20

it . And they kind of thought about it . I was like that'd be

16:22

great and I said

16:24

but I said I want you to realize where

16:26

I'm coming from . I said I'm paid to

16:28

manage that account here and if you roll it back into the TPM

16:31

and lose being paid , but if that's what's better for you

16:33

guys , cause this is driving nuts I'm not

16:35

in the business of driving nuts and

16:38

that's the fun part , cause you do that when enough people

16:40

, they refer people . Right

16:43

, you do that , you do . Do it put out enough good

16:45

in the world , it comes back .

16:47

There is an inherent I would say you've mentioned

16:49

the word conflict before like it's

16:52

hard to change overnight

16:54

, and I'm a little bit far from removed exactly

16:56

with how , like , younger advisors

16:58

are transitioning into their , like , the peak of their careers

17:01

. But at the end of the day , even if you're

17:03

a fee based manager , you're still getting paid

17:05

on assets under management , and so there

17:07

is a correlation between how much success that

17:09

you can have and the

17:11

AUM that you've got , regardless of the problems

17:13

you're solving and fees sorry , problems

17:15

that you're solving and the services

17:18

you can offer . From a pure like holistic

17:20

planning standpoint , I know that the industry is definitely

17:22

evolving and changing , but you're correct

17:24

that there's , like there's always going to be a wear and

17:27

tear , unless you're in a position where one you

17:29

are able to join a team that's already

17:31

so established that you kind of have that leeway or

17:33

you've just maybe you've started with you

17:36

know whoever very wealthy individuals that kind of get you

17:38

off your feet quicker , but we don't need to dive into that

17:40

fully . But I think I would agree with

17:42

anybody probably in a sales role , like in

17:45

anywhere like you want to hit a point where

17:47

you're successful enough where you can really take

17:49

a step back and say I'm not here trying

17:51

to hustle and bustle , to like pay my rent or to

17:53

get my basics taken care of . I can

17:55

now think further about what's

17:58

going to be more meaningful . How am I going to be able to

18:00

help clients ? And once you start doing

18:02

that , then you can really put

18:04

out there what will help attract the right people towards

18:06

your practice . And that's obviously what you've done here with

18:09

the total relationship framework . So I

18:11

wanted to carve out some time to just go through a little

18:13

bit more of like the specifics in that , because you did

18:15

mention it's almost like a how-to guide , especially

18:18

in a regulatory era that

18:20

has things like best practice and , you know

18:22

, avoiding those conflicts of interest . So if

18:25

I'm understanding correctly , there's essentially three

18:28

parts of this , like a life plan , a wealth plan

18:30

and a care plan . Can you just dive into that a

18:32

little bit and how that fits to the total relationship

18:34

framework ?

18:36

Yeah , I mean the would

18:38

love to . So the

18:41

yeah , it is three pieces that make up

18:43

the puzzle , and it's if the piece

18:45

starts with the life plan , if

18:47

you're coming to us and you're new , so okay

18:49

, first of all , everyone's got the word process

18:51

right . So everyone's got their steps . They're going to take

18:53

someone through If

18:56

they have their you know , certified

18:58

financial planning practitioners . They're going to do

19:00

the financial plan on the front end , because that gives you

19:02

the roadmap . Or , if you're a Nick Murray fan , you do

19:04

the fan , you do the plan first , and that predicts

19:07

the portfolio . Totally

19:09

agree with all that . What

19:11

we've found , though , is it's

19:15

one thing to basically find out okay , dan

19:18

, you buy a car every five

19:20

years . By the way , people buy automobiles

19:22

in by the time

19:24

they're 30 , they have fallen into a rhythm of

19:26

automobile purchasing Most

19:28

people and it's

19:30

either a number of years , it's a number of miles

19:32

, or you're driving it till it's dead . And

19:36

one of the things in the life plan

19:38

is an example where , early

19:41

in my career , individual

19:44

came to me . They were like ecstatic

19:46

, it might have been an inheritance thing , anyway , they got

19:48

this $100,000 . And I remember

19:50

that because it was a break point on A-share's back

19:52

in the day , right . So I was being paid a little

19:55

bit less , but it was like a bigger ticket and

19:57

this is a great day and it was a

19:59

co-call or whatever it was . Anyway

20:01

, they came in long-term investment

20:03

, setting it aside . They feel like they're adulting

20:05

their money , right that they've

20:07

moved on and made this investment in the stock

20:10

market Anyhow

20:12

. Two years later , they call

20:14

me the tech bubbles , burst the

20:17

hundred grand's , maybe worth 80 , and they bought

20:19

a $60,000 car the day before and

20:22

called me for the money . And

20:24

I'm like , wait a minute . We talked

20:26

that like this was like forever , and

20:29

it's two years since forever and

20:31

now you want $60,000

20:33

of an $80,000 portfolio . That's underwater

20:35

because we started with 100 and the market went down and

20:39

thankfully there was no cost to get them out of it . But I felt like

20:41

crap . It's like okay , so I got paid to

20:43

lose you money that you didn't tell me you needed and

20:46

I didn't know to ask . You needed it . And

20:49

what the life plan is designed to do , it

20:51

is to try and bring

20:54

a lot of clarity to every

20:56

client's relationship , whether

20:58

they're new to us or their existing client

21:00

is to what do you need in the next 12

21:03

to 24 months and

21:05

where's it coming from ? Are you saving

21:07

it ? Is it coming from the portfolio ? What is it ? And

21:10

we go through a process of asking

21:12

questions about things

21:15

that we've found that the answers

21:17

for every client are different . But the questions

21:19

are similar because we found these

21:21

are categories that people just

21:23

surprised us with what

21:25

they needed money for , and I also think , from a litigious

21:28

standpoint or a compliance standpoint . It's

21:30

like these are where the complaints come from . Right , I

21:32

needed money . The market's down , it was my long-term

21:34

portfolio . Now I'm upset because no one knew I needed

21:36

the money , but then wait a minute .

21:39

And so we just want to . That's like the position for

21:42

any fun sales people or wholesalers

21:44

tuning in that are either new or haven't

21:46

really been involved in this industry for longer

21:48

. That's the worst case scenario is when there's either

21:50

a complaint filed with the advisor particularly

21:52

if there was maybe

21:55

out of the blue or just a situation like this

21:58

where it was like caught everybody by surprise and is completely

22:00

the opposite of what was intended when that

22:02

investment was made at the time .

22:04

Yeah , and

22:07

or if you know those dollar amounts and

22:09

you've worked this plan out and you've done this

22:11

process that we're talking about here , the building out

22:13

this life plan , and what we're about to go through , the

22:16

piece of the piece that the clients have

22:18

, because they know the things that they need are set aside in

22:20

cash that's not invested . They

22:23

tolerate volatility that I think a lot of other people

22:25

would call and panic out , and then you're dealing

22:27

with repercussions , that . But so what are

22:29

those things we talk about ? So go back to the highest

22:31

, most important . We ask about family and we

22:33

ask about their parents specifically , because all

22:35

of a sudden , just like grandma got sick and

22:37

I moved home , like there are people out there

22:40

that are going to need to help with the transition of

22:42

mom or dad , or I'm calling to talk

22:44

to them about their investment , but mom just got diagnosed with

22:46

stage four cancer . It's like this is not the time to

22:48

be talking about the long-term investment , because your heart's

22:50

all tied up , the fact that you're finding out your mom's got

22:52

a health issue and you can't fix it . So

22:56

, and that's we

22:58

, the , the . The firm's name is foreign wealth

23:00

, because we start everything in the F as family , we

23:02

, every meeting we have a client and he changes the mom and

23:05

dad , everybody , okay , yeah , great . How

23:07

about your health ? Because

23:09

, again , if your health is bad now , you can't help other people and you can't do anything you want

23:11

to do . How are your kids , the

23:13

people that you love ? That's the F in family . Any

23:17

changes there ? Updates there we

23:19

then transitioned into because I found people

23:21

will actually . So people are going to sacrifice

23:24

for family first or surprise us with needs

23:26

for family first marriage , weddings

23:28

, babies , care facilities

23:31

, vacation excuse me , not vacations well , that's

23:33

second . So the next category Important

23:35

, but maybe less of a priority . Yeah , family

23:38

is great , you know , especially

23:41

post COVID , all of a sudden , like everyone came out of the woodwork

23:43

again with travel or vacation or leisure

23:45

activities Like this is what I'm going to do to

23:47

justify my existence because I work hard

23:49

, or the sacrifices I made . And

23:52

what are those trips ? When are you taking

23:54

them ? When's the deposit needed ? Where's that money coming

23:56

from ? Are you sticking out a credit card and surprising me

23:58

a year from now that you want me to pay off the credit card because

24:00

you took the vacation that you knew you were going to take before

24:02

you spent the money , and

24:04

so it's all like . It's

24:08

interesting . The industry wants us to do financial planning

24:10

for the rest of your life . Let's go project

24:12

to do an auto purchase every five years . You're

24:14

going to work this many years , you're going to have this portfolio , we're going

24:16

to project it with these rates of return and we're going to come up with

24:18

a percentage probability of whether you're going to run out of money

24:20

or not , and there's all kinds of

24:22

variables in that . And yet what

24:25

I found interesting is all the software

24:28

I've ever looked at to use and have access

24:30

to now to use doesn't tell me that

24:32

if you were going to buy

24:34

a house in 2023 and

24:36

now it's 2024 when we're looking at your plan , the

24:39

data just falls off . It's

24:41

like wait . I'd rather ask did you buy the house

24:43

? Like , where are you

24:45

at ? That's part of that relationship . Did you enjoy the vacation

24:47

you took ? And so we're literally tracking

24:50

these things within the software that we

24:52

built to basically identify how's mom

24:54

and dad mom's in the care of silly dads , okay , or

24:56

dad's deceased , or how are the kids

24:58

? Hey , you said you're going to go to

25:01

Napa for two weeks last month . How was the

25:03

trip ? What are you planning in the next three

25:05

to six months , because the closer in

25:07

the timeframe , the more certain

25:09

clients know what they're doing . Most

25:12

people have no idea what they're doing three years from now . They

25:14

have a general idea , they might be on a rhythm

25:16

of life , but specifically like

25:19

are you taking a summer vacation ? You're

25:22

going to get a , yes or no ? Where exactly are

25:24

you going ? How much is it exactly going to cost ? Do you

25:26

need money from the account to do that ? How about Christmas

25:28

? You know , we just started asking questions 12

25:30

months out to find out what are these activities

25:32

. So , family travel

25:34

and leisure , how's the house ? Specifically

25:38

, home improvements , what is it ? The

25:40

bathroom that , like , what's going to be the thing that goes bad ? That you

25:43

didn't tell me ? It's the roof and it's leaking in . The next

25:45

, you know , hail storm , we got to get a $20,000

25:47

new roof , or the septic's

25:50

got to get redone , or the furnace is going to go

25:52

out or the windows or whatever . Because in

25:54

life that happens . And

25:57

had someone asked it's like , well , yeah , no , I'm that

25:59

furnace man , I'm just holding

26:01

on Like I don't want to wait , but that's going to be

26:03

maybe 10 grand when it all comes . And it's like all

26:06

these little five , 10 , 15

26:08

, $20,000 increments add up when

26:10

all of a sudden , out of the blue , they call and they need it . And

26:12

then the advisor has got to be surprised

26:15

that the client needs money that

26:17

no one bothered to ask when you were

26:19

going to need that and now you're at the

26:21

mercy of the market . Not any value , only

26:24

travel , leisure , home

26:26

, home improvements , vehicles , homes

26:29

and vehicles in financial planning are

26:31

the biggest areas where clients

26:33

can make the biggest mistakes , because it's so easy

26:35

to just add five or $10,000 to the purchase

26:38

of a house or even a car , and

26:41

in the cars it's finding out what's the rhythm of the cars

26:44

. Is the ears , miles ? We actually track clients

26:46

. The vet , the year of clients cars and the

26:48

mileage on clients cars , just for the simple stack

26:51

, is like , hey , if your car is 10 years old and you got 200,000

26:53

miles on it , like I'm like

26:56

, when are we buying the next one ? Or

26:58

I may encourage you , hey , the markets are all time highs

27:00

. These were up on a trend . We got extra profits here

27:02

. Why don't we carve out that 50 or 80

27:04

grand to buy that next car now and

27:06

you can then figure out when you want to go get it Instead

27:09

of when you finally need it . Now we're

27:11

going to be at the mercy of what the markets are at and

27:14

I don't know what that's going to look like . So the life plan

27:16

is taking kind of the concept of

27:18

long-term financial planning but bringing

27:20

it to the where the rubber meets the road

27:22

, which is really is it going to hit the

27:24

client's bank account and is the money going

27:26

to be in that bank account when they want it and who's

27:28

responsible for that ? And when clients start

27:31

realizing that we're kind of raising our hand to be responsible

27:33

for that part of funding their retirement , beyond

27:35

just the cash flow month to month stuff , one

27:40

we get to participate in their life in ways you don't normally

27:42

. That's the whole relationship , part of it , right Either

27:44

for empathizing with their situation

27:46

is with their parents or what's going on with kids in college

27:49

and what have you are just celebrating vacations or

27:51

sometimes just encouraging them hey , you got the

27:53

money . Go like , enjoy this . So

27:56

that's the life plan part

27:58

of the total relationship . And

28:01

again , I think a lot of people's

28:03

websites , a lot of TV commercials

28:05

try and hint to that . They do some

28:07

of this , but I know so few

28:10

that actually will like

28:12

put out there on a task or put out there

28:14

and track that in July

28:17

of next year you're planning to buy $100,000

28:20

or something , or rather , you're going to take that vacation

28:24

that you want and $80,000

28:26

needs to come from the non

28:28

qualified account and

28:30

the advisor's job is to pre fund that over

28:33

the next 12 months . I think not

28:35

every . I think the vast majority of advisors

28:37

are just waiting for clients to call , ask for

28:39

the money and then send them the money and appease

28:41

them , whatever that looks like , at

28:43

the mercy of wherever the markets are at . And the more volatile

28:45

the markets have gotten , the less value that advisor

28:48

adds when they're allowing the randomness

28:50

of that withdrawal versus hey

28:53

, if you know six to 12 months in advance , you

28:55

have a greater likelihood of trying to carve that profit

28:58

out when the markets are at an all time high . It's

29:01

not timing the markets . We're trying to time clients

29:04

needs , and you

29:06

can . You don't know what the markets are going to

29:08

do , but you can find out what your clients

29:10

are going to do and all I tell clients

29:12

is the number one goal is to don't sell shares

29:15

if we don't have to in the markets down . The

29:17

only way you do that is when the markets are up , which is I

29:19

don't know if a market's going to go higher than

29:21

it's all time high , but you know a certainty

29:23

if it's at its all time high or near it , and

29:26

you know a certainty if it's 20% off , it's all time

29:28

high . And the whole goal to building wealth is don't

29:30

sell when it's down . And

29:32

so when the markets are all up , we built technology

29:34

that we can go for every client pull the dollar

29:36

needs for the next , whatever timeframe we ask

29:39

, and if we want to say here , most

29:41

recently I said , pull

29:43

the cash flow requirements that

29:45

clients have given us so we get out into

29:47

the February of 2025 , we'll just post

29:49

the presidential election , post the inauguration

29:52

of the new president . And so I know that

29:54

everything our clients have told us they need , has

29:56

we actually raised it ? When the markets tipped over

29:59

here at the higher levels , different

30:01

from where they were in October , when they were down 20

30:03

or 30% from where they are now , and we just added

30:05

a ton of value ? And if the markets keep going higher , so

30:07

be it . I'm willing to accept that and

30:10

, at the same time , if they sell off , we've

30:12

raised it . That's what the life plan gives

30:15

us the data and the opportunity to do in the conversation

30:17

with the client , the

30:20

wealth plan becomes some of what I just talked

30:22

about with regards to the cash management putting

30:24

it in the system , identifying where it's going to come from and

30:27

then being able to act as a whole

30:29

. So , instead of randomly

30:31

deciding when to pull money out , we

30:34

as a firm , I

30:37

sleep and I have peace

30:39

of mind because I know that , unless

30:41

a client didn't tell me we have raised

30:43

what our clients have told me , and that it's usually six

30:46

to 12 months . In some cases we'll

30:48

go out two years in advance and

30:50

we park it . We pull it from a separate account . Usually

30:53

we'll park it in the money market and earn some interest , which is finally

30:55

getting back to being more significant . We

30:57

point to it that the clients can see it and

31:00

then the rest of the portfolio can fluctuate . Because

31:03

what we found with the wealth plan side of things

31:05

is , if you don't start defining how we're

31:07

funding things or what , or

31:09

maybe not in accumulation phase of life

31:12

, maybe not adding to things , because we need to build up

31:14

this reserve before we add to it . So that's just cash

31:16

management planning . If

31:18

you don't do that , we

31:20

had the client come in . That's just like the million dollar

31:22

account drop 10% , it's 100 grand and they

31:24

started telling me that was the car I was going to buy . You

31:26

just lost my car in the market because

31:29

they tangibly are equating it to something

31:31

that they're looking out in the future that they need . And

31:33

what dawned on me is hey , if we can take

31:36

what you're tangibly looking out in the near

31:38

term and needing and funding

31:40

it now when your million dollar account becomes

31:42

$900,000 , if you're not attaching

31:44

it to something tangible you thought you

31:46

needed , you tolerate

31:48

that more that . Actually the behavioral finance

31:51

shows that the person that thinks

31:53

that attaches a loss to a need

31:55

will actually go liquidate the portfolio and buy

31:58

what they thought they lost . So

32:00

that's a double hit . If I needed the $50,000

32:02

car in two months and I lost it in the market

32:04

, I'm going to go buy it now and it's

32:06

a double hit to the portfolio often .

32:08

So the bottom line is we're managing

32:11

behavior here just as much as people's taxes

32:14

and investments .

32:15

Right ? Yes , nick

32:17

Murray got it right years ago about the behavioral finance and

32:19

, ironically , the education system has come up

32:21

behind them is it is

32:23

trying . The number one job of

32:25

a financial advisor is to protect the client

32:27

from themselves , and I'll go one

32:30

step further it's also to protect the advisor

32:32

for themselves . I think way too many financial

32:34

advisors panic faster or

32:37

do more damage to their clients because they're as scared

32:39

as a client is . And

32:42

the wealth ? So the wealth plan , outside

32:46

of taking the information from the life plan and the

32:48

cash flow needs , the wealth plan is

32:50

on our end , you

32:53

know . Going back to designations

32:55

, I got somewhere in this neck

32:57

of the somewhere in the years I got the SEMA

32:59

, the Certified Investment Management

33:02

Analyst .

33:03

Yeah , I was going to ask you about that because I know you've got SEMA

33:05

, cfp I think , the Certified Exit

33:07

Planner . So obviously you're brushing up

33:09

on various industry certifications

33:12

, so you'll get through how

33:14

you're applying today . But I was going to ask , I wanted to see , which

33:16

of those three are most applicable or which ones

33:18

you've you've found yourself actually implementing

33:20

the most in your career , because a

33:22

lot of young people are taking these exams , I think , just because

33:25

they need some extra education , but it's not

33:27

meeting where they're practicing at the moment . So I'd be

33:29

curious for someone in your shoes which of the

33:31

designations is actually like making its way into

33:33

your practice the most . But you're going through SEMA now

33:35

, so let's hear on that .

33:36

Yeah . So I think my answer to that

33:39

is and I'll come back to the SEMA

33:41

real quick I think my answer to that is

33:43

all these certifications are any type

33:45

of education . Quite frankly , like

33:48

you can ace driver's

33:50

ed , it doesn't mean you're going to be a good

33:52

driver . The

33:54

real hard part of

33:57

any of these designations is

33:59

how the application of that knowledge

34:01

works and how it's communicated to a client

34:03

. Going back to losing place

34:06

settings or losing shoes meant more

34:08

to her than losing millions of dollars . The

34:10

dollars didn't mean anything , but when you tied

34:12

it back to something that like where

34:14

that value is , that's where the rubber

34:17

meets the road with these designations and

34:19

trying

34:21

to discern what's noise in the financial

34:23

services industry and what's important . And

34:27

so the SEMA . I

34:29

signed

34:33

up . There's only certain universities that

34:35

will teach it . I signed up at

34:37

Yale just to get my oldest kid a hard time thinking

34:39

I got into Yale . I'm like it's an executive program , but

34:41

technically , yes , it's Yale .

34:43

They get you that with your LinkedIn certifications . They'll

34:45

be like it's like . Well , no , none of the wholesalers

34:47

or advisors went to Yale and

34:50

bought in , or I think they do . Booths

34:52

in Chicago is like the three big ones . It's like booths

34:55

. We paid for a week . We may

34:57

or may not stay there , depending on when you took the exam , and it

34:59

was cool and it's a nice little nugget

35:01

here , but , yes , executive education program

35:03

.

35:04

Yeah , so the short version is

35:06

Yale , first class

35:08

and first chapter

35:11

and like first page it's like

35:13

, okay , real returns are

35:15

unknown because they're in the future , right

35:18

, so what's really going to happen , no one knows . Okay

35:21

, we got that and so now we're

35:23

going to go study expected returns about what

35:26

people think are going to happen . So

35:28

like , okay , and I say to people with that , what the

35:30

SEMA means is I said it means I got a certification and no

35:32

one knows what's going to happen .

35:35

Unpredictable , can't be held accountable for what happens

35:37

in the future . Past performance is no guarantee of

35:39

future results .

35:41

Yeah , it is , but some of my you know

35:43

. It's like you don't know what you don't know until you

35:45

know it , and like the scales

35:47

fell off my eyes when I started getting

35:50

in that first class about expected

35:52

returns and something about

35:54

capital market assumptions , which in all the financial

35:56

planning software we're all clicking off . Yeah

35:59

, they updated the capital market assumptions . I just want to get

36:01

to the plan that I need to do the work on and the Monte Carlo

36:03

system that I'm working on or whatever the planning software

36:05

is that someone's using . But

36:08

capital market assumptions is where a firm is

36:10

taking the past rates of return

36:12

and volatility and projecting it some point in the

36:14

future what they think those returns are going to be . What

36:18

we've built and what we're encouraging

36:20

in the wealth plan is we

36:23

take four different companies

36:25

capital market assumptions , so

36:27

we're not hanging our hat in any one because there's every

36:30

firm's got bias , people have bias and

36:32

so what we found is , if you go and grab institutional

36:35

your vanguard , your Fidelity's , your Schwab's

36:38

, your Black Rock's , your I-Share's , your

36:40

Invesco's you know it's like that's

36:42

more than four . It doesn't matter

36:44

which one you grab , but grab different

36:47

ones and we blend both time

36:49

frames . So we blend 10 and 20

36:51

year time frames , with one to 10 year time

36:53

frames from four different firms , and

36:55

pull an average , we

36:57

pull inflation out of that and

36:59

then it's like , okay , what's your real expected return

37:01

of different asset classes going forward ? And what was

37:03

mind blowing to me is , had you done that

37:06

in 2019 , with

37:08

the markets getting toppied , before COVID hit

37:10

? That was telling you

37:13

, hey , the future expected return was

37:15

not very high because of how well

37:17

the market had done for 10 years , much less , a

37:19

little better on fixed income Post COVID

37:22

. So fast forward , six months later

37:24

, markets are shellacked , interest rates have

37:26

gone to zero . That capital market assumption

37:29

shift that our asset allocation almost

37:31

entirely out of fixed income , almost

37:33

entirely for everybody , because

37:35

it was basically predicting you're , you are going

37:37

to have negative real returns in every

37:39

, at every fixed income class . And

37:42

guess what , by avoiding it

37:45

also showed that by the the run up in 2021

37:47

, in 2022 , hey , take

37:50

some profit off the table on the fixed , you know

37:52

, on the equity side and go back into the fixed income

37:54

side because the interest rates were starting

37:56

to go back up or the expectation of future rates were going

37:58

to go back up . So it's , it's just a guide , but

38:01

if you're trying to get a client a five , six , seven

38:03

, eight percent you know net real return

38:05

, hey , why don't you look at a roadmap

38:07

of a bunch of firms that are guessing where that's going to

38:09

be as a as a compass , so just

38:11

guessing , like people are filling out these questionnaires

38:14

, and based on the client's question

38:16

or answer to the question , or based on

38:18

the bias of how the questions were stacked ? Like

38:21

you know , there's a difference response

38:23

between you know , how do you feel about losing

38:25

20% of your portfolio value versus how

38:27

do you feel about running out of money if you don't subject

38:29

your portfolio to a 20% loss ? Right

38:33

, you're going to get a different answer depending on the questions

38:35

are spelled out , but we're going to take

38:37

these questions . They're going to tell us what these answers

38:39

are . The answers are going to spit us into some formulas . Form

38:41

is going to spit us into some asset allocation and

38:44

that's what the client's supposed to have . And

38:46

I'm going time out because what I

38:48

found for the last 20 years plus of my career

38:50

is , depending on where interest rates were at or

38:52

the valuations of equity is we're at , that

38:55

should be driving the asset allocation , because

38:57

that has a lot more to do with the volatility and where the returns

38:59

are going to come from than what

39:01

these textbooks are averaging out for 50

39:03

or 100 years . Right , the entry and

39:05

exit point of how capital gets put to work or

39:07

gets taken out should be considered , and

39:09

what we found is like there isn't a secret

39:12

sauce out there , but if you take the average

39:14

of four different firms , you're more likely going

39:16

to get closer to what the averages are , and then we do the

39:18

same thing for

39:20

different , for how we actually go build our model

39:23

. So how we're going to go build our model is we're going to go take the asset

39:25

allocation 60 , 40 or 80

39:27

, 20 of all these same four different firms

39:29

, put them in a blender and pull out and just see what

39:31

are the assets they're putting in there , what are the positions

39:34

, what's the percentage , how do they change ? And

39:36

all I found is that if you follow the

39:38

flow of how money gets put in the market , you

39:41

participate with those flows , which

39:43

tends to return back into

39:45

performance , right , too much money is coming out

39:47

of something that's probably not going up in price or

39:50

vice versa , and so it's taking

39:52

me out of it . That's the first thing I want to do , because

39:54

I have emotions and I have biases and I have my

39:56

opinions and things and I can be wrong , and

39:58

it's taking and applying a bunch of what I think

40:00

history has to say . And then , if they're

40:03

guessing about the future , rather than putting my hat

40:05

on one firm or one person's guess

40:07

by blending it . And I laugh

40:09

every time stuff comes out , and so does my team

40:11

, because nine times out of 10 , the

40:15

research report is going to come out and

40:17

one company says go left . One company

40:20

says go right . One company goes straight . One company

40:22

says stop . And you put them in a blender and it says

40:24

don't do anything , leave it where it is . And

40:26

what I have found is had

40:28

the less you do to portfolios

40:31

, the better they grow . In a world

40:33

that tells you you should be doing all kinds of things

40:35

to these portfolios , I could go

40:37

on a rant for that for like hours , because

40:39

it's kind of- . Yes , go on your turn .

40:41

And no , I'd say it's just

40:43

kind of hilarious to think about how we have an industry

40:46

of professionals whose responsibilities to be

40:48

more aware of these things , but yet if

40:50

somebody were less at

40:53

, let's say , 85%

40:56

of moments of time , maybe even higher some quant

40:58

has better information than me If you essentially

41:00

did nothing , never touched it and just continuously

41:03

added to a broad base

41:05

of like asset classes , like you're going to be fine , so that

41:07

we don't necessarily need to get to that on

41:09

this podcast . But having provided

41:12

that overview that you've got for your

41:14

firm and how you manage clients assets

41:16

, I did want to carve out a moment here because

41:19

I know we're going to be on the clock here up at five

41:21

, but I wanted to talk about , obviously , the rubber

41:23

meets the road at some point with the

41:25

investments that you're actually making . So

41:27

, being a part of the broker dealer , you obviously

41:29

will have your selected funds and

41:31

fund families and investment options that are available

41:34

on the various platforms . Maybe there's some direct

41:36

investing that your team is doing yourself , maybe

41:38

it's just ETFs , but why don't you describe

41:40

and share with the audience like , how are you

41:42

actually leveraging asset

41:45

managers , maybe the wholesalers , or I

41:47

know some advisors ? They honestly just don't . So

41:49

I'd be curious like how do you manage that and what's

41:52

the rationale behind that ?

41:54

Yeah , so I

41:58

don't anymore . I did

42:01

. I found the mistake of doing it , meaning

42:03

I had I was a branch

42:06

manager back in the day and had what

42:08

I have . I had like five or six teams

42:11

, including my own , in the branch and

42:13

part of the requirement of being a branch manager

42:15

of the broker dealer was you facilitated the

42:17

meetings of the firms that we wanted

42:19

to come in and present the product and it was educational

42:22

right and you'd meet some wonderful

42:24

people that are presenting this wonderful

42:26

information and maybe they took you to lunch

42:28

or they brought donuts to the office or whatever

42:30

. They gave you a nice pen when they

42:33

left or a pad of paper

42:35

, whatever it was , and all

42:37

this and then the yeah

42:40

, a packet of some type of information

42:42

that now I'm trying to decide what , what I should do

42:44

for the large cap money manager . And here's

42:47

the large cap money manager packet of the guy

42:49

that brought me donuts the other day , and

42:51

again , it's

42:53

all shelf life and what's on top of your shelf

42:55

, of your head and where the information is sitting , is what

42:57

you're going to act on . What I realized

43:00

was simultaneously

43:02

one of my mentors back in the day , named

43:04

Bob Dunwoody , who I don't think

43:06

is with us anymore . He

43:08

had a saying . It's like hey , financial advisor

43:11

, take

43:13

your AUM . What's the value of all your

43:15

assets , of your clients , right ? What's

43:17

that dollar amount ? Is it 100 million ? Is it 200

43:19

million ? Is it 500 million ? Whatever it is , put

43:22

it in cash . So now see it as dollars

43:24

, literally liquid cash

43:26

. Now

43:29

ask yourself , where should it be invested

43:31

? Not where is it . What should it be in

43:33

? I wrote a

43:35

book in 2012 , which was my first crack

43:37

at trying to help financial advisors , called

43:39

your World Impact as a financial advisor . It's

43:42

in there . It's expanded on a little bit

43:44

in the total relationship

43:46

. What do we do

43:49

? Our philosophy is we have a predetermined

43:51

investment strategy and approach based

43:53

on the client's need . In other words

43:56

, it's a long term or short term . Is

43:59

it beyond three years or less than three years ? If it's

44:01

beyond three years , it's long termed to us and we

44:03

have a solution for that . Are

44:05

you going to be living off of that portfolio

44:07

? Are you accumulating ? So that'll be another differentiator

44:10

. But the bottom line is it is a predetermined

44:12

portfolio strategy set up ahead of

44:14

time that money goes into . It's

44:16

not created for the client . The idea

44:19

that you can create all these different custom portfolios

44:21

for the client is a facade , unless you only have one

44:23

client . Because Bob Dunwoody , going

44:25

back to this mentor , his point was if it's

44:27

all in cash and it should

44:29

be why isn't it where it should be ? And

44:32

if it was all in cash , it kind of freed your mind up

44:34

. Wait a second . And I think back in the day the average

44:36

advisor had over 1,000 positions . They

44:38

can't track 1,000 positions , they

44:41

can't stay on top of 1,000 positions . They

44:43

don't know what happens to the money manager or

44:45

the individual stock or whatever it is

44:47

. And yet the clients are all expecting

44:49

you to pay attention to that and part

44:52

of the wealth plan is building

44:54

predetermined custom portfolios

44:56

. I'm a believer that the actual investment

44:58

it doesn't matter Over

45:01

the next 10 , 20 , 30 year timeframe

45:03

that these clients are asking us to help them in their

45:05

lives and the generational wealth that is this business

45:07

. It does not matter what

45:10

large cap fund you have , what small cap

45:12

fund you have . What matters per vanguard

45:14

is keep costs low , keep

45:17

turnover low , purify it so

45:19

it can't drift and all of a sudden start owning something

45:21

it wasn't supposed to own , and follow

45:23

the stewardship principles of asset allocation , diversification

45:26

and maybe rebalancing . Actually , I'm starting to find

45:28

that rebalancing doesn't have a lot to do with anything in

45:30

the grand scheme of things , other than it sounds good . It's

45:34

definitely a way to take money in and out of a portfolio

45:36

, but just to do it for the fun of it , I think we're

45:38

just creating more tax consequences . So we're building

45:41

and have been for 20

45:43

years now , no , not quite 18

45:46

years discretionary

45:48

portfolios

45:50

that money goes into . That we've identified

45:53

, and that's where the difference is . Instead of

45:55

trying to build a portfolio that that fuels all

45:57

these clients needs and wants together into some

45:59

asset allocation , we're just

46:01

carving out what do you not need

46:03

into the future , that's long term

46:05

, with what you need now and

46:08

the customization is what doesn't go in the

46:10

model . We created models and

46:12

, instead of customizing for the client , we allowed

46:14

ourselves to add scale and

46:17

accountability , meaning every client's getting

46:19

about the same experience , which the other thing that drove me

46:21

nuts is . I'd show up at the dinner table and

46:23

a family get together and it's like , depending

46:25

on when I talk to somebody is what portfolio

46:28

they got or what their experience was

46:30

in the market is depending on how they added to the portfolio

46:32

and without having a predetermined portfolio

46:34

strategy . I wanted to fix the now

46:37

with this wealth plan and this philosophy

46:40

we've come up with . It's like I want to sit at the table and know everybody's

46:42

returns are the same for the long term

46:44

money . The customization came into

46:46

what they need in the next three six

46:49

, 24 , 36 months .

46:52

So , like with that , with those portfolios underneath

46:54

the hood , is that like ETF based ? Is it mostly

46:56

yes ? We've gone ETF

46:58

based because the mutual fund it's

47:01

been a tough go honestly with , like the funds , mutual

47:04

funds- are doomed .

47:05

I was told that a decade ago and it's just

47:07

. Mutual funds are doomed for the fact that technology

47:09

came to the place that allows things to just

47:12

there's efficiencies . It's efficiency .

47:14

You know like a large growth . It's like

47:17

I'm sure there's three or four funds that have outperformed

47:19

significantly , but if you like , throw any performance

47:21

metric on . Basically

47:23

, I mean , things change but like 2009

47:26

forward , it's kind of like sure

47:28

you , maybe a few active managers

47:30

hit some home runs , but like by and large it

47:33

does not make up for the ones that underperformed

47:35

. I think the most recent report I saw on active

47:37

manager flows was like only

47:39

40% of last year's managers outperformed

47:41

the S&P and I think that was large growth

47:43

. So , like sure , that's an asset class where you can just

47:45

set it , forget it , etf it .

47:47

But well , and Russell did a study . Russell

47:49

did a study years ago that it's like the top performing

47:51

money managers over a 10 year timeframe underperformed

47:55

70% of the time , which means you can identify

47:57

them in the 10 years . You can see what they are when you look backwards

47:59

.

48:01

Right , yeah , it's so easy when you see the

48:03

sheet right , it's so easy . When you see a fact sheet , it's

48:05

like every calendar year or whatever

48:07

, but it doesn't really necessarily mean this

48:10

pull , it doesn't account for that experience

48:13

and that is kind of what happens whenever

48:15

you're making an investment choice

48:17

for your clients , which , if there's

48:19

any takeaway from a lot of what you've talked about

48:21

, I know I mentioned upfront , like before

48:24

we started recording , that a lot of this audience is the sales

48:26

people and the fund wholesalers out there . They

48:30

only see we only see like

48:32

a net flows of money into our funds and money

48:34

out from your funds . And I remembered

48:36

when I was working with financial advisors like

48:38

it never occurred to me until I was sitting in meetings with their

48:40

clients that this is money that's just

48:42

funding their lifestyle . So like they

48:44

may have put in $500,000 into my

48:47

equity SNA five

48:49

years ago . And now my managers like

48:51

, well , why do they redeem ? And I'm like because

48:53

the person whose money it was just had

48:55

like sold their house and is buying a vacation . It

48:58

was like it has nothing to do with them being mad at

49:00

the performance of the fund . It's just like we are . Our

49:02

instrument is a vehicle for them to build wealth over

49:05

their lifetime and at some point they cash it out like

49:07

has nothing to do with the fund . It's just the way the world is .

49:09

Yeah , and the whole problem with I have

49:11

so much empathy for the

49:13

wholesaling industry it's

49:17

because the whole industry is renting other

49:19

people's money . They're

49:23

charging a fee to have access , to add value

49:25

and to turn and that asset is going to go to another generation

49:27

or it's going to go to a purpose because the

49:29

money flows and

49:32

thank God there's a ton of money out there . And

49:34

again , I think everybody's trying to add value and

49:36

not necessarily . There's obviously good and bad

49:38

in the world , just in general . But the

49:42

problem is there

49:45

when you try and drive costs

49:47

low on the ETF side

49:49

especially , you pay attention to trading

49:51

, daily trading volumes that you

49:53

don't get a put . You don't want to own more

49:55

shares in your practice than the daily trading

49:57

volume , which means you're going to move the market on your own

49:59

shares , trying to get out of them , which

50:01

nobody pays attention to . Or

50:04

the bids and the asks . You know you got to put limits

50:06

, orders in on everything you do . It's

50:08

just technology

50:11

is making more and I'm not saying it's good

50:13

, I'm just saying it's the reality that the ETF

50:15

space is making money

50:17

management more and more easier

50:19

to build what

50:22

has been asset allocation , diversification

50:24

, low cost and participation . I

50:27

think there's also trade offs , that it also creates

50:29

rallies

50:31

and falls in the market because the

50:33

human race can click their mouse

50:35

and all panic at the same time . And

50:38

that's also the undoing in the mutual fund world , because

50:40

those mutual funds and markets that are down and

50:43

they're dealing with those redemptions at the end of the day

50:45

they have to go sell often when you get what

50:47

they don't want to sell to meet the redemptions . Because

50:51

, as I explained to the client which is my favorite way of

50:53

explaining a mutual fund

50:56

to an ETF is , if you have a mutual fund

50:58

house and you have an ETF house and you're

51:00

going to buy the house , a mutual

51:03

fund , they build the house for you , the

51:05

ETF . You buy the house . It's finished

51:07

. When you go to sell the house , the mutual fund

51:10

they start ripping the windows off and the roof off and they dismantle

51:12

, they redeem all

51:14

the pieces of your shares in to give

51:16

you back your money . The ETF just

51:19

sells the house . And so it's

51:21

the efficiencies of those two worlds . One

51:23

was the only way to do it in the 1940s

51:27

and it's just it

51:29

is what it is .

51:29

I know I've tried to think

51:32

of a good comparison

51:35

, either with a relevant like business or

51:37

some other example to use , as far as

51:39

what will eventually be like that shift

51:41

and takeover between the ETFs

51:43

and like those active flows . But

51:45

it's a competitive industry . A lot of sharp

51:47

people are in the space . So things like

51:49

active ETFs and vehicles that are more

51:52

you know , they're less expensive but still

51:54

add value . Obviously we've got a lot of these tax

51:56

efficient vehicles coming . But

51:58

this is this is an interesting and a good

52:01

conversation . Why I love being able to have these

52:03

discussions with advisors is because , sort

52:05

of like , at the end of the day , I just like trajectory

52:07

wise . 15

52:10

to 20 years ago it seemed like there was a lot more

52:12

importance on the singular investment of any

52:15

given client and whereas now

52:17

it's sort of like this is just a sum of its

52:19

parts that the advisor is managing and

52:21

so sure , like I could give you a $500,000

52:24

for a tax efficient separate account , that

52:27

big , big whoop that does that , that saves

52:29

that tax on maybe 5%

52:31

of a $500,000 account . I'm thinking about like

52:34

this person's life and their holistic

52:36

picture , so I feel like that's kind of a trend

52:38

.

52:38

And that's so . That's right . Yeah , we put no

52:40

value because I don't think there's any to be

52:42

put on a diversified portfolio

52:45

of exchange traded funds . The value

52:47

is on the total relationship of paying

52:49

attention to when the money comes in and out

52:51

of those , where I think you can add a ton of value

52:53

. With markets that bounce around 5

52:55

, 10 , 20 , 30% in

52:57

weeks and months over the last

52:59

couple of years , when you're adding and , more

53:02

importantly , when you're redeeming those shares

53:04

, when you do that matters

53:06

. It actually locks in

53:08

the return . I think there could be a lot of value added to

53:10

that . And by not by

53:12

using blending multiple pieces

53:14

of research together , I'm removing my

53:17

ability to go guess , because

53:19

I found most people's guesses is wrong . Now

53:21

, everybody that's doing this and

53:24

the industry that's doing this is also creating the opportunity

53:26

. And , by the way , I'm a proponent of

53:28

the reason wealth is made in the marketplace

53:31

is because humans are irrational

53:33

. If everybody was rational

53:35

, the markets would only grow based on the company's

53:38

earnings . Grow like it would grow like a straight line

53:40

or fluctuate right to line with the

53:42

fundamentals , and the reality is that's not what happens . The

53:45

greatest returns happen because people panic and

53:47

then people that have the guts to take

53:49

, you know , plug their nose and take advantage of that

53:51

do , or the very

53:53

companies themselves do . And that volatility

53:55

of people's emotions is what I think gives

53:58

us these return potentials , because everything just keeps

54:00

swinging in and out of its trend

54:02

line , at the expense

54:04

of some , for the benefit of others . And by

54:06

taking a approach of taking my emotions

54:09

, taking my team's emotions , my

54:11

bias , my team's bias , anyone firms bias

54:13

and using blended research

54:16

I don't care what research you use , but

54:18

using several , I think has

54:20

done a wonderful job of giving us more of the average

54:22

return that we're looking for . Ironically , you

54:24

start getting an average return of the institutional

54:26

models that are out there , because that's what you're deriving

54:28

your portfolio from and that's what you're trying to do for

54:31

a client in the first place . And , lastly

54:33

, I can stand in front of an arbitration panel and raise

54:35

my hand and explain this is why I

54:37

did what I did , this is why I have that ETF

54:40

, this is why it was in this percentage and it was

54:42

the blending of these four firms research . Now

54:44

, they may not like that's what I did , but it's like

54:46

I can defend the snot out of that . But

54:49

if in Dan's portfolio , I bought XYZ

54:51

fund because the other guy took me out to lunch

54:53

and it was a great day and I forgot about it and that was

54:55

your fund . And now something went wrong and I'm

54:58

in the panel . Do

55:00

I have the documentation to justify why

55:03

I earned my fee for that advisory portfolio

55:05

? That's the risk I don't want to take .

55:07

It'd be like your honor . The wholesaler came

55:09

in great doughnut , great suit . We

55:11

had an awesome dinner that night , and so I made the purchase

55:14

outside as part of my portfolio the next

55:16

day . I solemnly swear

55:18

but yeah , that's super helpful . And

55:20

you've actually mentioned the planning

55:23

software a couple of times . Is that something that's internally

55:25

available through Raymond James ? Is it like an e-money

55:27

of sorts , because I feel like it seems like

55:29

it's worked well for you . So if you want to give it a nod , understanding

55:32

the tools that advisors use is always helpful .

55:35

So we built it inside of Salesforce

55:37

and

55:40

have recently grown it into a financial

55:42

services cloud . We're working currently

55:44

with , and part of the resources at , the TotalRelationshipcom

55:47

, which there'll be a link for the podcast for you

55:50

here , but where we've built a website to build a

55:52

community behind . Hey , here's how to do this . We're

55:55

building , or we're trying to build , a

55:57

tool

55:59

that , basically , will be just the way of

56:01

this data capture . How do you capture

56:03

some of this data that's consistent

56:06

. It's a place that also

56:08

here's the different questions to ask , because the client

56:11

, the customization , is the client's answers to their

56:13

lives and it's the client that has the answers . The

56:15

best advisors are the ones that know how to ask the question

56:18

and listen and find out the why behind the question

56:20

and help prioritize . Hey , you can't do everything

56:22

, but in this order you can do these things , and

56:24

the whole goal is to try and avoid future regret and

56:27

part of that whole third part of care

56:30

, is just caring enough to basically

56:32

say , hey , I want to sign up to monitor your life

56:34

, I want to sign up to be responsible for

56:36

the things you want to do in life . I want to be responsible

56:38

, remind you , I want to be the person that gives

56:41

you permission to enjoy your life

56:43

, because I think a lot of clients have shown me they're afraid

56:45

to spend the money and it was literally not until I took

56:47

out the 50 grand and put

56:49

it in the bank account that they actually would go buy the car , because

56:51

otherwise they think that's the portfolio and that's for later

56:53

and I can't touch that and I don't want to touch that . And

56:56

what do you mean ? I'm going to take money from that and it's just like

56:58

no , here , boom , there's the extra

57:01

. It's

57:03

just such a it's

57:06

a different way to go about a job that

57:08

otherwise is trying to outperform a portfolio

57:11

, trying to do better than some other

57:13

guy , and there's plenty of people out there that want to try and do that

57:15

, and I just think the world's getting set up more and more . It's

57:17

like if you want to do that , there's too many people that want to do

57:19

that themselves . Like I want to be the

57:21

solution of the do it yourself , or that got sick of doing

57:23

it or blew themselves up , or the widow of

57:25

the do it yourself , because I think there's

57:28

way more people . It's just like I just want to be protected for

57:30

myself from my life savings and I want someone

57:32

else to be responsible to help me spend and

57:34

not run out of that which I have , and

57:36

can I enjoy a little bit of it along the

57:38

way and get decent returns and

57:40

beat inflation right ? This isn't it's like

57:42

hey , yes , I can do that . You

57:45

may not like it . It's volatile at times , but we're going to try

57:47

and set it aside and we put a little system together

57:49

. And it's not pie charts

57:51

and 100 page

57:53

perspectives and

57:55

portfolio management . It's a discretionary

57:58

portfolio . We'll decide what's in it . You got to tell

58:00

us when you're going to need money in and out of it and

58:02

we're going to work together and have this relationship . And so let's talk

58:04

about your family and talk about your occupation and

58:06

talk about your hobbies and travel and your

58:09

home and your car , and how are the kids and how are the

58:11

pets and how is life and

58:14

in its day and age . Like , all of a sudden , that's a value

58:16

add In a social

58:18

media , like everyone's looking through computer

58:20

screens and we're trying to like understand people's

58:22

hopes and dreams and lives in ways

58:24

that it's coming down to which vacation they're

58:26

taking next , or an asking them to

58:28

enjoy it , or asking them

58:30

the mileage on their car , because I will you know , it's funny

58:33

ones . I only have to ask them that once . And

58:35

when they want to ask why , I'm like well , guess what , the

58:37

more miles you have , more likely you're going to need another car . Those

58:39

things are expensive , so I want to pay attention when that's coming

58:41

, so we're not surprised . It's like okay , so

58:45

it's just , it's just , it's so

58:47

. It

58:50

seems crazy that you know

58:52

, in the NFL , which I don't follow all that much , there's

58:54

professional coaches to coach

58:56

professional athletes how to block or

58:58

tackle , like they're in the NFL or

59:01

to teach a professional golf ride a putt , and

59:04

it's like . It seems like that's this way too , like they

59:06

still need to do those basic things , and it's just like I think

59:08

the financial industry has gotten so lost in trying to add

59:10

value in some other way that just doing the basic

59:12

things about how was mom and dad doing and

59:14

are you responsible for them when they go into the care facility

59:16

? And do you know that ? Do you know where the documents are

59:19

? Are you going to have to fund any of those

59:21

expenses ? Are we going to get parents or one of three

59:23

things . They're going to basically die with their last penny

59:25

. You're going to need to help them or they're going to leave you inheritance

59:27

. Which one of the three is it ? And

59:31

just asking the right question . It's just , it's it

59:33

. We're having a lot of fun with it . It's

59:35

like the whole .

59:36

We got a lot of problems to solve . But you're right , it's

59:39

the simple ones . But that never , that

59:42

never makes its way into . But I'm the wholesaler's nightmare .

59:44

I'm the wholesaler's nightmare because , like I , I've

59:47

removed the whole reason why any one of them mattered

59:50

to me . And yet they're all great people .

59:52

Let's we can , we can wrap on this one because it's been fun

59:54

and , like I said , there's no hurt feelings

59:57

out here , because I think I think anyone

59:59

who is a good wholesaler like understands that , one

1:00:01

, they're not going to work with every potential advisor

1:00:04

out there and two , if they're paying

1:00:06

attention to what's happening in the industry , they're

1:00:08

probably not disagreeing with you at all . So

1:00:11

so there's probably some that are like yep , I

1:00:13

actually get it . But I do want to close on this . Are you , are

1:00:15

you swatting away emails and phone calls

1:00:17

from them all the time ? Are they like , are they hitting you up

1:00:19

and trying to get in touch with you or someone else at your

1:00:21

firm , like on blast ? Is that like

1:00:23

a problem that you're trying to deal with or that you are dealing

1:00:25

with ?

1:00:28

Yeah , they , they . There's different

1:00:30

. I think we actually have a policy and procedure

1:00:32

for gatekeepers of how they , how they , get access

1:00:35

to me , or don't ? The four companies that we use

1:00:37

their research ? I will , I will interact

1:00:39

with . The hard part is I basically say I need nothing

1:00:41

from you other than the research . I don't want to go

1:00:43

to lunch , I don't want to have , I don't want to

1:00:45

pen , I don't want . You know , I just

1:00:47

, I just give me the research , or here's

1:00:49

the criteria that we use , of the puzzle , the pieces

1:00:51

that could go into our portfolio , which are quite

1:00:54

limiting , ironically , between

1:00:56

cost trading , volume and track

1:00:59

record . But

1:01:02

you know , I was , I was

1:01:04

at a strategic coach event and one of the participants

1:01:07

at the coaching was a wholesaler and

1:01:09

he was talking about the struggle that he was having

1:01:11

of coming up with an event , and the

1:01:13

purpose of the event was to solely

1:01:15

was to give the advisors a good time

1:01:17

and allow him to share a little bit about the product

1:01:20

, with the hope that

1:01:22

they somehow would come around and do a sale

1:01:24

in in the product

1:01:26

that they sold . And it was just like it

1:01:31

. It , you know , and that's that's

1:01:33

how that industry has been working forever , and it's just

1:01:36

like man .

1:01:36

I just want to use good products that have

1:01:38

low cost , that don't need to have a commercial

1:01:40

or don't have to take me out

1:01:42

to lunch to find them , find the way into my portfolio

1:01:45

and

1:01:48

yeah it's

1:01:50

, that's what keeps , that's what's keeping

1:01:52

today's wholesaler up at night is because once

1:01:55

you strip away the wholesaler being the conduit

1:01:57

for fund information like I

1:02:00

, like individuals used to show up

1:02:02

needing to present information that

1:02:05

was on the fact sheet or whatever else you

1:02:07

just you just don't need that anymore and like , and you can

1:02:09

look up anything you need to look up on a

1:02:11

fund at your own , on your own

1:02:13

time , with your own tools , and so it really

1:02:15

just makes it makes for . It

1:02:17

, makes it difficult for someone who is not thinking that way

1:02:19

to like go

1:02:21

about maybe running an event

1:02:23

. That's like really , that's like actually impactful and

1:02:25

valuable when they're supposed to focus on products

1:02:28

, but lo and behold , the people they're trying

1:02:30

to invite like they don't need that information in that

1:02:32

forum . Like that's , that's really where the tide is shifting

1:02:34

and that's where I , that's where I

1:02:36

felt it , it's where everyone out there in the field has

1:02:38

felt it , and it's it's just there's

1:02:41

going to be a path forward , but I think it's still getting ironed out

1:02:43

and it's still going to be a little choppy until it does .

1:02:46

Yeah , I had a relationship with a wholesaler

1:02:48

back in the beginning part of my career in the 2000

1:02:50

, the 2008 realm and we switched to go

1:02:52

to discretionary and I realized

1:02:55

that that product was it wasn't going to be a fit

1:02:57

for the direction that we were going and

1:03:00

I called him and told him I was doing it . But we pulled

1:03:02

a hundred million dollars out on a day

1:03:04

in a day because we went to scratch area and then

1:03:06

sold the models .

1:03:07

Well , bad day for the wholesaler in the office probably

1:03:09

.

1:03:10

Oh , it was just I ruined his year . I

1:03:12

, like I , to this day still

1:03:15

feel bad and

1:03:17

yet to this day , have said to myself I am never going

1:03:20

to put myself in a relational position that again

1:03:22

, that I have to feel

1:03:24

bad for doing what's right for hundreds or thousands

1:03:26

of people that entrusted

1:03:28

me with their life savings . I don't want that conflict .

1:03:32

Because there was a great relationship there and there was nothing the

1:03:34

wholesaler did wrong .

1:03:35

I love the guy . Still do we

1:03:38

have and we have and we there's a , there's some . It's kind

1:03:40

of a joke and it's kind of not a joke , but

1:03:43

he got crushed in

1:03:45

his business that year and it was my

1:03:47

fault . But I bring

1:03:49

him on the show , we'll get him on the show .

1:03:51

We're going to run back an episode with him about the worst

1:03:53

year of his career

1:03:55

because of Tyson . How about that ? We'll

1:03:58

facilitate that , yeah , yeah . Awesome he

1:04:00

might hear this episode and I might get a phone

1:04:02

call because

1:04:04

he knows who he is . Let

1:04:07

me know We'll get it over to him . But there it is . Yes , tyson

1:04:10

, thank you so much for for spending some time with us this afternoon . I

1:04:12

have so obviously we have the total relationship

1:04:14

. We'll make the link available . We talked about

1:04:16

the framework . This is both for advisors

1:04:18

, obviously out there , and for any wholesalers

1:04:20

that might want to check this out just to get a perspective

1:04:23

about what advisors are dealing with today . Certainly

1:04:26

, check it out and , tyson , we welcome you back

1:04:28

whenever . Feel free to be at your . Your officially

1:04:31

a friend of the show , so

1:04:33

thank you so much for joining the internal use only . Thanks

1:04:36

for listening . Find

1:04:38

us on Instagram at internal use only podcast or email

1:04:42

us at internal use only podcast

1:04:44

at gmailcom .